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FM AMEMBASSY PRETORIA
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UNCLAS SECTION 01 OF 04 PRETORIA 000598 
 
SIPDIS 
 
DEPT FOR AF/S/MTABLER-STONE; AF/EPS; EB/IFD/OMA 
USDOC FOR 4510/ITA/MAC/AME/OA/DIEMOND 
TREASURY FOR TRINA RAND 
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 MARCH 20, 2008 
ISSUE 
 
PRETORIA 00000598  001.2 OF 004 
 
 
¶1. (U) Summary.  This is Volume 8, issue 12 of U.S. Embassy 
Pretoria's South Africa Economic News Weekly Newsletter. 
 
Topics of this week's newsletter are: 
- Civil Construction Boom 
- Increase in World Cup-Related Investments 
- Dubai Group Game for Investment 
- Cisco to Open Technical Skills Facility 
- Coca Cola Opens Quality Testing Lab 
- Eskom Resumes Load-Shedding 
- Green Light for New Power Station 
- SAG Rolls-Out "Green" CFL Lamps 
- 15 Million Euro Carbon Credit Deal 
- Undersea Cable Gets Green Light 
- Tribunal Approves Neotel Acquisition 
End Summary. 
 
----------------------- 
Civil Construction Boom 
----------------------- 
¶2. (U) The civil construction sector is expected to grow 33% in 
2008, while the residential and nonresidential construction market 
is heading for slow growth.  The boom may last through at least 
2015, propelled by government infrastructure spending of R560 
billion ($70.9 billion) over the next three years, on top of planned 
spending by public utility Eskom of R1 trillion ($126.6 billion) on 
new power plants.  Strong demand and rising commodity prices are 
also driving expansion in mining, which will benefit the 
construction sector.  According to South African Reserve Bank data, 
the value of construction works amounted to R46 billion ($5.8 
billion) in 2007, a 32% increase over 2006.  (Business Day, March 
12, 2008) 
 
----------------------------------------- 
Increase in World Cup-Related Investments 
----------------------------------------- 
¶3. (U) SAG will increase spending to "upwards" of R30 billion ($3.8 
billion) on the 2010 FIFA World Cup, according to a report released 
on March 18.  Some R20 billion ($2.5 billion) have been allocated as 
direct investment in infrastructure.  Deputy President Phumzile 
Mlambo Ngcuka admitted that "in some instance" budget estimates were 
conservative and adjustments and increases had to be made.  With 
only 815 days before the 2010 World Cup kick-off, the report showed 
that building of the stadiums in the host cities was on track. 
Preparations for transport, information and communication 
technologies, electricity supply, safety and security, economic and 
social legacy projects, tourism and communication, were also under 
way.  (Engineering News, March 18, 2008) 
 
------------------------------- 
Dubai Group Game for Investment 
------------------------------- 
 
¶4. (U) Dubai World, the investment arm of the Dubai government, has 
acquired majority shareholdings in three game reserves founded by 
Eastern Cape ecotourism entrepreneur Adrian Gardiner.  Dubai World 
acquired 80% interests in the Shamwari Game Reserve, Sanbona 
Wildlife Reserve and Jock Safari Lodge.  According to media reports, 
the deal with Shamwari is valued at about R600 million ($75.9 
million).  Dubai World was part of the foreign consortium that won 
the bid to acquire the Victoria & Alfred Waterfront, SA's 
most-visited tourism and leisure development, for more than R7 
billion ($886 million) in 2007.  Dubai World Marketing and PR 
Manager Shadleigh Roscoe said the company had created a "sub-brand" 
called Dubai World Conservation Africa and this brand was 
responsible for "ecotourism for the company in Africa".  Dubai World 
Qresponsible for "ecotourism for the company in Africa".  Dubai World 
Chairman Sultan Ahmed Bin Sulayem said "this transaction affords the 
prospect to grow both the SA economy and tourism demand."  The 
company is expected to invest $1.5 billion in Africa over the next 
five years.  Dubai World representatives expected tourism to 
increase dramatically as a result of the 2010 FIFA World Cup.  "The 
country should be receiving up to six million tourists a year," 
according to Dubai Africa CEO James Wilson.  Dubai Wilson hinted at 
future developments in KwaZulu-Natal, adding that the new airport 
under development north of Durban "would open up the coastline". 
The group was looking at investing in hotels, shopping complexes, 
residential developments and golf resorts. The company's R900 
million ($111 million) luxury resort in the V&A Waterfront, the 
country's first seven-star hotel, is expected to be completed by 
 
PRETORIA 00000598  002.2 OF 004 
 
 
June 2009.  (Business Times, March 16, 2008 and Business Day, March 
17, 2008) 
 
