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RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHSA #0595/01 0861041
ZNR UUUUU ZZH
R 271041Z MAR 09
FM AMEMBASSY PRETORIA
TO RUEHC/SECSTATE WASHDC 7851
RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUCPCIM/CIMS NTDB WASHDC
RUCPDC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHJO/AMCONSUL JOHANNESBURG 9033
RUEHTN/AMCONSUL CAPE TOWN 6690
RUEHDU/AMCONSUL DURBAN 0812

UNCLAS SECTION 01 OF 03 PRETORIA 000595 
 
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 27, 2009 
ISSUE 
 
PRETORIA 00000595  001.2 OF 003 
 
 
¶1. (U) Summary.  This is Volume 9, issue 13 of U.S. Embassy 
Pretoria's South Africa Economic News Weekly Newsletter. 
 
Topics of this week's newsletter are: 
 
- SARB Cuts Interest Rates 
- Current Account Deficit Lowest in Almost Three Years 
- Slowdown 'May Bring Manufacturing Sector to its Knees' 
- Company Failures Increase 
- Trevor Manuel Will Not Become 
  Super Minister 
- Credit Crunch Has Little Effect on 
  South African Farmers 
- No Bailouts for Business, Says Phosa 
- Telkom to Wind Up Media Unit 
- Consortium to Begin Building $620 Million Johannesburg-Maputo 
  Pipeline 
- SAG Aims for Space Industry Development 
 
 
End Summary. 
 
 
------------------------ 
SARB Cuts Interest Rates 
------------------------ 
 
¶2. (U) The South African Reserve Bank's (SARB) Monetary Policy 
Committee (MPC) reduced the key policy interest rate, the repo rate, 
by 100 points to 9.5%.  This is the lowest level since June 2007, 
and follows a 50 point cut in December and a 100 point cut in 
February.  The MPC also decided to meet every month instead of every 
two months, but warned the public not to expect the rate to be cut 
at every meeting.  The MPC explained that it decided to cut the rate 
because of the slowing global and domestic economy and an improved 
medium-term outlook for inflation.  The MPC expects inflation to 
fall within the target range of 3-6% in the third quarter of 2009. 
Most analysts believe there will be further rate cuts in 2009. 
(Fin24, March 25, 2009) 
 
--------------------------------------------- ------- 
Current Account Deficit Lowest in Almost Three Years 
--------------------------------------------- ------- 
 
¶3. (U) South Africa's current account deficit is the lowest it has 
been since the third quarter of 2006.  SARB Governor Tito Mboweni 
reported that the deficit - the gap between export revenue and 
import costs - had fallen from a revised 7.8% of GDP in the third 
quarter of 2008 to 5.8% in the fourth quarter.  Mboweni warned that 
the R17.4 billion ($1.8 billion) trade deficit in January was a sign 
that the fourth quarter improvement might not last.  (Business 
Report, March 25, 2009) 
 
--------------------------------- 
Slowdown 'May Bring Manufacturing 
Sector to its Knees' 
--------------------------------- 
 
¶4. (U) The Bureau for Economic Research (BER) warned that an 
unprecedented contraction in global demand coupled with the domestic 
slowdown may bring South Africa's manufacturing sector to its knees. 
 The BER's manufacturing business confidence index slumped from 31 
points in the fourth quarter of 2008 to 16 points in the first 
quarter of 2009, showing the "extreme and broad-based weakness in 
the manufacturing sector."  Manufacturing output plunged by 22% in 
the fourth quarter of 2008 as exports collapsed on rock bottom 
foreign demand.  Sales activity is at a record low.  Factory worker 
layoffs continued to increase as production plummeted.  Analysts 
predict that business conditions will remain depressed, which means 
business confidence could be eroded further in the short term. 
(Business Day, March 23, 2009) 
 
 
 
------------------------- 
Company Failures Increase 
------------------------- 
 
¶5. (U) Statistics South Africa (StatsSA) data showed that company 
Q5. (U) Statistics South Africa (StatsSA) data showed that company 
 
PRETORIA 00000595  002.2 OF 003 
 
 
failures were 70% higher in February than a year earlier.  It was 
the third month in a row in which corporate liquidations increased 
by that order of magnitude.  The last time company failures climbed 
at such a pace was in 1991.  "It's what you would expect given the 
downswing in South Africa's economy," remarked Citadel chief 
economist Dave Mohr.  The South African economy shrank 1.8% in the 
fourth quarter of last year, which was its first contraction in more 
than a decade.  Analysts expect liquidations to increase further as 
the South African economy is only now starting to experience the 
collapse of the world economy."  (Business Day, March 24, 2009) 
 
----------------------------- 
Trevor Manuel Will Not Become 
Super Minister 
----------------------------- 
 
