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PGOV, SF 
SUBJECT: SOUTH AFRICA ECONOMIC NEWS WEEKLY NEWSLETTER SEPTEMBER 4, 
2009 ISSUE 
 
PRETORIA 00001808  001.2 OF 003 
 
 
¶1. (U) Summary.  This is Volume 9, issue 34 of U.S. Embassy 
Pretoria's South Africa Economic News Weekly Newsletter. 
 
Topics of this week's newsletter are: 
 
- South African Consumers in Debt Trouble 
- Outlook for Vehicle Sales Brightens 
- National Broadband Policy Expected "Shortly" 
- Government Backs MTN-Bharti Deal to Promote South-South 
Cooperation 
- Energy Bordering on Crisis Again 
- Minerals Export Stymied by Logistical Challenges 
- Public Enterprise Boss May Be Headed for SAA 
- South Africa and Italy to Expand Trade Relationship 
 
 
End Summary. 
 
 
-------------------------------------- 
South African Consumers in Debt Trouble 
--------------------------------------- 
 
¶2. (U) The National Credit Regulator (NCR) has warned that at least 
150,000 South Africans could be under debt review by Christmas as 
the effects of the economic crisis take hold.  Consumers under debt 
review work with credit counselors to reschedule payments to 
creditors.  Consumer Assist Chief Executive Officer Andre Snyman 
said there are already 100,000 consumers in credit counseling.  They 
owe a combined R20 billion ($2.5 billion) of which R12 billion ($1.5 
billion) is owed on mortgages.  People who were seeking assistance 
had used all of their reserves and investments, commented Snyman. 
Almost 1.3 million South Africans had fallen into arrears from June 
2007 to July 2009.  (Fin24, September 1, 2009) 
 
 
------------------------------------ 
Outlook for Vehicle Sales Brightens 
------------------------------------ 
¶3. (U) The National Association of Automobile Manufacturers of South 
Africa (Naamsa) reported on September 2 that total new vehicle sales 
for August declined 26.2% when compared to new vehicle sales in 
August 2008.  However, the decline had continued to be "less 
negative" than in previous months, reinforcing the underlying 
bottoming-out trend evident over the past three months, reported 
Naamsa.  Volkswagen SA spokesman Bill Stephens said market demand 
remained subdued, as unemployment had grown and household real 
incomes had fallen steeply, keeping households under financial 
pressure and the household debt-to-income ratio at sustained high 
levels.  Naamsa said the revival of the domestic motor vehicle 
industry depends on an improvement in consumer spending, lower 
interest rates and stimulatory government expenditure.  (Business 
Day, September 3, 2009) 
------------------------------------------- 
National Broadband Policy Expected "Shortly" 
------------------------------------------- 
 
¶4. (U) Minister of Communications Siphiwe Nyanda addressed the 
Southern African Telecommunications Networks and Application 
Conference (SATNAC) in Swaziland, which focused on the convergence 
of the information technology and telecommunications sectors. 
Nyanda announced that the South African Department of Communications 
(DOC) was finalizing the national broadband policy.  He said there 
was increasing pressure for integrated, affordable, and mobile 
communications solutions that spurred the need for migration to 
Internet Protocol (IP) based platforms.  The South African 
government hopes to deploy ICT to stimulate socioeconomic growth, 
and thus seeks to encourage more undersea, fiber-optic cables 
Qand thus seeks to encourage more undersea, fiber-optic cables 
connecting the country to international networks, as well as 
extending terrestrial fiber-optic networks.  He noted that South 
Africa's lack of infrastructure precludes the need to adapt from 
aged legacy systems.  Nyanda said convergence of the sectors could 
"reverse the skills gap," and he contemplated using voice over IP 
for education, health care, and service delivery in rural areas. 
(Engineering News, August 31, 2009) 
 
----------------------------------- 
Government Backs MTN-Bharti Deal to 
Promote South-South Cooperation 
 
PRETORIA 00001808  002.2 OF 003 
 
 
----------------------------------- 
 
¶5. (U) South Africa's government has backed the proposed merger 
between domestic mobile operator MTN Group and India's Bharti Airtel 
that could lead to the creation of the world's No. 3 mobile firm. 
While a combined MTN/Bharti would be the third-biggest mobile 
operator based on subscribers behind China Mobile and Vodafone, its 
annual sales of $20 billion would be dwarfed by China Mobile's $60 
billion and Vodafone's $65 billion.  The two companies have been 
working to conclude a $23 billion cross-ownership deal since May. 
Under the proposal, MTN would take a 36% stake in Bharti and Bharti 
would take a 49% stake in MTN, with the possibility of a full-blown 
merger to follow.  South-South cooperation is a key mechanism for 
the development agenda of India, Brazil, and South Africa under a 
trilateral initiative aimed at unlocking economic opportunities that 
exist between the three countries.  (Engineering News, August 31, 
2009) 
 
