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RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY
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UNCLAS SECTION 01 OF 03 PRETORIA 000323 
 
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USDOC FOR 4510/ITA/MAC/AME/OA/DIEMOND 
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USTR FOR COLEMAN 
 
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TAGS: ECON EFIN EINV ETRD EMIN EPET ENRG BEXP KTDB SENV
PGOV, SF 
SUBJECT: SOUTH AFRICA ECONOMIC NEWS WEEKLY NEWSLETTER JANUARY 26, 
2007 ISSUE 
 
PRETORIA 00000323  001.2 OF 003 
 
 
¶1. (U) Summary.  This is Volume 7, issue 04 of U.S. Embassy 
Pretoria's South Africa Economic News weekly newsletter. 
 
Topics of this week's newsletter are: 
- Blackouts Hit South Africa 
- Telkom Prices Hold SA Back 
- Mexico Looks to SA for Grain 
- New Law on Captive-Bred Animals 
- SA GM Crops Soar by 180% 
- Consumer Inflation Steady 
- Manual Launches R600m Survey 
End Summary. 
 
Blackouts Hit South Africa 
-------------------------- 
¶2. (U) SA was hit by widespread power outages that affected five 
provinces on January 18.  Although these outages were cleared after 
a few days, their occurrence has given rise to concerns about the 
adequacy of electricity supply over the next few years and the 
likely impact this could have on critical operations and future 
investment in energy-intensive industries.  SA generates some 50% of 
the continent's electricity and is heavily reliant on power to drive 
its energy-intensive economy, including mines, smelters, refineries, 
and factories.  According to the spokesman for the state-owned 
utility Eskom, six stations failed including one unit at the Koeberg 
nuclear power facility.  As a consequence, about 9,500 MW of Eskom's 
36,800 MW of generating capacity were not available during the power 
failure.  The cause of the failure is thought to be the automatic 
shutdown of the Koeberg unit (900 MW), which overloaded a system 
already experiencing unplanned and planned outages.  Other fingers 
point to poor government and management planning, a shortage of 
skilled technical staff, and coal delivery problems.  An 
investigation into the cause of the outages is in process. 
Regardless of the reason, SA is in for a difficult power supply 
period until new capacity comes on line in 2008.  While the 
international norm for spare generation capacity is 10%-15%, SA's 
spare capacity is well below 10% and some authorities believe it to 
be as low as 2%, leaving little margin for unplanned supply cuts. 
Government has budgeted $14 billion to upgrade generation capacity 
by 8,000 MW over the next five years, with the first new power 
supply due in 2008.  Until then SA seems set for planned load 
shedding.  (Business Day, January 19) 
 
Telkom Prices Hold SA Back 
-------------------------- 
 
¶3. (U) Reuters, the media and information provider that is one of 
the 100 largest companies listed on the London Stock Exchange, said 
Telkom's continued high telecommunication prices and low-quality 
bandwidth are deterring it from ploughing more money into SA.  While 
Reuters has been expanding in countries such as India, Chief 
Executive Officer (CEO) Tom Glocer said his company was reluctant to 
do the same in SA because of Telkom's high prices and poor 
bandwidth.  The statement from Glocer, in an interview during a 
brief stop in SA, will add to the pressure on government to inject 
new energy into sluggish efforts to promote telecommunications 
competition and foreign investment.  This also underlines recent 
research from economist and telecoms consultant Paul Cole, which 
shows that local consumers are paying 440 times more than they 
should for voice and data calls.  Glocer said if the 
telecommunication cost weakness was addressed, it would precipitate 
far greater investment from Reuters as SA had many advantages over 
other emerging markets, including stronger infrastructure, a 
well-run economy and sophisticated financial markets.  He said call 
center jobs that could have been SA's had already been lost due to 
these high costs.  Glocer's comments add to complaints from other 
groups.  Last year, the South African Contact Centre Community told 
Parliament that SA could potentially lose 100,000 new call center 
jobs because of high telecom costs, as global call center companies 
choose to operate in countries where costs were lower, such as India 
and the Philippines.  Eighteen months ago, international 
telecommunications group AT&T said it did not plan to increase its 
South African investment because of high costs, primarily in 
telecommunications.  President Thabo Mbeki has also repeatedly 
highlighted the high costs of telecom in SA.  (Business day, January 
17) 
 
Mexico Looks to SA for Grain 
---------------------------- 
 
PRETORIA 00000323  002.2 OF 003 
 
 
 
¶4. (U) Afgri Ltd., which trades approximately a quarter of SA's 
grain, said buyers from Mexico have asked for a quotation on a 
shipment of about 100,000 metric tons of white corn.  "That's about 
three boat loads," Wouter Mentz, Managing Director of Afgri4s 
trading unit, said on January 18.  According to Mentz, the interest 
from Mexico, where white corn is used to make tortillas, may have 
resulted in the 6.6 percent gain in South African prices this year. 
The order may be filled over the next 30 days.  In the current 
marketing year, which started in April 2006, SA has only exported 
white corn to African countries, with neighboring Zimbabwe the 
biggest buyer with 105,007 tons, or one-third of all shipments.  SA 
accounted for all the 1.78 million tons of grain exported from 
Africa in 2006.  (The Herald Mexico Edition, January 19) 
 
