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TAGS: ECON EFIN EINV ETRD EMIN EPET ENRG BEXP KTDB SENV
PGOV, SF 
SUBJECT: SOUTH AFRICA ECONOMIC NEWS WEEKLY NEWSLETTER JANUARY 2, 
2009 ISSUE 
 
PRETORIA 00000004  001.2 OF 003 
 
 
¶1. (U) Summary.  This is Volume 9, issue 1 of U.S. Embassy 
Pretoria's South Africa Economic News Weekly Newsletter. 
 
Topics of this week's newsletter are: 
 
- Growth in Credit Slows 
- COSATU Slammed on Labor Plans 
- South Africa's Trade Gap Swells 
- Vodacom Ponders Launching Mobile Money Service in South 
  Africa 
- Resources Slammed on the JSE 
- U.S. Firm Invests $150 million in Clean Power Company 
  Despite Global Downturn 
- Water Industry Showcase to be Held in 
  Johannesburg 
 
 
End Summary. 
 
 
 
---------------------- 
Growth in Credit Slows 
---------------------- 
 
¶2. (U) South African Reserve Bank (SARB) data shows the rate of 
growth in credit extension to the private sector (PSCE) decreased 
from 16.4% year-on-year (y/y) in October to 15.3% y/y in November. 
The rate of growth of South Africa's broad M3 money supply measure 
increased from 15.6% y/y in October to 16.3% y/y in November.  The 
credit extension growth was expected to have increased at a slower 
15.2% y/y in November; the broad M3 money supply growth rate, 
meanwhile, was expected to have increased at just 14.7% y/y, 
according to I-Net Bridge's Econometer.  Efficient Group Economist 
Fanie Joubert said "credit extension is slightly better than 
expected, but the pace at which it is coming down is still 
relatively high.  Nedbank chief economist Dennis Dykes remarked that 
the data was slightly above what he had anticipated.  "Money supply 
is a bit high, but these numbers do tend to be fairly erratic.  The 
trend over the last few months has been in the right direction and 
we will continue to see them coming off going into the new year. 
The priority is to make sure we avert a downturn and it is not that 
central banks are taking their eyes off the inflation story - 
inflation will come under control more and more."  (I-Net Bridge, 
December 30, 2008) 
 
----------------------------- 
COSATU Slammed on Labor Plans 
----------------------------- 
 
¶3. (U) The South African Chamber of Commerce and Industry (SACCI) 
slammed the Congress of South African Trade Unions' (COSATU) calls 
for labor law amendments, saying they would only serve as a 
"disincentive" to employ people.  SACCI Chief Executive Officer 
Neren Rau asserted that many businesses are at the threshold of 
insolvency and it therefore helps little to argue for further 
restrictive labor legislation.  COSATU is strategizing to fight 
layoffs in the midst of the economic crisis, and plans to pressure 
the ruling ANC to make it more difficult to fire workers.  "It is 
not the sort of message that investors are likely to find attractive 
in an environment considered by many to be already too 
'labor-friendly,'" Rau noted.  (I-Net Bridge, December 23, 2008) 
 
------------------------------- 
South Africa's Trade Gap Swells 
------------------------------- 
 
¶4. (U) South Africa's trade deficit widened to R12.1 billion ($1.2 
billion) in November due to higher vehicle imports and lower 
precious metals exports, reported the South African Revenue Service 
(SARS).  The gap widened from a R9.8 billion ($1 billion) shortfall 
in October despite a sharp drop in the value of oil imports. 
Economists polled by Reuters last week had predicted a deficit of R6 
QEconomists polled by Reuters last week had predicted a deficit of R6 
billion ($645.5 million), but the monthly trade figure is 
traditionally volatile and difficult to forecast.  Exports fell by 
17.93 percent, while imports decreased by 12.59 percent.  Precious 
metals fell by 30%.  "It's a lot bigger than we expected ... it's 
not a good number and shows ongoing structural problems in our trade 
account," said ETM economist Russell Lamberti.  SARS said the 
 
PRETORIA 00000004  002.2 OF 003 
 
 
cumulative trade deficit for the first 11 months of 2007 was R68.1 
billion ($7.3 billion), compared R84.2 billion ($9.1 billion) during 
the same period in 2008, keeping pressure on an ailing current 
account.  The deficit on the current account was 7.3 percent of GDP 
for 2007 and swelled to 7.9 percent of gross domestic product in the 
third quarter of 2008.  The current account deficit is expected to 
widen to 8.9 percent of GDP by 2010.  But Lamberti said the trade 
deficit may start easing in the next few months as importers and 
exporters adjust after a sharp drop in the rand in 2008. 
(Engineering News, December 30, 2008) 
 