¶6. (U) The African National Congress (ANC) and its allies have 
decided against the introduction of a "super cabinet" because they 
fear it could create conflict between executive office members. 
Minister of Finance Trevor Manuel would have been elevated to a key 
planning position in the super cabinet, according to press reports. 
The idea of a super cabinet came from discussions on how best to 
streamline and overhaul the Cabinet after the April elections. 
(Business Day, March 24, 2009) 
 
---------------------------------- 
Credit Crunch Has Little Effect on 
South African Farmers 
---------------------------------- 
 
¶7. (U) The availability of credit is not expected to be a major 
problem for South Africa's farmers during the 2009/10 production 
season.  Experts expect the farmers to benefit from high local price 
levels, an above-average crop, and a decrease in input costs. 
During the 2008/09 planting season there was a 7.1% decrease in the 
area planted with summer crops, but the decrease was attributable to 
less than normal rainfall rather than to increases in input costs or 
the availability of credit.  (Impact of Credit Crunch on Producers' 
Procurement of Agricultural Inputs, Foreign Agricultural Service, 
March 12, 2009.  Please contact FAS at +27-012-431-4057 for more 
information.) 
 
 
 
 
 
 
------------------------------------ 
No Bailouts for Business, Says Phosa 
------------------------------------ 
 
¶8. (U) Firms in the private sector that are struggling due to the 
economic slowdown should not be bailed out by the government, 
according to ANC Treasurer General Matthews Phosa.  Rescue packages 
were under debate, Phosa remarked, but he believed the government 
should help only public entities.  "I don't think we should reward 
those who failed because of greed and mismanagement.  Public 
utilities ... yes," he distinguished.  Phosa also touched on black 
economic empowerment (BEE), saying the country should not rely too 
much on funding schemes based on share prices.  He said that while 
BEE remained policy, its implementation needed to change because it 
was enriching only a few people.  Phosa stressed that the ruling 
party would not change its economic policies.  (Business Report, 
March 25, 2009) 
 
---------------------------- 
Telkom to Wind Up Media Unit 
---------------------------- 
 
¶9. (U) Fixed-line operator Telkom plans to call a shareholder 
meeting to seek approval to wind up its Telkom Media unit after it 
Qmeeting to seek approval to wind up its Telkom Media unit after it 
failed to find a buyer for it.  Telkom said it undertook an 
"extensive process" to identify suitable buyers for its interest in 
Telkom Media, but that it proved unsuccessful.  Telkom Media, in 
which Telkom has a 66% stake, was awarded a satellite and cable 
broadcasting license in September 2007, but by March 2008, Telkom 
announced that it was seeking a buyer for its stake.  "The fact that 
they haven't managed to find an investor for the last 12 months is a 
major reason for this decision," commented Frost & Sullivan ICT 
 
PRETORIA 00000595  003.2 OF 003 
 
 
industry analyst Lindsey Mc Donald.  "There is no point in throwing 
good money after bad, so it makes sense for Telkom to withdraw 
completely."  Telkom had aimed to develop a set of digital media 
businesses through Telkom Media.  (Engineering News, March 25, 
2009) 
 
----------------------------------------- 
Consortium to Begin Building $620 Million 
Johannesburg-Maputo Pipeline 
----------------------------------------- 
 
¶10. (U) South African and Mozambican consortium Petroline Holdings 
plans to start building a $620 million oil pipeline linking 
Johannesburg to the port of Maputo before the end of 2009.  The 450 
kilometer pipeline would have an annual capacity to transport 3.5 
million cubic meters of oil.  It would facilitate fuel imports via 
Mozambique's Maputo port, which is closer to Johannesburg than any 
of South Africa's major ports, including Durban.  The pipeline is 
expected to reduce the risk of fuel shortages in the interior of 
South Africa and cut deficiencies in transport and storage 
capacities.  The consortium aims to complete the project before 
¶2010.  Pipeline construction was originally scheduled to have 
started in September last year, but was delayed because an 
environmental impact study was not approved.  Stakeholders in the 
project include South Africa's Woesa Consortium, which holds 25%, 
and Gigajoule International, which controls another 20%.  A 
Mozambican consortium of small and medium companies holds the 
remaining 15%.  (Engineering News, March 26, 2009) 
 
--------------------------------------- 
SAG Aims for Space Industry Development 
--------------------------------------- 
 
¶11. (U) Minister of Trade and Industry Mandisi Mpahlwa launched the 
National Space Policy, saying that it was South Africa's primary 
goal to acquire the appropriate space-based systems for wider 
socio-economic benefits, as well as for the country's independent 
access to space. The DTI is aiming to promote the development of a 
competitive local commercial space sector with competitive space 
technology.  (Engineering News, March 6-26, 2009)