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SOUTH AFRICA


  
  

 

Key Economic Data 
 
  2003 2002 2001 Ranking(2003)
GDP
Millions of US $ 159,886 104,235 113,300 29
         
GNI per capita
 US $ 2,780 2,600 2,820 93
Ranking is given out of 208 nations - (data from the World Bank)

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Update No: 097 - (26/08/10)

A season of Strikes
The World Cup honeymoon appears to be over with public service strike action starting to bite painfully, at schools, courts and particularly hospitals across South Africa. Over one million public servants downed tools indefinitely August 17 after rejecting a revised government wage deal. South Africa has seen a wave of strikes in recent years, though unions say the latest strike could be the largest for several years, as it is indefinite. During the World Cup transport and power supply worker unions won pay rises after threatening to strike during the tournament. The government said August 22 it would take action against workers in essential services who continued to strike in defiance of a high court interdict ordering health, prison, police and emergency service personnel to return to work. Essential workers continuing to strike would be engaged in an illegal activity and subject to disciplinary processes. According to trade unionists, these processes could result in dismissal. The zero-tolerance approach is one of a series of tough stands taken by the government since it announced August 17 that there was no more room to negotiate on its final offer of a 7% annual salary increase and a R700 monthly housing allowance for public servants. Trade unions are striking for an 8,6% hike and a housing allowance of R1000 a month.

Public sector unions are striking for a salary increase which is double the rate of inflation. If such a demand had been only for this year, or if private sector salaries were rising as fast, or if South Africa was getting richer at a furious rate, or productivity were increasing, this demand might be considered more reasonable. But none of the above is true. South Africa has just come out of recession, the economy is weak, and private sector salary increases have been at or around inflation. According to the Reserve Bank, the government's wage bill increased from 2003 to this year by: 9,5%, 15,6%, 6,7%, 8,2%, 16%, 15% and last year by a massive 17,2%. The average inflation rate was 6,5%. The actual increase was never less than inflation, and for four of the past eight years double inflation. In 2003, the total annual wage bill was R140bn; it's now R340bn.

Hospitals bore the brunt of the public sector strike as patients were left unattended and some died due to lack of access to medication and patient care. Twenty-five trade unions affiliated with the Congress of South African Trade Unions and the Independent Labour Caucus have cleared an indefinite strike until their demands for an 8,6% pay rise and a R1000 monthly housing allowance are met. The African National Congress and its youth league called on the government and labour unions to urgently find a speedy resolution to the labour dispute. The South African National Defence Force (SANDF) has been roped in to help at 32 hospitals across the country during the public service strike. SANDF spokesperson Siphiwe Dlamini said members of the SANDF have been deployed to at least seven provinces. He said various multi-disciplinary medical teams from the SA Military Health Service have been deployed to the country's major hospitals.

Johannesburg police fired water cannons and rubber bullets at striking workers at a hospital August 19, on the second day of an open-ended public sector strike. About 1.3 million workers are staying away from their jobs to demand higher wages and housing allowances. Since the strike began, protests have mostly been limited to small groups picketing outside schools and hospitals. Health workers are considered essential services and not allowed to strike, but support staff have joined the walkout. One group of about 150 hospital staff tried to enter Chris Hani Baragwanath Hospital in the township of Soweto, prompting police to take action. Also August 18, the government signed its last offer of a 7 percent wage increase and a monthly housing allowance of 700 rand (65 euros). The public services ministry said the deal will be implemented if unions fail to sign on within 21 days. Public sector unions have refused to budge from their demands.

President Jacob Zuma has been requested to serve as co-chair of the United Nations Second Panel on Climate Change Sustainability. United Nations Secretary General Ban ki Moon made the request to Zuma to co-chair the panel which will have a special focus on climate change as a sustainable development challenge. The three pillars of climate change - namely economic, social and environmental, will be addressed during the first meeting, which will be held between September 19 and 25 in New York, said the Presidency in a statement. Zuma will chair the panel, together with Tarja Kaarina Halonen, the President of Finland. The panel is also expected to focus on related issues of food security, energy and poverty eradication. "We are honoured to serve, and view this assignment by the United Nations as recognition of the key role that the African continent should play in key international interventions and processes," said Zuma. He added that South Africa's hosting of the Conference of the Parties 17 (COP17 Summit) in 2011, and the presence of Minister in the Presidency, Trevor Manuel in the High Level Advisory Group on Climate Finance, among others, showed South Africa's commitment to the goal of achieving sustainable development in the world.

Media freedom at risk
President Jacob Zuma has stepped into a debate raging over ANC proposals to change the way the media is regulated in South Africa. Journalists argue media freedom and democracy will be threatened by the introduction of a parliamentary Media Appeals Tribunal and a law allowing the government to classify material currently not secret. But the ANC says new legislation is needed to make journalists legally accountable for inaccurate reporting. And, in a letter to the ANC published online, President Zuma has said "Does it [the media] have a role in promoting nation building? Is it a spectator, or does it have vested interests and an agenda, political and commercial, that it cherishes and promotes?"

What it certainly does have has is a watching brief, the absolute pre-requiste of any democracy and an obligation to alert the forces of democracy to government moves which are totalitarian in intent. There are pro-government media as well as those that are independent or in opposition. Let the arguments between them rip, but do not legislate against freedom of non-secret information, or expression.