--------------------------------------- 
Cisco to Open Technical Skills Facility 
--------------------------------------- 
 
¶5. (U) Cisco announced the launch of its Global Talent Acceleration 
Program (GTAP) in Johannesburg.  GTAP aims to develop local 
next-generation network consulting engineers.  Cisco indicated a 
goal to further develop homegrown technical skills through education 
initiatives.  The GTAP facility would eventually act as a hub for 
Africa.  Cisco's South African partner, Torque IT, was one of the 
first companies signed up to host and manage the program training 
facility.  The program would employ and train South African-based 
recruits at the professional and associate level, and selected 
students would go through a program combining theory, industry 
exposure and hands-on experience.  Within the next 12 months to 18 
months, the facility would expand in three directions.  The first 
being a 'professional track', which would draw in students with 
about three years to five years of work experience.  Following that, 
Cisco partners would have the opportunity to put their own staff 
through GTAP.  Finally, students would be recruited to the 
Johannesburg facility from a range of sub-Saharan African countries. 
 This could position SA as a technology leader in the region. 
"Cisco is growing rapidly in South Africa, and we have witnessed 
that demand for technical skills has undoubtedly exceeded supply. 
The launch of GTAP furthers our commitment to support governments in 
addressing the shortfall," said Cisco Emerging Markets Senior 
Director Phil Wolfenden.  Cisco had already been working with the SA 
State Information Technology Agency on the upgrade of its government 
network.  (Engineering News, March 13, 2008) 
 
----------------------------------- 
Coca Cola Opens Quality Testing Lab 
----------------------------------- 
¶6. (U) Coca Cola launched a new $6 million quality testing 
laboratory in Guateng, which it lauded as its most technologically 
advanced facility in the world.  The facility would test Coca Cola 
products from bottlers in 56 African countries and territories, to 
make sure that their quality was on par with products from "New 
York, Paris, or London", a top official said at the launch function. 
 The facility offered analytical and technical support to bottlers 
in Africa, testing aspects including the torque of the bottle cap, 
gas volumes, temperature, pressure, and acid volumes.  Coca Cola 
Global Quality Analytical Services Director Robin Kumoluyi noted 
that the Africa Technical Center employed 32 full-time workers, 
creating 19 new positions.  Engineering News, March 17, 2008) 
 
--------------------------- 
Eskom Resumes Load-Shedding 
--------------------------- 
¶7. (U) Unscheduled load shedding by public utility Eskom resumed on 
March 17, owing to unplanned outages of four large power plants over 
the weekend, resulting in a loss of some 2,400 MW, in combination 
with a 3% surge in demand due to cold weather.   Eskom spokesman 
Andrew Etzinger explained that Eskom hoped to have two of the four 
units back on line by March 18, but the situation would remain tight 
Qunits back on line by March 18, but the situation would remain tight 
through the week.  The company said that it was currently using gas 
turbines to minimize load-shedding.  Eskom had not imposed power 
cuts on residential neighborhoods since February 4.  The power 
utility had advised customers that it was moving to the power 
rationing phase of its emergency response planning, that it would 
commence preemptive load-shedding on March 31 and that customers who 
had failed to cut use by the required 10% would suffer electricity 
cuts.  Eskom previously announced a July 1 dead-line for the 
introduction of a system of incentives to support power 
conservation, aspiring to move beyond load-shedding.  The current 
power rationing phase was designed to bridge the gap between the 
stabilization and conservation phases.  (Business Day, Classic 
Business News, Engineering News, March 18, 2008) 
 
--------------------------------- 
Green Light for New Power Station 
--------------------------------- 
¶8. (U) South Africa's Environmental Affairs and Tourism Minister 
Marthinus van Scalkwyk dismissed on March 17 appeals lodged against 
construction of Eskom's new coal-fired 5,400 MW power station 
Project Bravo in Witbank in Mpumalanga.  The Minister announced that 
 
PRETORIA 00000598  003.2 OF 004 
 
 
"the plant, which formed part of Eskom's plans to boost generation 
capacity as the country was currently experiencing a serious supply 
shortfall, would be fitted with the most advanced air pollution 
abatement equipment ever installed in a South African power 
station."  Eskom would install flue-gas desulphurization technology 
in order to remove 90% of the sulphur dioxide from the emissions. 
Project Bravo falls in the recently declared Highveld Priority Area 
and would be subject to detailed scrutiny for air quality impacts. 
The ministry's decision also mandated that the new power station be 
carbon capture ready, requiring submission of a report detailing 
preferred technology before proceeding with construction.  (Business 
Day, Engineering News, March 18, 2008) 
 
