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TAGS: ECON, EFIN, EINV, ETRD, EMIN, EPET, ENRG, BEXP, KTDB, SENV,
PGOV, SF
SUBJECT: SOUTH AFRICA ECONOMIC NEWS WEEKLY NEWSLETTER APRIL 17, 2009
ISSUE
PRETORIA 00000831 001.2 OF 003
1. (U) Summary. This is Volume 9, issue 17 of U.S. Embassy
Pretoria's South Africa Economic News Weekly Newsletter.
Topics of this week's newsletter are:
- Business Index Shows Light at End of Tunnel
- Empowerment Fund Changes Strategy to Help Smaller Firms
- Telkom and AT&T Launch Strategic Alliance
- Tourism's Impact on Economy Still Upbeat
- Passenger Rail Services to Be Consolidated
- Granite Miners Have Two Months to Back Expropriation Claim
- New Green Paper on Minerals Beneficiation Launched
- R6 Billion Lost Annually to Illegal Fishing
End Summary.
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Business Index Shows Light at End of Tunnel
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2. (U) South Africa's leading economic indicator, which predicts
growth six to 12 months in advance, increased from 105.9 points in
January to 106.6 points in February, suggesting the recession may be
less severe than feared. The South African Reserve Bank's composite
leading business cycle indicator is compiled from data from surveys,
share prices, and South Africa's main trading partners. The figures
showed that four of the components measured by the indicator rose in
February: job advertisements in a Sunday newspaper; sales of new
passenger vehicles; the commodity price index; and the spread
between 10-year bonds and 91-day Treasury bills. The business
confidence, share prices, residential building plans, money supply,
manufacturing orders, and working hours components dropped. This
was the first time the indicator, which accurately predicted the
current economic downturn, had risen since February last year. It
has steadily declined from a peak of 127.2 in March 2007. Analysts
warned that an economic recovery depends on the extent of South
Africa's response to a pick-up in the global economy, which has
begun to show signs of improvement. It would also take time for
lower interest rates to inject some vigor into consumer spending,
the main growth engine of the economy. (Business Day, April 21,
2009)
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Empowerment Fund Changes Strategy to Help Smaller Firms
--------------------------------------------- ----------
3. (U) The National Empowerment Fund (NEF) plans to spend R700
million ($78 million) in 2009, mainly on providing finance for small
and medium-sized businesses. The economic slowdown has required the
NEF, which was set up to promote black economic empowerment (BEE),
to devote time and energy to assist distressed companies. The NEF's
total equity and loan exposure to the small business sector is about
R300 million ($33 million), and it has had to restructure financing
instruments for about 40% of its 177 beneficiaries because of the
difficult economic times. The fund has disbursed more than R978
million ($109 million) to 160 black entrepreneurs and
black-empowered businesses since its inception. Of this, 76% is
invested in deals of less than R5 million ($600,000) and 24% in
deals of more than R5 million ($600,000). A panel of business
mentors would also be deployed to help clients with various aspects
of their businesses, such as accounting, access to markets, and
Qof their businesses, such as accounting, access to markets, and
general strategic advice. (Business Day, April 20, 2009)
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Telkom and AT&T Launch Strategic Alliance
-----------------------------------------
4. (U) State-owned Telkom and AT&T signed a memorandum of
understanding that would allow the two companies to tap into each
other's networks, ensuring that African and multinational firms
based in Africa link more effectively to other global markets. The
contract is expected to be finalized in the next five months.
Telkom CEO Reuben September remarked that AT&T chose Telkom because
of its presence in 35 African countries (through the acquisition of
Africa Online and MWeb Africa), its strong international
connectivity, and strong enterprise relationship. AT&T Business
Solutions CEO Ronald Spears explained, "Through Telkom, AT&T would
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extend its world-class, internet-based network to sub-Saharan Africa
and strengthen its ability to serve the needs of its customers in
the key South African market." (Business Report and MoneyWeb, April
16-17, 2009)
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Tourism's Impact on Economy Still Upbeat
---------------------------------------
5. (U) Tourism's share of the economy kept rising in 2008,
contributing an estimated 8.4% to the gross domestic product (GDP).
Minister of Environmental Affairs and Tourism Marthinus van
Schalkwyk predicted a 12% contribution to GDP within five years.