New Law on Captive-Bred Animals 
------------------------------- 
 
¶5. (U) The South African Government (SAG) will implement a new 
hunting law in March 2006, which is likely to impose a ban on 
hunting captive-bred animals.  The norms, standards, and regulations 
relating to the management of large predators will be implemented 
with the National Environmental Management and Biodiversity Act 10 
of 2004 (NEMBA).  The animals to be protected include lions, 
leopards and cheetahs, which are raised in captivity and then later 
released into the wild to be hunted for trophies.  The breeders of 
these animals feel that once the law is implemented they may lose 
the safari market, mostly American and British hunters, to other 
countries like Tanzania where hunters may have to pay $60,000 to 
shoot a lion, compared to $15,000 - $25,000 in SA.  The breeders 
also argue that closing the industry would have a negative economic 
impact on local villagers who sell their donkeys to feed the 
predators.  Predator hunting is reported to be a one billion rand 
industry in SA, with approximately 300 breeders keeping nearly 5,000 
lions.  Meanwhile, the SAG has been receiving increased pressure 
from animal rights activists and the general public to ban "canned" 
hunting because it is regarded as cruel and unethical.  The activity 
involves the shooting of captive-bred predators, lured by sound or 
scent into an area where escape is impossible.  (Business Day, 
January 17) 
 
SA GM Crops Soar by 180% 
------------------------ 
 
¶6. (U) According to figures released by the International Service 
for the Acquisition of Agri-Biotech Applications (ISAAA), the 
production of Genetically Modified (GM) crops in SA - maize, soya 
and cotton - last year totaled 1.4 million hectares, an increase of 
180% over the 500,000 hectares in 2005.  "The increase was the 
second highest percentage increase of any country in the world 
surpassed only by India with a 192% increase," ISAAA said.  ISAAA 
noted that SA was also a major producer of GM maize seed produced by 
numerous commercial and emerging farmers.  "These achievements, in 
no uncertain terms, reflect the trust and confidence of thousands of 
South African commercial and emergent farmers and consumers in crop 
biotechnology as the leaders in Africa of this unique agricultural 
technology," Lourie Bosman, president of a local farming body, Agri 
SA, said.  (I-net Bridge, January 23) 
 
Consumer Inflation Steady 
------------------------- 
 
7.(U) According to data released by Statistics South Africa 
(StatsSA) on January 24, SA's targeted CPIX (Consumer Price Index 
excluding interest rates on mortgage bonds) inflation was steady at 
5% year-on-year in December, slightly below forecasts.  Analysts 
said the steady CPIX, measuring 5% for three consecutive months, 
reduced pressure on the central bank to raise interest rates again 
when its Monetary Policy Committee (MPC) meets in February.  "We now 
think it's unlikely that the CPIX will breach the upper limit of the 
target (3% to 6%) and it could encourage the MPC to leave interest 
rates unchanged at the next MPC meeting," Nedbank economist Magan 
Mistry said.  The central bank has forecast CPIX to breach the upper 
end of the target range in April 2007, but sharp falls in fuel costs 
on the back of lower international crude oil prices may slow 
inflation in the months ahead.  (Mail & Guardian, January 25) 
 
 Manual Launches R600m Survey 
---------------------------- 
 
PRETORIA 00000323  003.2 OF 003 
 
 
 
8.(U) A R600 million community survey which will collect 
demographic, geographic, social and economic data was launched by 
Finance Minister Trevor Manual on January 22.  The survey, the first 
of its kind in SA, is the largest household survey after the census 
survey in 2001.  The survey will be undertaken by Statistics South 
Africa (Stats SA) from February 7 to February 28 and the results are 
expected to be published by October 2007.  Manuel encouraged all 
South Africans who would be participating in the survey to share 
knowledge of their households and of themselves.  "It is important 
for people to understand the value of this community survey," Manuel 
said.  The survey will produce data that can be used to assess the 
impact of socioeconomic policies, measure service delivery and 
provide an indication as to how far the country has gone in 
eradicating poverty.  (Fin24, January 22) 
 
FDI in SA Slowing Down 
---------------------- 
 
¶9. (U) Recent data released by the United Nations Conference on 
Trade and Development (UNCTAD) revealed a drop in foreign direct 
investment (FDI) in SA by 43% last year.  The release showed FDI had 
fallen from $6.4 billion in 2005 to $3.7 billion in 2006.  Chief 
economist for Econometrix questioned the figures explaining that 
Barclays' acquisition in 2005 of Absa accounted for a large portion 
of foreign investment, which helped to catapult SA's FDI from $0.8 
billion in 2004 to $6.4 billion in 2005.  Although Barclay's 
acquisition was a "big jump" for foreign investment in 2005, it does 
not accurately reflect the steady growth in the SA economy.  (Cape 
Argus, January 25) 
 
BOST