Cablegate: South Africa Economic News Weekly Newsletter December 28,

VZCZCXRO1043
RR RUEHDU RUEHJO
DE RUEHSA #4252/01 3621210
ZNR UUUUU ZZH
R 281210Z DEC 07
FM AMEMBASSY PRETORIA
TO RUEHC/SECSTATE WASHDC 3039
RUCPCIM/CIMS NTDB WASHDC
RUCPDC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPARTMENT OF TREASURY WASHDC
RUEHJO/AMCONSUL JOHANNESBURG 7802
RUEHTN/AMCONSUL CAPE TOWN 5179
RUEHDU/AMCONSUL DURBAN 9459

UNCLAS SECTION 01 OF 02 PRETORIA 004252

SIPDIS

DEPT FOR AF/S/RMARBURG; AF/EPS; EB/IFD/OMA
USDOC FOR 4510/ITA/MAC/AME/OA/DIEMOND
TREASURY FOR OAISA/RALYEA/CUSHMAN
USTR FOR COLEMAN

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 DECEMBER 28,
2007 ISSUE

1. (U) Summary. This is Volume 7, issue 52 of U.S. Embassy
Pretoria's South Africa Economic News weekly newsletter.

Topics of this week's newsletter are:
- Zuma to Review Inflation Targeting
- JSE Rocky for New Mine Listings
- PPI Slows to 9.1 Percent
- Trade Deficit Surprise Fall

End Summary.

----------------------------------
Zuma to Review Inflation Targeting
----------------------------------

2. (U) Jacob Zuma, the newly elected President of the African
National Congress (ANC), said that he would look into inflation
targeting, the current monetary policy used by the South African
Reserve Bank to control inflation. "Clearly, our main method of
inflation targeting, which is hiking the interest rate, has resulted
in complaints from both the top end of the financial spectrum as
well as the bottom end," Zuma reportedly said. "So it stands to
reason that there's some kind of problem there. And though I am not
going to pretend that I have delved into the issue properly, it is
something that I am going to get to," he said. The Reserve Bank has
raised interest rates eight times since June 2006. In his first
speech following his election, Zuma moved to calm fears that there
would be a shift in economic policies. (Mail and Guardian, December
24, 2007)

---=---------------------------
JSE Rocky for New Mine Listings
-------------------------------

3. (U) New mining listings had a rocky ride on the Johannesburg
Stock Exchange in 2007, with most of the newcomers trading in
mid-December below both debut prices and mid-year peaks. Seven
resources companies joined the JSE this year, according to JSE
business development manager Lauren Czepek, with another two or
three in the pipeline for 2008. The JSE is also seeing a lot of
interest from foreign-listed mining companies seeking dual listings
because they had South African assets and resources, or else needed
to raise capital in South Africa or enter black empowerment
transactions, Czepek said. (Business Day, December 27, 2007)

------------------------
PPI Slows to 9.1 Percent
------------------------

4. (U) South Africa's producer price inflation (PPI) slowed to 9.1%
year-on-year in November. This fell below forecasts, and was lower
than the 9.5% rise in October. On a monthly basis, PPI rose by .3%
after a 1.1% jump in October. RMB economist Kay Muller said the
figure was good news as "it shows that inflationary pressures are
showing signs of easing, and endorses our view that interest rates
will be left on hold in January." However, Investec Group economist
Annabel Bishop said that, while the figure was lower than expected,
there is a "growing risk" of further interest rate hikes as CPIX
inflation is likely to peak at close to 9% early next year.
(Business Day, December 20, 2007)

---------------------------
Trade Deficit Surprise Fall
---------------------------

5. (U) The trade balance narrowed significantly in November to R608
million ($87 million), the smallest gap since December 2006,
compared with October's record R14.73 billion ($2.1 billion)
shortfall. Contributing to the deficit was a month-on-month
decrease in imports of mineral products, machinery and original
equipment components, and a month-on-month increase in exports of
Qequipment components, and a month-on-month increase in exports of
precious stones and metals and mineral products. The cumulative
trade deficit for the first 11 months of 2007 was R71.3 billion
($10.2 billion), in comparison to R67.5 billion ($9.6 billion) for
the same period last year. This narrower-than-expected deficit will
take some pressure off the rand and interest rates, with decreasing
concern about the current account deficit for the fourth quarter.
However, the current account deficit remains large, and will be
around 6.5% of GDP in 2007. (Business Day, December 28, 2007)

PRETORIA 00004252 002 OF 002

BOST

© Scoop Media