South African President Jacob Zuma has flown into China August 24 for a three-day visit aimed at strengthening business ties. Mr Zuma is expected to sign a series of trade agreements with his country's largest trading partner. His trip comes as he faces mounting problems at home, with more than a million public sector workers striking. Mr Zuma is due to hold talks with Chinese President Hu Jintao during his mission to Beijing, the capital, and Shanghai. A delegation of no fewer than 300 businessmen and ministers is accompanying Mr Zuma as he looks for tips from the Chinese on how to boost his country's growth rate. Mr Zuma will also meet Prime Minister Wen Jiabao and tour the World Expo site in Shanghai. Martyn Davies, chief executive of business consultants Frontier Advisory, said South Africa was trying to strengthen ties with other emerging countries. "As the largest economy in the continent, South Africa is punching below its weight when in comes to global economic platforms like the G8," Mr Davies told AFP news agency. "So there is a need to collaborate with other emerging economies, not collide with them."

Cosatu Warns of Economic Shutdown As Strikers Dig In
The Congress of South African Trade Unions (Cosatu) has given the government an ultimatum to agree to public sector unions' wage demands or face a total shutdown. "We call on all workers to intensify their action. Every Cosatu-affiliated union must tomorrow (August 25) submit notice to their employers to embark on a secondary strike," Cosatu general secretary Zwelinzima Vavi said August 24. "So by next Thursday (September 2) if the current strike is not resolved, the entire economy of SA will be shut down," he said. Mr Vavi also noted the government's comments on the 8,5% wage offer. "No 8,5% wage offer was tabled. Government has been negotiating with the media rather than unions. This is pure misinformation aimed at confusing the public." The National Education, Health and Allied Workers Union (Nehawu) said it is deeply disturbed by the "outright lies" the government has told South Africans. It said an 8,5% wage increase has not been presented to the unions. It said those lies showed the contempt the government has for its citizens and is indicative of SA's leadership crisis. "We have noticed that despite government pleading poverty, it has enough money to buy full-page adverts to peddle its lies and also has money to transfer patients to the private hospitals," Nehawu spokesman Sizwe Pamla said. The unions are demanding an 8,6% increase and a R1000 monthly housing allowance, while the government is offering a 7% increase and a R700 housing allowance. A spokesman for the government, Themba Maseko, said that, in addition to the 7% wage increase, there is a 1,5% pay progression that workers will get automatically if they accept the offer, thus increasing the offer to 8,5%. He said the difference between strikers' demands and the government's offer is just a tenth of a percentage point. However, Mr Pamla said this performance-based system is part of the existing conditions of service. It is not part of this year's negotiations and has not been part of any recent negotiation. He said Nehawu will start mobilising other Cosatu-affiliated unions tomorrow to embark on a sympathy strike. "Since the strike last week, we have seen doctors and nurses protesting. Our aim is to target other government departments to intensify the strike," Mr Pamla said. The South African National Military Veterans Association said yesterday that it will deploy its members to hospitals affected by the strike. "Much as we sympathise with the workers on their right to better working conditions and living wages, we can never condone the use of violence and the unjust actions that lead to fatalities due to the strike," the association's president, Kebby Maphatsoe, said. Dumisane Nkwamba, spokesman for the Department of Public Service and Administration, said the government is engaging union leaders so that they can agree on an amicable solution.

