SOUTHERN AFRICA REPORT - Vol 25 No 23 - 06/08/2007
Monday, June 11th, 2007SOUTHERN AFRICA REPORT
Southern Africa’s Premier Current Affairs Briefing
Vol 25 No 23
June 8 2007
CURRENT AFFAIRS
Declaration of Table Mountain by editors, publishers calls for
abolition of `insult’ and criminal defamation laws in Africa
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Strike aggravates relations between ANC and Cosatu 2
Eskom plans 10 nuclear power plants in two decades 3
Visitors required to register cellphones before `roaming’
Economy: Is light the end of tunnel or oncoming train? 4
MEDIA
Optimism on amendments to films Bill turns sour 5
Beeld wins against attempt at judicial censorship 6
BUSINESS
Reserve Bank raises prime by 0.5% over inflation fears 6
SA is glossing over concern at burgeoning BoP deficit 7
Coega’s problems: absence of local power, weak rail 7
Car sales drop in May while medium, heavies hold up 8
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Current Affairs - Page 1
Declaration of Table Mountain by editors, publishers calls for abolition of `insult’ and criminal defamation laws in Africa
THE WORLD ASSOCIATION of newspapers comprising 18,000 members celebrated in Cape Town on June 3-6 the holding of its first annual congress in Africa by issuing a Declaration of Table Mountain calling for the abolition of “insult” and criminal defamation laws which have become the scourge of journalists on the continent.
The Declaration will be presented to United Nations Secretary General Ban Ki-Moon with the request that it be presented to the General Assembly, to UNESCO Director-General Konchiro Matsuura, asking that it be placed before the General Conference and to African Union Commission Chairperson Alpha Oumar Konare requesting that it be distributed to all members of the AU and endorsed by the organisation at its next summit meeting of heads of state.
It records that in the five months leading up to the Cape Town congress, 103 editors, reporters, journalists, broadcasters and on-line editors in 26 African countries were harassed, detained and/or imprisoned under those laws.
The Declaration follows the Declaration of Windhoek issued in the capital of Namibia 16 years ago on May 3, 1991. When the UN adopted that Declaration two years later its anniversary became World Press Freedom Day.
The Declaration of Table Mountain was adopted by the boards of WAN and WAN’s associate organisation, the World Editors’ Forum, on the eve of the Cape Town congress and was announced by WAN President Gavin O’Reilly, chief operating officer of Independent News and Media Ltd, in his opening speech in the presence of SA’s President Thabo Mbeki.
Mbeki, in his speech formally opening the congress, referred to the “tussle between media freedom and governance” and said, “There are some countries on our continent where journalists are in prison and this is worrying for all of us”.
Mbeki, who has always upheld the media freedom clauses in the SA Constitution, said media freedom was of special interest to organisations such as the AU and the African Editors’ Forum, which had planned a number of initiatives to bolster this freedom on the continent.
These initiatives included collective debates between political leaders and African editors, the first of which is in Accra, Ghana, in July and the launch of an African media freedom day. “The problem of media freedom around the continent is an important one”, he said.
The Table Mountain Declaration focuses a searchlight on the African Union’s Peer Review Mechanism (APRM) as part of the Nepad (New Partnership for Africa’s Development) programme and the exclusion of the fostering of a free and independent press as a key requirement in the APRM assessment of “good governance” in the countries of the continent.
O’Reilly called on Mbeki to help remove some key obstacles to press freedom in Africa where “the daily persecution and harassment of the free press must cease”.
He went on to say that “we are particularly grieved” by the exclusion of the fostering of a free and independent press as a key requirement –“as indeed it must be” — in the assessment of good governance, which drew the lame response from Mbeki that “it was an oversight”. He said, “I was surprised to hear that; it’s not deliberate that it’s not there”.
He said he would take this up with his colleagues in the AU and in the historic debate — “a new kind of dialogue” — between the five presidents and editors. “We should all of us be sensitive to this problem and act on it and not merely make good speeches”, he said.
Mbeki will have an uphill battle. “Insult laws” and criminal defamation exist in 48 of the 53 countries in Africa. Those among the 48 who volunteer for the AU Peer Review process are unlikely to get to first base if a requirement for the fostering of a free and independent press is added to the four existing criteria for “good governance” — adoption of codes of good governance; having an accountable, efficient civil service; ensuring the effective functioning of parliament; and ensuring the independence of the judiciary.
“Insult laws” vary from country to country but the common theme is the protection of presidents, prime ministers and parliamentarians from criticism which “brings their good name into disrepute”. It frequently extends to the heads of the defence force and police and often to all civil servants, foreign diplomats and to the country’s flag and name, the dignity of parliament and the good name of state institutions.
O’Reilly called on African governments to release jailed journalists, abolish draconian press laws and recognise the importance of press freedom for economic, political and social development.
The Declaration stated: “In country after country, the African press is crippled by a panoply of repressive measures, from jailing and persecution of journalists to the widespread scourge of `insult’ laws and criminal defamation which are used, ruthlessly, by governments to prevent critical appraisal of their performances and to deprive the public from information about their misdemeanours”.
But O’Reilly also focused on South Africa. He referred to the anti-press legislation contained in apartheid-era laws which the South African press have for more than a decade requested the government to review and repeal or amend. He called on Mbeki to repeal them.
