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FM AMEMBASSY PRETORIA
TO RUEHC/SECSTATE WASHDC 7750
RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUCPCIM/CIMS NTDB WASHDC
RUCPDC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
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UNCLAS SECTION 01 OF 03 PRETORIA 000533 
 
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 MARCH 20, 2009 
ISSUE 
 
PRETORIA 00000533  001.2 OF 003 
 
 
¶1. (U) Summary.  This is Volume 9, issue 12 of U.S. Embassy 
Pretoria's South Africa Economic News Weekly Newsletter. 
 
Topics of this week's newsletter are: 
 
- Manufacturing Production Has Steepest Fall in Almost Two Decades 
- Gold Production Declines Sharply 
- Retail Sales Grow 
- Moody's to Review South Africa's Local Currency Rating 
- Automotive Industry Seeks New Approach 
- Tata Communications to Be Seacom Anchor Tenant 
- Anglo American Sheds Last Of its AngloGold Shares 
- Mine Deaths Worsening for Year-to-Date Comparison 
- Ibhubesi Field Could Supply Gas by 2012 
- Minister of Environmental Affairs Encourages Equity 
 
End Summary. 
 
 
------------------------------------ 
Manufacturing Production Has Steepest 
Fall in Almost Two Decades 
------------------------------------- 
 
¶2. (U) Manufacturing production had its steepest fall in more than 
18 years, providing a grim picture of where the South African 
economy is headed this year.  Statistics South Africa (StatsSA) 
announced that manufacturing production for January decreased 
year-on-year (y/y) by 11.1%.  Nedbank Group's Economic Recovery Unit 
said some moderate recovery in the sector could be experienced 
during the second half of the year as low interest rates stimulate 
domestic demand.  (Business Times, March 15, 2009) 
 
---------------- 
Gold Production 
Declines Sharply 
---------------- 
 
¶3. (U) South Africa's gold production in January this year was 8.7% 
lower than in January 2008.  South Africa's total mining production 
for the month dropped 11% y/y, said StatsSA.  Non-gold production 
fell by 11.4% in January, compared with last January.  The decrease 
in total mining production for January was largely attributable to 
negative contributions from diamonds (-6.2%), platinum group metals 
(-2.3%) and chromium (-1.1 %).  (Business Times, March 15, 2009) 
 
----------------- 
Retail Sales Grow 
----------------- 
 
¶4. (U) South Africa's annualized retail sales grew for the first 
time in nine months in January, according to recent data.  Stats SA 
said sales rose by 1.7% compared to the same month last year, the 
first growth since April 2008 and the highest rate since last 
February.  Analysts warned the January growth may not signal the 
start of a trend and could be a knee-jerk reaction to sharply lower 
fuel prices, as well as base effects following power cuts during 
January last year.  (Business Day, March 18, 2009) 
 
-------------------------------- 
Moody's to Review South Africa's 
Local Currency Rating 
-------------------------------- 
 
¶5. (U) Ratings agency Moody's has placed South Africa's A2 local 
currency rating on review for possible downgrade, citing fiscal 
pressures and the risk of a prolonged recession.  The agency 
affirmed the positive outlook on the government's Baa1 foreign 
currency rating and the A2/Baa1 foreign currency ceiling for debt 
and deposits.  The review reflected fiscal pressures which, although 
not unique to South Africa, may weaken the government's 
creditworthiness.  (Business Times, March 15, 2009) 
 
-------------------------------------- 
Automotive Industry Seeks New Approach 
-------------------------------------- 
 
¶6. (U) National Association of Automotive Component and Allied 
Q6. (U) National Association of Automotive Component and Allied 
Manufacturers President Stewart Jennings called for aggressive 
 
PRETORIA 00000533  002.2 OF 003 
 
 
interest rate cuts to stimulate the economy and for measures to 
protect the industry.  Jennings called for the government to provide 
subsidized finance, increased quality standards, a focused Buy SA 
campaign, labor regulation reform to increase labor productivity, 
tariff interventions, and more aggressive antidumping duties in 
order to protect local manufacturers.  National Association of 
Automobile Manufacturers of South Africa (NAAMSA) President David 
Powells urged the government to intensify its industrial policy 
program to support the motor industry.  Powells remarked that 
financial support from the Industrial Development Corporation (IDC), 
over and above support already received by the industry in the form 
of the Automotive Production and Development Programme (APDP), was 
necessary to stabilize the industry.  (Business Day, March 19, 
2009) 
 
------------------------- 
Tata Communications to Be 
Seacom Anchor Tenant 
------------------------- 
 