Rise of the 'Tenderpreneurs' – Business Deals in Zuma's Clan
Political networks are helping a scion of the Zuma clan secure lucrative supply and production deals with Asian investors. The business empire of Khulubuse Zuma, a favourite nephew of President Jacob Zuma, is growing at breakneck speed and strengthened by a raft of opaque deals with Chinese and South Korean companies. Hardly known before his uncle took over the presidency in May 2009, Khulubuse Zuma has sealed several multimillion-dollar deals in mining and transport over the past few months. Rapidly growing joint ventures with China and South Korea are part of Khulubuse's strategy to see his empire reach the US$10 billion mark over the next decade. Controversy surrounds the July 14 announcement of a tie-up between South Korea's Daewoo Shipbuilding and Marine Engineering, the world's second largest shipbuilder, and the Impinda Group, a little-known South African company owned by Khulubuse Zuma. The timing and conditions of the deal are suspect. Daewoo admitted that the deal was signed just after its Chief Executive, Nam Sang-tae, had met with President Zuma. Also, as Impinda has little experience in shipping, it seems that the deal is of more strategic than commercial value. The deal will allow the South Korean company to acquire a 49% stake in the shipping and logistics arm of Impinda Group. The deal will help Impinda to grow its commodity, oil and natural gas shipping services, of which it currently has none, as well as position the company to export coal and other minerals across the continent. The move is part of Daewoo's diversification strategy aimed at reducing its reliance on shipbuilding. A memorandum of understanding was signed in July and a final deal should be signed before the end of the year. Khulubuse is already in talks with a handful of South African mining companies about the terms of potential shipping deals. Former PetroSA Chief Executive Officer Mpumelelo Tshume is listed as the CEO of the Impinda Group and will provide a useful complement to Zuma's mining sector ties. The deals keep on coming. The little-known Mpisi Trading 74, of which Khulubuse is chairman, entered into a contract for a vehicle dealership with Dongfeng Automobile Company, a Chinese government-owned manufacturer, in late July. The latter is part of the Dongfeng Motor Group, one of the top three vehicle manufacturers in China, which specialises in the production of army trucks and is also highly ranked in China's light commercial vehicle industry. Both companies will initially inject R20 million (US$2.8 mn.) each - to introduce some small commercial vehicle models into the South African market by the end of 2010. They will later introduce other models while expanding their sales network into other African countries later in 2011. The two also have plans to set up a manufacturing base in South Africa. As part of the deal's skills transfer package, South Africans will be sent for training in China. Khulubuse Zuma is now seen as part of a new breed of black economic empowerment (BEE) beneficiaries linked to his uncle's government. The new kids on the BEE block include Robert Gumede, an information technology expert based in the Mpumalanga. Another BEE beneficiary is Sandile Zungu, an empowerment luminary once touted as future Director-General in the Presidency. She was Zuma's preferred candidate to chair a lobbying group, Business Unity South Africa, but lost the position to the former leader of the Association of Black Accountants of South Africa, Futhi Mtoba. Critics point to Khulubuse's lack of commercial experience and weak track record as an empowerment businessman. Khubuluse's previous business experience is as a taxi operator and manager of several security companies. He says that Daewoo was interested in his unknown shipping company because he has 'a vision'. He says that the growth target for his empire in the next decade is $10bn. Khulubuse Zuma's meteoric rise appears to be a case of 'BEE in the family', which is in stark contrast with the ANC's latest endeavours to rein in the 'tenderpreneurs' - business people and politicians who use their political connections to access public sector business and empowerment opportunities. So serious is the plague of tenderpreneurship that the ANC has prepared a discussion document on the topic for its five-day meeting in September, the ruling party's biggest gathering between elective conferences. Khulubuse's deals and those of other family members are bringing more attention to the links between Asian business and South African political networks. ‘Duduzile Zuma’, one of the president's daughters, is closely linked with the South Africa-based Sahara Group, which is owned by the Gupta family of India. The Guptas - brothers Ajay, Atul and Tony - are new members of President Zuma's inner circle, and they were the prime movers during his visit to India in June, much to the chagrin of the South African business delegation. The Guptas have business relationships with Lazarus Zim's Afripalm Resources and Minister of Human Settlement Tokyo Sexwale’'s Mvelaphanda Resources through empowerment deals. The Guptas are also the funders of a new daily newspaper, New Age, that is scheduled to hit the streets in mid-September. One of Jacob Zuma's sons, Duduzane, worked with the Gupta family to buy the South African subsidiary of Toronto-listed Uranium One in May for $37mn. Ajay Gupta is a founding member of South Africa's International Marketing Council, the body charged with marketing South Africa abroad. Khulubuse Zuma's deal coincides with a renewed South African effort to attract interest from Brazil, Russia, India and China. President Zuma is going to visit Moscow and Beijing. Sources close to Khulubuse say that he is planning a new deal with India-based business interests. Opposition parties are critical of the fact that the presidential nephew is doing roaring business with companies from countries that are consolidating diplomatic, business and trade relations with his uncle's government. The shipping deal has another element to it. Congo-Kinshasa controversially awarded two of Khulubuse Zuma's companies, Foxwhelp and Caprikat, the exploration rights to two oil blocks in June. The Daewoo and Congolese deals appear at least tangentially linked; the goal of the South Korean accord is to provide transportation services for the African mineral trade. The Congo-Kinshasa deal brings in more figures from the president's circle. Tokyo Sexwale's Mvelaphanda Holdings is advising Khulubuse's companies on their Congolese activities. Zuma's nephew incorporated Foxwhelp and Caprikat in the British Virgin Islands in March. Zuma's companies now have the rights to Blocks 1 and 2 in the Lake Albert Basin, licences originally awarded by President Joseph Kabila’s government to Ireland’'s Tullow and South Africa's Divine Inspiration Group in 2006. The terms of the deal are highly favourable to Zuma's side. While the production sharing agreement gives the Kinshasa government a 15% stake in the joint venture, Ciprikat and Foxwhelp have the rights to an unprecedented 60% of profit oil from the first 12 million barrels of oil. Michael Hulley, a lawyer with connections to Sexwale and President Zuma, signed on behalf of Foxwhelp. Foxwhelp and Caprikat gave addresses linked to Mvelaphanda as the locations of their South African offices. Another of Khulubuse Zuma's business ventures is struggling. Aurora Empowerment Systems - which Zuma chairs and which has Nelson Mandela;'s grandson, Zondwa Mandela, as a director - acquired two mines in Orkey and Grootvlei from the liquidated Pamodzi Gold in April, beating out a rival offer from the China-Africa Development Fund. Workers at the mines have been on strike since March after not receiving their wages. Khulubuse and Hulley are now trying to lure Chinese investors into management of the mines.

Press Freedom - Tutu, Cardinal Oppose New Media Law
Nobel Peace Prize Laureate Archbishop Desmond Tutu of South Africa and Roman Catholic Cardinal Wilfrid Napier have called on their compatriots to oppose a proposed media law that critics say resembles apartheid legislation. In an unscripted speech August 18, at the Institute for Democracy in Cape Town, Tutu, who is due to retire from public life in October, challenged South Africans to fight for press freedom by mobilizing the spirit that made the 2010 soccer World Cup a success. Tutu challenged opponents of the new media control proposals that the ruling African National Congress has put forward, to fight back. He said, "This is your country and it is going to become what you allow it to be." The Catholic Archbishop of Durban Cardinal Napier, who like Tutu was a noted foe of apartheid, has also spoken out against the ANC's proposed Protection of Information Bill and a state media tribunal. "It is hard to imagine how any person, group or organisation, which only a few years ago was protesting so vigorously for the exposing of all injustice, all corruption, all favouritism and nepotism, could in such a short time be calling for legislation designed to prevent the reporting of these very ills," said Napier August 19. The archbishop was among hundreds of readers, academics and activists who sent e-mails, faxes and text messages to The Mercury, in support of the Durban daily newspaper's "No" campaign to the proposed media changes. "It must be either an extremely short memory or a very guilty conscience that could drive one who had suffered under the old regime to change so quickly from opposing to supporting that undemocratic conduct," said Napier, who also heads the Southern Africa Catholic Bishops' Conference. In an appeal to South African President Jacob Zuma, Napier said, "Please do not allow our country to be brought into disrepute so soon after the wonderful picture of unity and solidarity that South Africa presented to the world during the World Cup."