-------------------------------- 
Energy Bordering on Crisis Again 
-------------------------------- 
 
¶6. (U) Eskom's Andrew Etzinger recently commented that the utility's 
reserve margin was back to the crisis levels of January 2008, when 
Eskom shared available electricity on a rotating basis and cut power 
supplies to mines.  Etzinger emphasized the need to pursue energy 
efficiency in earnest.  He said significant new power production 
from Eskom would be available only in 2012.  Electricity supply 
until then "would be very tight."  South Africa is experiencing its 
first recession in nearly two decades, but Etzinger argued, "Demand 
for electricity has continued almost as though there was no 
recession.  We have, in a sense, two economies.  There is the real 
economy, where recession reduces growth and opportunity.  Then there 
is the energy economy, where demand continues its upward trajectory 
seemingly independent of what pain consumers and taxpayers may be 
experiencing.  It appears that negative economic growth does not 
offer a respite from energy demand."  Prior to the crisis, South 
Africa had the least expensive electricity in the world.  The 
electricity regulator NERSA has since approved two generous price 
increases, 27.5% and 31.1%, but demand is up by 10% from when the 
power conservation program was implemented 18 months ago.  Etzinger 
noted, "Cheap electricity had worked nicely for the economy in the 
past, but that it was now a negative, and there was no way out of 
the mess without tariffs rising drastically."  (Mail and Guardian, 
August 31, 2009) 
 
 
------------------------------------- 
Minerals Export Stymied by Logistical 
Challenges 
------------------------------------- 
 
¶7. (U) African Rainbow Minerals (ARM) Executive Patrice Motsepe said 
South Africa was running the risk of losing business to rival 
countries because of logistics ineptitude.  Motsepe noted that "this 
is not just an industry-specific issue, but it's about the country 
as a whole, and our global competitiveness."  Work is being done to 
look into a new lower-cost, higher-capacity transport route for the 
export of manganese from South Africa's rich Kalahari manganese 
field.  ARM Ferrous Executive Director Jan Steenkamp said ARM, with 
Qfield.  ARM Ferrous Executive Director Jan Steenkamp said ARM, with 
its partner Assmang, and rival diversified miner BHP Billiton, 
sponsored a feasibility study to look at all the manganese export 
alternatives on the eastern and western corridors.  State-controlled 
transport logistics company Transnet "is currently working with the 
producers to look at long-term export capacity," Steenkamp said. 
(Mining Weekly, August 31, 2009) 
 
-------------------------------------------- 
Public Enterprise Boss May Be Headed for SAA 
-------------------------------------------- 
¶8. (U) Department of Public Enterprises (DPE) Director General 
Portia Molefe has resigned and industry speculation is that she is a 
contender for the CEO post at South African Airways (SAA).  DPE 
declined to comment on Molefe's resignation.  Former Minister of 
Public Enterprises Alec Erwin, who appointed Molefe, remarked that 
Molefe was "an effective and innovative Director General, and if she 
is leaving government it would be a huge loss."  Despite 
long-standing funding problems at SAA, Molefe has argued that the 
airline is a strategic asset providing vital business and tourism 
 
PRETORIA 00001808  003.2 OF 003 
 
 
links to the rest of the world and so should remain under government 
control.  (Comment: the former SAA CEO was forced to resign earlier 
this year amidst reports of financial mismanagement and corruption 
and the process of appointing a new CEO is well under way.) 
However, there are some signs that Molefe might be out of favor 
politically.  Before the April elections, she had floated the idea 
of corralling state entities into a single agency not headed by a 
cabinet minister.  The implication was that Molefe herself would 
head the agency, but the Zuma administration rejected the proposal. 
It has also become clear that she and DPE Minister Barbara Hogan do 
not always see eye-to-eye.  (Business Day, September 2, 2009) 
 
 
 
 
-------------------------------- 
South Africa and Italy to Expand 
Trade Relationship 
-------------------------------- 
 
¶9. (U) South African Trade and Industry Minister Dr. Rob Davies and 
Italian Economic Development Minister Claudio Scajola met in 
Pretoria to discuss small enterprise development and cooperation on 
trade within South Africa's industrial policy.  Davies noted that 
there were complementary opportunities for Italian firms and 
organizations, especially in South Africa's agroindustries and the 
furniture-making sector.  South Africa imported about R17 billion 
($2.1 billion) worth of goods from Italy in 2008, mainly machinery, 
electrical equipment and appliances.  South Africa exported about 
R13 billion ($1.6 billion) worth of goods to Italy, most of which 
were precious metals, coal, and metallurgical products.  Davies said 
that South Africa mostly exported primary or raw materials and 
imported manufactured goods.  South Africa was aiming to shift the 
balance increasingly towards value-added products.  (Engineering 
News, August 31, 2009)