VZCZCXRO7851
RR RUEHDU RUEHJO
DE RUEHSA #1473/01 1161056
ZNR UUUUU ZZH
R 261056Z APR 07
FM AMEMBASSY PRETORIA
TO RUEHC/SECSTATE WASHDC 9430
RUCPCIM/CIMS NTDB WASHDC
RUCPDC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPARTMENT OF TREASURY WASHDC
RUEHJO/AMCONSUL JOHANNESBURG 6639
RUEHTN/AMCONSUL CAPE TOWN 4235
RUEHDU/AMCONSUL DURBAN 8765

UNCLAS SECTION 01 OF 03 PRETORIA 001473 
 
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 APRIL 26, 2007 
ISSUE 
 
¶1. (U) Summary.  This is Volume 7, issue 17 of U.S. Embassy 
Pretoria's South Africa Economic News weekly newsletter. 
 
Topics of this week's newsletter are: 
- Johannesburg Long-term Rating Upgraded 
- Ownership Component of BEE Unimportant 
- New Country of Origin Regulations 
- Rural Women Ensnared in Poverty Trap 
- South African Giant Retailers Go Green 
- March Inflation Up, But at Expected Levels 
- Work Permits for Professionals Underutilized 
- SA Celebrates World IPR Day 
 
End Summary. 
 
Johannesburg Long-term Rating Upgraded 
-------------------------------------- 
 
¶2. (U) International rating agency Fitch has upgraded the City of 
Johannesburg's long-term rating from A to A+, based on improved tax 
collection and a growing economy.  The rating increase means that 
the city's debt is seen as less risky, and this will enable it to 
borrow for its capital projects at a lower rate of interest.  Fitch 
said the upgrade reflected the city's improved operating 
performance, including improved tax collection, aided by the clean 
up and updating of its asset register.  This resulted in more assets 
on the city's balance sheet.  Fitch warned, however, that 
Johannesburg would need to consolidate its debt collection efforts 
to ensure that it did not allow bad debt to accumulate as it had in 
the past.  The agency said that Johannesburg contributed 16% of SA's 
GDP and employed 15% of the country's workers.  (Business Day, April 
25) 
 
Ownership Component of BEE Unimportant 
-------------------------------------- 
 
¶3. (U) Broad-based black economic empowerment is firmly on the 
agenda of medium to large privately held businesses, according to a 
survey released by Grant Thornton LLP.  The survey of 7,200 firms 
conducted at the end of 2006 found that 67% ranked skills 
development as the most important component of their BEE strategy, 
followed by employment equity at 59%.  Only 38% reported that black 
ownership is of great importance.  In fact, 16% of business owners 
reported that black ownership was not at all important for them to 
achieve their BEE targets.  According to Tony Balshaw, managing 
partner of Grant Thornton in Eastern Cape, "Businesses are beginning 
to understand that a broad-based approach to empowerment entails all 
seven elements of the codes [of good practice]."  (Business Day, 
April 25) 
 
New Country of Origin Regulations 
--------------------------------- 
 
¶4. (U) Department of Trade and Industry (DTI) Minister Mandisi 
Mpahlwa has signed the final regulations relating to "country of 
origin" labeling on clothing and textiles imported to SA.  The 
Merchandise Marks Act, which came into effect on April 14, is 
designed to prevent the importation of products with misleading 
labels, especially those that state that the goods originate from SA 
when in fact they are imported.  The Act also enables the DTI to 
exclude the use of certain marks.  Specifically, the Act prohibits 
the importation or sale in SA of merchandise or goods listed in the 
schedule, such as textiles, articles of textiles, clothing, shoes, 
and leather goods, unless the goods are clearly affixed with a 
country of origin label.  Retailers will now be required to attach 
labels indicating the country of origin and, if manufactured 
locally, whether imported material was used.  The DTI, South African 
Revenue Service (SARS), and the South African Bureau of Standards 
are tasked with ensuring enforcement of the regulations.  SARS will 
randomly detain consignments to conduct inspections, and 
non-compliant goods will be seized.  DTI also has requested that the 
large retail group Edcon provide workshops to inform the public of 
the new regulations.  (Business Day, April 20) 
 
Rural Women Ensnared in Poverty Trap 
------------------------------------ 
 
¶5. (U) Deputy President Phumzile Mlambo-Ngcuka called for public and 
private sector intervention to ease the plight of rural women during 
the 4th World Congress on Rural Women held in Durban.  Statistics 
 
PRETORIA 00001473  002 OF 003 
 
 
released at the forum indicated that a quarter of the South African 
population depends entirely on state grants.  According to 
Mlambo-Ngcuka, women are affected by unrewarding seasonal wage work, 
subject to demands of the household, and suffer from double 
exploitation and patriarchy.  Women are working hard for too little. 
 She said rural women remained in a poverty trap and factors 
perpetuating that poverty needed to be eradicated through a holistic 
response from private and public stakeholders.  Poverty factors 
included a lack of access to affordable basic infrastructure, poor 
health, not owning assets, poor or no skills, exposure to labor 
market risks, and no social security.  HIV and the Aids pandemic 
were also targeted as a factor that was forcing young girls to look 
after families.  She named initiatives such as micro-credit, 
co-operatives, adult education, and youth development as necessary 
to assist the poor rural women.  (Business Day, April 24 and The 
Sowetan, April 24) 
 