Unions Defy Strike Injunction
Some one million South African civil servants are continuing their indefinite strike despite a court injunction banning unions from closing emergency services. Police have fired rubber bullets at striking health workers, injuring several protesters in Durban. The army has deployed medical teams to more hospitals around the country to keep emergency health services open. The trade unions began their strike August 17, in a dispute over pay. The government obtained an injunction against the strike August 21, which the unions immediately condemned. Those shot outside Durban's Addington Hospital were reportedly blockading the staff entrance. Nurse Buhle Ntsele, who was bleeding from the thigh after being shot, said their protest had been peaceful. "People who are working have betrayed us. We need to deal with them," the South African Press Agency (Sapa) reports. Sapa says that some nurses were on duty at the hospital's casualty unit, amid a heavy police presence outside. Mugwena Maluleke, a spokesman for the Congress of South African Trade Unions (Cosatu) said that union members would not be advised to return to work. "We have to highlight our plight. We have told our members, there must be no obstruction of entrances and no intimidation," he told Sapa. The government has offered a 7% pay rise. Unions affiliated to Cosatu are demanding an increase of 8.6%. The government says it cannot afford to deliver wage increases that amount to twice the rate of inflation. Health Minister Aaron Motsoaledi said August 20 that hospital workers who interrupted vital medical care and forced colleagues to join the strike are carrying out actions tantamount to murder. President Jacob Zuma has defended the unions' right to strike but also urged for them to end violence and intimidation.

Government Gets Tough On Striking Workers
As violence and intimidation continues to flare in the nationwide public servants' strike, government has interdicted unions in order to ensure that essential services continue. The interdict from the labour court orders government employees who are on strike to immediately refrain from intimidating, harassing or interfering with other employees and management from continuing with their work, especially in institutions like hospitals and schools, State Security Minister Siyabonga Cwele said August 20. "We agreed on a range of measures to be taken to ensure the safety of citizens and employees who are not part of the industrial action, as well as the growing number of volunteers who are stepping forward to deliver services," Cwele told a media briefing following a special Justice Crime Prevention and Security Cluster meeting. The meeting was attended by Health Minister Aaron Motsoaledi, Minister of Public Service and Administration Richard Baloyi, Deputy Minister for Basic Education Enver Surty as well as representatives from all the government security agencies. Police had their hands full August 19, and were forced to fire rubber bullets and use water cannons to disperse unruly protestors at Helen Joseph and Chris Hani Baragwanath hospitals where Cosatu members prevented their colleagues who did want to work from entering the premises. Strikers prevented patients and ambulances from entering hospitals and threw stones at police. In some cases, doctors and nurses were forced to lock themselves in their wards to continue treating patients because striking workers tried to stop them from working. Intimidation, assault and damage to property have been reported at schools. Reacting to this, Motsoaledi said he was "shocked" by these reports of intimidation, adding that it was unacceptable. "I'm not only surprised but shocked at the willingness to murder because we can't have that kind of country." Government has called on volunteers to come forward and pledge their services to help in hospitals and schools, saying "they will be protected". "Steps will be taken against strikers or sympathisers who intimidate staff or members of the public, or commit acts of hooliganism, destruction of property or violence," said Cwele. He announced that security agencies are being deployed countrywide as of August 20 to secure members of the public who need to access services, as well as staff who are not on strike. Special courts to deal with acts of hooliganism will also be set up. The government has offered public servants a 7 percent salary hike and a R700 housing allowance - unions are demanding an 8.6 percent salary increase and R1000 housing allowance. At the current offer, the increases are expected to cost the state an additional R5 billion. The unions have 21 days to sign on the wage offer which was now a resolution of the Public Service Bargaining Council, said Baloyi, adding he was surprised by the level of violence during the strike. "While we expect public servants to exercise their democratic right to embark on industrial action, they should do so responsibly and within the confines of the law ...they must also respect the rights of other members of the public.

Cabinet Disappointed by Rejection of Wage Offer
Cabinet has expressed disappointment at the unions' decision to reject the state's latest wage offer, saying while it understood public servants' struggle over low wages, their demands on government was simply not affordable. Briefing the media August 19, following Cabinet's ordinary meeting the previous day, government spokesman Themba Maseko said the state had negotiated in good faith in an attempt to meet employees' demands. "We had to make a choice between increasing the salary bill to unaffordable levels by meeting the union's demands and cutting other urgently needed services. "It's a choice between improving the wages of state employees and continuing to address the service delivery needs of poor communities and the unemployed," he added. Maseko noted that government's offer of a 7 percent annual increase and a R700 housing allowance was way above the inflation rate of 4.5 percent. Unions are demanding an 8.6 percent increase and R1000 housing allowance. "While government fully understands and appreciates the plight of all public servants regarding low wages, it has to be mindful of its responsibilities to all South Africans as the final offer already places a huge burden on the fiscus, as the money has to be found in the budget," he said. Cabinet also acknowledged that the R700 housing allowance "did not necessarily respond adequately to economic realities experienced by our employees" but stressed it was all it could afford at this stage. "It must be noted that the final offer will have a carry through effect of a further R2.7 billion in the 2011/2012 financial year. The 8.6 percent demand is simply not affordable as every additional cent spent on salaries means less money for other essential services to the public," he added. Maseko pointed out that increasing personnel expenditure would translate into less money being available for education, learning materials, health care and health facilities, roads, economic infrastructure and other essential services. Cabinet also spoke out against acts of intimidation and violence by public servants participating in the nation-wide strike, warning that such acts will be dealt with by law. Maseko warned that those protestors who broke the law could expect no sympathy from law enforcement agencies. "Cabinet condemns unreservedly the violence, intimidation and the acts bordering on thuggery and criminality that has characterised the strike in parts of the country. "While the majority of public servants have protested peacefully, the disruption of classes and health facilities is totally unacceptable and will not be tolerated," Maseko said. While workers had the right to strike, they also had an obligation to society to protest peacefully, respecting the rights of other citizens, he added. Cabinet also appealed to teacher unions to consider the interests of school children. "Cabinet is also concerned about the talk of an indefinite strike, especially in the education sector at the expense of our young learners who are just about to sit for the year-end examinations. Government calls for sanity and common sense to prevail," he said. On the medical front, Maseko said the Defence Force would be on standby to provide assistance in emergency and life threatening situations by providing medical care where it is urgently needed.

