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RUCPCIM/CIMS NTDB WASHDC
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UNCLAS SECTION 01 OF 03 PRETORIA 000233 
 
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 FEBRUARY 6, 
2009 ISSUE 
 
PRETORIA 00000233  001.2 OF 003 
 
 
¶1. (U) Summary.  This is Volume 9, issue 6 of U.S. Embassy 
Pretoria's South Africa Economic News Weekly Newsletter. 
 
Topics of this week's newsletter are: 
 
- Reserve Bank Cuts Interest Rate 
- South African Notes Pare Gains as Inflation Measure 
  Changes 
- Trade Deficit Revised Lower 
- January Vehicle Sales Worst in Eight Years 
- Emigration Down; Skilled Workers May Return Home 
- SEACOM Undersea Cable Proceeding as Scheduled 
- General Electric is Doing Deals in 
  South Africa 
- Mining and Other Jobs Loss Barometer 
- Audit Shows Gaps in South Africa's Mine Safety Standards 
- NanoAfrica2009 Conference in Pretoria 
 
End Summary. 
 
 
------------------------------- 
Reserve Bank Cuts Interest Rate 
------------------------------- 
 
¶2. (U) The South African Reserve Bank (SARB) cut its key monetary 
policy interest rate, the repo rate, by 100 basis points to 10.5%. 
The full percentage point reduction, the biggest single adjustment 
in more than five years, adds to December's 50 basis point cut that 
started unwinding the 500 basis point hikes between June 2006 and 
June 2008.  CPIX inflation (CPI less mortgage cost) has eased 
sharply since hitting a peak of 13.6% in August last year, and is 
seen slowing further in January, aided by the introduction of a 
revised and re-weighted headline measure.  The economy is under 
strain with consumers battling to cope with relatively high interest 
rates, while a global slowdown has added to pressure on industry. 
(Business Day, February 5, 2009) 
 
--------------------------------- 
South African Notes Pare Gains as 
Inflation Measure Changes 
--------------------------------- 
 
¶3. (U) South African bonds and the rand were little changed after 
Statistics South Africa (StatsSA) released details of a new method 
to calculate consumer-price inflation.   StatsSA estimated CPIX 
inflation would have been 1.2 percentage points lower in December 
had the new product weightings in the consumer-price index been 
applied.  Bonds pared earlier gains while the rand fluctuated 
between gains and losses after the announcement.  Investec portfolio 
manager Vivienne Taberer commented, "The estimates are still in line 
with expectations of a drop of 2 to 3 percentage points between the 
December and January numbers."   (Bloomberg.com, February 3, 2009) 
 
--------------------------- 
Trade Deficit Revised Lower 
--------------------------- 
 
 
¶4. (U) The South African Revenue Services (SARS) revised downward 
South Africa's trade deficit for 2008 after excluding gold that was 
temporarily imported for refining purposes.  SARS announced in a 
statement the shortfall for the year stood at R64.5 billion ($6.5 
billion) rather than R88.05 billion ($8.8 billion) as previously 
published.  Total imports for 2008 were revised from R751.1 billion 
($7.5 billion) to R727.6 billion ($7.3 billion), while exports 
remained at R663.1 billion ($6.6 billion).  The revised deficit for 
the third and fourth quarters were R19.3 billion ($1.9 billion) and 
R14.7 billion ($1.5 billion), respectively, down from the R26.6 
billion ($2.7 billion) and R30.9 billion ($3.1 billion).  The change 
will relieve some pressure on an ailing current account, which has 
Qwill relieve some pressure on an ailing current account, which has 
weighed heavily on the rand.  The rand weakened by almost 30% 
against the dollar last year.  IHS Global Insight chief economist 
Ronel Oberholzer commented that the erroneous data might have had an 
indirect bearing on monetary policy.  The SARB would have been 
cautious about making decisive interest rate cuts to prevent further 
decline in the exchange rate, in the face of a weak rand which was 
ostensibly caused in part by the overstated trade deficit. 
(Business Day, February 3, 4, 2008) 
 
