SOUTH AFRICA ECONOMIC NEWS WEEKLY NEWSLETTER FEBRUARY 27,

UNCLAS SECTION 01 OF 03 PRETORIA 000378 DEPT FOR AF/S/; AF/EPS; EB/IFD/OMA USDOC FOR 4510/ITA/MAC/AME/OA/DIEMOND TREASURY FOR TRINA RAND USTR FOR JACKSON 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 FEBRUARY 27, 2009 ISSUE PRETORIA 00000378 001.2 OF 003 ¶1. (U) Summary. This is Volume 9, issue 9 of U.S. Embassy Pretoria's South Africa Economic News Weekly Newsletter. Topics of this week's newsletter are: - Q4 GDP Down 1.8% - U.S. Trade with South Africa - Government and Auto Industry Officials to Discuss Loan Package - Task Team Recommends Heightened Security Measures for SAA Crew Members - Speculation Grows Over Future Transnet Leadership - MTN Posts Healthy Profits - Anglo Share Price Falls Heavily as Dividend is Suspended - 19,000 Jobs Cut - Objection Filed Against Sasol's Carbon Credit Application - South Africa Makes Efforts to Improve e-Waste Management End Summary. -------------- Q4 GDP Down 1.8% -------------- ¶2. (U) South Africa's real gross domestic product at market prices on a quarter-on-quarter (q/q) seasonally adjusted annualized (SAA) basis dropped by 1.8% in the fourth quarter of 2008, according to Statistics South Africa. The main contributors to the decrease in economic activity for the fourth quarter of 2008 were manufacturing; electricity, gas, and water; wholesale and retail trade; hotels and restaurants; and the mining and quarrying industry. These were counteracted by growth in finance, insurance, real estate and business services; general government; agriculture, forestry and fishing; construction; and transport, storage and communications; and personal services. The third quarter GDP was the 40th consecutive quarter of positive growth since 1998, although the impact of rate increases since June 2006 had brought the pace of growth down. This is therefore the first quarterly decline in a decade. (Business Times, February 24, 2009) -------------- U.S. Trade with South Africa -------------- ¶3. (U) U.S. total trade with Sub-Saharan Africa (exports plus imports) increased 28% in 2008, as both exports and imports grew. U.S. exports to South Africa rose by 18%. U.S. imports from South Africa grew by 10%. Declines in the import of platinum and diamonds from South Africa were more than balanced by strong growth in the import of ferroalloys and extremely high growth of over 250% in the import of passenger vehicles (caused by a surge in imports as new car lines produced in South Africa came on the market at the end of 2007). AGOA imports from all countries were $66.3 billion, 30% more than in 2007. AGOA imports excluding fuel products were $5.1 billion, increasing by 51%. Much of this non-energy product increase was due to a 225% increase in imports of AGOA transportation equipment, virtually all from South Africa. South Africa exported transportation equipment valued at $1.9 billion to the U.S. in 2008. (Department of Commerce International Trade Administration, U.S. Trade with Sub-Saharan Africa, January-December 2008) -------------- Government and Auto Industry Officials to Discuss Loan Package -------------- ¶4. (U) Department of Trade and Industry Minister Mandisi Mpahlwa plans to meet car makers to discuss a rescue package to help limit job losses. About 22,500 jobs are on the line in the automotive and component manufacturing sector, according to the National Qcomponent manufacturing sector, according to the National Association of Automotive Manufacturers. Car producers including Volkswagen, Mercedes-Benz, Ford, Toyota and General Motors employ about 116,000 people. Car industry representatives and component manufacturers are looking for loans at low interest rates to help with cash flow. (Business Day, February 24, 2009) PRETORIA 00000378 002.2 OF 003 -------------- Task Team Recommends Heightened Security Measures for SAA Crew Members -------------- ¶5. (U) The luggage of South African Airways (SAA) crews will be physically searched as security is being tightened following the detention of 15 crew members in connection with drug trafficking at London's Heathrow International Airport last week. This is one of the resolutions of a special task team formed by SAA that includes representatives of the airline, Airports Company South Africa (ACSA),the South African Revenue Service (SARS),and the African Police Service (SAPS) to review measures put in place by SAA after the first incident last month when 15 crew members were detained in Heathrow. The task team would also increase the number of sniffer dogs, install drug detection scanning devices, institute searches of aircraft to ensure that no unauthorized goods are on board, and improve co-ordination between SARS and SAPS units. SAA Acting CEO Chris Smyth emphasized the need for co-operation among the stakeholders in the task team. "SAA has neither the capability nor the mandate for broader policing and security matters and we have requested assistance via the task team ... taking the government's concerns and directives into account, ACSA will assume responsibility for security and processing of staff through the SAA crew center." (Business Day, February 23, 2009) -------------- Speculation Grows Over Future Transnet Leadership -------------- ¶6. (U) Rand Merchant Bank (RMB) Private Equity Chief Khetso Gordhan is poised to become the new CEO of state-owned transport and freight logistics group Transnet, according to press reports. Gordhan would replace Maria Ramos, who is leaving to take the top job at Absa. Gordhan