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USDOC FOR 4510/ITA/MAC/AME/OA/DIEMOND 
TREASURY FOR TRINA RAND 
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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 JANUARY 23, 
2009 ISSUE 
 
PRETORIA 00000136  001.2 OF 003 
 
 
¶1. (U) Summary.  This is Volume 9, issue 4 of U.S. Embassy 
Pretoria's South Africa Economic News Weekly Newsletter. 
 
Topics of this week's newsletter are: 
 
- Manuel: First Wave of Unemployment Being Seen in Africa 
- Retail Nosedive Raises Clamor for Big Rate Cut 
- Tata Increases Stake in Neotel 
- Fitch Downgrades ACSA 
- ICASA Awards Licenses to Altech 
- Westinghouse to Open Office in Cape Town 
- Eskom Pursues Development in 2009 
- DWAF Takes Steps to Avoid Water Supply Shortage 
 
End Summary. 
 
 
--------------------------------------------- ---------- 
Manuel: First Wave of Unemployment Being Seen in Africa 
--------------------------------------------- ---------- 
 
¶2. (U) The first wave of unemployment is being seen in Africa as 
many foreign direct investors scale back or shut down their 
operations, remarked Finance Minister Trevor manual at the 
first-ever meeting of the African "Committee of 10" (a group of five 
Finance Ministers and five Central Bank governors organized under 
the auspices of the African Union).  Speaking in Cape Town, Manuel 
observed that African states are encountering significant fiscal 
pressures as their revenue sources dry up, expenditures rise to meet 
the most elementary levels of service provision, and they battle to 
retain expenditure levels in the face of "significantly reduced GDP 
growth."  Manual remarked, "We are witnessing that the export 
markets developed with enormous sacrifice are suddenly closed to 
imports from our countries, as a result of falling consumer demand 
and increased protectionism ... we are living through intense 
liquidity pressures as our domestic banking sector battles to secure 
the finance to on-lend.  Many countries are witnessing the drying up 
of remittance flows which have, over the past number of years, been 
a reliable source of finance which offsets impact to the skills 
drain."  Manuel also noted that the mainstays of recent developments 
in sectors such as tourism are already in decline, and that Africa 
has not yet recovered from the severe impact of high food and fuel 
prices that the continent has lived through over the past 15 months. 
 (Business Times, January 16, 2009) 
 
--------------------------------------------- - 
Retail Nosedive Raises Clamor for Big Rate Cut 
--------------------------------------------- - 
 
¶3. (U) Statistics South Africa figures showed retail sales tumbled 
4% in November, falling for the seventh successive month.  This poor 
performance backs the case for more interest rate cuts to boost the 
flagging economy and help shield it from the global recession. 
Sales of durable goods, which are hardest hit by high interest 
rates, decreased by 8.4% y/y in November.  News that the South 
African Reserve Bank (SARB) had brought its monetary policy 
committee meeting next month forward by a week to avoid clashing 
with the national budget fanned speculation SARB may cut rates more 
aggressively than usual.  Local markets have priced in a cumulative 
four percentage point fall in local lending rates this year, after 
SARB began its easing cycle last month with a half-percentage-point 
cut.  Consumer spending is not expected to improve in the next few 
months as fears of job losses compound the burden of steep debt 
Qmonths as fears of job losses compound the burden of steep debt 
costs and slowing income growth.  (Business Day, January 22, 2009) 
 
------------------------------ 
Tata Increases Stake in Neotel 
------------------------------ 
 
¶4. (U) State-owned Eskom and Transnet agreed to sell their combined 
30% stake in telecoms operator Neotel to Bombay-listed Tata 
Communications.  Tata has owned a 26% stake in Neotel since 2001. 
Neotel CEO Ajay Pandey commented that the sale would strengthen 
Neotel's position as a stable player in the local market and allow 
Neotel to capitalize on Tata's vast international network.  Pandey 
was encouraged that a global telecoms giant was investing in South 
Africa and Neotel in particular, given the economic climate.  "Such 
transactions reinforce international investors' confidence in the 
country and more specifically in South Africa's telecommunications 
 
PRETORIA 00000136  002.2 OF 003 
 
 
mark," he noted.  Neotel's other shareholders are the black 
empowerment group Nexus (with 19%) and CommuniTel and Two Telecom 
Consortium (12.5% each).  (Business Day, January 20, 2009) 
 