Strike Will Have Negative Impact Abroad – Sacci
As workers in the public service intensify their strike action, the South African Chamber of Commerce (SACCI) is concerned that the move will have a negative impact on the country's image abroad. "It is with great disappointment that SACCI notes that an agreement has not been reached in the compensation negotiations between the Public Service Commission and Labour," SACCI said August 18. It condemned the undisciplined behaviour of workers in some instances where there were reported acts of intimidation by teachers of pupils attending schools as well as striking health workers who were reporting for work. "Such behaviour will impact negatively on global perceptions of the business environment in South Africa. The strike also adds to the pressures relating to service delivery backlogs," it said. The failure to reach an agreement has an impact on the economy that stretches beyond the Public Service Commission. "Additional pressure on public sector finances and the subsequent need to increase the taxes will have consequential downstream impact on both business and consumers. "Increased taxes will hamper the growth particularly of small and medium enterprises, and make it more difficult for them to remain viable. This has the possible result of increasing the number of closures of small and medium enterprises that have not yet recovered from the global downturn." Public Service and Administration Minister Richard Baloyi said government would no longer afford to increase the current offer which also includes a R700 housing allowance and annual 1.5 pay progression linked to performance. To date the unions have rejected this offer. They are instead demanding an 8.6 percent wage hike and a monthly R1000 housing allowance. "We are saying as the employer, the call for a strike at the moment where children are due to sit for exams, where South Africans are demanding acceleration of services, we are saying a strike at this time is unfortunate for the country, workers and leaders irrespective of where they find themselves," said the minister. Commenting on the motor industry strike, which entered its seventh day August 19, SACCI said the strike action has a negative impact on the export of vehicles. Workers are demanding a 15 percent wage increase. "The ability of the South African economy to determine a positive trajectory for employment growth is directly correlated with our ability to signal a strong work ethic, high productivity and an environment conducive to ease of doing business," SACCI said.

Teachers Join 'Political' Strike
The start of an indefinite public sector strike August 18 was possibly more about politics than pure economics, says economist Mike Schussler. Large swathes of SA's 1,3m-strong public sector, including the 245,000-member South African Democratic Teachers Union (Sadtu), downed tools raising the spectre of 2007's month-long public sector strike in the public mind. "I have a sneaky suspicion that there is also politics at play ... the unions are trying to show that they are quite strong and that may have a role to play in the (ultimate) length of the strike," Schussler said. While it was true the Congress of South African Trade Unions (Cosatu) was far more of a political entity than it had been in the past, it was difficult to say that Cosatu's muscle-flexing within its alliance with the African National Congress (ANC) would definitely translate into a longer strike, said independent political analyst Nic Borain. "I do think that Cosatu's put all of its eggs in its political basket (with respect to) its relationship with the ANC ... Its ability to pressurise the ANC is the central plank of its strategy, but I find it difficult to say that this means the strike will last longer," he said. Research released earlier this year by Tokiso Dispute Settlement Services, SA's largest private dispute resolution provider that showed Sadtu, was responsible for 42% of all working days lost to strike action from 1995 to 2009. The survey also shows that the National Union of Mineworkers was responsible for 12% of "person days" lost, and the South African Municipal Workers Union came in third, with responsibility for 10% of days lost. Tokiso CEO Tanya Venter said the survey data had to be seen in the context of 2007's month-long public service strike, the largest in SA's history. The Gauteng department of education said August 18 it will implement study groups to continue learning during the public sector strike. "Under these conditions, the best way to learn is to establish voluntary study groups where learners can help each other go through past papers and study notes," said provincial MEC for education Barbara Creecy at a media briefing in Johannesburg. Creecy said the department had printed 40,000 sets of study material to use ahead of preliminary examinations in two weeks. The department was also distributing self explanatory guidelines on how to set up study groups.

ANC Admits Party Racked By Bribery, Vote Buying
The African National Congress (ANC) has admitted that bribery and vote buying are widespread in its branches and threaten to subvert its internal democracy. In discussion papers released ahead of its national general council meeting in Durban in September, the party said money increasingly influenced the outcome of elections in the party. It raised the question of whether members with money had more influence than the rest of the membership. It also warned of the increasing use of violence and of meetings and conferences being disrupted by disgruntled members. Since its conference in Polokwane in 2007, money in the competition for party positions had grown in influence. People were even being paid to disrupt meetings, it said. Outright bribery, the provision of cellphone starter packs and free travel were some of the incentives used to buy votes. The party proposed an integrity committee to probe allegations of improper conduct. This would help to "prevent misdemeanours" and protect "genuine black business people and entrepreneurs who have links with the ANC from getting a bad name". The ANC already has guidelines on lobbying for internal elections, but bribery and vote buying have persisted. It is concerned that funding for the party could be used to influence leadership and policies and affect its integrity. Judith February, a political analyst at democracy watchdog Idasa, said the ANC had repeatedly shown an unwillingness to regulate the funding of political parties through legislation. "We are not sure that the ANC is committed to this ... all they have done is stonewall." Although the ANC has never fully disclosed its funders, it said the issue needed to be debated. "Our approach towards party financing will therefore have to be broader, so that it also deals with the 'informal' party financing, which is so much more insidious and dangerous to internal democracy," it said. The ANC has been linked to questionable funding sources, including kickbacks from the more than R30bn arms deal and a R38,5bn subcontract linked to its investment vehicle, Chancellor House, for the supply of boilers to Eskom. Results of a study by TNS Research Surveys released August 3 showed that the majority of South Africans felt the ANC should not be allowed to be connected to any companies that received government tenders.

