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UNCLAS SECTION 01 OF 03 PRETORIA 002738 
 
DEPT FOR AF/S/; AF/EPS; EB/IFD/OMA 
USDOC FOR 4510/ITA/MAC/AME/OA/DIEMOND 
TREASURY FOR TRINA RAND 
USTR FOR JACKSON 
 
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 DECEMBER 19, 
2008 ISSUE 
 
PRETORIA 00002738  001.2 OF 003 
 
 
¶1. (U) Summary.  This is Volume 8, issue 51 of U.S. Embassy 
Pretoria's South Africa Economic News Weekly Newsletter. 
 
Topics of this week's newsletter are: 
 
- Inflation Lower 
- Residential Building Continues to Slow 
- Bill Simplifies Registration Process for New Drugs 
- Intelsat to Launch $250 Million Satellite for Africa 
- France Telecom Plans New ACE Fiber-Optic Cable to Link 
  African West Coast to Europe 
- Regulator Unveils Proposed Power Conservation Rules for 
  South Africa 
- Layoffs Loom in Mining and Other Sectors 
- Durban Working to Reduce Water Loss 
 
End Summary. 
 
 
 
--------------- 
Inflation Lower 
--------------- 
¶2. (U) CPIX inflation (CPI less mortgage cost) dipped from 12.4% in 
October to 12.1% in November reports Statistics South Africa 
(StatsSA).  Lower food and fuel inflation accounted for much of the 
drop.  This was the third monthly decline after the 13.6% was 
registered in August.  However, the latest figures were below the 
market forecast of 11.8%, suggesting that interest rates may not be 
cut as steeply as the market expects.  The market has been pricing 
in up to 500 basis points of cuts by the end of next year. 
Economists noted that rand weakness would slow the process of 
disinflation, and that there is no evidence yet that prices are 
slowing across a broad front.  The South African Reserve Bank (SARB) 
expects inflation to fall sharply in the first half of next year as 
food and fuel prices drop and to return within the 3%-6% target 
range by the third quarter of 2009.  (Business Day, December 18, 
2008) 
-------------------------------------- 
Residential Building Continues to Slow 
-------------------------------------- 
 
¶3. (U) StatsSA reports that the real value of residential building 
plans approved between January and October 2008 declined by 24.2% 
year on year (y/y).  This was primarily caused by high interest 
rates, more stringent requirements for credit, and economic 
uncertainty.  Analysts expect residential building activity to 
remain under pressure well into next year.  At a regional level, the 
number of plans approved for new housing units was down about 25% 
y/y in the Western Cape and Gauteng.  KwaZulu-Natal continued to 
register growth over the period, supported by the lower end of the 
market.  The slowdown in residential building has already had 
negative effects on contractors, brick manufacturers and materials 
suppliers.  (Business Day, December 18, 2008) 
 
--------------------------------------------- ----- 
Bill Simplifies Registration Process for New Drugs 
--------------------------------------------- ----- 
¶4. (U) The final version of the Medicines and Related Substances 
Amendment Bill has removed a proposed two-tier registration process 
for new drugs.  The pharmaceutical industry objected to the proposed 
process, charging that it would interfere with expeditious 
registration of new drugs and the approval of clinical trials.  The 
old version of the bill also renewed tensions between the industry 
and the Department of Health because it attempted to include the 
Minister of Health in the process of registering medicines.  The new 
version anticipates that the South African Health Products 
Qversion anticipates that the South African Health Products 
Regulatory Authority (SAHPRA) would oversee the registration of 
medicines and the approval of clinical trials.  Pharmaceutical 
industry representatives expressed satisfaction with the final 
version of the bill.   (Business Report, December 8, 2008) 
--------------------------------------------- ------- 
Intelsat to Launch $250 Million Satellite for Africa 
--------------------------------------------- ------- 
¶5. (U) Privately-owned satellite firm Intelsat and a South African 
investment consortium plan to build and launch a $250 million 
satellite to improve communications and attract foreign investment 
in Africa.  Intelsat and an investment group led by Convergence 
Partners said the "Intelsat New Dawn" satellite is expected to enter 
 
