VZCZCXRO1054 
RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN 
DE RUEHSA #1186 1561404 
ZNR UUUUU ZZH 
R 041404Z JUN 08 
FM AMEMBASSY PRETORIA 
TO RUEHC/SECSTATE WASHDC 4638 
INFO RUCPDC/DEPT OF COMMERCE WASHDC 
RHEBAAA/DEPT OF ENERGY WASHINGTON DC 
RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE 
RUEHBJ/AMEMBASSY BEIJING 0806 
RUEHRL/AMEMBASSY BERLIN 0622 
RUEHBY/AMEMBASSY CANBERRA 0678 
RUEHLO/AMEMBASSY LONDON 1525 
RUEHMO/AMEMBASSY MOSCOW 0808 
RUEHNE/AMEMBASSY NEW DELHI 0489 
RUEHOT/AMEMBASSY OTTAWA 0637 
RUEHFR/AMEMBASSY PARIS 1362

UNCLAS PRETORIA 001186 
 
SIPDIS 
SENSITIVE 
 
STATE PLEASE PASS USAID 
STATE PLEASE PASS USGS 
DEPT FOR AF/S, ISN, EEB/ESC AND CBA 
DOE FOR T.SPERL, G.PERSON, A.BIENAWSKI, M.SCOTT, L.PARKER 
 
E.O. 12958: N/A 
TAGS: ENRG EPET EMIN EWWT EIND EINV SENV SF
SUBJECT: ELECTRICITY CRISIS STALLS COEGA ALUMINUM SMELTER 
 
 
¶1. (SBU) SUMMARY: The long-time government-championed aluminum 
smelter at Coega in the Eastern Cape is the highest profile casualty 
of South Africa's power crisis. The SAG is disappointed and still 
in denial over the postponement - and potential permanent loss - of 
its biggest greenfield project in the queue. The power crisis is a 
critical issue for potential foreign investors. End Summary. 
 
¶2. (U) The power crisis claimed a high-profile industrial casualty 
with Rio Tinto on May 29 postponing its $3 billion Coega aluminum 
smelter until 2012, when it is hoped South Africa would have sorted 
out its electricity problems, according to local press coverage. 
Rio Tinto CEO Dick Evan said in London the project had been 
suspended for three or four years and it would redeploy its team of 
approximately 200 engineers to other international projects. This 
raises doubts as to whether the power-intensive project will ever 
get off the ground. The project was proclaimed two years ago by the 
government as its largest greenfield investment and the long-sought 
anchor for the Coega Industrial Development Zone. 
 
¶3. (U) The delay comes despite recent assurances by the Coega 
Development Corporation and the government that the viability of the 
smelter was proven and that the current electricity crisis would not 
affect its implementation. Rio Tinto SA spokesman Robert Valdmanis 
said the pre-construction phase had been completed, but construction 
could not begin until guarantees about electricity requirements were 
in place. 
 
-------------------- 
On Again - Off Again 
-------------------- 
 
¶4. (U) The latest delay follows an announcement earlier this year 
by Rio Tinto CE Tom Albanese that the company would not go ahead 
until new power plants had been built and the electricity supply 
guaranteed - beyond the existing agreement with state power company 
Eskom. The postponement comes amid mounting calls for the scrapping 
of energy-intensive projects as the country battles a crippling 
power crisis. Critics have questioned the project with respect to 
the need to import the bauxite and the small number of jobs it would 
create. 
 
¶5. (SBU) Department of Foreign Affairs Director: USA Fadl 
Nacerodien asserted the deal was still very much alive to the 
Embassy team on the same day (but in advance of the announcement 
reported in the press the following day) at bilateral meetings. 
Department of Minerals and Energy Deputy Director General Nhlanhla 
Gumede told Energy Officer on June 3 the deal was still in play, 
citing the perseverance of the Coega Development Corporation. 
Department of Trade and Industry Manager: Americas Desk Cobs Pillay 
admitted to Energy Officer that the deal was stalled, but he was 
still bullish on the long-term prospects for the smelter and the 
Coega Industrial Development Zone. He said Middle Eastern investors 
showed a strong interest in the zone and they might even consider 
taking over the smelter project. 
 
--------------------------------------------- -- 
Comment - Successive Evaluation - Government Frustration 
--------------------------------------------- -- 
 
¶6. (SBU) The SAG has been promoting this flagship investment since 
2001 to seed additional investment at the Coega Industrial 
Development Zone and deep-water port near Port Elizabeth in the 
impoverished Eastern Cape. The anchor tenant aluminum smelter was 
first championed by Pechiney of France, but the project was acquired 
first by Alcan of Canada, then by Rio Tinto of the UK. Rio Tinto is 
now subject to a hostile takeover bid from BHP Billiton of 
Australia, so it is possible that yet another skeptical board may 
have to vet the long-delayed deal. This may be the ultimate delay - 
to never. It is difficult to quantify the magnitude of other 
investment lost to the power crisis, but it is clearly topic number 
one for potential FDI investors in energy-intensive industries. 
 
BOST