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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 APRIL 9, 2009 
ISSUE 
 
PRETORIA 00000707  001.2 OF 003 
 
 
¶1. (U) Summary.  This is Volume 9, issue 15 of U.S. Embassy 
Pretoria's South Africa Economic News Weekly Newsletter. 
 
Topics of this week's newsletter are: 
 
- Recession Rules Out Post-Election Policy Shift; Mboweni and Manuel 
 
  Agree on Rate Cuts 
- Significant Rise in Reserves 
- Treasury Will Not Call the Shots 
- South Africa Ponders a Protectionist 
  Response to Economic Crisis 
- South African Logistics Costs Continue to Mount 
- Minister of Communication's Death Leads to Leadership Void 
- Sasol Signs Gas-to-Liquids Agreement with Uzbekistan 
- South Africa May Invest in Battery-Powered Car 
End Summary. 
 
 
--------------------------------------------- - 
Recession Rules Out Post-Election Policy Shift; 
Mboweni and Manuel Agree on Rate Cuts 
--------------------------------------------- - 
 
¶2. (U) South African Reserve Bank (SARB) Governor Tito Mboweni ruled 
out shifts in economic policy regardless of the election's outcome 
on April 22.  South Africa might have slipped into a recession in 
the first quarter of this year, warned Mboweni, adding that optimism 
about a quick recovery in the global economy might be misplaced. 
"Whatever party comes to power after the elections will have to 
confront this reality, and I'm very sorry to say there is very 
little room for maneuver," he commented.  Mboweni urged adherence to 
the Group of 20's agenda of fiscal and monetary stimulus and 
stricter financial regulation.   More cuts in interest rates are on 
the way, Mboweni hinted.  Trevor Manuel echoed that sentiment this 
week when he told an academic forum that there was "plenty of room" 
for further cuts in interest rates.  Manuel rarely comments on 
monetary policy because the SARB makes policy decisions independent 
of government.  (Business Day, April 8, 2009) 
 
---------------------------- 
Significant Rise in Reserves 
---------------------------- 
 
¶3. (U) South Africa's net gold and foreign exchange reserves 
increased from $33.151 billion in February to $33.458 billion in 
March, suggesting the SARB used the opportunity of a stronger rand 
during the month to boost its reserves.  The SARB attributed the 
rise in reserves to "usual foreign exchange operations" and 
valuation adjustments.  SARB data showed the rand had strengthened 
from R10.05/$ in February to R9.49/$ in March.  South Africa's net 
reserves rose after the SARB brought a long-standing negative 
position into balance in 2004 with the elimination of its 
loss-making forward foreign exchange book.  Even with the increase, 
the SARB's reserves lag behind those of other emerging economies. 
(Fin24, April 8, 2009) 
 
-------------------------------- 
Treasury Will Not Call the Shots 
-------------------------------- 
 
¶4. (U) The prospective African National Congress (ANC) government 
would create a Central Planning Commission to decide when, where, 
and how much money to spend, announced transitional team leader 
Collins Chabane. Establishment of the commission would signal an end 
to the days of a powerful National Treasury.  "Departments won't 
have to go cap in hand to Treasury," Chabane commented.  The 
commission would set priorities and instruct the Treasury to find 
money, added Chabane.  "It will not be the role of the Treasury to 
Qmoney, added Chabane.  "It will not be the role of the Treasury to 
say it is expensive," he remarked.  The role of the Treasury will be 
to identify the available resources that the state could use to 
implement its programs, according to Chabane.  The commission would 
be situated within the executive office and would be led by Jacob 
Zuma.  The ANC is also considering scrapping deputy ministries in 
some departments while increasing the number in others, depending on 
workload.  (The Sunday Independent, April 5, 2009) 
------------------------------------ 
South Africa Ponders a Protectionist 
Response to Economic Crisis 
 
PRETORIA 00000707  002.2 OF 003 
 
 
------------------------------------ 
 
¶5. (U) ANC President Jacob Zuma has promised a "smooth transition" 
after a new administration takes office in May.  Speaking at a 
business breakfast in Johannesburg, Zuma said that underperforming 
ministers would be removed from office, some cabinet departments 
would be split, and a planning commission would be established in 
the Presidency to oversee policy.  Responding to a question on the 
mandate of the South African Reserve Bank, Zuma said:  "The role of 
the Reserve Bank will continue to be the same.  The Bank has been 
doing very well.  I don't think it will change."  While 
acknowledging flaws in the implementation of affirmative action, 
Zuma said he saw no need for a "sunset clause" for black employment 
targets.  (Business Day, April 1, 2009) 
 
---------------------------- 
South African Logistics Costs 
Continue to Mount 
---------------------------- 
 