Sweeping Probe of State Corruption
The Special Investigating Unit (SIU) has announced the largest government investigation yet into tender fraud and corruption in seven state departments, including the South African Police Service (SAPS). The probe, announced August 12, follows persistent complaints about corruption and tender fraud in the government. In addition to the police, the departments of public works, arts and culture, human settlements, the Gauteng health department and the Eastern Cape education department will be probed. The South African Social Security Agency, which distributes social grants, is also being investigated. Each investigation will be staffed by a "substantial team" of forensic investigators, lawyers, accountants and analysts, the Presidency said. The probe of the Department of Public Works department was described as one of the biggest by the SIU. The investigation will mainly focus on procurement, including numerous leases the department negotiated for client departments, "many of which involve significant amounts". Recent media reports alleged misconduct over a proposed R500m contract to lease new office space for the police. President Jacob Zuma's spokesman, Zizi Kodwa, denied there was any connection with the announced probe, saying the investigation had long been requested by the leadership of the police, under Gen Bheki Cele. Mr Kodwa said the probe reflected the Zuma government's commitment to fighting corruption. "It has long been coming ... but you don't want to do this in a rush ... it must be based on fact." The Presidency said the SIU's investigation of the SAPS originated from a referral by the Independent Complaints Directorate, the police watchdog body. The arts and culture investigation will include under-spending or misspending on World Cup projects dating back to the 2007 financial year. The unit has previously looked into housing tenders and social grant fraud. A director of the Institute for Accountability in Southern Africa, Paul Hoffman, described the probe as the strongest action against corruption by the Zuma administration to date. "Taken at face value this is the biggest step against corruption," he said. However, Mr Hoffman said it is noteworthy that Mr Zuma has not asked the Hawks to lead the probe. The unit was established after the Scorpions were disbanded last year. "It's the perfect sort of investigation that the Scorpions were trained, organised and set up to carry out," he said. Mr Hoffman also questioned whether the SIU has the capacity for what appears to be a major investigation. "I think the SIU is overworked already and misses the backup it got from the Scorpions." The SIU said all investigations are at an early stage. While it has the technical skills needed, an increase in its workload necessitated the need for more staff. "The SIU has embarked on a large recruitment drive to ensure that it can deliver on all the investigations," a representative said.

Ballooning State Wage Bill 'Unsustainable'
Reserve Bank figures suggest the public sector wage bill has been increasing by 6,5% above inflation every year for the past eight years, a progression which economists suggest is unsustainable and which may be "crowding out" other longer-term investments. The figures suggest a runaway aspect to public finances and substantially weaken the case of public sector trade unions in the current strike. They also suggest why the government is taking a harder line against strikers, as the public sector wage bill growth threatens to become unsustainable. The figures also show the effect of the occupation-specific dispensation, which has taken total public sector salary bill increases to extraordinary levels despite an economic downturn. At the national level, the public sector wage bill has increased by 8,4%, 11,4%, 10,1%, 9,2%, 13,1%, 12,1% and 18,7% per year between 2002 and this year. The total wage bill has increased from R140bn in 2002-03 to R322bn in 2009-10, an average increase of 10,38%. The data, drawn from the Reserve Bank Quarterly Bulletins, do not reflect the actual increases of individual public servants since they constitute the total figure, which includes increases in the total number of public servants. However, the bulletins also show provincial expenditure on public sector wages, which in some ways demonstrates more accurately the actual increases earned by public servants. They do so because these numbers reflect expenditure on mainly teachers and health workers, the constitutionally delegated functions of provincial government. Hence, they do not include expenditure on the wages of ancillary state institutions like the Council for Scientific and Industrial Research. At the provincial level, the increases were between 8% and 10% until 2006-07, after which they exploded. From then, the increases were 14,9%, 21% and 17,8% in each following year. The 21% increase in 2008-09 shows the effect of the "occupation- specific dispensation" which effectively provided a huge boost to public sector wages. When the whole period is considered, both national and provincial figures translate into average real increases of 5,62% and 6,54% per year for the past seven years. This longer-term data is corroborated by more recent Statistics SA (Stats SA) figures, which show the real increase per public sector worker was 10,7% in the fourth quarter of last year, on a seasonally adjusted basis. Standard Bank economist Danelee van Dyk says the overall trend is "worrying". "We are dealing with a confluence of different factors." These included affordability and the effect on the economy and investment. While public sector wage increases per worker were about 10,7%, the most recent data suggest the same figure for private sector employees was only 0,5%. At a time of global uncertainty, investors are seeking a good quality investment environment and the increases do not bode well for its creation, Ms van Dyk says. On the other hand, it was clear that the public service was picking up some of the employment burden caused by the economic downturn, thereby supporting the economy. Stats SA's figures show the public sector increased its formal workforce by 695000 jobs since the start of the economic downswing. The average quarterly increase was about 80000 jobs compared to the previous year. However, in the first quarter of this year, it had already declined to 42000, she says. The public sector does indeed make a positive contribution to personal disposable income in the economy, given that it employs 27% of the workforce, she says. A breakdown of Stats SA figures also shows that the share of total public sector employment is fast catching up to its share of gross earnings. The public sector earns about 33% of the gross earnings of formally employed people in the economy. Thus, its proportion of the total earnings pie is roughly the same as the proportional number of jobs in the sector. However, Ms van Dyk says this is not as benign as it seems. The sectors where there is a large share of employment -- for example, the wholesale and retail trade sector -- had a lower share of gross earnings, suggesting that the individuals in this sector were predominantly lower paid. This may reflect the skills bias in these sectors, and this probably explains why salaries in the financial sector were higher. Yet most jobs in the public sector did not require highly skilled workers. "I cannot justify the fact that the public sector is earning a third of gross earnings in the economy," she says.