-------------------------------- 
Vodacom Ponders Launching Mobile 
Money Service in South Africa 
-------------------------------- 
 
 
¶5. (U) South Africa may become the newest market for Vodacom's 
mobile money transfer service.  The Vodafone-developed service 
allows users to deposit, withdraw, and transfer money with their 
cellular phones as well as to convert cash into electronic money via 
an authorized agent.  Vodacom Chief Communications Officer Pieter 
Uys noted that South Africa has a large number of people who do not 
have bank accounts.  Users of the service do not need to have a bank 
account because the service holds the money in a bank account on 
behalf of the phone user.  Vodacom launched the service in Kenya in 
March 2007 and in Tanzania in April 2008.  Uys commented that the 
service is designed to find new revenue streams, retain customers, 
and diversify the number of services that Vodacom offers. 
(Engineering News, December 12, 2008) 
 
------------------------------- 
Resources Slammed on the JSE 
------------------------------- 
 
¶6. (U) The five most battered stocks on the Johannesburg Stock 
Exchange (JSE) in 2008 were mining and industrial companies.  Junior 
miner Metorex shed 90.7% of its value, Super Group lost 85.6%, Bell 
Equipment was down 72.6%, Combined Motor Holdings shed 71.5%, and 
Wesco Investment lost 69.5%.  One of the most dramatic features of 
local markets in the past year was the steep fall in metals prices. 
Gold and platinum started the year on a high, reaching new record 
prices for the first three months.  By July the prices of both 
precious metals and base metals were cut in half.  Gold prices at 
the end of 2008 are approximately the same as they were at the 
beginning of the year, but platinum prices are more than 50% lower 
than their per ounce price at the beginning of 2008.  NKC 
Independent economist Christie Viljoen said there was very little 
information indicating that the local market had reached a turning 
point or that a recovery was imminent.  Low trading volumes in 
coming weeks mean that the market would "remain directionless until 
early next year," Viljoen predicted.  (Business Day, December 24, 
2008) 
 
------------------------------------------- 
U.S. Firm Invests $150 million in 
Clean Power Company Despite Global Downturn 
------------------------------------------- 
 
¶7. (U) Power cogeneration projects are forging ahead despite the 
economic slowdown and an associated crunch in credit extension. 
Johannesburg-based clean and renewable energy company BioTherm 
Energy has received an injection of $150 million of equity from the 
QEnergy has received an injection of $150 million of equity from the 
U.S. private equity company Denham Capital, which targets 
investments in the energy sector.  Cogeneration is power generated 
from process by-products like waste and heat from industrial 
processes.  BioTherm has eight cogeneration projects in South Africa 
with total generating capacity of 120 MW.  These include projects 
with PetroSA, Engen, glass manufacturer PFG, Hernic Ferrochrome, and 
pharmaceutical group Adcock Ingram.  BioTherm CEO Charles Liebenberg 
says that the company can use bank financing to leverage the equity 
injection, in combination with another $50 million of black economic 
empowerment funding, to finance cogeneration projects totaling $800 
million.  Liebenberg cautioned, "Eskom, the regulator NERSA, and the 
Department of Minerals and Energy are supportive of independent 
power producers but that needs to manifest rapidly in realistic 
legislation, policy, and enabling environment."  Liebenberg also 
noted that South Africa can learn from EU experience in implementing 
cogeneration that is energy efficient and favorable for reducing 
 
PRETORIA 00000004  003.2 OF 003 
 
 
carbon output.  He warned that Eskom's tariff structure does not 
reflect the cost of production, nor the life cycle cost of base load 
fossil fuel including carbon emissions, thus creating a challenge 
for implementing waste energy conversion projects.  (Business Day, 
December 24, 2008) 
 
-------------------------- 
Water Industry Showcase to 
be Held in Johannesburg 
-------------------------- 
 
 
¶8. (U) Increased investment in water-related infrastructure in 
Africa is creating business and growth opportunities across the 
continent.  The global value of the water industry, including waste 
treatment, valves, pumps, filtration, and desalination equipment, is 
now estimated at $400 billion.  The global water industry will be 
able to showcase its opportunities and challenges at WaterTec Africa 
2009, which is to be held in Johannesburg in June 2009.  The World 
Bank remains the biggest single contributor to the overall funding 
of water infrastructure in Africa.  South Africa is also investing 
heavily in water-related infrastructure.  Finance Minister Trevor 
Manual recently announced a R3.1 billion ($331 million) grant for a 
three-year program which would focus on improving regional and 
district water storage and supply capacity.  The South African 
government also allocated R500 million ($53.4 million) to address 
backlogs in electrification and water sanitation in schools and 
clinics.  (Engineering News, December 12, 2008)