SOUTH AFRICA ECONOMIC NEWS WEEKLY NEWSLETTER APRIL 9, 2009

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SUBJECT: SOUTH AFRICA ECONOMIC NEWS WEEKLY NEWSLETTER APRIL 9, 2009
ISSUE

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1. (U) Summary. This is Volume 9, issue 15 of U.S. Embassy
Pretoria's South Africa Economic News Weekly Newsletter.

Topics of this week's newsletter are:

- Recession Rules Out Post-Election Policy Shift; Mboweni and Manuel

Agree on Rate Cuts
- Significant Rise in Reserves
- Treasury Will Not Call the Shots
- South Africa Ponders a Protectionist
Response to Economic Crisis
- South African Logistics Costs Continue to Mount
- Minister of Communication's Death Leads to Leadership Void
- Sasol Signs Gas-to-Liquids Agreement with Uzbekistan
- South Africa May Invest in Battery-Powered Car
End Summary.


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Recession Rules Out Post-Election Policy Shift;
Mboweni and Manuel Agree on Rate Cuts
-------------- -


2. (U) South African Reserve Bank (SARB) Governor Tito Mboweni ruled
out shifts in economic policy regardless of the election's outcome
on April 22. South Africa might have slipped into a recession in
the first quarter of this year, warned Mboweni, adding that optimism
about a quick recovery in the global economy might be misplaced.
"Whatever party comes to power after the elections will have to
confront this reality, and I'm very sorry to say there is very
little room for maneuver," he commented. Mboweni urged adherence to
the Group of 20's agenda of fiscal and monetary stimulus and
stricter financial regulation. More cuts in interest rates are on
the way, Mboweni hinted. Trevor Manuel echoed that sentiment this
week when he told an academic forum that there was "plenty of room"
for further cuts in interest rates. Manuel rarely comments on
monetary policy because the SARB makes policy decisions independent
of government. (Business Day, April 8, 2009)

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Significant Rise in Reserves
--------------


3. (U) South Africa's net gold and foreign exchange reserves
increased from $33.151 billion in February to $33.458 billion in
March, suggesting the SARB used the opportunity of a stronger rand
during the month to boost its reserves. The SARB attributed the
rise in reserves to "usual foreign exchange operations" and
valuation adjustments. SARB data showed the rand had strengthened
from R10.05/$ in February to R9.49/$ in March. South Africa's net
reserves rose after the SARB brought a long-standing negative
position into balance in 2004 with the elimination of its
loss-making forward foreign exchange book. Even with the increase,
the SARB's reserves lag behind those of other emerging economies.
(Fin24, April 8, 2009)

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Treasury Will Not Call the Shots
--------------


4. (U) The prospective African National Congress (ANC) government
would create a Central Planning Commission to decide when, where,
and how much money to spend, announced transitional team leader
Collins Chabane. Establishment of the commission would signal an end
to the days of a powerful National Treasury. "Departments won't
have to go cap in hand to Treasury," Chabane commented. The
commission would set priorities and instruct the Treasury to find
money, added Chabane. "It will not be the role of the Treasury to
Qmoney, added Chabane. "It will not be the role of the Treasury to
say it is expensive," he remarked. The role of the Treasury will be
to identify the available resources that the state could use to
implement its programs, according to Chabane. The commission would
be situated within the executive office and would be led by Jacob
Zuma. The ANC is also considering scrapping deputy ministries in
some departments while increasing the number in others, depending on
workload. (The Sunday Independent, April 5, 2009)
--------------
South Africa Ponders a Protectionist
Response to Economic Crisis

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--------------


5. (U) ANC President Jacob Zuma has promised a "smooth transition"
after a new administration takes office in May. Speaking at a
business breakfast in Johannesburg, Zuma said that underperforming
ministers would be removed from office, some cabinet departments
would be split, and a planning commission would be established in
the Presidency to oversee policy. Responding to a question on the
mandate of the South African Reserve Bank, Zuma said: "The role of
the Reserve Bank will continue to be the same. The Bank has been
doing very well. I don't think it will change." While
acknowledging flaws in the implementation of affirmative action,
Zuma said he saw no need for a "sunset clause" for black employment
targets. (Business Day, April 1, 2009)

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South African Logistics Costs
Continue to Mount
--------------