PRETORIA 00000233  002.2 OF 003 
 
 
 
------------------------------------------ 
January Vehicle Sales Worst in Eight Years 
------------------------------------------ 
 
¶5. (U) National Association of Automobile Manufacturers of South 
Africa (NAAMSA) reported new vehicle sales declined from 47,215 
units in January 2008 to 30,503 units in January 2009, the worst 
performance in eight years.  NAAMSA said all sectors of the South 
African automotive industry were experiencing an unprecedented and 
severe deterioration in conditions as the economy rapidly slowed. 
Exports of South African-produced motor vehicles declined by 7.2% 
(year-on-year) y/y in January. Manufacturer's projections suggested 
that overall industry export sales could decline by as much as 35% 
in 2009.  NAAMSA expects that market sentiment and automotive 
industry trading conditions will continue to be tested by the 
still-high interest rate environment, record high levels of 
household debt, volatile exchange rates and unpredictable 
international financial markets in 2009.  Recent above-average new 
vehicle price increases would also serve to undermine affordability 
and demand.  Any improvement in international trading conditions 
would only occur after the severe global economic and financial 
crisis dissipates, NAAMSA speculated.  (Business Day, February 3, 
2009) 
 
------------------------------- 
Emigration Down; 
Skilled Workers May Return Home 
------------------------------- 
 
¶6. (U) Layoffs abroad and a weak rand at home mean that emigration 
has become less appealing to many South Africans.  Moving company 
officials report a dramatic decline in the number of South Africans 
emigrating to popular destinations like Australia, New Zealand, and 
the United Kingdom.  The effects of the global financial crisis on 
those countries has caused some South Africans who are living abroad 
to consider returning home, which may be good news for South Africa. 
 Despite the contraction in the domestic economy, there is still a 
demand for critical skills in the engineering, finance, and health 
fields.  (Business Day, February 4, 2009) 
 
--------------------------------------------- 
SEACOM Undersea Cable Proceeding as Scheduled 
--------------------------------------------- - 
 
¶7. (U) Portions of the SEACOM undersea fiber-optic cable now rest on 
the seabed of the Indian Ocean and the Red Sea.  SEACOM announced 
that "the cable has been laid from the edge of the South African 
waters to Mozambique, and cable-laying is also proceeding in the Red 
Sea from Egypt towards the coast of Yemen."  The remainder of 
SEACOM's deepwater cable would be deployed from India towards 
Africa, where the three cable segments would be joined.  SEACOM is 
also busy with land-based construction.  High-performance optical 
transmission equipment, which connects customers to inland 
terrestrial networks, has been installed in the Maputo, Mumbai, and 
Djibouti cable landing stations.  Construction of the cable station 
in Kenya would be complete in early February, followed shortly by 
the Tanzanian and South African stations.  Equipment installation in 
these locations, and in Egypt, would be complete in April.  SEACOM 
noted that it is preparing to provide services to customers by June. 
Qnoted that it is preparing to provide services to customers by June. 
 ICT industry players in South Africa await June 2009, when Southern 
and Eastern Africa become truly connected to international broadband 
networks.  Plentiful bandwidth is expected to result in lower ICT 
costs and new opportunities across many sectors, including the call 
center and business process outsourcing industries.  (Engineering 
News, February 4, 2009) 
 
------------------------------- 
General Electric is Doing Deals 
in South Africa 
------------------------------- 
 
¶8. (U) Power generation technology supplier GE Energy announced a 
$50 million deal to upgrade old steam turbines at synthetic fuels 
producer Sasol.  The announcement follows a 15-year service 
agreement signed in November by the two companies that provide for 
installation and maintenance of gas turbines at Sasol's Secunda 
plant, aiming to increase power efficiency and produce power from 
otherwise flared methane (also targeting Kyoto-related Clean 
 
