SOUTH AFRICA ECONOMIC NEWS WEEKLY NEWSLETTER MARCH 20, 2009

UNCLAS SECTION 01 OF 03 PRETORIA 000533

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 MARCH 20, 2009
ISSUE

PRETORIA 00000533 001.2 OF 003



1. (U) Summary. This is Volume 9, issue 12 of U.S. Embassy
Pretoria's South Africa Economic News Weekly Newsletter.

Topics of this week's newsletter are:

- Manufacturing Production Has Steepest Fall in Almost Two Decades
- Gold Production Declines Sharply
- Retail Sales Grow
- Moody's to Review South Africa's Local Currency Rating
- Automotive Industry Seeks New Approach
- Tata Communications to Be Seacom Anchor Tenant
- Anglo American Sheds Last Of its AngloGold Shares
- Mine Deaths Worsening for Year-to-Date Comparison
- Ibhubesi Field Could Supply Gas by 2012
- Minister of Environmental Affairs Encourages Equity

End Summary.


--------------
Manufacturing Production Has Steepest
Fall in Almost Two Decades
--------------


2. (U) Manufacturing production had its steepest fall in more than
18 years, providing a grim picture of where the South African
economy is headed this year. Statistics South Africa (StatsSA)
announced that manufacturing production for January decreased
year-on-year (y/y) by 11.1%. Nedbank Group's Economic Recovery Unit
said some moderate recovery in the sector could be experienced
during the second half of the year as low interest rates stimulate
domestic demand. (Business Times, March 15, 2009)

--------------
Gold Production
Declines Sharply
--------------


3. (U) South Africa's gold production in January this year was 8.7%
lower than in January 2008. South Africa's total mining production
for the month dropped 11% y/y, said StatsSA. Non-gold production
fell by 11.4% in January, compared with last January. The decrease
in total mining production for January was largely attributable to
negative contributions from diamonds (-6.2%),platinum group metals
(-2.3%) and chromium (-1.1 %). (Business Times, March 15, 2009)

--------------
Retail Sales Grow
--------------


4. (U) South Africa's annualized retail sales grew for the first
time in nine months in January, according to recent data. Stats SA
said sales rose by 1.7% compared to the same month last year, the
first growth since April 2008 and the highest rate since last
February. Analysts warned the January growth may not signal the
start of a trend and could be a knee-jerk reaction to sharply lower
fuel prices, as well as base effects following power cuts during
January last year. (Business Day, March 18, 2009)

--------------
Moody's to Review South Africa's
Local Currency Rating
--------------


5. (U) Ratings agency Moody's has placed South Africa's A2 local
currency rating on review for possible downgrade, citing fiscal
pressures and the risk of a prolonged recession. The agency
affirmed the positive outlook on the government's Baa1 foreign
currency rating and the A2/Baa1 foreign currency ceiling for debt
and deposits. The review reflected fiscal pressures which, although
not unique to South Africa, may weaken the government's
creditworthiness. (Business Times, March 15, 2009)

--------------
Automotive Industry Seeks New Approach
--------------


6. (U) National Association of Automotive Component and Allied
Q6. (U) National Association of Automotive Component and Allied
Manufacturers President Stewart Jennings called for aggressive

PRETORIA 00000533 002.2 OF 003


interest rate cuts to stimulate the economy and for measures to
protect the industry. Jennings called for the government to provide
subsidized finance, increased quality standards, a focused Buy SA
campaign, labor regulation reform to increase labor productivity,
tariff interventions, and more aggressive antidumping duties in
order to protect local manufacturers. National Association of
Automobile Manufacturers of South Africa (NAAMSA) President David
Powells urged the government to intensify its industrial policy
program to support the motor industry. Powells remarked that
financial support from the Industrial Development Corporation (IDC),
over and above support already received by the industry in the form
of the Automotive Production and Development Programme (APDP),was
necessary to stabilize the industry. (Business Day, March 19,
2009)

