Identifier
Created
Classification
Origin
07PRETORIA3843
2007-11-02 08:18:00
UNCLASSIFIED
Embassy Pretoria
Cable title:  

SOUTH AFRICA ECONOMIC NEWS WEEKLY NEWSLETTER NOVEMBER 2,

Tags:  ECON EFIN EINV ETRD EMIN EPET ENRG BEXP KTDB SENV 
pdf how-to read a cable
VZCZCXRO6180
RR RUEHDU RUEHJO
DE RUEHSA #3843/01 3060818
ZNR UUUUU ZZH
R 020818Z NOV 07
FM AMEMBASSY PRETORIA
TO RUEHC/SECSTATE WASHDC 2525
RUCPCIM/CIMS NTDB WASHDC
RUCPDC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHJO/AMCONSUL JOHANNESBURG 7699
RUEHTN/AMCONSUL CAPE TOWN 5015
RUEHDU/AMCONSUL DURBAN 9324
UNCLAS SECTION 01 OF 03 PRETORIA 003843 

SIPDIS

DEPT FOR AF/S/RMARBURG; AF/EPS; EB/IFD/OMA
USDOC FOR 4510/ITA/MAC/AME/OA/DIEMOND
TREASURY FOR OAISA/RALYEA/CUSHMAN
USTR FOR COLEMAN

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 NOVEMBER 2,
2007 ISSUE

UNCLAS SECTION 01 OF 03 PRETORIA 003843

SIPDIS

DEPT FOR AF/S/RMARBURG; AF/EPS; EB/IFD/OMA
USDOC FOR 4510/ITA/MAC/AME/OA/DIEMOND
TREASURY FOR OAISA/RALYEA/CUSHMAN
USTR FOR COLEMAN

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 NOVEMBER 2,
2007 ISSUE


1. (U) Summary. This is Volume 7, issue 44 of U.S. Embassy
Pretoria's South Africa Economic News weekly newsletter.

Topics of this week's newsletter are:
- Treasury Forecasts Slower Economic Growth
- Skills Poaching Is Asset Stripping - Manuel
- SA's Cheap Power May Attract $3.8 billion Aluminum Smelter
- Cape Town Convention Center Yields Returns
- Electricity Shortages Over Next Five Years
- Eskom Imposes Load-Shedding Again
- Westinghouse Acquisition Aligned to Localization Effort

End Summary.

--------------
Treasury Forecasts Slower Economic Growth
--------------


2. (U) According to the National Treasury's Medium Term Budget
Policy Statement, the South African economy would grow by 4.9% this
year, slowing to 4.5% in 2008 but increasing to 4.8% in 2009 and
5.3% in 2010. National Treasury said the expected lower pace of
economic expansion in 2008 reflects the impact of tighter monetary
policy and slower growth in developed markets as a result of the
sub-prime mortgage crisis in the U.S. The South African Reserve
Bank has increased interest rates by 350-basis points since June
2006, in a bid to control inflation. According to the National
Treasury, the deficit on the current account will likely widen from
6.5% in 2006 to 6.7% in 2007, 6.9% in 2008, 7.7% in 2009, and 7.8%
in 2010. It said South Africa's investment needs and the capital
imports required to support infrastructure expansion would likely
exceed the economy's ability to raise exports, resulting in a
"relatively large" current account shortfall. National Treasury

said in the event of sharply slower world growth or a reversal of
capital inflows to emerging markets, South Africa's high current
account deficit and inflationary pressures could expose the domestic
economy to heightened risk. "Future growth needs to reflect a much
stronger expansion in South African exports and production.
Improved export growth alongside the accumulation of foreign
reserves will help to reduce the economy's exposure to international
financial risks," National Treasury said. (Business Day, October
30, 2007)

---= --------------
Skills Poaching Is Asset Stripping - Manuel
--------------


3. (U) South African Finance Minister Trevor Manuel, speaking at the
Institute of International Finance in Washington D.C., complained
that advanced countries were asset-striping less developed countries
of their human skills. He particularly criticized the migration of
health care workers to developed countries, resulting in significant
shortages in Africa. Manuel complained that South Africa had become
a training ground for developed countries. Manuel returned to the
theme of advanced country asset stripping in his Medium Term Budget
Policy Statement speech on October 30. In the context of a comment
about global skills shortages, he said, "Last week, the European
Union announced its intent to recruit 20 million skilled foreigners
over the next twenty years. I believe this kind of parasitic
conduct of nations is wrong." (Business Report, October 22, 2007)

-------------- --------------
SA's Cheap Power May Attract $3.8 billion Aluminum Smelter
QSA's Cheap Power May Attract $3.8 billion Aluminum Smelter
-------------- --------------


4. (U) National Aluminum (Nalco),India's second largest aluminum
producer, is considering the construction of a $3.8 billion, 500,000
ton smelter in South Africa to benefit from low-cost electricity.
Nalco is looking at a number of countries, but the chairman said
that the cost of the plant would halve if the company got power
supply from the SAG, rather than having to build its own power plant
in other locations. India's Minister of Mines and South African
Department of Minerals and Energy Director General Sandile Nogxina
called for greater collaboration between the two countries. In a
separate development, BHP Billiton is considering a $3 billion plan
to build its largest aluminum smelter in the DRC. Given Eskom's
growing electricity shortages and the SAG's desire to attract energy
intensive investments, South Africa's electricity prices will have
to increase in order to finance additional power plants. The
regulator is taking a go-slow approach to approving price changes.

