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FM AMEMBASSY PRETORIA
TO RUEHC/SECSTATE WASHDC 7514
RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUCPCIM/CIMS NTDB WASHDC
RUCPDC/DEPT OF COMMERCE WASHDC
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UNCLAS SECTION 01 OF 03 PRETORIA 000378 
 
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 27, 
2009 ISSUE 
 
PRETORIA 00000378  001.2 OF 003 
 
 
¶1. (U) Summary.  This is Volume 9, issue 9 of U.S. Embassy 
Pretoria's South Africa Economic News Weekly Newsletter. 
 
Topics of this week's newsletter are: 
 
- Q4 GDP Down 1.8% 
- U.S. Trade with South Africa 
- Government and Auto Industry Officials to Discuss Loan 
  Package 
- Task Team Recommends Heightened 
  Security Measures for SAA Crew Members 
- Speculation Grows Over Future Transnet Leadership 
- MTN Posts Healthy Profits 
- Anglo Share Price Falls Heavily as Dividend is Suspended - 19,000 
 
  Jobs Cut 
- Objection Filed Against Sasol's Carbon Credit Application 
- South Africa Makes Efforts to Improve 
  e-Waste Management 
 
End Summary. 
 
---------------- 
Q4 GDP Down 1.8% 
---------------- 
 
¶2. (U) South Africa's real gross domestic product at market prices 
on a quarter-on-quarter (q/q) seasonally adjusted annualized (SAA) 
basis dropped by 1.8% in the fourth quarter of 2008, according to 
Statistics South Africa.  The main contributors to the decrease in 
economic activity for the fourth quarter of 2008 were manufacturing; 
electricity, gas, and water; wholesale and retail trade; hotels and 
restaurants; and the mining and quarrying industry.  These were 
counteracted by growth in finance, insurance, real estate and 
business services; general government; agriculture, forestry and 
fishing; construction; and transport, storage and communications; 
and personal services.  The third quarter GDP was the 40th 
consecutive quarter of positive growth since 1998, although the 
impact of rate increases since June 2006 had brought the pace of 
growth down.  This is therefore the first quarterly decline in a 
decade.  (Business Times, February 24, 2009) 
 
---------------------------- 
U.S. Trade with South Africa 
---------------------------- 
 
¶3. (U) U.S. total trade with Sub-Saharan Africa (exports plus 
imports) increased 28% in 2008, as both exports and imports grew. 
U.S. exports to South Africa rose by 18%.  U.S. imports from South 
Africa grew by 10%.  Declines in the import of platinum and diamonds 
from South Africa were more than balanced by strong growth in the 
import of ferroalloys and extremely high growth of over 250% in the 
import of passenger vehicles (caused by a surge in imports as new 
car lines produced in South Africa came on the market at the end of 
2007).  AGOA imports from all countries were $66.3 billion, 30% more 
than in 2007.  AGOA imports excluding fuel products were $5.1 
billion, increasing by 51%.  Much of this non-energy product 
increase was due to a 225% increase in imports of AGOA 
transportation equipment, virtually all from South Africa.  South 
Africa exported transportation equipment valued at $1.9 billion to 
the U.S. in 2008.  (Department of Commerce International Trade 
Administration, U.S. Trade with Sub-Saharan Africa, January-December 
2008) 
 
--------------------------------- 
Government and Auto Industry 
Officials to Discuss Loan Package 
--------------------------------- 
 
¶4. (U) Department of Trade and Industry Minister Mandisi Mpahlwa 
plans to meet car makers to discuss a rescue package to help limit 
job losses.  About 22,500 jobs are on the line in the automotive and 
component manufacturing sector, according to the National 
Qcomponent manufacturing sector, according to the National 
Association of Automotive Manufacturers.  Car producers including 
Volkswagen, Mercedes-Benz, Ford, Toyota and General Motors employ 
about 116,000 people.  Car industry representatives and component 
manufacturers are looking for loans at low interest rates to help 
with cash flow.  (Business Day, February 24, 2009) 
 
 
PRETORIA 00000378  002.2 OF 003 
 
 
-------------------------------------- 
Task Team Recommends Heightened 
Security Measures for SAA Crew Members 
-------------------------------------- 
 
¶5. (U) The luggage of South African Airways (SAA) crews will be 
physically searched as security is being tightened following the 
detention of 15 crew members in connection with drug trafficking at 
London's Heathrow International Airport last week.  This is one of 
the resolutions of a special task team formed by SAA that includes 
representatives of the airline, Airports Company South Africa 
(ACSA), the South African Revenue Service (SARS), and the African 
Police Service (SAPS) to review measures put in place by SAA after 
the first incident last month when 15 crew members were detained in 
Heathrow.  The task team would also increase the number of sniffer 
dogs, install drug detection scanning devices, institute searches of 
aircraft to ensure that no unauthorized goods are on board, and 
improve co-ordination between SARS and SAPS units.  SAA Acting CEO 
Chris Smyth emphasized the need for co-operation among the 
stakeholders in the task team.  "SAA has neither the capability nor 
the mandate for broader policing and security matters and we have 
requested assistance via the task team ... taking the government's 
concerns and directives into account, ACSA will assume 
responsibility for security and processing of staff through the SAA 
crew center."  (Business Day, February 23, 2009) 
 
 
----------------------------- 
Speculation Grows Over Future 
Transnet Leadership 
----------------------------- 
 