6. (U) The South African government would consider reversing some of
the tariff cuts that it has pursued for the last 15 years, suggested
Deputy Trade and Industry Minister Dr. Rob Davies. The reversals
could be necessary to mitigate against some of the imbalances
created by bail-outs being deployed in other countries to salvage
distressed firms and industries. "People are saying that they don't
want the world to move into protectionism - and at some sort of
level we can agree to that. "But let's not go into this situation
starry-eyed and as idealists. Let's not go into a multilateral
disarmament process and come out unilaterally disarmed," Davies
quipped. While the developed world might not be using tariff
policy, Davies argued, the "massive" bail-outs were certainly linked
to messages about "buying local." South Africa would likely direct
some additional resources to support industrial sectors, but it
could not compete with the quantum of money being dispersed
elsewhere, Davies cautioned. He counseled against committing not to
raise tariffs where South Africa has "WTO legal space" to do so.
South Africa could not "sit by and let all these subsidies, which
will have the same effect as a tariff, proceed" without considering
responding by using all policy instruments at its disposal, urged
Davies. Such "boldness" would need to be backed by strong evidence
to justify how a tariff increase would be effective in enabling
industries to develop over the long term, he stressed. (Engineering
News, April 7, 2009)

--------------
Minister of Communication's
Death Leads to Leadership Void
--------------



7. (U) Minister of Communications Ivy Matsepe-Casaburri died of
natural causes on April 6. Government Spokesperson Thabo Masebe
said Matsepe-Casaburri had not been at work for a long time because
of her health. President Kgalema Motlanthe expressed his
condolences and said Matsepe-Casaburri was "an outstanding leader
and servant of the people of South Africa." Her death leaves a
leadership void at the Department of Communications (DOC) with the
recent resignation of Director-General Lyndall Shope-Mafole.
Shope-Mafole was released from her DOC contract in February to
pursue a leadership role in the opposition COPE party. Under
Qpursue a leadership role in the opposition COPE party. Under
Matsepe-Casaburri's leadership, the DOC had been criticized for
hampering efforts to increase liberalization in the ICT sector. DOC
interventions delayed the Independent Communications Authority of
South Africa (ICASA) from issuing individual electronic
communications network service (I-ECNS) licenses required for
independent operators to develop national networks. A Pretoria High
Court ruling in favor I-ECNS operators finally paved the way for
ICASA license issuance in January 2009. (Department of
Communications, April 7, 2009 and Engineering News, January 22,
2009)

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Sasol Signs Gas-to-Liquids
Agreement with Uzbekistan
--------------


8. (U) Petrochemicals giant Sasol signed a preliminary agreement
with Uzbekneftegaz, the national oil and gas company of Uzbekistan,

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and Malaysia's Petronas for the development and implementation of a
gas-to-liquids (GTL) project in Uzbekistan. The three companies
also signed a memorandum of understanding for mutual cooperation in
the oil and gas industry in Uzbekistan. Sasol's technology would
now be deployed to produce transportation fuels from Uzbekistan's
abundant domestic natural gas reserves. "The wealth of gas
resources within Uzbekistan makes this an ideal location for a GTL
facility" commented Sasol General Manager Lean Strauss, who noted
that Uzbekistan has about 60 trillion cubic feet of natural gas
reserves. The GTL project would not only enhance Uzbekistan's fuel
production, but would also make a significant contribution to the
economy of the country through foreign direct investment and job
creation, Sasol noted. Sasol and Petronas were also exploring other
areas of cooperation in the Uzbekistan oil and gas industry.
(Engineering News, April 8, 2009)

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South Africa May Invest in
Battery-Powered Car
--------------


9. (U) South Africa may invest in the Joule, the country's first
battery-powered car. Cabinet has approved the establishment of an
interagency committee to assess an investment in the Joule. The
committee will include representatives from the Departments of
Environmental Affairs and Tourism, Minerals and Energy, Science and
Technology, Trade and Industry, Transport, and Treasury. The Joule
would become Africa's first locally manufactured and assembled
zero-emissions vehicle. South African automotive designer Keith
Helfet designed the six-seater multi-purpose vehicle, which would be
powered by a 220-volt battery. The battery would run for
approximately 200 kilometers before requiring recharging. The
Gauteng provincial government has reportedly expressed an interest
in placing the first major order for Joules. (BuaNews, March 19,
2009)