Reserves Rise on Push to Revaluate Strong Rand
South Africa's gold and foreign exchange reserves rose 2,3%, boosted by currency revaluation effects and a surge in deposits from the government, which is helping the Reserve Bank to build its stockpile of foreign exchange. Analysts expect the trend to continue in the months ahead, as the Treasury steps in to help the Bank smooth out volatility and curb excess gains in the rand. Most of that increase stemmed from gains in the euro and the pound against the dollar, which accounted for about 614m of the total. Both currencies are components of the Bank's foreign exchange holdings. The Treasury deposited another 480m of its foreign exchange purchases with the Bank, after making a 614m deposit in June. "Rand strength provided a fitting ground for reserves accumulation in the month, driven predominantly by government," Standard Bank economist Danelee van Dyk said. "This trend should continue in the coming months, while the Bank (is expected to remain) largely on the sidelines for now." The rand appreciated by more than 4% against the dollar in July, giving ample scope for foreign exchange purchases, which have been dominated by the Treasury this year. The Bank has held off due to the cost of "sterilising" the rands generated by its buying of dollars. Analysts say the rand, already seen as too strong for SA's recovery, would probably have broken the key level of R7,20 against the dollar without the government's intervention. Against a trade-weighted basket of currencies, it has appreciated by more than 4% this year, spurring calls from labour unions for measures to curb its gains. It showed signs of strength again yesterday, in thin trade during the public holiday. The currency touched R7,18, its strongest level since January 2008, before retreating marginally to R7,225. Gains in the unit tend to erode the competitiveness of local exports and encourage imports, which in turn curbs domestic production of similar goods - and hurts employment. Net reserves at the Reserve Bank, which exclude foreign deposits, increased to 38,7bn in July from 38,2 bn. These do not include the Treasury's deposits. Ms van Dyk estimated that purchases of foreign exchange by the Bank itself amounted to just 33m. Other analysts said the Treasury's actions were doing little to stem the rand's rally, driven mainly by foreign purchases of local shares and bonds - a global trend spurred by investors' growing risk appetite. SA's reserves, which help shield its economy from external shocks, still tend to lag those of its emerging market peers. The data showed that net reserves cover 6,9 months of imports, unchanged from June. A weaker gold price reduced the value of gold reserves by 254m to 4,71bn, the data showed.

SADC Pushes Towards Customs Union
The 30th Summit of Heads of State and Government of the Southern Africa Development Community (SADC) closed August 17 with an affirmation to consolidate timelines for the establishment of the Free Trade Area (FTA) and speeding up preparations towards a Customs Union. In a communique, issued at the end of the two-day summit, which was attended by 14 Heads of State including President Jacob Zuma, the leaders said they remain unshaken and committed in the establishment of Customs Union which they say will help deepen regional integration. With regards to the Free Trade Area, which will enable easier trade among member states by easing time spent at border posts through the establishment of one-stop border posts, the summit adopted comprehensive work programme with concrete actions and timeless. The launch of the FTA is seen the initial step in the trade integration trajectory, and will move the regional bloc incrementally towards establishing a Customs Union which was set for 2010, a Common Market by 2015 and a Monetary Union by 2016. A regional central bank and a common currency are expected in 2018. However, to date, only 11 out of 15 SADC Member States have joined the protocol for the creation of this FTA. During the summit a high-level expert group was appointed to look at how the Customs Union can be speeded up. The team are expected to report back to the SADC by December 2011. "The main mandate of this group will be to consolidate and refine technical work so far done in order to reach agreement and common understanding of parameters, benchmarks, timelines, a model customs union and its implementation modalities," reads the communique. However, country membership overlaps exist in SADC, COMESA and EAC - all three organisations plan to be part of this customs union - a situation that presents technical challenges as a country cannot belong to more than one customs union. With regards to other economic challenges in the region, the leaders noted the adverse social-economic effects of the global economic crisis on the region. As a result, they have resolved to hold an extra ordinary summit on economic development.

GDP Figures Disappoint Economists
Leading economists revise their figures as South Africa's economy grew by a lower than expected 3,2% in the second quarter of 2010 and warn that worse may be coming Economists reacted negatively to a lower than expected Gross Domestic Product (GDP) figure released august 23. Statistics SA data shows GDP rose by 3,2% for the second quarter of 2010. Salomi Odendaal, an economist at Citadel cites a drop in activity in the market for the results. "It is clear from data received in recent weeks that there is some loss of momentum in economic activity in the second quarter," she said. Dennis Dykes, Nedbank 's chief economist, identifies the current figures could be the result of a drop in momentum in the economy and believes the figures this could push the SA Reserve Bank to reduce the repo rate. "Obviously it (GDP) is still growing, but not at the pace that we would have hoped. It would tend to support some easing ... it is reasonably firm growth, but the fact that we have lost some momentum, the rand is still very strong and that inflation has been coming in under expectations, probably all adds to arguments that they could ease once again in September," he said. Speaking to Business Day, economist at ABSA capital Gina Schoeman, said that these GDP figures were way below expectation even though she said quarter on quarter stats are often volatile. "We were looking for improvement, especially relying on data showing that consumers are rapidly recovering," she said. Quinten Berthenshaw from ETM believes the worst might still come as the current growth in GDP is not sustainable. "Much of the impetus in economic activity in the second quarter was derived from temporary factors which brings into question the sustainability of this growth in the remainder of the year and into 2011,"he said. Both Odendaal and Schoeman concurred with Bethenshaw saying that their forecasts for year on year growth in GDP had changed significantly. StatsSA said the manufacturing industry grew 6,9%. This increase was led by strong growth in the petroleum, chemical products, rubber and plastic products division, the food and beverages division and the motor vehicle, parts and accessories and other transport equipment division. The wholesale, retail, motor trade and accommodation industries increased 5,8% aided by an increase reflected on all sectors of trade. On a year-on-year basis, GDP grew by 3% led by the manufacturing industry, registering an increase of 7,9%; followed by a 3,9% increase in the agriculture, forestry and fishing industry and general government services. StatsSA said the nominal value added to the economy during the second quarter of 2010 was R657bn, which is R30bn more than in the first quarter of 2010. The rand did not react well to the GDP news and was at 7.4125 against the dollar at midday, almost 1% down for the day.