------------------------------ 
SAG Rolls-Out "Green CFL Lamps 
------------------------------ 
¶9. (U) The SAG has successfully distributed over 12 million 
energy-saving, compact fluorescent lamps (CFL) to households in four 
provinces in the last three years.  The initiative known as the 
National Electricity Emergency Plan was introduced in the Western 
Cape Province in 2006 as a measure to reduce the high demand for 
power in the area.  Over 580,000 homes in KwaZulu- Natal were later 
retrofitted with more than four million CFLs in the northern and 
southern parts of the province.  The SAG continues to supply an 
additional 4.5 million CFLs in parts of Gauteng, Free State and 
Limpopo Provinces as well as the Northern and Western Cape 
provinces.  Eskom spokesman Andrew Etzinger saw the CFL distributing 
program as "a practical response to the current strain on the 
system". (Sowetan, March 11, 2008) 
 
---------------------------------- 
15 Million Euro Carbon Credit Deal 
---------------------------------- 
¶10. (U) Diversified chemical and fertilizer company Omnia announced 
on March 17 its Euro 15 million ($23.4 million) agreement with the 
International Finance Corporation (IFC), under which the IFC will 
buy up to a million carbon credits from Omnia over the next five 
years.  This is the first carbon delivery guarantee agreement of its 
kind in sub-Saharan Africa, and only the second in the world, 
whereby the IFC mitigates the country and project risk, making the 
Certified Emission Reduction (CER) carbon credits accessible to a 
wider range of potential international buyers.  According to IFC 
Southern Africa Region Manager Saleem Karimjee, the IFC has 
committed to purchase a minimum of 50% of Omnia's CERs for the next 
five years and guarantee delivery of the credits to buyers, under 
the Clean Development Mechanism (CDM) of the Kyoto Protocol.  The 
Omnia CDM project, Envinox, is located at the group's Sasolburg 
plant, and could generate 420,000 CERs per year; from the nitrous 
oxide destruction facility installed at Omnia's nitric acid plant 
(nitrous oxide is a green-house gas.)  Omnia indicated that carbon 
credits generated by the plant were expected to add about R60 
million ($7.6 million) per year to the company's revenues. 
(Business Day, Engineering News, March 18, 2008) 
 
------------------------------- 
Undersea Cable Gets Green Light 
------------------------------- 
Q------------------------------- 
 
¶11. (U) The 21 parties involved in the East Africa Submarine System 
(EASSY) project (an undersea, fiber-optic cable along Africa's east 
coast) have agreed to begin construction of the $235 million system. 
 The EASSY cable will be the second of two systems to be constructed 
along a route that previously had no undersea cables.  EASSY, which 
has been plagued by delays, will connect SA and countries in East 
Africa with submarine cables linking the Middle East with Europe and 
Asia.  The EASSY consortium, consisting mainly of telecommunications 
operators, has commissioned France's Alcatel to build the cable 
system.  SA operators Neotel, MTN and Vodacom/Telkom are the largest 
investors in the cable system and together are investing at least 
$50 million in its construction.  Telkom Kenya's Simon Olawo, who 
heads the EASSY Project Secretariat, says a funding shortfall of $15 
million was resolved at a meeting in Tanzania last week.  "The 
project is now oversubscribed," he said.  He added that the parties 
are also confident the cable will be allowed to land in SA.  Olawo 
confirmed that EASSY has received an assurance from Department of 
Communications Director-General Lyndall Shope-Mafole that there 
would be no hindrance to the cable landing in SA.  Olawo downplayed 
suggestions that the market may be overtraded, with rival Seacom 
already constructing another cable system along a similar route. "We 
 
PRETORIA 00000598  004.2 OF 004 
 
 
think there's a market for two cables," he says, adding that there 
is enormous demand in the region for cheap bandwidth. "Costs will go 
down dramatically, especially with the two cables competing."  Olawo 
stated that EASSY will be ready for service by the end of 2009, 
about six months after Seacom's cable.   (Financial Mail, March 14, 
2008) 
 
------------------------------------ 
Tribunal Approves Neotel Acquisition 
------------------------------------ 
 
¶12. (U) South Africa's Competition Tribunal has approved a R230 
million ($29 million) Neotel acquisition of Transtel Telecoms, a 
division of State-owned Transnet.  Transnet also planned to enter 
into a master service agreement to appoint Neotel (the country's 
second, fixed-line operator) as the exclusive provider of electronic 
communications services to Transnet for five years.  Transnet's core 
rail and harbor operational communications services will remain 
within Transnet.  The disposal of Transtel Telecoms forms part of 
Transnet's non-core business disposal strategy, which is part of a 
turnaround strategy focusing on rail, port and pipeline 
infrastructure and operations.  (Engineering News, March 19, 2008) 
 
BOST