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Cablegate: South Africa Economic News Weekly Newsletter December 19,

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TAGS: ECON EFIN EINV ETRD EMIN EPET ENRG BEXP KTDB SENV
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SUBJECT: SOUTH AFRICA ECONOMIC NEWS WEEKLY NEWSLETTER DECEMBER 19,
2008 ISSUE

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1. (U) Summary. This is Volume 8, issue 51 of U.S. Embassy
Pretoria's South Africa Economic News Weekly Newsletter.

Topics of this week's newsletter are:

- Inflation Lower
- Residential Building Continues to Slow
- Bill Simplifies Registration Process for New Drugs
- Intelsat to Launch $250 Million Satellite for Africa
- France Telecom Plans New ACE Fiber-Optic Cable to Link
African West Coast to Europe
- Regulator Unveils Proposed Power Conservation Rules for
South Africa
- Layoffs Loom in Mining and Other Sectors
- Durban Working to Reduce Water Loss

End Summary.

---------------
Inflation Lower
---------------
2. (U) CPIX inflation (CPI less mortgage cost) dipped from 12.4% in
October to 12.1% in November reports Statistics South Africa
(StatsSA). Lower food and fuel inflation accounted for much of the
drop. This was the third monthly decline after the 13.6% was
registered in August. However, the latest figures were below the
market forecast of 11.8%, suggesting that interest rates may not be
cut as steeply as the market expects. The market has been pricing
in up to 500 basis points of cuts by the end of next year.
Economists noted that rand weakness would slow the process of
disinflation, and that there is no evidence yet that prices are
slowing across a broad front. The South African Reserve Bank (SARB)
expects inflation to fall sharply in the first half of next year as
food and fuel prices drop and to return within the 3%-6% target
range by the third quarter of 2009. (Business Day, December 18,
2008)
--------------------------------------
Residential Building Continues to Slow
--------------------------------------

3. (U) StatsSA reports that the real value of residential building
plans approved between January and October 2008 declined by 24.2%
year on year (y/y). This was primarily caused by high interest
rates, more stringent requirements for credit, and economic
uncertainty. Analysts expect residential building activity to
remain under pressure well into next year. At a regional level, the
number of plans approved for new housing units was down about 25%
y/y in the Western Cape and Gauteng. KwaZulu-Natal continued to
register growth over the period, supported by the lower end of the
market. The slowdown in residential building has already had
negative effects on contractors, brick manufacturers and materials
suppliers. (Business Day, December 18, 2008)

--------------------------------------------- -----
Bill Simplifies Registration Process for New Drugs
--------------------------------------------- -----
4. (U) The final version of the Medicines and Related Substances
Amendment Bill has removed a proposed two-tier registration process
for new drugs. The pharmaceutical industry objected to the proposed
process, charging that it would interfere with expeditious
registration of new drugs and the approval of clinical trials. The
old version of the bill also renewed tensions between the industry
and the Department of Health because it attempted to include the
Minister of Health in the process of registering medicines. The new
version anticipates that the South African Health Products
Qversion anticipates that the South African Health Products
Regulatory Authority (SAHPRA) would oversee the registration of
medicines and the approval of clinical trials. Pharmaceutical
industry representatives expressed satisfaction with the final
version of the bill. (Business Report, December 8, 2008)
--------------------------------------------- -------
Intelsat to Launch $250 Million Satellite for Africa
--------------------------------------------- -------
5. (U) Privately-owned satellite firm Intelsat and a South African
investment consortium plan to build and launch a $250 million
satellite to improve communications and attract foreign investment
in Africa. Intelsat and an investment group led by Convergence
Partners said the "Intelsat New Dawn" satellite is expected to enter