--------------------- 
Fitch Downgrades ACSA 
--------------------- 
 
¶5. (U) Fitch Ratings (Fitch) downgraded the national long-term 
rating of Airports Company South Africa (ACSA) from AA to AA-, 
saying that rising capital spending and a decline in passenger 
numbers would increase ACSA's use of borrowed money beyond levels 
considered proper for its previous rating.  Fitch affirmed ACSA's 
short-term rating at F1+.  The ratings take into account ACSA's 
prospective, rather than existing, leverage.  ACSA's planned capital 
expenditure spend from 2008 to 2012 totals R17.8 billion ($1.6 
billion).  Fitch explained, "ACSA's current regulatory regime does 
not remunerate capital expenditure until it is completed and 
operational. Thus, the substantial capital expenditure is a burden 
upon the group's financial profile."  Near- and long-term passenger 
forecasts, current capacity constraints, and the 2010 World Cup 
tournament require ACSA to expand at all of its airports.  Funding 
requirements for the capital expenditure program were expected to 
peak in the 2010 financial year.  (Engineering News, January 20, 
2009) 
 
 
------------------------------- 
ICASA Awards Licenses to Altech 
------------------------------- 
 
¶6. (U) JSE-listed Allied Technologies (Altech) has been granted 
electronic communications network service (I-ECNS) and electronic 
communications service (I-ECS) licenses by the Independent 
Communications Authority of South Africa (ICASA).  "The issuance of 
the licenses is not only a victory for Altech, but also for the 
South African telecommunications industry as a whole.  We eagerly 
look forward to participating in the new competitive environment 
that will result," remarked Altech CEO Craig Venter.  The licenses 
were granted after Altech successfully opposed the government's 
legal appeal against a judgment that Altech and about 300 other 
value-added network services (VANS) could build their own 
telecommunications networks.  The Pretoria High Court ruled the 
company was entitled to convert its existing Value Added Network 
Service (VANS) license to an I-ECNS license.  (Engineering News, 
January 20, 2009) 
 
---------------------------------------- 
Westinghouse to Open Office in Cape Town 
---------------------------------------- 
 
¶7. (U) International electrical company Westinghouse plans to open a 
branch in Cape Town to deal with to the increased demand for nuclear 
energy and business growth resulting from its relationship with 
State-owned power utility Eskom.  The office would supply Eskom's 
Koeberg nuclear power station with technology, integrated services, 
and fuel solutions.  Westinghouse Vice President for Engineering 
Services for Component and Global Plant Engineering Tim Collier 
remarked that the establishment of the Cape Town office solidified 
the Westinghouse commitment to South Africa and to Eskom by 
providing direct local support for continued successful operation of 
the Koeberg power station.  (Engineering News, January 21, 2009) 
 
--------------------------------- 
Q--------------------------------- 
Eskom Pursues Development in 2009 
--------------------------------- 
 
 
¶8. (U) This year Eskom plans to pursue an aggressive planning and 
development schedule for a third new-generation coal-fired power 
station as well as other base-load projects, including nuclear, 
despite a marked slowdown in demand.  Eskom Chief Generation Officer 
Brian Dames remarked that Eskom is also prioritizing the independent 
power producer program as part of a plan to close future supply-side 
gaps. Dames stressed that Eskom would continue to pursue all of its 
current projects except for the Nuclear 1 and the R19 billion ($1.9 
billion) second pumped storage project in Limpopo.  Eskom assumes 
there will be "marginal to zero" growth for 2009.  Dames indicated 
that growth in 2010 could also well be flat to modest, but noted 
 
PRETORIA 00000136  003.2 OF 003 
 
 
that "because future demand is so unclear, we need to continue with 
our project development work.  We need to identify the next 
coalfield - do the design, find a site and move through all the 
environmental and regulatory project development phases."  Dames 
affirmed that Eskom would continue to advance its nuclear program 
and would seek to firm up site selection, environmental clearances 
and future government support.  (Engineering News, January 20, 
2009) 
 
------------------------- 
DWAF Takes Steps to Avoid 
Water Supply Shortage 
------------------------- 
 
¶9. (U) Department of Water Affairs and Forestry (DWAF) Minister 
Lindiwe Hendricks announced the government's plan to avoid a 
potential water shortage on the Vaal river system, which supplies 
about 40% of South Africa's population with water.  Government 
officials worry that demand for water from the river system will 
outstrip supply by 2013 unless the government diversifies its water 
supply, prevents pollution, and stops water theft.  The DWAF plans 
to spend R7.3 billion ($709 million) to build a dam to increase the 
amount of water in the Vaal river system mix.  The government has 
earmarked R550 million ($55 million) to improve sewage treatment 
plants on the Vaal river system.  The government also plans to 
prosecute farmers who allegedly divert as much as 180 million cubic 
liters of water per year.  (Engineering News, January 19, 2009)