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UNCLAS SECTION 01 OF 03 PRETORIA 000831 
 
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 APRIL 17, 2009 
ISSUE 
 
PRETORIA 00000831  001.2 OF 003 
 
 
¶1. (U) Summary.  This is Volume 9, issue 17 of U.S. Embassy 
Pretoria's South Africa Economic News Weekly Newsletter. 
 
Topics of this week's newsletter are: 
 
- Business Index Shows Light at End of Tunnel 
- Empowerment Fund Changes Strategy to Help Smaller Firms 
- Telkom and AT&T Launch Strategic Alliance 
- Tourism's Impact on Economy Still Upbeat 
- Passenger Rail Services to Be Consolidated 
- Granite Miners Have Two Months to Back Expropriation Claim 
- New Green Paper on Minerals Beneficiation Launched 
- R6 Billion Lost Annually to Illegal Fishing 
 
 
End Summary. 
 
 
------------------------------------------- 
Business Index Shows Light at End of Tunnel 
------------------------------------------- 
 
¶2. (U) South Africa's leading economic indicator, which predicts 
growth six to 12 months in advance, increased from 105.9 points in 
January to 106.6 points in February, suggesting the recession may be 
less severe than feared. The South African Reserve Bank's composite 
leading business cycle indicator is compiled from data from surveys, 
share prices, and South Africa's main trading partners.  The figures 
showed that four of the components measured by the indicator rose in 
February: job advertisements in a Sunday newspaper; sales of new 
passenger vehicles; the commodity price index; and the spread 
between 10-year bonds and 91-day Treasury bills.  The business 
confidence, share prices, residential building plans, money supply, 
manufacturing orders, and working hours components dropped.  This 
was the first time the indicator, which accurately predicted the 
current economic downturn, had risen since February last year.  It 
has steadily declined from a peak of 127.2 in March 2007.  Analysts 
warned that an economic recovery depends on the extent of South 
Africa's response to a pick-up in the global economy, which has 
begun to show signs of improvement.  It would also take time for 
lower interest rates to inject some vigor into consumer spending, 
the main growth engine of the economy.  (Business Day, April 21, 
2009) 
 
--------------------------------------------- ---------- 
Empowerment Fund Changes Strategy to Help Smaller Firms 
--------------------------------------------- ---------- 
 
¶3. (U) The National Empowerment Fund (NEF) plans to spend R700 
million ($78 million) in 2009, mainly on providing finance for small 
and medium-sized businesses. The economic slowdown has required the 
NEF, which was set up to promote black economic empowerment (BEE), 
to devote time and energy to assist distressed companies.  The NEF's 
total equity and loan exposure to the small business sector is about 
R300 million ($33 million), and it has had to restructure financing 
instruments for about 40% of its 177 beneficiaries because of the 
difficult economic times.  The fund has disbursed more than R978 
million ($109 million) to 160 black entrepreneurs and 
black-empowered businesses since its inception.  Of this, 76% is 
invested in deals of less than R5 million ($600,000) and 24% in 
deals of more than R5 million ($600,000).  A panel of business 
mentors would also be deployed to help clients with various aspects 
of their businesses, such as accounting, access to markets, and 
Qof their businesses, such as accounting, access to markets, and 
general strategic advice.  (Business Day, April 20, 2009) 
 
----------------------------------------- 
Telkom and AT&T Launch Strategic Alliance 
----------------------------------------- 
 
¶4. (U) State-owned Telkom and AT&T signed a memorandum of 
understanding that would allow the two companies to tap into each 
other's networks, ensuring that African and multinational firms 
based in Africa link more effectively to other global markets.  The 
contract is expected to be finalized in the next five months. 
Telkom CEO Reuben September remarked that AT&T chose Telkom because 
of its presence in 35 African countries (through the acquisition of 
Africa Online and MWeb Africa), its strong international 
connectivity, and strong enterprise relationship.  AT&T Business 
Solutions CEO Ronald Spears explained, "Through Telkom, AT&T would 
 
PRETORIA 00000831  002.2 OF 003 
 
 
extend its world-class, internet-based network to sub-Saharan Africa 
and strengthen its ability to serve the needs of its customers in 
the key South African market."  (Business Report and MoneyWeb, April 
16-17, 2009) 
 
--------------------------------------- 
Tourism's Impact on Economy Still Upbeat 
--------------------------------------- 
 
¶5. (U) Tourism's share of the economy kept rising in 2008, 
contributing an estimated 8.4% to the gross domestic product (GDP). 
Minister of Environmental Affairs and Tourism Marthinus van 
Schalkwyk predicted a 12% contribution to GDP within five years. 
While growth in foreign arrivals slowed to 5.5% in 2008 due to the 
global economic slowdown - down from double-digit growth of the past 
few years - the country still welcomed a record 9.6 million 
tourists.  Tourism added R70.5 billion ($7.8 billion) in direct 
contributions to GDP, up 12% from 2007.  The sector employed more 
than 1 million people, up 7% from 2007.  "The South African industry 
continued to perform well in spite of pressures exerted by the 
global financial crisis that had seen growth in the global industry 
shrink to 1.3% last year," Van Schalkwyk said.  South African 
Tourism Board CEO Didi Moyle commented that an increase in flight 
capacity was critical.  "The U.S. market performed very well, and 
was helped by Delta and South African Airways putting on double 
daily flights to the U.S."  The number of American visitors to South 
Africa grew 3.8% to 287,438 despite the U.S. economy slipping into 
recession.  Despite the tough first few months of 2009, foreign 
arrivals would grow this year, Moyle predicted.  (Business Day, 
April 17, 2009) 
 
