SOUTH AFRICA ECONOMIC NEWS WEEKLY NEWSLETTER FEBRUARY 6,

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SUBJECT: SOUTH AFRICA ECONOMIC NEWS WEEKLY NEWSLETTER FEBRUARY 6,
2009 ISSUE

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1. (U) Summary. This is Volume 9, issue 6 of U.S. Embassy
Pretoria's South Africa Economic News Weekly Newsletter.

Topics of this week's newsletter are:

- Reserve Bank Cuts Interest Rate
- South African Notes Pare Gains as Inflation Measure
Changes
- Trade Deficit Revised Lower
- January Vehicle Sales Worst in Eight Years
- Emigration Down; Skilled Workers May Return Home
- SEACOM Undersea Cable Proceeding as Scheduled
- General Electric is Doing Deals in
South Africa
- Mining and Other Jobs Loss Barometer
- Audit Shows Gaps in South Africa's Mine Safety Standards
- NanoAfrica2009 Conference in Pretoria

End Summary.


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Reserve Bank Cuts Interest Rate
--------------


2. (U) The South African Reserve Bank (SARB) cut its key monetary
policy interest rate, the repo rate, by 100 basis points to 10.5%.
The full percentage point reduction, the biggest single adjustment
in more than five years, adds to December's 50 basis point cut that
started unwinding the 500 basis point hikes between June 2006 and
June 2008. CPIX inflation (CPI less mortgage cost) has eased
sharply since hitting a peak of 13.6% in August last year, and is
seen slowing further in January, aided by the introduction of a
revised and re-weighted headline measure. The economy is under
strain with consumers battling to cope with relatively high interest
rates, while a global slowdown has added to pressure on industry.
(Business Day, February 5, 2009)

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South African Notes Pare Gains as
Inflation Measure Changes
--------------


3. (U) South African bonds and the rand were little changed after
Statistics South Africa (StatsSA) released details of a new method
to calculate consumer-price inflation. StatsSA estimated CPIX
inflation would have been 1.2 percentage points lower in December
had the new product weightings in the consumer-price index been
applied. Bonds pared earlier gains while the rand fluctuated
between gains and losses after the announcement. Investec portfolio
manager Vivienne Taberer commented, "The estimates are still in line
with expectations of a drop of 2 to 3 percentage points between the
December and January numbers." (Bloomberg.com, February 3, 2009)

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Trade Deficit Revised Lower
--------------



4. (U) The South African Revenue Services (SARS) revised downward
South Africa's trade deficit for 2008 after excluding gold that was
temporarily imported for refining purposes. SARS announced in a
statement the shortfall for the year stood at R64.5 billion ($6.5
billion) rather than R88.05 billion ($8.8 billion) as previously
published. Total imports for 2008 were revised from R751.1 billion
($7.5 billion) to R727.6 billion ($7.3 billion),while exports
remained at R663.1 billion ($6.6 billion). The revised deficit for
the third and fourth quarters were R19.3 billion ($1.9 billion) and
R14.7 billion ($1.5 billion),respectively, down from the R26.6
billion ($2.7 billion) and R30.9 billion ($3.1 billion). The change
will relieve some pressure on an ailing current account, which has
Qwill relieve some pressure on an ailing current account, which has
weighed heavily on the rand. The rand weakened by almost 30%
against the dollar last year. IHS Global Insight chief economist
Ronel Oberholzer commented that the erroneous data might have had an
indirect bearing on monetary policy. The SARB would have been
cautious about making decisive interest rate cuts to prevent further
decline in the exchange rate, in the face of a weak rand which was
ostensibly caused in part by the overstated trade deficit.
(Business Day, February 3, 4, 2008)

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January Vehicle Sales Worst in Eight Years
--------------


5. (U) National Association of Automobile Manufacturers of South
Africa (NAAMSA) reported new vehicle sales declined from 47,215
units in January 2008 to 30,503 units in January 2009, the worst
performance in eight years. NAAMSA said all sectors of the South
African automotive industry were experiencing an unprecedented and
severe deterioration in conditions as the economy rapidly slowed.
Exports of South African-produced motor vehicles declined by 7.2%
(year-on-year) y/y in January. Manufacturer's projections suggested
that overall industry export sales could decline by as much as 35%
in 2009. NAAMSA expects that market sentiment and automotive
industry trading conditions will continue to be tested by the
still-high interest rate environment, record high levels of
household debt, volatile exchange rates and unpredictable
international financial markets in 2009. Recent above-average new
vehicle price increases would also serve to undermine affordability
and demand. Any improvement in international trading conditions
would only occur after the severe global economic and financial
crisis dissipates, NAAMSA speculated. (Business Day, February 3,
2009)

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Emigration Down;
Skilled Workers May Return Home
--------------


6. (U) Layoffs abroad and a weak rand at home mean that emigration
has become less appealing to many South Africans. Moving company
officials report a dramatic decline in the number of South Africans
emigrating to popular destinations like Australia, New Zealand, and
the United Kingdom. The effects of the global financial crisis on
those countries has caused some South Africans who are living abroad
to consider returning home, which may be good news for South Africa.
Despite the contraction in the domestic economy, there is still a
demand for critical skills in the engineering, finance, and health
fields. (Business Day, February 4, 2009)