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service in early 2011. Demand for fixed satellite services in
Africa is growing because of increased investment on the continent
and a growing number of people who sign up for phone, internet, and
cable services. The project would be funded with 15% equity and 85%
debt. Intelsat and the Convergence Partners-led group would provide
the equity; Nedbank and the Industrial Development Corporation of
South Africa would be the biggest providers of debt. Mobile
operators Vodacom and Kuwait's Zain have already indicated that they
would use the satellite. (Engineering News, December 9, 2008)
------------------------------------------
France Telecom Plans New ACE Fiber-Optic
Cable to Link African West Coast to Europe
------------------------------------------
6. (U) France Telecom-Orange recently signed a memorandum of
understanding for the installation of a fiber-optic, submarine cable
that would provide over 20 countries within the West African coastal
region with internet access. The 12,000 kilometer ACE (Africa Coast
to Europe) cable would extend from Gabon to France. ACE is expected
to connect Gabon, Cameroon, Nigeria, Benin, Togo, Ghana, Ivory
Coast, Liberia, Sierra Leone, Guinea, Guinea Bissau, Senegal,
Gambia, Cape Verde, Mauritania, Morocco, Spain, Portugal, and France
from 2011. An extension to South Africa is also being studied.
France Telecom operates in 15 African countries and is a co-owner of
several submarine cables linking Africa with to the rest of the
world. It is a co-owner of the SAT3-WASC-SAFE cable (which links
Portugal to Malaysia via the West African Coast) and Atlantis-2
(which links Portugal to Argentina via Senegal).
(MYBROADBAND.co.za, December 15, 2008)
-----------------------------------
Regulator Unveils Proposed Power
Conservation Rules for South Africa
-----------------------------------

7. (U) The National Energy Regulator of South Africa (NERSA) laid
out rules for its power conservation program in a bid for reaction
from the public and affected sectors by early January of 2009. The
program proposes limiting electricity usage on an annual basis.
Users would pay a surcharge if they exceed their electricity
allotment. "The program is designed to accelerate the achievement
of energy savings through behavior change and promoting the use of
demand side management," NERSA said in the proposal. State-owned
utility Eskom has been rationing electricity since January of 2008
when the national grid nearly collapsed, forcing mines to
temporarily shut down. The reduction in consumption from
conservation would provide Eskom with the "breathing space"
necessary to address unplanned maintenance and possible slippages in
the tight timeline for bringing new capacity onto the grid between
2008 and 2013. NERSA excluded from its penalty plan national
priority projects such as providing essential services and the
construction of stadiums for the 2010 World Cup and Gautrain.
(Engineering News and Business Day, December 17, 2008)

----------------------------------------
Layoffs Loom in Mining and Other Sectors
----------------------------------------

8. (U) Analysts and institutions have started to tally estimates of
Q8. (U) Analysts and institutions have started to tally estimates of
mining and other layoffs in South Africa. The Chamber of Mines has
asserted that layoffs would be a last resort, but stated that over
9,000 South African mining jobs are at risk. The National Union of
Mineworkers insists that its priority is to defend jobs, calling for
a moratorium on layoffs. Trade Union Solidarity reported that it
had received notice of a possible 9,163 layoffs in mining. Platinum
miner Lonmin has already announced that some 5,500 workers might
lose their jobs. The future of about 1,700 workers at DRDGold South
Africa's East Rand Proprietary Mines is in doubt. Petra Diamonds
has also confirmed that it had issued a notice to trade unions to
start consultations over the future of 1,000 employees. Mining
contractor Murray & Roberts plans to lay off more than 1,400
employees. Namakwa Diamonds said it planned to lay off 355 of its
605 employees. Rio Tinto has announced plans to lay off thousands
of its world-wide employees, but has not disclosed specific plans
for its South African operations. Anglo American announced
significant cutbacks in capital expenditures, jobs, and production.
This could affect jobs at Anglo Plat and Kumba Iron Ore. Aquarius
Platinum has shut its Everest Mine for six months for technical and
safety reasons, cutting up to 1,950 jobs. One analyst cited the
following job losses: Ford (800), ArcelorMittal (200 contract
workers), DRD Gold (1,700), Lonmin (5,500 plus 1,400 contract

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workers), Uranium One (1013), new car dealers (3,500), Absa (1,210),
and Mutual & Federal (600). (Mining Weekly, Business Report,
Business Times, Business Day, December 12-17, 2008)

-----------------------------------
Durban Working to Reduce Water Loss
-----------------------------------
9. (U) Durban's R850 million ($85 million) asbestos cement water
pipe replacement program is expected to save rate payers more than
R248 million ($24 million) in water loss per year. The project
entails laying an estimated 2,800 kilometers of pipeline. The
objective of the project is to reduce water loss to 20% in the next
five years. Durban "is planning ahead to prevent a full-blown water
crisis. The old burst-prone pipes are being replaced with modified
polyvinyl chloride pipes that have an estimated 50-year life span,"
commented Alan Kee, Durban's Water and Sanitation Project Executive.
(Engineering News, December 8, 2008)

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