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Cablegate: South Africa Economic News Weekly Newsletter September 28,

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TAGS: ECON EFIN EINV ETRD EMIN EPET ENRG BEXP KTDB SENV
PGOV, SF
SUBJECT: SOUTH AFRICA ECONOMIC NEWS WEEKLY NEWSLETTER SEPTEMBER 28,
2007 ISSUE


1. (U) Summary. This is Volume 7, issue 39 of U.S. Embassy
Pretoria's South Africa Economic News weekly newsletter.

Topics of this week's newsletter are:
- SA Ranks Fifth for African Governance
- Construction Boom Causes Cement Shortage
- Man-days Lost to Strikes Increases
- SA's Unemployment Rate Remains Static
- From Table Mountain to the Big Apple
- SA Drops Six Positions in Rankings for "Ease of Doing Business"
- SA One of Least Corrupt African Countries
- Energy Summit Reviews 1998 Energy Policy
- Beware the Ties that Bind China and Africa

End Summary.

-------------------------------------
SA Ranks Fifth for African Governance
-------------------------------------
2. (U) A new ranking of African governance places South Africa fifth
out of 48 sub-Saharan countries because of falling life expectancy
and the high incidence of violent crime. Mauritius ranked first,
followed by the Seychelles, Botswana and Cape Verde. The index was
created by the Mo Ibrahim Foundation in collaboration with the
Kennedy School of Government at Harvard. It measures governance in
five broad categories: safety and security; the rule of law;
participation and human rights; sustainable economic development;
and human development. According to Mo Ibrahim Foundation board
member Mamphela Ramphele, the index is "based on the notion that the
chief legitimate purpose of a state is to deliver political goods to
its citizens." Ramphele stressed that the index measures
achievements, not promises. At the bottom of the list of 48
countries are Sudan, Chad, the Democratic Republic of Congo, and
Somalia.3. (U) The lawsuit, if successful, could be a catalyst for
other mining companies to bring similar actions under SA law. The
SA government recently announced it had extended the deadline for
mining companies to file for compensation for the loss of mining
rights by two years to avoid a deluge of filings before the current
deadline of April 30, 2007. The extension will also allow potential
claimants to obtain the results of the lawsuit before the claim
deadline. (Business Day, September 26, 2007)

----------------------------------------
Construction Boom Causes Cement Shortage
----------------------------------------
3. (U) South African Reserve Bank Governor Tito Mboweni has
expressed concern that South Africa's construction boom has led to
shortages of cement and other materials. "Sometimes I think there
is too much construction happening," Mboweni told an audience at
Rhodes University in Grahamstown, noting, "The consequences are that
we have supply constraints." His comment came the day after the
latest First National Bank (FNB) commercial property cost index
revealed that building costs surged 29% y/y in the second quarter of
2007. FNB property analyst John Loos blamed the price surge on
input supply constraints. "There is a shortage of building
materials," Loos said. (Business Day, September 26, 2007)

----------------------------------
Man-days Lost to Strikes Increases
----------------------------------

4. (U) The number of man-days lost to strikes rose to 11.5 million
in the first half of 2007, in part because of a long public sector
strike. In comparison, only 1.6 million man-days were lost in the
first six months of 2006. The previous high was during the
apartheid era in 1987, when strikes focused on political rather than
economic goals, and 9 million man-days were lost to strikes in the
course of the year. With wage increases demanded by trade unions
generally far above wage increases offered by employers in the first
six months of 2007, the scene may be set for additional industrial
action. (Quarterly Bulletin, South African Reserve Bank, September
2007)

-------------------------------------
SA's Unemployment Rate Remains Static
-------------------------------------

5. (U) According to Statistics South Africa, South Africa's
unemployment rate was static at 25.5% in March -- virtually
unchanged from a year ago and suggesting that faster economic growth

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is doing little to spur job creation. "Economic growth has not been
particularly labor absorptive," said Standard Bank economist Shireen
Darmalingam, noting, "The labor market remains in relatively poor
shape." Including discouraged jobs seekers -- jobless people who
haven't looked for work in a month -- the unemployment rate rose to
38.3% from 37% in September, Stats SA reported. Darmalingam
calculates that the economy needs to add 558,000 jobs per year to
reduce the jobless rate to 14% by 2014. Jobs have increased at an
average annual rate of 500,000 over the last three years. However,
only 197,000 jobs were created between March 2006 and March 2007.
(Business Day, September 27, 2007)

------------------------------------
From Table Mountain to the Big Apple
------------------------------------