Economy 'Moving Sideways' – Standard
Standard Bank added its voice to increasing concern about the economy August 12, which it said is showing no signs of picking up the growth momentum seen in the first half. Announcing the bank's interim results to June, group CEO Jacko Maree said uncertainty about global conditions and high household debt could result in a "pull-back" of the recovery process. "The economy is moving sideways and I think the next few months will continue to be tough," Mr Maree said. According to Standard Bank's estimates, more than 1-million jobs were lost in the past five quarters. Analysts have not ruled out more job losses this year. Although its results were better than those of its rivals, Mr Maree was cautious about the future, underscoring the depth of the concern among local executives over how soon the economy will achieve sustained growth. Absa CEO Maria Ramos also said recovery continued to be affected by subdued economic activity. Absa reported a drop in headline earnings in the six months to June and expected muted earnings growth in the second half. So did Nedbank, whose interim earnings grew by just 0,2%. The subdued earnings growth bodes ill for the financial services sector, which contributes more than 21% to SA's gross domestic product (GDP) and whose performance reflects the pulse of the economy. Banks have been under pressure to grow interest revenues on sluggish demand for loans as consumers battle with spiralling debts and companies drastically reduce their appetite for credit in the face of weak markets, cash- flush balance sheets due to their unwillingness to invest, and uncertainty about the future. While expressing satisfaction with the bank's results, Mr Maree said he remained anxious about the recovery. The bank is expecting revenue growth in the near term to remain challenging, and its 2010 earnings to remain "under some pressure", he said. Cadiz Holdings analyst Rob Nagel said it is not surprising that Standard Bank is being conservative about predicting earnings growth. "Banks need some activity and clients are sitting on the sidelines," Mr Nagel said. Mr Maree said the effect of massive job losses, high household debt and slow growth in consumer demand are damping prospects for a quick turnaround. Although real GDP growth during the first quarter was 4,6%, lenders are growing less confident the pace of growth will be sustained for the rest of the year. "While the economy has grown relatively robustly in the first half of 2010, it is possible that the second half of the year will see a modest pull-back in economic activity, given the uncertain global environment and the debt overhang of households," Mr Maree said. "Extensive job losses are weighing heavily on the economy from both an economic and social perspective."With more than 1-million jobs lost over the past five quarters, it is clear that household demand will suffer and pressure on public finances will escalate," he said. Globally, Mr Maree said the tide has turned towards emerging markets, which are showing greater promise of growth compared with industrialised countries, whose economies are struggling to gain momentum. "The global economy is showing a two-track recovery profile: emerging markets are growing while mature economies slowly regain lost ground."Led by the Bric (Brazil, Russia, India and China) economies, emerging markets are continuing to move to the centre of global economic focus. "An axis of developing nations, including Latin America and Africa, is supporting the ongoing structural shift to the south and east," he said.

Business Confidence Improves From Recession
South Africa's Business Confidence Index (BCI) in July recorded the second highest reading this year at 84.3 points, the South African Chamber of Commerce and Industry (SACCI) said August 5. The July figure of 84.3 points is 1.1 point above the July 2009 level following on June 2010's 84.8 points. "The figure has improved from the recession but it is still not good enough at the moment," said SACCI economist Richard Downing of the BCI'S composite weighted index of 13 sub-indices that include new vehicle sales and merchandise import and export volumes. According to the chamber, the month of July 2010 renewed focus away from the sentiment of the World Cup and returned it to the economic reality of a domestic economy struggling to gain momentum. The global economy also reflected tensions as the pace of positive financial market developments outpaced a lagging real economy, SACCI said, adding that business confidence has yet to perceive strong and real economic prospects. "If July 2010 is compared to June 2010 (month on month) five sub indices of the BCI were positive, four were negative and four remained neutral," said the chamber. Sub-indices of the volumes of merchandise exports as well as imports recorded a relative strong performance compared to previous months. "The Soccer World Cup 2010 was an exceptional success and although it raised expectations during June 2010, a special effort is required to sustain the positive momentum and enhance the business outlook. Stronger domestic demand and stronger posturing in the international trade environment are necessary to promote sustained improvements in business confidence." SACCI said that relative to July 2009, eight of the BCI sub-indices improved with real retail sales and building construction still lagging recent economic improvements. It said that increase in liquidations is a legacy of the recession and the period of exuberance before the recession. "Higher real financing cost came about by default as inflation trended lower and nominal interest rates remained unchanged," said SACCI. The volatility of the exchange rate at present it said is primarily a function of the global financial flow of funds rather than a current account phenomenon. "South Africa's highly developed financial markets provide a comfortable platform for these flows to take place over the short term providing the potential for substantial returns. Leads and lags on proceeds or payments of global trade transactions also exaggerate the volatility of the rand exchange rate," explained SACCI. It said though the present rand strength was causing some discomfort, the reasons for the strength should be looked at before ill conceived policy on intervention is implemented thereby contributing to economic distortions with potential unintended consequences for the economy.
 

 

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