PRETORIA 00002738  002.2 OF 003 
 
 
service in early 2011.  Demand for fixed satellite services in 
Africa is growing because of increased investment on the continent 
and a growing number of people who sign up for phone, internet, and 
cable services.  The project would be funded with 15% equity and 85% 
debt.  Intelsat and the Convergence Partners-led group would provide 
the equity; Nedbank and the Industrial Development Corporation of 
South Africa would be the biggest providers of debt.  Mobile 
operators Vodacom and Kuwait's Zain have already indicated that they 
would use the satellite.  (Engineering News, December 9, 2008) 
------------------------------------------ 
France Telecom Plans New ACE Fiber-Optic 
Cable to Link African West Coast to Europe 
------------------------------------------ 
¶6. (U) France Telecom-Orange recently signed a memorandum of 
understanding for the installation of a fiber-optic, submarine cable 
that would provide over 20 countries within the West African coastal 
region with internet access.  The 12,000 kilometer ACE (Africa Coast 
to Europe) cable would extend from Gabon to France.  ACE is expected 
to connect Gabon, Cameroon, Nigeria, Benin, Togo, Ghana, Ivory 
Coast, Liberia, Sierra Leone, Guinea, Guinea Bissau, Senegal, 
Gambia, Cape Verde, Mauritania, Morocco, Spain, Portugal, and France 
from 2011.  An extension to South Africa is also being studied. 
France Telecom operates in 15 African countries and is a co-owner of 
several submarine cables linking Africa with to the rest of the 
world.  It is a co-owner of the SAT3-WASC-SAFE cable (which links 
Portugal to Malaysia via the West African Coast) and Atlantis-2 
(which links Portugal to Argentina via Senegal). 
(MYBROADBAND.co.za, December 15, 2008) 
----------------------------------- 
Regulator Unveils Proposed Power 
Conservation Rules for South Africa 
----------------------------------- 
 
¶7. (U) The National Energy Regulator of South Africa (NERSA) laid 
out rules for its power conservation program in a bid for reaction 
from the public and affected sectors by early January of 2009.  The 
program proposes limiting electricity usage on an annual basis. 
Users would pay a surcharge if they exceed their electricity 
allotment.  "The program is designed to accelerate the achievement 
of energy savings through behavior change and promoting the use of 
demand side management," NERSA said in the proposal.  State-owned 
utility Eskom has been rationing electricity since January of 2008 
when the national grid nearly collapsed, forcing mines to 
temporarily shut down.  The reduction in consumption from 
conservation would provide Eskom with the "breathing space" 
necessary to address unplanned maintenance and possible slippages in 
the tight timeline for bringing new capacity onto the grid between 
2008 and 2013.  NERSA excluded from its penalty plan national 
priority projects such as providing essential services and the 
construction of stadiums for the 2010 World Cup and Gautrain. 
(Engineering News and Business Day, December 17, 2008) 
 
---------------------------------------- 
Layoffs Loom in Mining and Other Sectors 
---------------------------------------- 
 
¶8. (U) Analysts and institutions have started to tally estimates of 
Q8. (U) Analysts and institutions have started to tally estimates of 
mining and other layoffs in South Africa.  The Chamber of Mines has 
asserted that layoffs would be a last resort, but stated that over 
9,000 South African mining jobs are at risk.  The National Union of 
Mineworkers insists that its priority is to defend jobs, calling for 
a moratorium on layoffs.  Trade Union Solidarity reported that it 
had received notice of a possible 9,163 layoffs in mining.  Platinum 
miner Lonmin has already announced that some 5,500 workers might 
lose their jobs.  The future of about 1,700 workers at DRDGold South 
Africa's East Rand Proprietary Mines is in doubt.  Petra Diamonds 
has also confirmed that it had issued a notice to trade unions to 
start consultations over the future of 1,000 employees.  Mining 
contractor Murray & Roberts plans to lay off more than 1,400 
employees.  Namakwa Diamonds said it planned to lay off 355 of its 
605 employees.  Rio Tinto has announced plans to lay off thousands 
of its world-wide employees, but has not disclosed specific plans 
for its South African operations.  Anglo American announced 
significant cutbacks in capital expenditures, jobs, and production. 
This could affect jobs at Anglo Plat and Kumba Iron Ore.  Aquarius 
Platinum has shut its Everest Mine for six months for technical and 
safety reasons, cutting up to 1,950 jobs.   One analyst cited the 
following job losses:  Ford (800), ArcelorMittal (200 contract 
workers), DRD Gold (1,700), Lonmin (5,500 plus 1,400 contract 
 
PRETORIA 00002738  003.2 OF 003 
 
 
workers), Uranium One (1013), new car dealers (3,500), Absa (1,210), 
and Mutual & Federal (600).  (Mining Weekly, Business Report, 
Business Times, Business Day, December 12-17, 2008) 
 
----------------------------------- 
Durban Working to Reduce Water Loss 
----------------------------------- 
¶9. (U) Durban's R850 million ($85 million) asbestos cement water 
pipe replacement program is expected to save rate payers more than 
R248 million ($24 million) in water loss per year.  The project 
entails laying an estimated 2,800 kilometers of pipeline.  The 
objective of the project is to reduce water loss to 20% in the next 
five years.  Durban "is planning ahead to prevent a full-blown water 
crisis.  The old burst-prone pipes are being replaced with modified 
polyvinyl chloride pipes that have an estimated 50-year life span," 
commented Alan Kee, Durban's Water and Sanitation Project Executive. 
 (Engineering News, December 8, 2008)