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Cablegate: South Africa Economic News Weekly Newsletter Ocotober 5,

DE RUEHSA #3538/01 2820641
R 090641Z OCT 07





E.O. 12958: N/A
2007 ISSUE

1. (U) Summary. This is Volume 7, issue 40 of U.S. Embassy
Pretoria's South Africa Economic News weekly newsletter.

Topics of this week's newsletter are:
- Trade Deficit Disappoints Market
- Internet Costs Stifle SAG Open Source Policy
- Car Sales Decline Again
- Critic Claims Climate Consciousness Dims at Energy Summit
- Biofuel Won't Burn Food Prices
- SARB Transparent Despite Personal Cost
- Completing the Supply Chain
- AngloGold Still Optimistic About Fatality-Free Deep-Level Mining

End Summary.

Trade Deficit Disappoints Market
2. (U) South Africa's trade deficit in August totaled R9.1 billion,
barely changed from last month and well above forecasts. The trade
gap suggests the current account deficit could widen further,
putting additional pressure on the rand. Exports rose .8% while
imports increased .1% compared with July. The cumulative deficit
for the calendar year is R50.1 billion, a significant increase over
the R41.6 billion deficit for the same period last year. With the
strength of the rand eroding the appeal of exports and an
infrastructure plan boosting the need for imports of machinery and
equipment, South Africa's international trade position "is still
very weak," according to Efficient Research Economist Nico Kelder.
(Business Day, October 1, 2007)

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Internet Costs Stifle SAG Open Source Policy
3. (U) High cost of internet access is stifling South Africa's
software development industry and thwarting the SAG's open source
procurement policy and commitment to use locally developed software.
According to Linda McDonald, an analyst for Frost and Sullivan, the
SAG's plan to save million of rands yearly by cutting out annual
software license fees, boost local skills and create more jobs as
developers are hired to modify open source software to suit the
government's needs, is a false hope unless the cost of Internet
access drops. Unless developers can spend numerous hours in online
discussions at an affordable rate, they will not be able to create
the necessary programs for the SAG's software. (Business Day,
September 25, 2007)

Car Sales Decline Again
4. (U) New vehicle sales continued their decline, plunging in August
by 13% compared with August 2006. This is the biggest fall in
nearly five years and marks the sixth monthly decline in a row.
Annual sales year-to-date are down by 3.2%. In the year to last
month, sales for passenger cars and commercial vehicles plunged
14.1% and 11%, respectively. Heavy commercial vehicles increased,
reflecting heavy public and private sector spending on
infrastructure. Standard Bank Economist Danelee van Dyk estimated
that South Africa will experience a 5-7% fall in the whole market
this year. Higher interest rates, stricter lending criteria and
strikes in the motor industry have added to the pressures on demand.
(Business Day, October 2, 2007)
--------------------------------------------- -----
Critic Claims Climate Consciousness Dims at Energy Summit
--------------------------------------------- -----

5. (U) Johannesburg Earthlife Africa Sustainable Energy and Climate
Change Project Coordinator Richard Worthington offered a contrarian
view of the September 25-26 Energy Summit in a Business Day
editorial on October 3. The Energy Summit was organized by the SAG
Department of Energy to engage stake-holders in a reassessment of
the 1998 national energy policy white paper. Worthington criticized
the energy summit for being too focused on security of energy supply
and set on a significant expansion of coal and nuclear power,
including an emphasis on coal-to-liquid technology (with significant
carbon emissions) and "new-fangled and unproven" Pebble Bed Modular
Reactor technology. Worthington lamented that the SAG has failed to
implement the commitment in the 1998 energy policy "to ensure that
an equitable level of national resources is invested in renewable
energy technologies" - as reiterated in the Department of Energy

PRETORIA 00003538 002 OF 003

paper released at the Summit. Worthington concluded his editorial
by criticizing the linkage between minerals and energy. (Business
Day, October 3, 2007)

Biofuel Won't Burn Food Prices

6. (U) Department of Energy Chief Director of Clean Energy Sandile
Tyata said South Africa's commitment to biofuel production would not
overly burden food prices due to increased demand for corn. He
stressed that biofuels would not be a "free-for-all" and there would
be guidelines and limitations on what could be done when it was
introduced. Tyata was responding to cautionary statements that the
biofuel industry would keep food prices high, and questions about
the wisdom of using corn and sugar as sources of ethanol as a
biofuel additive to gasoline. South African Reserve Bank Governor
Tito Mboweni noted the risks to food prices in comments in August.
Tyata said the SAG was finalizing its biofuels strategy, so he could
not comment on details of the plan. It is expected that 1.2 billion
of liters of bioethanol will be produced in South Africa by 2010,
according to the President of the SA Biofuels Association Andrew
Makenete, who asserted that the introduction of biofuels would be
good for the food industry. (Business Report, October 3, 2007)

SARB Transparent Despite Personal Cost

7. (U) South African Reserve Bank (SARB) Governor Tito Mboweni
emphasized the need for SARB transparency in a recent speech in
Pretoria. He acknowledged, however, that transparency sometimes has
a personal cost. "For instance, we publish the governor's
compensation package. The first year we did that people complained
I earned more than the Finance Minister and the President earned."
Publication of the package even sparked a shareholder's revolt in
2003, which led to the replacement of the head of SARB's
Remuneration Committee. However, the public outcry was not the
worst of Mboweni's worries. "It was particularly a problem for me
as a divorcee," he told the audience. "My ex-wife found out how
much I earned and asked for more maintenance." (Pretoria News,
October 2, 2007)

Completing the Supply Chain

8. (U) Engineering News previously reported that last year only 9%
of the 745 million tons per year of freight transported in South
Africa used rail. Some 88% of freight transport takes place on the
country's road infrastructure, exacerbating congestion, accidents,
and the deterioration of infrastructure. Council for Scientific and
Industrial Research (CSIR) supply chain analyst Emma Maspero called
for greater coordination of the supply chain, including inter-modal
transfer of containers between road and rail and to and from ports.
He claimed that more freight carried by rail would generate
significant savings to the economy. CSIR is working on a number of
initiatives with the Transnet National Ports Authority that address
increasing containerization and aim at increased planning and
efficiencies. Current infrastructure development includes deepening
and widening the entrance channel at the Port of Durban, designing
and constructing a new port at Ngqura in the Eastern Cape, and
upgrading the container terminal at the Cape Town Port.
(Engineering News, October 1, 2007)

--------------------------------------------- -
AngloGold Still Optimistic About Fatality-Free Deep-Level Mining
--------------------------------------------- -

9. (U) Africa's leading gold producer AngloGold Ashanti said on
Tuesday it believed it was possible to mine at deep levels without
suffering fatalities, after four of its workers were killed
following seismic events at its Mponeng mine on Friday. COO Neville
Nicolau said it was not a solution to close down the shafts that had
fatalities, as many people depended on these mines for jobs, a
sentiment which was shared by labor representatives. Instead,
companies like AngloGold Ashanti needed to work with labor and
government to effect a cultural change that led workers to
thoroughly understand the reasons for safety, and not just act to
appease their supervisors. South Africa has some of the world's

PRETORIA 00003538 003 OF 003

deepest gold mines, and their owners have repeatedly come under fire
from the unions and government for the high fatality rates in these
mines. AngloGold Ashanti owned many of these mines and has already
suffered 23 fatalities so far this year. (Mining Weekly, October 3,


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