is a former Department of Transport Director-General and a former Johannesburg City Manager. Another potential candidate is Transnet Freight Rail Division CEO Siyabonga Gama. Khetso Gordhan's possible appointment has incensed some black professionals, who felt that Gama had been sidelined. "Strategically, he is the right person," remarked one Transnet Director. "But operationally, he is not very strong. He is more a visionary type of guy, and you need someone who is strong operationally to be the group executive. But he ... would be acceptable at Luthuli House [ANC headquarters]." The ANC has become sensitive to the appointment of senior management in government departments and state-owned enterprises on the eve of the April general election. The ruling party fears that new appointments may be used as an imposition on the incoming ministers. (Business Report, February 20, 2009) -------------- MTN Posts Healthy Profits -------------- ¶7. (U) Africa's largest cellular phone company, MTN Group, announced that profit rose 44% in the year to December. Earnings per share gained 39%. The company is scheduled to report full earnings on March 12. Ivy Asset Management fund manager Bruce Main said much of the growth in the last year probably came from African countries, excluding South Africa. MTN said it would spend $1.5 billion to Qexcluding South Africa. MTN said it would spend $1.5 billion to expand its network this year in Nigeria, the fastest-growing network on the continent. Sub-Saharan Africa "should still be one of the best-performing regions in 2009," according to a recent Rand Merchant Bank report. (Business Report, February 23, 2009) -------------- Anglo Share Price Falls Heavily as Dividend is Suspended - 19,000 Jobs Cut -------------- ¶8. (U) The share price of mining giant Anglo American fell heavily on February 20 after the company announced it was suspending dividend payments and would shed 9,000 jobs on top of the 10,000 jobs cut from subsidiary Anglo Platinum. The world economy faced "horrendous market conditions," commented Anglo CEO Cynthia Carroll. She expected an unprecedented level of uncertainty, continuing volatility, weakness in commodity prices, and a poor outlook for the PRETORIA 00000378 003.2 OF 003 near term. After worse-than-expected results, the Anglo share price fell nearly 16% in Johannesburg and 11.8% in London. The dividend suspension was Anglo's first since the start of World War II. Job cuts were across geographies and business units. Three-quarters of the cuts would relate to natural attrition and contractor reductions in line with production cuts and project cutbacks. An increase in iron ore demand from China was the lone positive note during the first quarter, Carroll reported. Iron ore production at South Africa's Anglo-owned Kumba Iron Ore Sishen mine increased 13% to 36.7 million tons per annum. (Mining Weekly, Business Day, February 22-23, 2009) -------------- Objection Filed Against Sasol's Carbon Credit Application -------------- ¶9. (U) Petrochemicals giant Sasol has applied for carbon credits under the clean development mechanism (CDM) for its proposed investments to replace coal with natural gas from Mozambique for use in its operations. NGO Earthlife Africa has filed a formal objection with the United Nations to Sasol's application for CDM rights. Earthlife Africa questioned the "additionality" of the project, which is a requirement for registration as a CDM project. Earthlife Africa accepts that using natural gas instead of coal would yield carbon credits of about R1.1 billion ($110 million) per year, but argues that Sasol had already mentioned exploitation of natural gas from Mozambique in its annual report in 1999. Sasol claims that if there were not an option to sell carbon credits, it would not have built the 645-kilometer pipeline from Mozambique and that the project was conceived after January 2000, which is the operative date for determining additionality. An Earthlife Africa spokesperson said, "This marks a cynical attempt to game the CDM system - thus earning billions in revenue and the perverse right to continue pumping greenhouse gases into the atmosphere." Sasol said it was well aware of the extent of its carbon dioxide emissions. Sasol claimed that it had made great strides to reduce the impact of its operations, as well as to develop its technology so that future plants would be more efficient with respect to carbon. The Sasol Nitro project was one of South Africa's 11 CDM projects that are up and running and generating credits. Earthlife Africa is a vocal critic of carbon-based and nuclear energy projects, favoring greater investment in renewable energy. (Engineering News, February 23, 2009) -------------- South Africa Makes Efforts to Improve e-Waste Management -------------- ¶10. (U) E-Waste Association of South Africa (eWASA) Chairman Keith Anderson announced plans to establish a sustainable, environmentally sound e-waste management system. Recycling hazardous e-waste materials is one major goal of the project. Anderson met with electrical and electronic equipment manufacturers to discuss the possibility of imposing a recycling levy on their products. The levy would defray the transport costs of the hazardous recyclables. He added that eWASA plans to simplify e-waste collection, transportation, dismantling, processing, and final disposal by Qtransportation, dismantling, processing, and final disposal by establishing an online tracking system. (Business Report, February 23, 2009) LA LIME