------------------------------------------ 
Passenger Rail Services to Be Consolidated 
------------------------------------------ 
 
¶6. (U) South African Rail Commuter Corporation's Metrorail and the 
passenger transport businesses operated by Transnet are undergoing a 
merger to create a new Passenger Rail Agency of South Africa 
(PRASA).  PRASA's main goal will be to improve existing passenger 
service, which is currently able to sustain about 650 million 
passenger journeys a year.  There is also a program to upgrade 2,000 
coaches by the end of 2010.  PRASA CEO Lucky Montana noted that 
PRASA would need to introduce some 560 new coaches yearly for the 
next 10 to 12 years if it is to match capacity to anticipated demand 
growth and reposition commuter rail at the heart of the country's 
public transport system.  Montana admitted that such an aspiration 
would require an investment far beyond the R25 billion ($2.7 
billion) already allocated by national government for the next three 
years.  Montana said a plan for further investment was currently 
before government.  Future projects being considered include the 
R8.6 billion ($988 million) Moloto corridor rail system between 
Gauteng and Mpumalanga and a high-speed between Johannesburg and 
Durban.  PRASA is also assessing two serious bids to build a new 
link between Cape Town and the city's international airport. 
(Engineering News, April 10, 2009) 
 
--------------------------------- 
Granite Miners Have Two Months to 
Back Expropriation Claim 
--------------------------------- 
Q--------------------------------- 
 
 
¶7. (U) The South African government has agreed to a two-month stay 
of an International Centre for the Settlement of Investment Disputes 
(ICSID) arbitration in which Italian granite miners claim that their 
mineral rights are being expropriated by South Africa's minerals 
legislation.  The claimants had alleged that South Africa's Mineral 
and Petroleum Resources Development Act (MPRDA) and South Africa's 
BEE-mining charter had expropriated the indirect interests that the 
granite miners held in the South African quarrying sector and had 
otherwise violated the bilateral investment treaties that had been 
signed between South Africa, Italy, and Belgium/Luxembourg.  The 
South African government said that the ICSID's tribunal had given 
effect to the stay, which had come into being on March 28 and which 
would expire on May 28.  The South African government's agreement to 
the stay followed its submission on March 27 of a package including 
four witness statements, five expert reports on several specialized 
disciplines, and 19 volumes of documentary evidence and legal 
authorities.  During the stay period, South African quarrying 
 
PRETORIA 00000831  003.2 OF 003 
 
 
companies indirectly owned by the claimants would be expected to 
complete their application for "old-order" rights to be  converted 
into "new-order" rights, subject to compliance with the MPRDA and 
mining charter, to enable the company to prospect or mine for 
minerals.  (Mining Weekly, April 10, 2009) 
 
-------------------------- 
New Green Paper on Minerals 
Beneficiation Launched 
-------------------------- 
 
¶8. (U) South Africa's Department of Minerals and Energy (DME) 
recently launched the long-awaited minerals beneficiation strategy, 
a draft document on which stakeholders were invited to make written 
submissions.  DME mineral policy and promotion Deputy Director 
General Musa Mabuza explained that once comments come through, they 
would be consolidated and the document would be taken to Cabinet to 
be adopted as a policy position of the country.  Chamber of Mines 
Chief Economist Roger Baxter highlighted the importance of doing 
proper analysis of the top ten minerals in South Africa to see what 
was feasible and how to integrate the different stakeholders to play 
a constructive engaging role in the process.  The Department of 
Trade and Industry said it viewed the strategy as valuable starting 
point, as it was important for job creation, and said the strategy 
was 100% backed by the department.  (Mining Weekly, April 10, 2009) 
 
--------------------------- 
R6 Billion Lost Annually to 
Illegal Fishing 
--------------------------- 
 
¶9. (U) A report commissioned by the South African Institute for 
Security Studies has revealed that illegal fishing in South African 
waters was costing the country nearly R6 billion ($667 million) 
annually.  Most of the fish poached are hake, anchovies, sardines, 
and shark.  According to the report, Spanish vessels working with 
local vessels are responsible for most of the poaching.  South 
African law does not allow the issuance of fishing quotas to foreign 
vessels, but local quota holders often sell their quotas to Spanish 
ships.  The practice often results in large-scale poaching.  The 
Department of Environmental Affairs and Tourism (DEAT) is also 
blamed for having allowed several vessels owned by a known and 
convicted Spanish poacher Manual Martinez into the hake industry in 
¶2007.  DEAT reduced the hake quota by 14% between 2005 and 2007, 
which resulted in a R300 million direct loss to the industry, 
according to the report.  (The Cape Times, April 13, 2009)