--------------
Tata Communications to Be
Seacom Anchor Tenant
--------------


7. (U) Tata Communications, which owns a 56% stake in South African
alternative fixed-line operator Neotel, announced on March 17 that
it was an anchor tenant customer for the broadband-boosting Seacom
cable system. Seacom and Tata Communications were planning for the
system to be ready for service by June 2009. Tata Communications
would operate the landing point in Mumbai, while Neotel would manage
the landing point in Mtunzini, South Africa. The project would
provide connectivity between the Tata Communications global network,
the Seacom cable system, and Neotel's converged network in South
Africa. Another subsidiary company, Tata Communications
Transformation Services, was awarded the network administration,
operations, and maintenance contract for the cable, supporting 1.28
terabits per second of capacity. "Prior to the development of this
cable system, a majority of east and southern Africa relied on small
and expensive satellite circuits to meet their international network
requirements," said Seacom President Brian Herlihy. (Engineering
News, March 18, 2009)

--------------
Anglo American Sheds Last
Of its AngloGold Shares
--------------


8. (U) Cash-seeking Anglo American is now completely out of gold,
the precious metal that was synonymous with the iconic South
African-rooted diversified major since its inception in 1917. The
company announced it had disposed of its remaining 11.3%
shareholding in AngloGold Ashanti for $1.28 billion. On December
31, 2008 Anglo American's shareholding in AngloGold Ashanti had been
16.2%. (Engineering News, Business Day, March 18, 2009)

--------------
Mine Deaths Worsening for
Year-to-Date Comparison
--------------


9. (U) More mine workers died in work-related incidents so far this
year than the same period last year, according to National Union of
Mineworkers (NUM) Safety Head Mziwakhe Nhlapo, speaking to an Exxaro
mine safety summit at the Council of Science and Industrial
Research. He noted that 34 miners had died this year, compared to
22 over the same period in 2008 (some of this period was affected by
power outages). Many of this year's fatalities involved workers who
had not completed a full trade test acceptable to the Chamber of
Qhad not completed a full trade test acceptable to the Chamber of
Mines. Nhlapo also suggested that mine layoffs could also be a
cause of low worker morale, which could be a contributing factor to
the increased number of deaths. Exxaro Executive General Manager
Safety Nombasa Tsengwa highlighted that because the law forced every
single mine death to result in temporary mine closure and an
investigation, there was a considerable knowledge base for potential
corrective action. AngloGold Ashanti's Moab Khotsong mine was
closed on March 16 after a miner was killed an underground cave-in
incident. (Mining Weekly, March 18, 2009)

--------------
Ibhubesi Field Could Supply Gas by 2012
--------------


10. (U) The Ibhubesi natural gas field off South Africa's west coast

PRETORIA 00000533 003.2 OF 003


could start supplying gas and condensate to the Western Cape
industrial and power generation sectors as early as 2012, according
to U.S.-based Forest Exploration Commercial Director John Langhus,
speaking to the Cape Regional Chamber of Commerce and Industry. He
remarked that the project had the potential to produce about 3.65
million gigajoules of energy a year for its 30-year lifespan,
including 400-700 megawatts of power generation capacity. This
would significantly enhance the energy security of the province,
which is reliant on transmission lines from Mpumalanga Province and
diesel-driven peaking power plants to supplement the base load
generated by the Koeberg nuclear facility. Ibhubesi was now
considered "big and economically viable enough" to justify expected
investment of $3-4 billion over twenty years, Langhus commented,
"after having been put on the backburner during the period of
uncertainty that characterized South Africa's controversial
conversion of old exploration leases to new order rights - including
a black empowerment component." Forest expected to be granted
production rights to block 2A, according to Langhus, 380 kilometers
northwest of Cape Town and about 100 kilometers offshore. Forest is
lead operator of the consortium with a 53% share, in partnership
with state-owned PetroSA (24%) and Anshcutz SA (23%). (Business
Day, March 18, 2009)

--------------
Minister of Environmental Affairs
Encourages Equity
--------------


11. (U) South African Minister of Environmental Affairs and Tourism
Marthinus Van Schalkwyk announced at a recent climate change
conference that South Africa is making serious contributions in the
fight against carbon emissions reduction, but cautioned that the
developing world must not be forced to carry the developed world's
carbon emissions burden. He emphasized the need for establishing a
legally binding instrument under which developed countries would
provide finance, technology and capacity support to developing
countries. (Engineering News, March 13 -19, 2009)