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TAGS: ECON EFIN EINV ETRD EMIN EPET ENRG BEXP KTDB SENV
PGOV, SF 
SUBJECT: SOUTH AFRICA ECONOMIC NEWS WEEKLY NEWSLETTER JUNE 5, 2009 
ISSUE 
 
PRETORIA 00001139  001.2 OF 004 
 
 
¶1. (U) Summary.  This is Volume 9, issue 22 of U.S. Embassy 
Pretoria's South Africa Economic News Weekly Newsletter. 
 
Topics of this week's newsletter are: 
 
- Zuma Lays Out Ambitious Program 
- Recession Adds More Strain to Motor Industry 
- Mboweni in Bid to Talk Down Currency 
- South Africa Refuses to Sign Interim Economic Partnership 
Agreement 
  With E.U. 
- Gautrain Rapid Rail Development Proceeding As Scheduled,But May 
Not 
  Be Ready for 2010 
- Transnet Sources Equipment for New Port from China 
- Zuma to Focus on Safety, Black Ownership in Mining 
- No Longer a Gold Mine 
- Illegal Mining a Problem in the Free State - Death Toll Reaches 76 
 
  at Harmony Shaft 
- DST Hunt for Space Agency Board Members 
End Summary. 
 
 
------------------------------- 
Zuma Lays Out Ambitious Program 
------------------------------- 
 
¶2. (U) President Zuma's first State of the Nation Address 
highlighted "10 priority areas," which form part of the current 
administration's Medium Term Strategic Framework (2009-2014).  These 
priority areas include employment creation, skills development, 
poverty alleviation, healthcare, and infrastructure investment. 
There were also a number of ambitious targets given the current 
economic downturn and the expectation of a slow recovery.  Chief 
among these is the creation of 500,000 jobs by the end of 2009 and 4 
million jobs by 2014.  The government also aims to reduce the rate 
of new HIV infections by 50% by 2011 and "to reach 80% of those in 
need of ARV treatment also by 2014."  (Absa Capital Research Morning 
Sheet, June 5, 2009) 
 
-------------------------------------------- 
Recession Adds More Strain to Motor Industry 
-------------------------------------------- 
 
¶3. (U) The National Association of Automobile Manufacturers of South 
Africa (NAAMSA) reported that new vehicle sales plunged 34.7% y/y in 
May to 25,819 units.  In the year to date, new vehicle sales have 
plummeted 35.8%, compared with the corresponding period last year. 
New passenger car sales dropped 27.2% in May, new light commercial 
vehicles suffered a decline of 43.5%, and medium commercial and 
heavy truck sales fell by 41.9% and 54.9%, respectively.  "The 
continuing weakness in medium and heavy commercial vehicle sales 
reflected lower investment spending by the private sector," NAAMSA 
said.  The latest vehicle sales figures suggested domestic demand 
remained "very weak," with plunging commercial vehicle sales 
implying that conditions in some areas of the economy got worse in 
the second quarter, according to one Nedbank report.  Moreover, 
vehicle exports plunged 41.3% in May due to low demand in South 
Africa's major export markets (the Euro zone, Japan and the US). 
The cuts in interest rates had not yet improved consumer confidence, 
observed ABSA Vehicle and Asset Finance Unit Managing Executive 
Marcel de Klerk.  (Business Day, June 3, 2009) 
 
------------------------------------- 
Mboweni in Bid to Talk Down Currency 
------------------------------------- 
 
¶4. (U) South African Reserve Bank (SARB) Governor Tito Mboweni took 
the unusual step of intervening personally to halt a sustained rand 
rally, warning its strength might be "unwelcome" for South Africa's 
Qrally, warning its strength might be "unwelcome" for South Africa's 
shrinking economy.  There was no "preferred level" for the rand, he 
said, but "many might argue that its elevated levels were unwelcome 
... if for example we look at the impact on manufacturing."   A 
strong rand could derail a recovery in local factory exports when 
the global economy eventually starts to recover.  Citigroup 
economist Jean-Francois Mercier noted, "It may be the speed of the 
rand's move rather than the level which has concerned the Governor. 
If you want exports to help growth in your economy, this kind of 
 