¶6. (U) Rand Merchant Bank (RMB) Private Equity Chief Khetso Gordhan 
is poised to become the new CEO of state-owned transport and freight 
logistics group Transnet, according to press reports.  Gordhan would 
replace Maria Ramos, who is leaving to take the top job at Absa. 
Gordhan is a former Department of Transport Director-General and a 
former Johannesburg City Manager.  Another potential candidate is 
Transnet Freight Rail Division CEO Siyabonga Gama.  Khetso Gordhan's 
possible appointment has incensed some black professionals, who felt 
that Gama had been sidelined.  "Strategically, he is the right 
person," remarked one Transnet Director.  "But operationally, he is 
not very strong.  He is more a visionary type of guy, and you need 
someone who is strong operationally to be the group executive.  But 
he ... would be acceptable at Luthuli House [ANC headquarters]." 
The ANC has become sensitive to the appointment of senior management 
in government departments and state-owned enterprises on the eve of 
the April general election. The ruling party fears that new 
appointments may be used as an imposition on the incoming ministers. 
 (Business Report, February 20, 2009) 
 
------------------------- 
MTN Posts Healthy Profits 
------------------------- 
 
 
¶7. (U) Africa's largest cellular phone company, MTN Group, announced 
that profit rose 44% in the year to December.  Earnings per share 
gained 39%.  The company is scheduled to report full earnings on 
March 12.  Ivy Asset Management fund manager Bruce Main said much of 
the growth in the last year probably came from African countries, 
excluding South Africa.  MTN said it would spend $1.5 billion to 
Qexcluding South Africa.  MTN said it would spend $1.5 billion to 
expand its network this year in Nigeria, the fastest-growing network 
on the continent.  Sub-Saharan Africa "should still be one of the 
best-performing regions in 2009," according to a recent Rand 
Merchant Bank report.  (Business Report, February 23, 2009) 
 
-------------------------------------- 
Anglo Share Price Falls Heavily as 
Dividend is Suspended - 19,000 Jobs Cut 
-------------------------------------- 
 
¶8. (U) The share price of mining giant Anglo American fell heavily 
on February 20 after the company announced it was suspending 
dividend payments and would shed 9,000 jobs on top of the 10,000 
jobs cut from subsidiary Anglo Platinum.  The world economy faced 
"horrendous market conditions," commented Anglo CEO Cynthia Carroll. 
 She expected an unprecedented level of uncertainty, continuing 
volatility, weakness in commodity prices, and a poor outlook for the 
 
PRETORIA 00000378  003.2 OF 003 
 
 
near term.  After worse-than-expected results, the Anglo share price 
fell nearly 16% in Johannesburg and 11.8% in London.  The dividend 
suspension was Anglo's first since the start of World War II.  Job 
cuts were across geographies and business units.  Three-quarters of 
the cuts would relate to natural attrition and contractor reductions 
in line with production cuts and project cutbacks.  An increase in 
iron ore demand from China was the lone positive note during the 
first quarter, Carroll reported.  Iron ore production at South 
Africa's Anglo-owned Kumba Iron Ore Sishen mine increased 13% to 
36.7 million tons per annum.  (Mining Weekly, Business Day, February 
22-23, 2009) 
 
------------------------------- 
Objection Filed Against Sasol's 
Carbon Credit Application 
------------------------------- 
 
¶9. (U) Petrochemicals giant Sasol has applied for carbon credits 
under the clean development mechanism (CDM) for its proposed 
investments to replace coal with natural gas from Mozambique for use 
in its operations.  NGO Earthlife Africa has filed a formal 
objection with the United Nations to Sasol's application for CDM 
rights.  Earthlife Africa questioned the "additionality" of the 
project, which is a requirement for registration as a CDM project. 
Earthlife Africa accepts that using natural gas instead of coal 
would yield carbon credits of about R1.1 billion ($110 million) per 
year, but argues that Sasol had already mentioned exploitation of 
natural gas from Mozambique in its annual report in 1999.  Sasol 
claims that if there were not an option to sell carbon credits, it 
would not have built the 645-kilometer pipeline from Mozambique and 
that the project was conceived after January 2000, which is the 
operative date for determining additionality. An Earthlife Africa 
spokesperson said, "This marks a cynical attempt to game the CDM 
system - thus earning billions in revenue and the perverse right to 
continue pumping greenhouse gases into the atmosphere."  Sasol said 
it was well aware of the extent of its carbon dioxide emissions. 
Sasol claimed that it had made great strides to reduce the impact of 
its operations, as well as to develop its technology so that future 
plants would be more efficient with respect to carbon.  The Sasol 
Nitro project was one of South Africa's 11 CDM projects that are up 
and running and generating credits.  Earthlife Africa is a vocal 
critic of carbon-based and nuclear energy projects, favoring greater 
investment in renewable energy.  (Engineering News, February 23, 
2009) 
 
----------------------------- 
South Africa Makes Efforts to 
Improve e-Waste Management 
----------------------------- 
 
¶10. (U) E-Waste Association of South Africa (eWASA) Chairman Keith 
Anderson announced plans to establish a sustainable, environmentally 
sound e-waste management system.  Recycling hazardous e-waste 
materials is one major goal of the project.  Anderson met with 
electrical and electronic equipment manufacturers to discuss the 
possibility of imposing a recycling levy on their products.  The 
levy would defray the transport costs of the hazardous recyclables. 
He added that eWASA plans to simplify e-waste collection, 
transportation, dismantling, processing, and final disposal by 
Qtransportation, dismantling, processing, and final disposal by 
establishing an online tracking system.  (Business Report, February 
23, 2009) 
 
LA LIME