¶7. (U) Tata Communications, which owns a 56% stake in South African 
alternative fixed-line operator Neotel, announced on March 17 that 
it was an anchor tenant customer for the broadband-boosting Seacom 
cable system.  Seacom and Tata Communications were planning for the 
system to be ready for service by June 2009.  Tata Communications 
would operate the landing point in Mumbai, while Neotel would manage 
the landing point in Mtunzini, South Africa.  The project would 
provide connectivity between the Tata Communications global network, 
the Seacom cable system, and Neotel's converged network in South 
Africa.  Another subsidiary company, Tata Communications 
Transformation Services, was awarded the network administration, 
operations, and maintenance contract for the cable, supporting 1.28 
terabits per second of capacity.  "Prior to the development of this 
cable system, a majority of east and southern Africa relied on small 
and expensive satellite circuits to meet their international network 
requirements," said Seacom President Brian Herlihy.  (Engineering 
News, March 18, 2009) 
 
------------------------- 
Anglo American Sheds Last 
Of its AngloGold Shares 
------------------------- 
 
¶8. (U) Cash-seeking Anglo American is now completely out of gold, 
the precious metal that was synonymous with the iconic South 
African-rooted diversified major since its inception in 1917.  The 
company announced it had disposed of its remaining 11.3% 
shareholding in AngloGold Ashanti for $1.28 billion.  On December 
31, 2008 Anglo American's shareholding in AngloGold Ashanti had been 
16.2%.  (Engineering News, Business Day, March 18, 2009) 
 
------------------------- 
Mine Deaths Worsening for 
Year-to-Date Comparison 
------------------------- 
 
¶9. (U) More mine workers died in work-related incidents so far this 
year than the same period last year, according to National Union of 
Mineworkers (NUM) Safety Head Mziwakhe Nhlapo, speaking to an Exxaro 
mine safety summit at the Council of Science and Industrial 
Research.  He noted that 34 miners had died this year, compared to 
22 over the same period in 2008 (some of this period was affected by 
power outages).  Many of this year's fatalities involved workers who 
had not completed a full trade test acceptable to the Chamber of 
Qhad not completed a full trade test acceptable to the Chamber of 
Mines.  Nhlapo also suggested that mine layoffs could also be a 
cause of low worker morale, which could be a contributing factor to 
the increased number of deaths.  Exxaro Executive General Manager 
Safety Nombasa Tsengwa highlighted that because the law forced every 
single mine death to result in temporary mine closure and an 
investigation, there was a considerable knowledge base for potential 
corrective action.  AngloGold Ashanti's Moab Khotsong mine was 
closed on March 16 after a miner was killed an underground cave-in 
incident.  (Mining Weekly, March 18, 2009) 
 
--------------------------------------- 
Ibhubesi Field Could Supply Gas by 2012 
--------------------------------------- 
 
¶10. (U) The Ibhubesi natural gas field off South Africa's west coast 
 
PRETORIA 00000533  003.2 OF 003 
 
 
could start supplying gas and condensate to the Western Cape 
industrial and power generation sectors as early as 2012, according 
to U.S.-based Forest Exploration Commercial Director John Langhus, 
speaking to the Cape Regional Chamber of Commerce and Industry.  He 
remarked that the project had the potential to produce about 3.65 
million gigajoules of energy a year for its 30-year lifespan, 
including 400-700 megawatts of power generation capacity.  This 
would significantly enhance the energy security of the province, 
which is reliant on transmission lines from Mpumalanga Province and 
diesel-driven peaking power plants to supplement the base load 
generated by the Koeberg nuclear facility.  Ibhubesi was now 
considered "big and economically viable enough" to justify expected 
investment of $3-4 billion over twenty years, Langhus commented, 
"after having been put on the backburner during the period of 
uncertainty that characterized South Africa's controversial 
conversion of old exploration leases to new order rights - including 
a black empowerment component."  Forest expected to be granted 
production rights to block 2A, according to Langhus, 380 kilometers 
northwest of Cape Town and about 100 kilometers offshore.  Forest is 
lead operator of the consortium with a 53% share, in partnership 
with state-owned PetroSA (24%) and Anshcutz SA (23%).  (Business 
Day, March 18, 2009) 
 
-------------------------------- 
Minister of Environmental Affairs 
Encourages Equity 
--------------------------------- 
 
¶11. (U) South African Minister of Environmental Affairs and Tourism 
Marthinus Van Schalkwyk announced at a recent climate change 
conference that South Africa is making serious contributions in the 
fight against carbon emissions reduction, but cautioned that the 
developing world must not be forced to carry the developed world's 
carbon emissions burden.  He emphasized the need for establishing a 
legally binding instrument under which developed countries would 
provide finance, technology and capacity support to developing 
countries.  (Engineering News, March 13 -19, 2009)