PRETORIA 00001139  002.2 OF 004 
 
 
rand strength is not sustainable in the longer term."  Mboweni's 
remarks helped to slow the latest spurt in the rand, which scaled a 
nine-month peak at R7.86/$ on June 1.  (Business Day, June 2, 2009) 
 
 
--------------------------------------- 
South Africa Refuses to Sign Interim 
Economic Partnership Agreement With E.U. 
--------------------------------------- 
 
¶5. (U) Botswana, Lesotho, and Swaziland broke ranks with South 
Africa and signed an interim economic partnership agreement (EPA) 
with the European Union (EU).  In response, Trade and Industry 
Minister Rob Davies warned that South Africa was prepared to set up 
trade barriers to stop cheap imports entering the country.  Davies' 
warning is the strongest sign yet that the almost 100-year-old 
Southern African Customs Union (SACU) is in jeopardy, as its rules 
prevent signatories from entering separate trade agreements with 
other countries.  Talks on the interim EPA, marked by bitter 
recrimination within SACU, have led to a deep rift among members. 
SACU would have to reassess the distribution of revenues from the 
customs revenue pool, noted South African Department of Trade and 
Industry Chief Trade Negotiator Xavier Carim.  Such a change may 
hurt the countries that have signed the interim EPA because of their 
dependence on SACU customs revenue to prop up national income. 
(Business Day, June 5, 2009) 
 
--------------------------------------------- -------- 
Gautrain Rapid Rail Development 
Proceeding As Scheduled, But May Not Be Ready for 2010 
--------------------------------------------- -------- 
 
¶6. (U) Gautrain Management Agency CEO Jack van der Merwe said the 
Gautrain rapid-rail link project is around 60% complete.  The first 
phase is still scheduled to be up and running by the end of June 
¶2010.  However, the decision on whether to accelerate completion of 
the first phase by May 2010 (in time for the 2010 FIFA World Cup) is 
still pending.  This initial phase includes the rail network between 
OR Tambo International Airport and Sandton (with stations at OR 
Tambo, Rhodesfield, Marlboro and Sandton).  The second phase will 
link Sandton and Park stations in Johannesburg with Pretoria.  It is 
to be completed in 2011.  Van der Merwe says the R25 billion ($3 
billion) project is running largely on schedule.  The Gautrain 
project is being constructed for the Gauteng provincial government 
by the Bombela consortium, which will also operate the rail system 
for a 15-year period.  (Engineering News, May 29, 2009) 
 
 
 
 
 
 
 
--------------------------------------------- ----- 
Transnet Sources Equipment for New Port from China 
--------------------------------------------- ----- 
 
¶7. (U) The State-owned transport logistics company Transnet has 
taken delivery of R72 million ($9 million) of components and 
equipment bound for the new Ngqura container terminal in the Eastern 
Cape Province.  The consignment from China included two fully erect 
rail-mounted gantry cranes, as well as small assembly parts, tools, 
consumables, and break-bulk cargo.  Port of Ngqura Business Unit 
Executive Hector Danisa said the investment would assist in getting 
more cargo volumes off the road and onto rail, as well as offering 
Qmore cargo volumes off the road and onto rail, as well as offering 
faster, cheaper alternatives to customers.  "The cranes will 
certainly assist us in meeting ... promised port-rail turnaround of 
under six hours.  They offer double the handling rate of reach 
stackers, which are used in some of our port terminals," he added. 
The cranes were expected to be fully operational by mid-June 2009. 
Transnet announced that the majority of Ngqura's container terminal 
infrastructure was in already place for the commercial launch in 
October.  Transnet has invested more than R10 billion ($1.3 billion) 
to date to develop the facility as a high-performance terminal. 
(Engineering News, May 29, 2009) 
 
--------------------------------------------- ----- 
Zuma to Focus on Safety, Black Ownership in Mining 
--------------------------------------------- ----- 
 
PRETORIA 00001139  003.2 OF 004 
 
 
 