¶6. (U) The South African government would consider reversing some of 
the tariff cuts that it has pursued for the last 15 years, suggested 
Deputy Trade and Industry Minister Dr. Rob Davies.  The reversals 
could be necessary to mitigate against some of the imbalances 
created by bail-outs being deployed in other countries to salvage 
distressed firms and industries.  "People are saying that they don't 
want the world to move into protectionism - and at some sort of 
level we can agree to that.  "But let's not go into this situation 
starry-eyed and as idealists.  Let's not go into a multilateral 
disarmament process and come out unilaterally disarmed," Davies 
quipped.  While the developed world might not be using tariff 
policy, Davies argued, the "massive" bail-outs were certainly linked 
to messages about "buying local."   South Africa would likely direct 
some additional resources to support industrial sectors, but it 
could not compete with the quantum of money being dispersed 
elsewhere, Davies cautioned.  He counseled against committing not to 
raise tariffs where South Africa has "WTO legal space" to do so. 
South Africa could not "sit by and let all these subsidies, which 
will have the same effect as a tariff, proceed" without considering 
responding by using all policy instruments at its disposal, urged 
Davies.  Such "boldness" would need to be backed by strong evidence 
to justify how a tariff increase would be effective in enabling 
industries to develop over the long term, he stressed.  (Engineering 
News, April 7, 2009) 
 
------------------------------ 
Minister of Communication's 
Death Leads to Leadership Void 
------------------------------ 
 
 
¶7. (U) Minister of Communications Ivy Matsepe-Casaburri died of 
natural causes on April 6.  Government Spokesperson Thabo Masebe 
said Matsepe-Casaburri had not been at work for a long time because 
of her health.  President Kgalema Motlanthe expressed his 
condolences and said Matsepe-Casaburri was "an outstanding leader 
and servant of the people of South Africa."  Her death leaves a 
leadership void at the Department of Communications (DOC) with the 
recent resignation of Director-General Lyndall Shope-Mafole. 
Shope-Mafole was released from her DOC contract in February to 
pursue a leadership role in the opposition COPE party.  Under 
Qpursue a leadership role in the opposition COPE party.  Under 
Matsepe-Casaburri's leadership, the DOC had been criticized for 
hampering efforts to increase liberalization in the ICT sector.  DOC 
interventions delayed the Independent Communications Authority of 
South Africa (ICASA) from issuing individual electronic 
communications network service (I-ECNS) licenses required for 
independent operators to develop national networks.  A Pretoria High 
Court ruling in favor I-ECNS operators finally paved the way for 
ICASA license issuance in January 2009.  (Department of 
Communications, April 7, 2009 and Engineering News, January 22, 
2009) 
 
-------------------------- 
Sasol Signs Gas-to-Liquids 
Agreement with Uzbekistan 
-------------------------- 
 
¶8. (U) Petrochemicals giant Sasol signed a preliminary agreement 
with Uzbekneftegaz, the national oil and gas company of Uzbekistan, 
 
PRETORIA 00000707  003.2 OF 003 
 
 
and Malaysia's Petronas for the development and implementation of a 
gas-to-liquids (GTL) project in Uzbekistan.  The three companies 
also signed a memorandum of understanding for mutual cooperation in 
the oil and gas industry in Uzbekistan.  Sasol's technology would 
now be deployed to produce transportation fuels from Uzbekistan's 
abundant domestic natural gas reserves.  "The wealth of gas 
resources within Uzbekistan makes this an ideal location for a GTL 
facility" commented Sasol General Manager Lean Strauss, who noted 
that Uzbekistan has about 60 trillion cubic feet of natural gas 
reserves.  The GTL project would not only enhance Uzbekistan's fuel 
production, but would also make a significant contribution to the 
economy of the country through foreign direct investment and job 
creation, Sasol noted.  Sasol and Petronas were also exploring other 
areas of cooperation in the Uzbekistan oil and gas industry. 
(Engineering News, April 8, 2009) 
 
------------------------- 
South Africa May Invest in 
Battery-Powered Car 
------------------------- 
 
¶9. (U) South Africa may invest in the Joule, the country's first 
battery-powered car.  Cabinet has approved the establishment of an 
interagency committee to assess an investment in the Joule.  The 
committee will include representatives from the Departments of 
Environmental Affairs and Tourism, Minerals and Energy, Science and 
Technology, Trade and Industry, Transport, and Treasury.  The Joule 
would become Africa's first locally manufactured and assembled 
zero-emissions vehicle.  South African automotive designer Keith 
Helfet designed the six-seater multi-purpose vehicle, which would be 
powered by a 220-volt battery.  The battery would run for 
approximately 200 kilometers before requiring recharging.  The 
Gauteng provincial government has reportedly expressed an interest 
in placing the first major order for Joules.  (BuaNews, March 19, 
2009)