While growth in foreign arrivals slowed to 5.5% in 2008 due to the
global economic slowdown - down from double-digit growth of the past
few years - the country still welcomed a record 9.6 million
tourists. Tourism added R70.5 billion ($7.8 billion) in direct
contributions to GDP, up 12% from 2007. The sector employed more
than 1 million people, up 7% from 2007. "The South African industry
continued to perform well in spite of pressures exerted by the
global financial crisis that had seen growth in the global industry
shrink to 1.3% last year," Van Schalkwyk said. South African
Tourism Board CEO Didi Moyle commented that an increase in flight
capacity was critical. "The U.S. market performed very well, and
was helped by Delta and South African Airways putting on double
daily flights to the U.S." The number of American visitors to South
Africa grew 3.8% to 287,438 despite the U.S. economy slipping into
recession. Despite the tough first few months of 2009, foreign
arrivals would grow this year, Moyle predicted. (Business Day,
April 17, 2009)
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Passenger Rail Services to Be Consolidated
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6. (U) South African Rail Commuter Corporation's Metrorail and the
passenger transport businesses operated by Transnet are undergoing a
merger to create a new Passenger Rail Agency of South Africa
(PRASA). PRASA's main goal will be to improve existing passenger
service, which is currently able to sustain about 650 million
passenger journeys a year. There is also a program to upgrade 2,000
coaches by the end of 2010. PRASA CEO Lucky Montana noted that
PRASA would need to introduce some 560 new coaches yearly for the
next 10 to 12 years if it is to match capacity to anticipated demand
growth and reposition commuter rail at the heart of the country's
public transport system. Montana admitted that such an aspiration
would require an investment far beyond the R25 billion ($2.7
billion) already allocated by national government for the next three
years. Montana said a plan for further investment was currently
before government. Future projects being considered include the
R8.6 billion ($988 million) Moloto corridor rail system between
Gauteng and Mpumalanga and a high-speed between Johannesburg and
Durban. PRASA is also assessing two serious bids to build a new
link between Cape Town and the city's international airport.
(Engineering News, April 10, 2009)
---------------------------------
Granite Miners Have Two Months to
Back Expropriation Claim
---------------------------------
Q---------------------------------
7. (U) The South African government has agreed to a two-month stay
of an International Centre for the Settlement of Investment Disputes
(ICSID) arbitration in which Italian granite miners claim that their
mineral rights are being expropriated by South Africa's minerals
legislation. The claimants had alleged that South Africa's Mineral
and Petroleum Resources Development Act (MPRDA) and South Africa's
BEE-mining charter had expropriated the indirect interests that the
granite miners held in the South African quarrying sector and had
otherwise violated the bilateral investment treaties that had been
signed between South Africa, Italy, and Belgium/Luxembourg. The
South African government said that the ICSID's tribunal had given
effect to the stay, which had come into being on March 28 and which
would expire on May 28. The South African government's agreement to
the stay followed its submission on March 27 of a package including
four witness statements, five expert reports on several specialized
disciplines, and 19 volumes of documentary evidence and legal
authorities. During the stay period, South African quarrying
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companies indirectly owned by the claimants would be expected to
complete their application for "old-order" rights to be converted
into "new-order" rights, subject to compliance with the MPRDA and
mining charter, to enable the company to prospect or mine for
minerals. (Mining Weekly, April 10, 2009)
--------------------------
New Green Paper on Minerals
Beneficiation Launched
--------------------------
8. (U) South Africa's Department of Minerals and Energy (DME)
recently launched the long-awaited minerals beneficiation strategy,
a draft document on which stakeholders were invited to make written
submissions. DME mineral policy and promotion Deputy Director
General Musa Mabuza explained that once comments come through, they
would be consolidated and the document would be taken to Cabinet to
be adopted as a policy position of the country. Chamber of Mines
Chief Economist Roger Baxter highlighted the importance of doing
proper analysis of the top ten minerals in South Africa to see what
was feasible and how to integrate the different stakeholders to play
a constructive engaging role in the process. The Department of
Trade and Industry said it viewed the strategy as valuable starting
point, as it was important for job creation, and said the strategy
was 100% backed by the department. (Mining Weekly, April 10, 2009)
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R6 Billion Lost Annually to
Illegal Fishing
---------------------------
9. (U) A report commissioned by the South African Institute for
Security Studies has revealed that illegal fishing in South African
waters was costing the country nearly R6 billion ($667 million)
annually. Most of the fish poached are hake, anchovies, sardines,
and shark. According to the report, Spanish vessels working with
local vessels are responsible for most of the poaching. South
African law does not allow the issuance of fishing quotas to foreign
vessels, but local quota holders often sell their quotas to Spanish
ships. The practice often results in large-scale poaching. The
Department of Environmental Affairs and Tourism (DEAT) is also
blamed for having allowed several vessels owned by a known and
convicted Spanish poacher Manual Martinez into the hake industry in
2007. DEAT reduced the hake quota by 14% between 2005 and 2007,
which resulted in a R300 million direct loss to the industry,
according to the report. (The Cape Times, April 13, 2009)