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UNCLAS SECTION 01 OF 03 PRETORIA 003426 
 
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PGOV, SF 
SUBJECT: SOUTH AFRICA ECONOMIC NEWS WEEKLY NEWSLETTER SEPTEMBER 28, 
2007 ISSUE 
 
 
¶1. (U) Summary.  This is Volume 7, issue 39 of U.S. Embassy 
Pretoria's South Africa Economic News weekly newsletter. 
 
Topics of this week's newsletter are: 
- SA Ranks Fifth for African Governance 
- Construction Boom Causes Cement Shortage 
- Man-days Lost to Strikes Increases 
- SA's Unemployment Rate Remains Static 
- From Table Mountain to the Big Apple 
- SA Drops Six Positions in Rankings for "Ease of Doing Business" 
- SA One of Least Corrupt African Countries 
- Energy Summit Reviews 1998 Energy Policy 
- Beware the Ties that Bind China and Africa 
 
End Summary. 
 
------------------------------------- 
SA Ranks Fifth for African Governance 
------------------------------------- 
¶2. (U) A new ranking of African governance places South Africa fifth 
out of 48 sub-Saharan countries because of falling life expectancy 
and the high incidence of violent crime.  Mauritius ranked first, 
followed by the Seychelles, Botswana and Cape Verde.  The index was 
created by the Mo Ibrahim Foundation in collaboration with the 
Kennedy School of Government at Harvard.  It measures governance in 
five broad categories:  safety and security; the rule of law; 
participation and human rights; sustainable economic development; 
and human development.  According to Mo Ibrahim Foundation board 
member Mamphela Ramphele, the index is "based on the notion that the 
chief legitimate purpose of a state is to deliver political goods to 
its citizens."  Ramphele stressed that the index measures 
achievements, not promises.  At the bottom of the list of 48 
countries are Sudan, Chad, the Democratic Republic of Congo, and 
Somalia.3. (U) The lawsuit, if successful, could be a catalyst for 
other mining companies to bring similar actions under SA law.  The 
SA government recently announced it had extended the deadline for 
mining companies to file for compensation for the loss of mining 
rights by two years to avoid a deluge of filings before the current 
deadline of April 30, 2007.  The extension will also allow potential 
claimants to obtain the results of the lawsuit before the claim 
deadline. (Business Day, September 26, 2007) 
 
---------------------------------------- 
Construction Boom Causes Cement Shortage 
---------------------------------------- 
¶3. (U) South African Reserve Bank Governor Tito Mboweni has 
expressed concern that South Africa's construction boom has led to 
shortages of cement and other materials.  "Sometimes I think there 
is too much construction happening," Mboweni told an audience at 
Rhodes University in Grahamstown, noting, "The consequences are that 
we have supply constraints."  His comment came the day after the 
latest First National Bank (FNB) commercial property cost index 
revealed that building costs surged 29% y/y in the second quarter of 
¶2007.  FNB property analyst John Loos blamed the price surge on 
input supply constraints.  "There is a shortage of building 
materials," Loos said.  (Business Day, September 26, 2007) 
 
---------------------------------- 
Man-days Lost to Strikes Increases 
---------------------------------- 
 
¶4. (U) The number of man-days lost to strikes rose to 11.5 million 
in the first half of 2007, in part because of a long public sector 
strike.  In comparison, only 1.6 million man-days were lost in the 
first six months of 2006.  The previous high was during the 
apartheid era in 1987, when strikes focused on political rather than 
economic goals, and 9 million man-days were lost to strikes in the 
course of the year.  With wage increases demanded by trade unions 
generally far above wage increases offered by employers in the first 
six months of 2007, the scene may be set for additional industrial 
action.  (Quarterly Bulletin, South African Reserve Bank, September 
2007) 
 
------------------------------------- 
SA's Unemployment Rate Remains Static 
------------------------------------- 
 
¶5. (U) According to Statistics South Africa, South Africa's 
unemployment rate was static at 25.5% in March -- virtually 
unchanged from a year ago and suggesting that faster economic growth 
 
PRETORIA 00003426  002 OF 003 
 
 
is doing little to spur job creation.  "Economic growth has not been 
particularly labor absorptive," said Standard Bank economist Shireen 
Darmalingam, noting, "The labor market remains in relatively poor 
shape."  Including discouraged jobs seekers -- jobless people who 
haven't looked for work in a month -- the unemployment rate rose to 
38.3% from 37% in September, Stats SA reported.  Darmalingam 
calculates that the economy needs to add 558,000 jobs per year to 
reduce the jobless rate to 14% by 2014.  Jobs have increased at an 
average annual rate of 500,000 over the last three years.  However, 
only 197,000 jobs were created between March 2006 and March 2007. 
(Business Day, September 27, 2007) 
 
------------------------------------ 
From Table Mountain to the Big Apple 
------------------------------------ 
 
