SOUTH AFRICA ECONOMIC NEWSLETTER

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TAGS: ECON EINV EFIN ETRD BEXP KTDB PGOV SF
SUBJECT: SOUTH AFRICA ECONOMIC NEWSLETTER
March 24 2005 ISSUE



1. Summary. Each week, AMEmbassy Pretoria publishes an
economic newsletter based on South African press reports.
Comments and analysis do not necessarily reflect the
opinion of the U.S. Government. Topics of this week's
newsletter are:
- New Vehicle Exports Increase by 49.5% in February;
- Savings Have to Increase for 6% Growth;
- Competition Tribunal to Rule on Airline Collusion;
- Competition Commission Finds Collusion in Car Security
Industry;
- Documented Immigrants, Emigrants and Tourists Increase;
and
- 3.3 Percent Consumer Price Increase Expected
End Summary.

NEW VEHICLE EXPORTS INCREASE BY 49.5% IN FEBRUARY
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2. South African new vehicle exports increased 49.5
percent (m/m) in February to 8,374 units compared to 5,600
in January. Despite the large monthly increase, year-on-
year (y/y) exports were 10.6 percent lower in the first
two months of 2005 compared with the same period last
year. The National Association of Automobile
Manufacturers of South Africa (NAAMSA) expects exports to
rise by 31.7 percent to 145,500 units or an average of
13,153 units in the remaining ten months of 2005. The
y/y drop is largely due to the end of the production for
the "old" BMW 3 series, whose production ended on February

7. BMW exported over 30,000 units in 2004, but due to the
model change over, BMW expects to export 25,000 units this
year. Exports of the new 3 series will start around May,
so February March and April are likely to see y/y declines
for overall exports. Exports from other manufacturers
have increased by 41.8 percent y/y in the first two
months. Source: I-Net Bridge, March 23.

SAVINGS HAVE TO INCREASE FOR 6% GROWTH
--------------


3. The current level of savings in South Africa would
have to increase substantially for growth to reach 6
percent, according to Finance Minister Trevor Manuel.
Manuel stated that gross domestic savings and gross fixed
capital formation of at least 20 percent and 25 percent of
GDP, respectively, were required to achieve this GDP
growth rate. Manuel noted that gross savings as a
percentage of GDP were only 16.3 percent in 2003 and 14.8
percent in the first three quarters of 2004 and the rate
of gross fixed capital formation was 16 percent in both
2003 and 2004. Net household savings showed a declining
trend from 0.8 percent of GDP in 2003 to 0.7 percent in
the first three quarters of 2004. Net savings by
government fell from negative 1.6 percent of GDP in 2003
to negative 2 percent in the first three quarters of 2004
as government increased its capital expenditure relative
to consumption. Manuel's comments in a written reply to
a question in Parliament come at a time when government is
considering raising the economy's growth target above the
average of 4.2 percent. Source: Business Day, March 22.

COMPETITION TRIBUNAL TO RULE ON AIRLINE COLLUSION
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4. The Competition Commission has referred claims against
South Africa Airways (SAA),SA Airlink, SA Express and
Nationwide to the Competition Tribunal on price collusion.
The airlines are accused of agreeing to simultaneously
introduce a fuel surcharge on the price of tickets for
domestic flights, which resulted in price increases. The
Commission has recommended the airlines each be fined up
to 10 percent of their revenue in the previous financial
year. Commissioner Menzi Simelane began the
investigation in May 2004 into the Airlines Association of
Southern Africa, of which SAA, SA Airlink, SA Express,
Nationwide and British Airways (Comair) are members.
Comair successfully applied for corporate leniency after
admitting to contravening some sections of the Competition
Act, but agreeing to assist the commission in the
collusion case. Comair was not referred to the Tribunal,
although this situation could change if the leniency is
withdrawn. Simelane said the airlines should have
consulted the commission before implementing the fuel tax.
Source: Sapa, March 23.

COMPETITION COMMISSION FINDS COLLUSION IN CAR SECURITY
INDUSTRY
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5. South Africa's Competition Commission has uncovered
further evidence of collusion and price fixing among some
of South Africa's largest vehicle- tracking companies,
including Netstar and Tracker. The Commission also found
that 15 manufacturers of gearlocks and alarm systems were
contravening competition laws. Two firms it named were
Sherlock, part of JSE Securities Exchange SA-listed
Control Instruments, and Grip-Tech. These companies all
face fines of up to 10 percent of their annual revenue.
The commission has referred two complaints against the
vehicle tracking, gearlock and alarm companies to the
Competition Tribunal for adjudication. The probe into
security accessories comes as a result of a probe into the
vehicle industry. Commission investigations into the
vehicle and related industries originated with one
complaint about Toyota imposing minimum resale prices on
dealers, which resulted in the commission imposing a R12
million fine ($1.87 million using 6.45 rands per dollar,
the average 2004 exchange rate) on Toyota in 2004. This
fine led to an investigation into minimum resale pricing
by other car makers, whose final results have not been
released. The investigation has taken longer than
expected because it revealed possible collusion in sectors
associated with vehicle manufacturing. The vehicle
industry contributes up to 5.7 percent of South Africa's
GDP and employs more than 260,000 people. Source:
Business Day, March 23.

DOCUMENTED IMMIGRANTS, EMIGRANTS AND TOURISTS INCREASE
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6. In 2003, documented immigration, self-declared
emigration and tourist arrivals increased 61 percent, 48
percent and 1.4 percent respectively. Both documented
immigration and self-declared emigration demonstrated wide
fluctuations from 1970 to present. Documented immigration
showed two major peaks in 1975 and 1982. From 1990
onwards, there was a downward trend until 2001 when the
trend began to increase. In 2003, the number of
documented immigrants to South Africa was 10,578 compared
to 6,545 in 2002, with 47 percent coming from other
African countries and 90 percent being economically
inactive. Emigration data showed three major peaks,
occurring in 1977, 1986, and 1994. In the post-1994
period, the trend in self-declared emigrants has been
relatively flat up until 2001 when emigrants began to
increase annually. In 2003, the number of self-declared
emigrants increased to 16,165 compared to 10,890 in 2002,
an increase of 48 percent. For self-declared emigrants,
65 percent were economically active while 35 percent were
not. During 2003, Nigeria was the top source of
immigrants while the United Kingdom was the leading
destination country of self-declared emigrants. Foreign
tourist arrivals in September 2003 increased 1.4 percent
in 2003, totaling 6.6 million, with approximately 68
percent of arrivals coming from other African countries.
Overseas arrivals increased 0.1 percent in 2003, with the
United Kingdom at 24 percent, Germany at 13 percent, and
the United States at 10 percent, as the major sources of
foreign tourists. Source: Business Day, March 23; Stats
SA Reports 03-51-02/03, March 22.

3.3 PERCENT CONSUMER PRICE INCREASE EXPECTED
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7. South Africa's consumer price index excluding mortgage
rate changes (CPIX) is expected to increase 3.3 percent in
February, according to an I-Net Bridge survey of
economists. CPIX increased 4.3 percent in January and is
the inflation target used by the South African Reserve
Bank (SARB). February's increase should be well within
the SARB inflation target range of 3 to 6 percent.
February's overall consumer price (CPI) should increase
2.7 percent, compared to January's 3 percent increase.
Statistics SA will release the official February consumer
inflation data on March 30. Source: I-Net Bridge, March

24.

FRAZER