PRETORIA 00000233  003.2 OF 003 
 
 
Development Mechanism credits).  GE Transportation announced that it 
had been awarded a contract by Anglo Platinum to provide 26 
emergency diesel generators for its mining operations, providing up 
to 15.4 MW back-up capacity at individual mines.  Middle East and 
Africa CEO Nabil Habayeb, who was speaking at "GE Day" in 
Johannesburg, was bullish on business in South Africa and Africa, 
and said he was comfortable with the alignment of the business to 
Africa's key growth sectors, particularly infrastructure, including 
energy, water, and transport.  GE is sanguine about Africa's growth 
potential, citing that across the continent, GE has not received a 
single order cancellation as a consequence of the economic slowdown. 
 (Engineering News, Business Day, February 4, 2009) 
 
------------------------------------ 
Mining and Other Jobs Loss Barometer 
------------------------------------ 
 
¶9. (U) The mining industry has shed 8,675 jobs since the end of 
December, reports the National Union of Mineworkers.  Vehicle 
manufacturers have laid off 1,724 people countrywide, says the union 
Solidarity.  Contract and temporary workers - who are generally not 
unionized and are the first to go under the axe - are being laid off 
in large numbers.  Solidarity knows of 2,000 contract workers who 
have been laid off, but suspects the figure is higher.  The 
Department of Minerals and Energy mining task team has urged mining 
companies to refrain from dismissing contract workers with only a 
24-hour notice period.  Since its inception in December, the task 
team has urged mining companies to view layoffs as a last resort and 
to take such actions in full compliance with the country's labor law 
and mining companies' social and labor commitments under licensing. 
(Mail & Guardian, Mining Weekly, January 30, February 3, 2009) 
 
---------------------------------- 
Audit Shows Gaps in South Africa's 
Mine Safety Standards 
---------------------------------- 
 
¶10. (U) South Africa's Minister of Minerals and Energy Buyelwa 
Sonjica on February 2 released the long-awaited national Mine Safety 
Audit, ordered by past President Thabo Mbeki to investigate 
compliance with safety regulations in mines.  "These audits have 
indicated that there are a lot of gaps in the safety standards in 
the mining industry.  We are calling on stakeholders involved in the 
sector to take the finding and recommendations of the report very 
seriously," Sonjica said.  The average compliance across all sectors 
was identified as 66%, with gold mines earning highest compliance. 
Critical issues were mine design, shaft installation and 
maintenance, communication systems, backup power, secondary outlets, 
safety risk management, health risk management, and training.  The 
ministry said stakeholders would have two weeks to analyze the 
report and make plans to implement the recommendations.  Mbeki 
ordered the safety audit in 2007, after 3,200 workers were trapped 
underground at Harmony Gold's Elandsrand mine.  The audit was 
reported to be finished long ago, but its release was delayed to 
give the new President an opportunity to review.  The entire report 
has not been made available to journalists or the public.  The 
Qhas not been made available to journalists or the public.  The 
Chamber of Mines and the trade union Solidarity both welcomed the 
safety audit.  (Mining Weekly, Business Day, February 3, 2009) 
 
------------------------------------- 
NanoAfrica2009 Conference in Pretoria 
------------------------------------- 
 
¶11. (U) South Africa hosted the third NanoAfrica conference on 
February 1-4 2009 in Pretoria.  NanoAfrica2009 focused on the latest 
developments and future trends in the multidisciplinary area of 
nano-science and nanotechnology.  South Africa's National 
Nanotechnology Strategy has identified six "focus areas" for 
nanotechnology research in South Africa: chemicals and 
bioprocessing, energy, health, materials and manufacturing, mining 
and minerals, and water.  Minister of Science and Technology Rosebud 
Mangena expressed satisfaction about South Africa's progress on 
nanotechnology and its "relatively early" adoption of the 
discipline.  (Engineering News, February 2, 2009)