¶8. (U) President Jacob Zuma said he plans to focus on enforcing 
safety measures to curb mining deaths which have hurt output and to 
review black ownership in the mining industry.  In a speech 
delivered May 30 to the National Union of Mineworkers (NUM), the 
President also committed to ensuring local communities benefited 
from mining activities in their areas.  "We need to vigorously 
support and entrench a culture of zero harm in this industry ... the 
safety record of our mines has become a central issue that will be 
placed under the scrutiny of government," he told the union members. 
 In 2008, the total fatality figure amounted to 168 workers, and a 
recent safety audit showed mine safety compliance in South Africa 
was below target at just 66%.  Mining companies have suffered 
production losses after fatalities due to routine shutdowns ordered 
by the government for investigations, and work stoppages by union 
members who have vowed to stop work for a day to mark the death of 
colleagues.  Zuma split the minerals and energy portfolio when 
forming his cabinet earlier this month in a bid to give more focus 
to the issues facing each industry.    New Mining Minister Susan 
Shabangu will oversee the first major review of the Mining Charter, 
a five-year-old agreement meant to bring more black ownership in 
mining, reversing decades of exclusion under white apartheid rule. 
Zuma lamented that only a few of the black economic empowerment 
initiatives had been successful and he urged the unions, industry, 
and the local communities to engage in the review.  (Engineering 
News, June 2, 2009) 
 
 
 
--------------------- 
No Longer a Gold Mine 
--------------------- 
 
¶9. (U) Old Mutual Investment Group South Africa recently pointed out 
challenges facing gold mining stocks in South Africa.  "We believe 
gold shares in South Africa are poor-quality businesses that will 
battle to earn returns above their cost of capital," the fund 
manager group said.  AngloGold Ashanti, Gold Fields, and Harmony 
Gold all have poor safety records that cause loss of life and gold 
production, which means less revenue and profit.  AngloGold has sold 
part of its output forward at less than the spot price of gold and 
its acquisition of Ashanti Goldfields mines in Ghana and Tanzania 
has faced challenges.  Gold Fields is battling with the troublesome 
South Deep mine in the Northwest Province of South Africa.  Harmony 
has high-cost mines and will battle to turn a profit if the gold 
price moves into a bear phase.  (Business Day, JuQ, 2009) 
 
------------------------------------------ 
Illegal Mining a Problem in the Free State 
Death Toll Reaches 76 at Harmony Shaft 
------------------------------------------ 
 
¶10. (U) A rising death toll from an illegal mining incident has 
prompted concern and calls for a probe and new measures to combat 
illegal mining.  Criminal charges have been made against 294 illegal 
miners brought to surface at one of South African gold major Harmony 
Gold's old shafts, while 76 bodies had been recovered at the same 
shaft.  The miners had reportedly died following an underground fire 
in an abandoned area of the shaft.  Harmony Gold South Region COO 
Tom Smith said the shaft was no longer in operation, with only the 
QTom Smith said the shaft was no longer in operation, with only the 
shaft barrel operating to pump water out of the shaft.  Harmony said 
in a statement that it was not certain if any other illegal miners 
had died underground at the shaft, adding that it would not deploy 
its own employees to search the areas where the illegal miners were 
working, as these areas were "extremely dangerous."  "We continue to 
address the issue of criminal mining on a daily basis, together with 
the South African Police Services (SAPS), the Department of Justice, 
the National Prosecuting Authority and other affected mining 
companies," Harmony CEO Graham Briggs added.  The company has 
implemented a number of initiatives to combat the problem, including 
tightening security at shaft heads, conducting daily search 
operations underground and improving access control measures.  A 
Harmony spokesperson said, "Our first priority is the safety of our 
workers, and we have daily inspections to make sure that the areas 
where our workers are active, are safe, and their safety is not 
affected by criminal miners.  Gold junior Pan African Resources also 
reported the death of 20 illegal miners at its Baberton mines 
earlier this year.  (Mining Weekly, Business Report, Business Day, 
The Times, June 2-3, 2009) 
 
PRETORIA 00001139  004.2 OF 004 
 
 
 
 
 
-------------------------------------- 
DST Hunt for Space Agency Board Members 
-------------------------------------- 
 
 
¶11.  (U) The Department of Science and Technology has started to 
recruit board members of South Africa's National Space Agency 
(SANSA).   The board would consist of 10-15 members, with 
backgrounds in finance, law, management, and technical expertise. 
The board will also be responsible for the governance and control of 
the agency.  SANSA would serve to provide and regulate the promotion 
and use of space and co-operation in space related activities.  The 
agency is expected to be operational by the beginning of the State's 
financial year in April 2010.  (Engineering News, May 29-June4, 
2009)