PRETORIA 00003843 002 OF 003


(Business Report, October 23, 2007)

--------------
Cape Town Convention Center Yields Returns
--------------


5. (U) A study conducted jointly by Barry Standish of the University
of Cape Town and independent economic modeler Antony Boting has
shown that the Cape Town International Convention Center (CTICC),
established in 2003, is making significant contributions to the
economy and society. The CTICC has contributed over R2.4 billion
($370 million) to the GDP in 2006-2007, according to the report.
The CTICC has been used to host international meetings, private,
public and organizational gatherings, including occasional private
weddings. CTICC Managing Director Dirk Elzinga stated that the
center has hosted over 509 conferences in the past year, 46 of which
were international, collectively bringing over 45,576 international
delegates to Cape Town. Standish and Boting's report has also
indicated that the CTICC promotes "induced" tourism, because
delegates who had been attending events at the center tend to extend
their stay in Cape Town after the conferences, or they return as
leisure tourists at a later stage. This type of tourists or
business tourists accounts for 30 - 40% of the CTICC's economic
effect, while visiting delegates' spending reflects 50%. In terms
of the report, the contribution is the most important and
comprehensive measure of the center's macroeconomic impact. The
largest international conference hosted by the CTICC was the 19th
World Diabetes Congress held in December 2006, which attracted over
12,300 delegates. CTICC employs 3,796 people directly and an
additional 5,343 people indirectly, a significant contribution in
the effort to mitigate unemployment. (Business Day, October 29,
2007)

--------------
Electricity Shortages Over Next Five Years
--------------


6. (U) State electricity supplier Eskom CEO Jacob Marega qualifies
the scale of recent electricity interruptions as unprecedented in
South Africa. Marega said the reserve margin gap between available
capacity and demand had declined from 25% in 2001 to 8-10% now. He
warned that the power system would be susceptible to supply
interruptions over the next five years until Eskom is able to bring
on a new base-load power station. Marega implicitly blamed the
government for failing to plan for new plants in time. He
attributed recent load-shedding and outages to a convergence of
planned maintenance outages, technical problems that led to
unplanned outages, load losses in a number of power stations, and
unanticipated demand due to cold weather. Marega emphasized that
the low reserve margin rendered the system vulnerable to problems.
He called for greater attention to demand-side management measures
to help mitigate the slim margin. Marega appealed to South African
citizens to assist by conserving energy. (Sunday Times, October 21,
2007)

--------------
Eskom Imposes Load-Shedding Again
--------------


7. (U) Eskom imposed another round of load-shedding (rolling,
unwarned black-outs) last week as it faced an electricity shortage
Qunwarned black-outs) last week as it faced an electricity shortage
due to cold weather, seasonal scheduled maintenance (2,700 MW),
unscheduled shutdowns of some domestic generation units, and the
shutdown of a key supply unit in Mozambique, normally providing
1,500 MW. Eskom said it had to use all its emergency resources,
including gas turbines and buying back power from large industrial
users. Eskom "exhausted" its load-shedding agreements with major
users, particularly BHP Billiton's two aluminum smelters in Richards
Bay. BHP Billiton said that it had received power reduction
requests from Eskom every day for the past three weeks. Eskom
called for people to practice conservation in their electricity
consumption. The Department of Minerals and Energy has started a
conservation advertisement campaign. (Business Report, October 28,
2007)

-------------- ---
Westinghouse Acquisition Aligned to Localization Effort
-------------- --------------


8. (U) Westinghouse Regional VP for South Africa Rita Bowser

PRETORIA 00003843 003 OF 003


announced that the acquisition of South Africa's IST Nuclear (ISTN)
should be concluded later this week, materially increasing the
domestic footprint of the U.S. company. Bowser said the purchase is
aimed to position Westinghouse for bidding on the first tranche of
Eskom's new nuclear build, which is targeted to total 20,000 MW over
the next two decades. Westinghouse aims to respond to the South
African Government's stated objective of seeking to build local
nuclear-industry capacity around Eskom's multibillion dollar nuclear
power program. In addition, Bowser argued that Westinghouse's
modular design of 1,100 MW units would be advantageous and also
promote localization of suppliers. The name ISTN will be changed to
Westinghouse Electric Company South Africa as soon as the
acquisition is complete. (Engineering News, October 30, 2007)


BOST