VZCZCXRO6420
RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHSA #0415/01 0331332
ZNR UUUUU ZZH
R 021332Z FEB 07
FM AMEMBASSY PRETORIA
TO RUEHC/SECSTATE WASHDC 8022
RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY
RUCPCIM/CIMS NTDB WASHDC
RUCPDC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEHJO/AMCONSUL JOHANNESBURG 6137
RUEHTN/AMCONSUL CAPE TOWN 3911
RUEHDU/AMCONSUL DURBAN 8552

UNCLAS SECTION 01 OF 03 PRETORIA 000415 
 
SIPDIS 
 
DEPT FOR AF/S/MTABLER-STONE; AF/EPS; EB/IFD/OMA 
USDOC FOR 4510/ITA/MAC/AME/OA/DIEMOND 
TREASURY FOR OAISA/RALYEA/CUSHMAN 
USTR FOR COLEMAN 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EINV ETRD EMIN EPET ENRG BEXP KTDB SENV
PGOV, SF 
SUBJECT: SOUTH AFRICA ECONOMIC NEWS WEEKLY NEWSLETTER FEBRUARY 02, 
2007 ISSUE 
 
PRETORIA 00000415  001.2 OF 003 
 
 
¶1. (U) Summary.  This is Volume 7, issue 05 of U.S. Embassy 
Pretoria's South Africa Economic News weekly newsletter. 
 
Topics of this week's newsletter are: 
- Drop in Producer Inflation 
- Slowdown in Credit Growth 
- Small Trade Surplus in December 
- IPR Awareness Promoted by SARS 
- Eight out of Ten Businesses Affected by Crime 
- Appeals Against Nuclear Fuel Plant Overruled 
- FCB Meets BEE Targets 
- Nissan to Spend R95m on Infrastructure 
- Plan to Bring Retail and Manufacturing into BEE Net 
End Summary. 
 
 
Drop in Producer Inflation 
-------------------------- 
 
¶2. (U) According to data released by Statistics South Africa (Stats 
SA) on January 26, South Africa's Producer Price Index (PPI) 
increased by 9.3% year-on-year (y/y) in December 2006 from a 10.0% 
y/y increase in November.  Economists expected an increase of 10.3%. 
 December's increase was due to annual increases in the price 
indices for locally produced commodities (+7.0 percentage points) 
and for imported commodities (+2.3 percentage points), Stats SA 
noted.  Stats SA reported that PPI increased 7.7% in 2006, as 
compared to 3.1% in 2005.  PPI increased 0.6% and 1.7% in 2004 and 
2003 respectively.  (Fin24, January 25) 
 
Slowdown in Credit Growth 
------------------------- 
 
¶3. (U) Official South African Reserve Bank (SARB) data, released on 
January 29, showed that growth in demand for credit by the private 
sector slowed to 25.81% in the year to December from 26.77% in the 
year to November.  During the same period, the broadly defined M3 
measure of money supply grew by 21.93% from November's 25.33%. 
Based on this data, together with official figures showing a 
slowdown in consumer and producer inflation, many analysts now 
believe that interest rates will not be increased at February's 
Monetary Policy Committee (MPC) meeting.  The MPC raised interest 
rates by 200 basis points in 2006 and will meet in February to 
decide on the next move.  SARB Governor Tito Mboweni had previously 
warned that debt levels were worrying.  Faster economic growth in 
the economy has been driven largely by domestic demand, pushing 
household debt to a record 73% of disposable income.   (Business 
Day, January 30) 
 
Small Trade Surplus in December 
------------------------------- 
 
¶4. (U) Data released by the South African Revenue Service (SARS) on 
January 31, showed a trade surplus of R388 million ($55 million) in 
December compared with a deficit of R10.5 billion ($1.5 billion) in 
November.  A Reuters survey of economists had predicted a R2 billion 
deficit in December.  Although a surplus is normally recorded in 
December, this was the smallest surplus on record, analysts said. 
According to SARS, imports of crude oil declined by R3.6 billion 
($0.5 billion) in December, while imports of machinery and 
electrical appliances were down R3.7 billion ($0.52 billion), 
contributing to the overall 30% decline in imports.  Exports fell by 
11.6% compared to November.  Analysts said the fall in exports and 
imports could largely be attributed to seasonal shutdowns during the 
holiday period, but the data was still better than expected. 
Infrastructure spending in the coming years is expected to keep 
demand for imports high.  (Business Day, February 1) 
 
IPR Awareness Promoted by SARS 
------------------------------- 
 
¶5. (U) In honor of World Customs Day, SARS Deputy Chief Operations 
and Head of Customs, Leonard Radebe, has begun to push for 
Intellectual Property Right (IPR) awareness.  On SABC News, Radebe 
explained the various types of IPR crimes, including the 
counterfeiting of goods ranging from Nike products to medicines.  He 
described training programs provided for customs officials, 
including ethics training to counter corruption among border 
officials.  He called for the public to play a role in halting IPR 
 
PRETORIA 00000415  002.2 OF 003 
 
 
crimes by providing SARS with any feedback of possible counterfeit 
products.  The news clip also included references to local IPR 
organization hotlines, and SARS hotlines for suspicious trading 
activity.   Radebe also penned an article for Pretoria News 
outlining the seriousness of IPR crimes, their economic effect, as 
well as the effect of counterfeit trade on South Africa.  (SABC3 
January 26, Pretoria News January 26) 
 
