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UNCLAS SECTION 01 OF 03 PRETORIA 000875 
 
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 30, 2009 
ISSUE 
 
PRETORIA 00000875  001.3 OF 003 
 
 
¶1. (U) Summary.  This is Volume 9, issue 18 of U.S. Embassy 
Pretoria's South Africa Economic News Weekly Newsletter. 
 
Topics of this week's newsletter are: 
 
- South African Reserve Bank Cuts Repo Rate 
- Company Failures Rise 
- Finance Minister Will Have Role in Next ANC Government 
- South Africa Takes Anti-Dumping Action against China and Malaysia 
- ACSA to Use Improved Screening Measure to Detect Drug Smuggling 
and 
  Swine Flu 
- Goodyear Invests in the Eastern Cape 
- Region to Top Up South Africa's Power 
- Eskom Seeks More Government Support 
- PBMR Demonstration Delay 
- Zuma Administration to Split Departments 
End Summary. 
 
 
----------------------------------------- 
South African Reserve Bank Cuts Repo Rate 
----------------------------------------- 
 
¶2. (U) The South African Reserve Bank's (SARB) Monetary Policy 
Committee (MPC) cut the key monetary policy interest rate, the repo 
rate, by 100 points to 8.5%.  Interest rates have been cut by a 
cumulative 350 points since December 2008.  Domestic output and 
expenditure growth were declining or negative, remarked SARB 
Governor Tito Mboweni.  "The growth outlook is dependent on the 
broader global economic recovery," he said.  (Absa Newsletter and 
Business Day, April 30, 2009) 
 
--------------------- 
Company Failures Rise 
--------------------- 
 
¶3. (U) Company failures shot up in the first quarter of 2009. 
According to Statistics South Africa, corporate liquidations surged 
to 1,008 in the first quarter of the year, in contrast to only 687 
in the first quarter of 2008.  The finance sector was hit hardest, 
followed by trade and manufacturing.  "This news is not unexpected, 
but confirms that 2009 is going to be a tough year for business," 
said Raymond Parsons, Deputy CEO of Business Unity South Africa. 
Barnard Jacob Mellet economist Elna Moolman told reporters, "I 
think, unfortunately, things will continue to deteriorate, probably 
until the end of the year."  (Business Day, April 29, 2009) 
 
--------------------------------------------- --------- 
Finance Minister Will Have Role in Next ANC Government 
--------------------------------------------- --------- 
 
¶4. (U) South African Finance Minister Trevor Manuel will have a role 
in the next ANC government, according to ANC Treasurer-General 
Mathews Phosa.  Speaking to investors in London, Phosa said that 
Manuel's role would be important, whatever his position turns out to 
be.  However, Phosa declined to say whether Manuel would stay on as 
Finance Minister.  Other media reports have speculated that Manuel 
might be moved to a new central planning commission due to be set up 
in the Presidency.  Phosa stressed that economic and financial 
policy would remain largely constant under Jacob Zuma. 
(Business Day, April 28, 2009) 
 
-------------------------------------- 
South Africa Takes Anti-Dumping Action 
Against China and Malaysia 
-------------------------------------- 
 
¶5. (U) South Africa has imposed provisional anti-dumping duties of 
62% and 96%, respectively, on stainless steel kitchen sink imports 
from China and Malaysia.   The government's International Trade 
Administration Commission (ITAC) found that the local industry was 
suffering material injury as a result of the dumping.  ITAC will now 
Qsuffering material injury as a result of the dumping.  ITAC will now 
complete the investigation and make a final determination.  This is 
only the third time that anti-dumping duties have been imposed on 
imports from China since South Africa granted China "market economy 
status" two years ago.  The case was filed by Franke Kitchen 
Systems, a local manufacturer.  Importers of kitchen sinks claim 
that the duties will leave Franke with a monopoly position in the 
 
PRETORIA 00000875  002.3 OF 003 
 
 
South African market.  (Tralac Newsletter, April 29, 2009) 
 
-------------------------------------- 
ACSA to Use Improved Screening Measure 
to Detect Drug Smuggling and Swine Flu 
-------------------------------------- 
 
¶6. (U) The Airports Company of South Africa (ACSA) is planning to 
install technology to check the temperatures of passengers arriving 
from countries affected by swine flu. ACSA Director of Operations 
Bongani Maseko had initially planned to use thermal image detection 
systems to screen for drugs after two recent drug busts involving 
South African Airways crew members.  The technology would show 
raised temperatures, which could indicate that a passenger was 
anxious and a possible drug smuggler.  Now ACSA plans to use the 
technology to identify passengers who may be infected with swine 
flu.  (South African Press Association, April 29, 2009) 
 
------------------------------------ 
Goodyear Invests in the Eastern Cape 
------------------------------------ 
 