¶6. (U) Delta Air Lines, the only United States-based carrier 
operating between South Africa and the U.S., announced plans for a 
new route from New York to Cape Town, effective June 4, 2008. 
Subject to government approval, Delta plans to begin three weekly 
flights between Cape Town and New York's John F. Kennedy Airport, 
via Dakar.  Delta already runs a daily service between Johannesburg 
and Atlanta.  This new route is part of Delta's international 
expansion plans, which include new daily service between Atlanta/New 
York and Amman, Cairo, Edinburgh, Malaga, Tel Aviv, and Nairobi in 
¶2008.  (South African Press Agency, September 26, 2007) 
 
--------------------------------------------- -- 
SA Drops Six Positions in Rankings for "Ease of Doing Business" 
--------------------------------------------- -- 
 
¶7. (U) South Africa has lost its status as the easiest African 
country to do business, dropping six slots in the World Bank's 
annual study "Doing Business 2008" that compares the impact of 
regulations on business in 178 countries.  According to the report, 
South Africa fell from 29th to 35th place because it has failed to 
cut red tape as quickly as other emerging markets.  Mauritius has 
risen to 27th place to displace South Africa as the top-ranked 
African country.  According to the World Bank's South Africa country 
office, the rankings were not a poor reflection on South Africa, 
which remains a good place to do business.  South Africa still ranks 
within the top fifth of countries evaluated and is ranked 9th for 
protecting investors.  The National Credit Act helped South Africa 
improve its ranking for "getting credit" to 26th place, while more 
onerous regulations for registering property and paying taxes 
dropped South Africa's ranks in those categories to 76th and 61st 
place, respectively.  Labor legislation was noted as a barrier to 
doing business.  South Africa ranks 91st in the "ease of employing 
workers" category.  (The Times and Business Day, September 27, 
2007) 
 
----------------------------------------- 
SA One of Least Corrupt African Countries 
----------------------------------------- 
 
¶8. (U) South Africa is perceived to be one of the least corrupt 
countries in Africa, according to Transparency International's 
Corruption Report released on September 26.  The Corruption 
Perception Index (CPI) ranks South Africa second, just below 
Botswana, for African countries.  South Africa ranks 43 out of 180 
states monitored.  (Pretoria News, September 27, 2007) 
 
---------------------------------------- 
Energy Summit Reviews 1998 Energy Policy 
---------------------------------------- 
 
¶9. (U) The South African Department of Minerals and Energy organized 
a two-day Energy Summit September 24-25 to engage with stake-holders 
in reassessing South Africa's energy policy as set forth in the 
white paper on energy adopted in 1998.   Speaking to reporters 
during the event, DME DG Sandile Nogxina said all areas of policy 
would be scrutinized.  "We need to ask whether the assumptions that 
underpinned the policy of 1998 are still relevant," he noted.  The 
white paper singled out deregulation and greater commercialization 
and competition as cornerstones of future policy.  Nogxina stated 
that crude oil was now $80 per barrel, compared to $10 in 1998.  He 
emphasized that the role of the state was critical in striking the 
healthy balance between the interests of capital and national 
objectives, like affordable access to energy for the population. 
The white paper concludes that there may be delays in achieving 
 
PRETORIA 00003426  003 OF 003 
 
 
deregulation in the liquid fuels market, given growing energy supply 
concerns and failure to meet identified milestones.  An accompanying 
editorial welcomed private participation in South Africa's growing 
power needs, marked by the appointment of an AES-led consortium to 
build two gas-fired power plants of 1,000 MW.  The editorial noted 
that plans to unbundle and privatize state-owned Eskom have fallen 
by the way-side.  Identification of Eskom as the single buyer of 
electricity and provider of a guaranteed off-take agreement may 
create the environment to attract independent power producers, 
targeted to provide 30% of new generation capacity over the next 
20-25 years.  (Business Day, September 26, 2007) 
 
------------------------------------------ 
Beware the Ties that Bind China and Africa 
------------------------------------------ 
 
¶10. (U) A Sunday Times editorial advised African countries to be 
careful in accepting gifts and increasing ties to China.  The 
editorial noted that Deputy President Phumzile Mlambo-Ngcuka was 
leading a team of ministers in Beijing, trying to make sure South 
Africa gets its share of the aid, trade and skills development China 
is offering in return for fair and preferably preferential access to 
its resources.  Describing a two-day conference in Cape Town 
studying the potential effect of China's deepening involvement in 
Africa, the writer quotes Chen Wenbing, First Secretary at the 
Chinese Embassy in Pretoria, as saying: "We are being told by our 
policy makers and government to take more care of the morality and 
to give more back to Africa.  We are asking what we can do to 
improve the image of China in Africa."  Panel participants compared 
China's overtures to countries that compete for Chinese economic aid 
or political backing to colonial-era locking up of resources.  The 
editorialist ends by warning Mlambo-Ngcuka and her team to be wary 
of yet another bilateral deal that leaves neighbors in the cold. 
(Sunday Times, September 23, 2007) 
 
BOST