South African Giant Retailers Go Green 
-------------------------------------- 
 
¶6. (U) Two of SA's giant retail chains, Pick n' Pay Stores and 
Woolworths, have announced that they will commit to energy 
reductions and combating climate change.  Pick n' Pay Stores intends 
to become the first local retailer to disclose its carbon dioxide 
emissions, while Woolworths aims to reduce its "relative carbon 
footprints" by 30% in the next five years.  It plans to replace all 
its refrigerators with more environmentally friendly ones in an 
effort to reduce greenhouse gas emissions.  Pick n' Pay said that in 
addition to its energy reduction program, it would also stock only 
fish that are harvested in a sustainable way, such as hake, snoek 
and tuna.  Woolworths' CEO Simon Susman said his company would cut 
electricity consumption and transportation emissions by 30% and 20%, 
respectively.  Woolworths also plans to reduce food packaging, an 
area which it has been previously criticized for overdoing, by 30%. 
Susman said the company would reduce current packaging as well as 
recycle and reuse the current packaging material.  In the longer 
term, the company is evaluating the feasibility of investments in 
solar power, wind energy and heat recycling at its massive central 
delivery facility.  Beyond this retail sector, however, South 
African corporate commitments to environmental measures are few. 
(Business Report, April 23 and Financial Mail Magazine, April 13) 
 
March Inflation Up, But at Expected Levels 
------------------------------------------ 
 
¶7. (U) March's CPIX inflation (CPI less mortgage interest rates) 
rose in line with expectation to 5.5% year-on-year, up from 
February's 4.9%.  This brings the CPIX ever closer to exceeding the 
target bandwidth of 3-6%.  CPI was recorded at 6.1% year-on-year, up 
from last month's 5.7%, but at lower than expected levels.  The 
monthly rise in CPIX inflation of 0.9% is mainly attributed to 
increases in education and transport costs.  Annual increases in 
school and university fees increased by 8% year-on-year, while fuel 
prices, a subcomponent of transportation costs, rose 4.3% due to a 
24 rand cents/liter increase.  As reported last month, food price 
inflation due to the drought continues to cause pressure on CPIX. 
Next month's forecast indicates continued upward movement largely 
due the recently announced further increase in fuel prices by 69 
rand cents/liter. (Business Day, April 26) 
 
Work Permits for Professionals Underutilized 
-------------------------------------------- 
 
¶8. (U) Revised legislation last year enabled the Department of Home 
Affairs to simplify the recruitment of highly skilled foreigners to 
work in SA.  Under the legislation, the government identified 
critical sectors in which SA suffers from a severe shortage of core 
skills.  Quotas were then offered to enable professionals in these 
categories to apply for work permits without first securing 
permanent employment.  The categories include the financial 
services, engineering science, education and telecommunication 
sectors. 
¶9. (U) However, Minister of Home Affairs Nosiviwe Mapisa-Nqakula 
revealed during her announcement that 34,825 work permits will be 
available under this year's quota and that only 10% of last year's 
quota was actually used by the private sector.  She attributed the 
low utilization to the department's failure to adequately publicize 
the program, cumbersome application processes and red tape, 
immigration regulations that are overly burdensome for companies to 
bring in needed skills, foreign perception of high crime, and global 
 
PRETORIA 00001473  003 OF 003 
 
 
shortages of engineering skills. (Business Day, April 26) 
 
SA Celebrates World IPR Day 
--------------------------- 
 
¶10. (U) In celebration of World Intellectual Property Day, South 
African companies have focused on enhancing public awareness and 
altering public perception that piracy is not a crime.  Microsoft, 
in a two page newspaper insert, published numerous articles 
detailing the challenges of combating piracy, the need to alter 
public perceptions of the crime, the negative economic consequences 
caused by piracy, and how the public can recognize a pirated copy. 
The articles cite Business Software Alliance's report, which 
indicates that SA has a 36% piracy rate, and that reducing it to 27% 
over the next few years could add 15,000 jobs.  According to a 
leading IPR law firm, Bowman Gilfillan, counterfeiting in SA covers 
all areas from designer handbags to computer software, clothing, 
toys, and pharmaceuticals.  Crime syndicates are known to use 
counterfeiting as a way of laundering drug money.  Despite these 
negative aspects, the Group Manager for Microsoft, SA stated that 
although piracy is still a significant problem, SA has made 
considerable gains considering that its piracy rate was 64% in 1999 
compared to the current 36%. Department of Trade and Industry is 
also participating in World IPR Day by co-hosting an exhibition with 
local industry stakeholders and the Companies and Intellectual 
Property Registration Office.  The exhibits will be based on the 
World Intellectual Property Organization's (WIPO) theme "Encouraging 
Creativity." (Business Day, April 26) 
 
BOST