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SEACOM Undersea Cable Proceeding as Scheduled
-------------- -


7. (U) Portions of the SEACOM undersea fiber-optic cable now rest on
the seabed of the Indian Ocean and the Red Sea. SEACOM announced
that "the cable has been laid from the edge of the South African
waters to Mozambique, and cable-laying is also proceeding in the Red
Sea from Egypt towards the coast of Yemen." The remainder of
SEACOM's deepwater cable would be deployed from India towards
Africa, where the three cable segments would be joined. SEACOM is
also busy with land-based construction. High-performance optical
transmission equipment, which connects customers to inland
terrestrial networks, has been installed in the Maputo, Mumbai, and
Djibouti cable landing stations. Construction of the cable station
in Kenya would be complete in early February, followed shortly by
the Tanzanian and South African stations. Equipment installation in
these locations, and in Egypt, would be complete in April. SEACOM
noted that it is preparing to provide services to customers by June.
Qnoted that it is preparing to provide services to customers by June.
ICT industry players in South Africa await June 2009, when Southern
and Eastern Africa become truly connected to international broadband
networks. Plentiful bandwidth is expected to result in lower ICT
costs and new opportunities across many sectors, including the call
center and business process outsourcing industries. (Engineering
News, February 4, 2009)

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General Electric is Doing Deals
in South Africa
--------------


8. (U) Power generation technology supplier GE Energy announced a
$50 million deal to upgrade old steam turbines at synthetic fuels
producer Sasol. The announcement follows a 15-year service
agreement signed in November by the two companies that provide for
installation and maintenance of gas turbines at Sasol's Secunda
plant, aiming to increase power efficiency and produce power from
otherwise flared methane (also targeting Kyoto-related Clean

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Development Mechanism credits). GE Transportation announced that it
had been awarded a contract by Anglo Platinum to provide 26
emergency diesel generators for its mining operations, providing up
to 15.4 MW back-up capacity at individual mines. Middle East and
Africa CEO Nabil Habayeb, who was speaking at "GE Day" in
Johannesburg, was bullish on business in South Africa and Africa,
and said he was comfortable with the alignment of the business to
Africa's key growth sectors, particularly infrastructure, including
energy, water, and transport. GE is sanguine about Africa's growth
potential, citing that across the continent, GE has not received a
single order cancellation as a consequence of the economic slowdown.
(Engineering News, Business Day, February 4, 2009)

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Mining and Other Jobs Loss Barometer
--------------


9. (U) The mining industry has shed 8,675 jobs since the end of
December, reports the National Union of Mineworkers. Vehicle
manufacturers have laid off 1,724 people countrywide, says the union
Solidarity. Contract and temporary workers - who are generally not
unionized and are the first to go under the axe - are being laid off
in large numbers. Solidarity knows of 2,000 contract workers who
have been laid off, but suspects the figure is higher. The
Department of Minerals and Energy mining task team has urged mining
companies to refrain from dismissing contract workers with only a
24-hour notice period. Since its inception in December, the task
team has urged mining companies to view layoffs as a last resort and
to take such actions in full compliance with the country's labor law
and mining companies' social and labor commitments under licensing.
(Mail & Guardian, Mining Weekly, January 30, February 3, 2009)

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Audit Shows Gaps in South Africa's
Mine Safety Standards
--------------


10. (U) South Africa's Minister of Minerals and Energy Buyelwa
Sonjica on February 2 released the long-awaited national Mine Safety
Audit, ordered by past President Thabo Mbeki to investigate
compliance with safety regulations in mines. "These audits have
indicated that there are a lot of gaps in the safety standards in
the mining industry. We are calling on stakeholders involved in the
sector to take the finding and recommendations of the report very
seriously," Sonjica said. The average compliance across all sectors
was identified as 66%, with gold mines earning highest compliance.
Critical issues were mine design, shaft installation and
maintenance, communication systems, backup power, secondary outlets,
safety risk management, health risk management, and training. The
ministry said stakeholders would have two weeks to analyze the
report and make plans to implement the recommendations. Mbeki
ordered the safety audit in 2007, after 3,200 workers were trapped
underground at Harmony Gold's Elandsrand mine. The audit was
reported to be finished long ago, but its release was delayed to
give the new President an opportunity to review. The entire report
has not been made available to journalists or the public. The
Qhas not been made available to journalists or the public. The
Chamber of Mines and the trade union Solidarity both welcomed the
safety audit. (Mining Weekly, Business Day, February 3, 2009)

--------------
NanoAfrica2009 Conference in Pretoria
--------------


11. (U) South Africa hosted the third NanoAfrica conference on
February 1-4 2009 in Pretoria. NanoAfrica2009 focused on the latest
developments and future trends in the multidisciplinary area of
nano-science and nanotechnology. South Africa's National
Nanotechnology Strategy has identified six "focus areas" for
nanotechnology research in South Africa: chemicals and
bioprocessing, energy, health, materials and manufacturing, mining
and minerals, and water. Minister of Science and Technology Rosebud
Mangena expressed satisfaction about South Africa's progress on
nanotechnology and its "relatively early" adoption of the
discipline. (Engineering News, February 2, 2009)