6. (U) Delta Air Lines, the only United States-based carrier
operating between South Africa and the U.S., announced plans for a
new route from New York to Cape Town, effective June 4, 2008.
Subject to government approval, Delta plans to begin three weekly
flights between Cape Town and New York's John F. Kennedy Airport,
via Dakar. Delta already runs a daily service between Johannesburg
and Atlanta. This new route is part of Delta's international
expansion plans, which include new daily service between Atlanta/New
York and Amman, Cairo, Edinburgh, Malaga, Tel Aviv, and Nairobi in
2008. (South African Press Agency, September 26, 2007)

--------------------------------------------- --
SA Drops Six Positions in Rankings for "Ease of Doing Business"
--------------------------------------------- --

7. (U) South Africa has lost its status as the easiest African
country to do business, dropping six slots in the World Bank's
annual study "Doing Business 2008" that compares the impact of
regulations on business in 178 countries. According to the report,
South Africa fell from 29th to 35th place because it has failed to
cut red tape as quickly as other emerging markets. Mauritius has
risen to 27th place to displace South Africa as the top-ranked
African country. According to the World Bank's South Africa country
office, the rankings were not a poor reflection on South Africa,
which remains a good place to do business. South Africa still ranks
within the top fifth of countries evaluated and is ranked 9th for
protecting investors. The National Credit Act helped South Africa
improve its ranking for "getting credit" to 26th place, while more
onerous regulations for registering property and paying taxes
dropped South Africa's ranks in those categories to 76th and 61st
place, respectively. Labor legislation was noted as a barrier to
doing business. South Africa ranks 91st in the "ease of employing
workers" category. (The Times and Business Day, September 27,
2007)

-----------------------------------------
SA One of Least Corrupt African Countries
-----------------------------------------

8. (U) South Africa is perceived to be one of the least corrupt
countries in Africa, according to Transparency International's
Corruption Report released on September 26. The Corruption
Perception Index (CPI) ranks South Africa second, just below
Botswana, for African countries. South Africa ranks 43 out of 180
states monitored. (Pretoria News, September 27, 2007)

----------------------------------------
Energy Summit Reviews 1998 Energy Policy
----------------------------------------

9. (U) The South African Department of Minerals and Energy organized
a two-day Energy Summit September 24-25 to engage with stake-holders
in reassessing South Africa's energy policy as set forth in the
white paper on energy adopted in 1998. Speaking to reporters
during the event, DME DG Sandile Nogxina said all areas of policy
would be scrutinized. "We need to ask whether the assumptions that
underpinned the policy of 1998 are still relevant," he noted. The
white paper singled out deregulation and greater commercialization
and competition as cornerstones of future policy. Nogxina stated
that crude oil was now $80 per barrel, compared to $10 in 1998. He
emphasized that the role of the state was critical in striking the
healthy balance between the interests of capital and national
objectives, like affordable access to energy for the population.
The white paper concludes that there may be delays in achieving

PRETORIA 00003426 003 OF 003


deregulation in the liquid fuels market, given growing energy supply
concerns and failure to meet identified milestones. An accompanying
editorial welcomed private participation in South Africa's growing
power needs, marked by the appointment of an AES-led consortium to
build two gas-fired power plants of 1,000 MW. The editorial noted
that plans to unbundle and privatize state-owned Eskom have fallen
by the way-side. Identification of Eskom as the single buyer of
electricity and provider of a guaranteed off-take agreement may
create the environment to attract independent power producers,
targeted to provide 30% of new generation capacity over the next
20-25 years. (Business Day, September 26, 2007)

------------------------------------------
Beware the Ties that Bind China and Africa
------------------------------------------

10. (U) A Sunday Times editorial advised African countries to be
careful in accepting gifts and increasing ties to China. The
editorial noted that Deputy President Phumzile Mlambo-Ngcuka was
leading a team of ministers in Beijing, trying to make sure South
Africa gets its share of the aid, trade and skills development China
is offering in return for fair and preferably preferential access to
its resources. Describing a two-day conference in Cape Town
studying the potential effect of China's deepening involvement in
Africa, the writer quotes Chen Wenbing, First Secretary at the
Chinese Embassy in Pretoria, as saying: "We are being told by our
policy makers and government to take more care of the morality and
to give more back to Africa. We are asking what we can do to
improve the image of China in Africa." Panel participants compared
China's overtures to countries that compete for Chinese economic aid
or political backing to colonial-era locking up of resources. The
editorialist ends by warning Mlambo-Ngcuka and her team to be wary
of yet another bilateral deal that leaves neighbors in the cold.
(Sunday Times, September 23, 2007)

BOST

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