¶7. (U) Goodyear Tire and Rubber Holdings has decided to invest R70 
million ($8 million) in its Uitenhage plant in the Eastern Cape 
Province despite the troubles in the global automotive industry. 
The investment will allow the factory to produce three new, 
technologically-superior tire products, including one specifically 
aimed at the minibus taxi market.  Goodyear Managing Director 
Jean-Jacques Wiroth said the investment reinforced Goodyear's 
commitment to South Africa and sub-Saharan Africa.  Goodyear is 
investing in new machinery, training local staff, and developing 
distribution channels, according to Wiroth.  He added that Goodyear 
was extending its range through the launch of the new products in 
South Africa.  (Business Report, April 28, 2009) 
 
 
------------------------------------- 
Region to Top Up South Africa's Power 
------------------------------------- 
 
¶8. (U) Power producers in the Southern African Power Pool (SAPP) 
have pledged their support to assist South Africa in meeting the 
electricity requirements of the 2009 Confederations Cup and 2010 
FIFA World Cup, confirmed state-owned power utility Eskom.  Eskom 
reported that the other 13 members of the power pool had pledged to 
support South Africa in the areas of power generation, transmission, 
customer contributions, and demand-side management (DSM) initiatives 
during the sporting events.  Eskom would be able to tap into 
2,000-3,000 megawatts (MW) of power to back up its own strained 
system from power sources in the region.  SAPP Chief Engineer Alison 
Chikova reported that its members would meet in Mozambique to sign 
the pledge, as the 2010 FIFA World Cup would be a big 
electricity-supply challenge for the SAPP region.  The commitment to 
back Eskom's electricity infrastructure was prompted by the 
utility's pledge to honor supply contracts with the region despite 
the supply shortfall last year.  Electricity demand in the region 
has eased since the financial crisis has affected the economy. 
South Africa's peak demand of 36,000 MW last year - dangerously 
close to available capacity of 38,300 MW - has since dropped by 
almost 20% to 30,000 MW.  Little power has actually been traded in 
SAPP to date because of limited excess supply available and limited 
QSAPP to date because of limited excess supply available and limited 
transmission capacity.  (Weekender, Engineering News, April 29, 
2009) 
 
 
----------------------------------- 
Eskom Seeks More Government Support 
----------------------------------- 
 
¶9. (U) Eskom CEO Jacob Maroga argued recently that its build program 
was an effective fiscal stimulus program for South Africa, citing 
capital spending of nearly $12 billion in 2010/11 and $10 billion in 
2011/12.  Eskom's major new projects underway are two new coal-fired 
projects, in Limpopo and Mpumalanga, and a pumped storage peaking 
plant in the Drakensburg Mountains.  These three projects represent 
11,000 MW of generation capacity and $23 billion in total 
investment.  Maroga said this expenditure program would place a 
strain on the utility's financial ratios.  "Government has given us 
a guarantee ... but we may require more," he hinted, alluding to the 
 
PRETORIA 00000875  003.3 OF 003 
 
 
possibility that Eskom might have to approach government for yet 
more support beyond the $8 billion subordinated loan and the $20 
billion in guarantees already extended to help it finance its $45 
billion five-year capital program.  Eskom has delayed making a 
tariff increase request to the regulator because of current economic 
challenges and the April 22 elections.  South Africa's largest labor 
federation COSATU has already stated that it would oppose even an 
increase that was in line with Eskom's previously indicated price 
path of 20-25%.  The new power stations in Limpopo and Mpumalanga 
are on schedule to meet their commissioning target dates of 2012 and 
2013, according to Eskom.  (Engineering News, April 23, 2009) 
 
 
------------------------ 
PBMR Demonstration Delay 
------------------------ 
 
¶9. (U) South Africa's PBMR Company, which is developing the fourth 
generation pebble bed modular reactor (PBMR) technology, has 
confirmed a delay in the construction of its high-temperature, 
gas-cooled demonstration plant.  "The delay is because of 
modifications to the PBMR design from a direct cycle, gas-turbine 
concept intended for electricity generation to an indirect, 
steam-turbine concept that can generate electricity to be used for 
process heat applications," stated PBMR Communications Consultant 
Tom Ferreira.  He mentioned the U.S.-led New Generation Nuclear 
Plant project, South African coal-to-liquids and petrochemicals 
group Sasol, and Canadian oil sands as potential applications. 
Ferreira also referred to the recently announced memorandum of 
understanding with China's Institute of Nuclear and New Energy 
Technology at Tsinghua University in Beijing and the Chinergy 
Company.  He said the main objectives of the MOU would be to pursue 
collaboration in a number of strategic and technical areas relating 
to high-temperature projects in China and South Africa. 
(Engineering News, April 23, 2009) 
 
---------------------------------------- 
Zuma Administration to Split Departments 
---------------------------------------- 
 
¶9. (U) President Jacob Zuma plans to split certain departments, 
according to ANC transitional team leader Collins Chabane.  The team 
has proposed partitioning the Department of Water Affairs and 
Forestry as well as the Department of Environmental Affairs and 
Tourism.  Water-related matters would become part of the Department 
of Environmental Affairs, forestry matters would become part of the 
Department of Agriculture, and Tourism would become a stand-alone 
department.  Department of Minerals and Energy would become two 
departments, one focusing on mining and the other on energy.  (Mail 
and Guardian, April 30, 2009)