Eight out of Ten Businesses Affected by Crime 
--------------------------------------------- 
 
¶6. (U) According to Grant Thornton's 2007 International Business 
Report (IBR), 84% of medium-to-large privately held businesses in 
South Africa reported that they, their staff or families of staff 
have been personally affected by crime over the past 12 months.  The 
200 business surveyed have been affected by crimes such as 
housebreaking, hijacking, assault, road rage or similar offenses. 
Of those medium-to-large privately held businesses affected by 
crime, 88% reported having incurred increased costs for security, 
65% report decreased productivity and motivation of staff and 41% 
report a decrease in creativity, ingenuity and resourcefulness of 
staff.  Grant Thornton's National Chairperson, Leonard Brehm, said 
that business must be able to operate in a safe environment if South 
Africa is to meet its growth targets.  "This can only be achieved 
through strong and sustained action by government and security 
agencies, supported by a culture of community participation in 
assisting with the detection and control of crime," he said.  The 
statistics do not include the occurrence of white- and blue-collar 
crime within businesses.  (I-net Bridge, January 31) 
 
Appeals Against Nuclear Fuel Plant Overruled 
-------------------------------------------- 
 
¶7. (U) The Minister of Environmental Affairs and Tourism (DEAT), 
Marthinus van Schalkwyk, dismissed appeals against the establishment 
of a Pilot nuclear-Fuel Plant (PFP) in Pelindaba outside Pretoria. 
After considering the diverse appeals from various interested 
groups, Van Schalkwyk granted authorization to the state-run South 
African Nuclear Energy Fund (SANEF) to develop the PFP.  According 
to The Record of Decisions (ROD), the formal response document to 
the public, the approval was granted on the grounds that the 
negative environmental impacts associated with project can be 
mitigated, on condition of compliance with the law.  The other 
reasons given were that there has been sufficient public 
participation in the process, and that no fatal flaws were 
identified during the Environmental Impact Assessment (EIA). 
Meanwhile the opponents of the Minister's decision argue that it may 
have been prompted by the widespread blackouts which occurred in 
South Africa the week before.  (Business Day, January 30) 
 
 FCB Meets BEE Targets 
---------------------- 
 
¶8. (U) THE world's third largest advertising agency, U.S.-listed 
Interpublic Group (IPG), has taken a novel approach to Black 
Economic Empowerment (BEE) by agreeing to give 24% of its 74% 
shareholding in its South African arm, FCB SA, to local staff for 
free.  The deal was struck to allow FCB SA to meet BEE targets.  FCB 
SA is the fifth-largest revenue generator in IPG's global business, 
which spans 130 countries and reported revenue of R290 million ($41 
million) in 2006, which according to some experts keeps it level 
with Ogilvy as the two largest advertising agencies in SA.  FCB SA's 
Chief Executive Officer (CEO) Neil van der Weele said that the deal 
under which IPG would "lend" its 24% of FCB SA to staff was only 
reached after "tough negotiations" in the US.  Effectively, this 
increases FCB's black ownership level from 25% to 35%.  Van der 
Weele said FCB SA's board will also now have the same number of 
black and white directors.  By making this concession, IPG is giving 
up its dividend stream from SA, and the new shareholders will get 
immediate right to dividends, as well as voting rights.  However, in 
10 years IPG has the right to take back the shares it is now 
"lending" to the staff trust.  The Association for Communication and 
Advertising was reported in the Financial Mail in December as saying 
that even though 76% of advertising agencies had more than 26% black 
ownership, nearly two-thirds of their staff was white.  (Business 
Day, January 24) 
 
Nissan to Spend R95m on Infrastructure 
-------------------------------------- 
 
PRETORIA 00000415  003.2 OF 003 
 
 
 
¶9. (U) Nissan Diesel and its dealer network are to spend R89-million 
($12.5 million) on new infrastructure developments across South 
Africa, the truck manufacturer has announced.  An additional R6 
million (R0.8 million) will be invested in the training of 
much-needed technical apprentices and sales personnel.  Dealer 
infrastructure investment amounted to R34 million ($4.8 million) in 
¶2006.  Executive Vice-President of Nissan Diesel South Africa, Frans 
Cloete, said, "Trucking forms an integral part of the South African 
economy and it is of great importance to ensure that the wheels of 
industry and business continue to rotate effectively and 
productively."  Nissan Diesel SA wants to increase its market share 
to around 13%, in an industry that is expected to sell up to 38,000 
units in 2007.  (I-Net Bridge, January 22) 
 
Bring Retail and Manufacturing into BEE Net 
--------------------------------------------- ------ 
 
¶10. (U) The Department of Trade and Industry (DTI) is undertaking a 
review of South Africa's black empowerment legislation to ensure 
that sectors such as retail or export manufacturing, which have 
little reason to empower themselves under current legislation, are 
brought into the empowerment net.  Polo Redebe, DTI's Chief Director 
for Black Economic Empowerment (BEE), explained to parliament that 
current BEE legislation relies on voluntary economic incentives such 
as eligibility for government tenders or licenses.  However, large 
sections of the economy are impervious to these incentives, with the 
result that some of the biggest beneficiaries of economic growth are 
not required to do anything about empowerment.  (Business Day, 
February 1) 
 
BOST