He also spoke of the eight months of media protests against the Films and Publications Amendment Bill which if not amended would have imposed pre-publication censorship on newspapers and news broadcasters.
He also urged Mbeki to use his influence to curb “flagrant abuses of freedom ” in Zimbabwe. “Though conscious that it is a sovereign state, we hope, Mr. President, that you will bring your considerable influence and abiding sense of justice to do all in your power to help to rectify the flagrant abuses of freedom that exist in that country”.
Mugabe saw fit to discount any legitimate commentary from the international community but “we’d hope that a fellow African nation like SA can actively encourage real progress and bring normalcy and true liberty to that country”, O’Reilly said.
The Declaration welcomes moves by a global fund for African media development and recommends that it give priority attention to media legal reform and in particular the campaign to rid the continent of “insult” and criminal defamation laws.
It also commits WAN and WEF to expand their existing activities in regard to press freedom and development in Africa in the coming decade. O’Reilly endorsed that promise by committing the two organisations to significantly expanding existing activities to further promote press freedom on the continent.
Cynics commented that there was little chance of African states adopting the declaration by abolishing their “insult” laws, but there could indeed be some progress if Mbeki puts his weight behind it and the process is taken further by the UN and UNESCO.
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Current Affairs - Page 2
Strike aggravates relations between ANC and Cosatu
THE STRIKE BY PUBLIC servants is bound to aggravate the already tense relationship between President Thabo Mbeki’s administration and Cosatu (Congress of South African Trade Unions), particularly as it is, in part at least, a preliminary skirmish in the succession struggle within the African National Congress (ANC).
The strike should be seen in the context of a recent statement by Cosatu general-secretary Zwelinzima Vavi reaffirming Cosatu’s determination to flood the ANC with its members in order to restore the ANC’s traditional commitment to the working class, instead of — as Cosatu charges — pandering to the interests of the emerging black managerial and capitalist elite.
For the sake of clarity it should be remembered that the ANC and Cosatu are nominal allies in the tripartite alliance and that many trade union members hold dual membership of Cosatu and the ANC, a situation that Vavi and Cosatu are determined to amplify.
It should be further noted in the interests of what Mbeki refers to as contextual reportage that:
* Mbeki is widely seen as a man driven by a mission to prevent Jacob Zuma — whom he dismissed as South Africa’s deputy president three years ago — from succeeding him as the ANC’s and South Africa’s president.
* Vavi, in contrast, has been outspoken in favour of Zuma and has given credence to speculation that Zuma has been the victim of a conspiracy against him because of his declared concern for the poorer citizens of South Africa.
The public sector strike has already witnessed sharp exchanges between Public Service and Administration Minister Geraldine Fraser-Moleketi and leaders of Cosatu-affiliated trade unions, one of whom has accused Fraser-Moleketi of “lying” and misleading parliament.
The allegation relates to a briefing given to parliamentarians by Fraser-Moleketi on a working document that had been tabled in the Public Service Co-ordinating Bargaining Council (PSCBC) as a possible basis for an agreement to avert or, failing that, end the strike within a day or two before it seriously disrupted government departments, including hospitals and schools.
A major terrain of struggle between the Mbeki administration and the public sector unions, many of which are affiliated to Cosatu, has been the health department in general and hospitals, in particular, with two points of friction standing out conspicuously:
* A successful government application for a court order indicting nurses disrupting an essential service (care of the sick and dying) by striking, an order which a majority of nurses appear to have disobeyed on the first day of the strike.
* An ultimatum by Health Director-General Thamsanqa Mseleka to the striking nurses to return to work or face dismissal, a stance which seemed to have persuaded the nurses to test his resolve but which angered the trade unions.
Whatever the final outcome of the strike, it is bound to leave a residue of bitterness among many public servants, particularly as their demand for a 12% wage increase on their modest salaries is relatively restrained in comparison to the recommendation by a commission headed by Deputy Chief Justice Dikgang Moseneki that Mbeki’s remuneration package be increased by 57.3%. The package incorporates Mbeki’s car allowance and medical aid contributions, as well as what many workers undoubtedly see as his astronomically high salary.
The recrimination over the strike between Cosatu and its members and the Mbeki administration and the Mbeki establishment in the ANC should be seen in the context of recurring slanging matches between Mbeki and Vavi, including Vavi’s 2006 insinuation that South Africa might be replicating Zimbabwe’s descent into dictatorial rule veiled only by its quasi democracy.
The most recent dispute is dealt with at length by Mbeki in his Letter from the President in the ANC’s online publication ANC Today. It concerns a speech made by Vavi in Port Elizabeth on the occasion of the 20th anniversary of the founding of the National Union of Metalworkers (Numsa), one of the biggest unions affiliated to Cosatu.
The thrust of the speech is twofold: firstly, dismissal of reports of an economic boom in South Africa as “government propaganda” and, secondly, comparison of the purported propaganda about substantial progression in the quest for a “better life for all” with the half-truths and misinformation propagated by the Nazis in Adolf Hitler’s Third Reich.
Mbeki’s riposte spells out in detail the offensive racist policies of the Nazis and their grisly manifestation in the extermination and slave camps where the people deemed to be “untermenschen” were murdered and/or enslaved. He approvingly quotes the Bulgarian communist Georgi Dimitrov who described Nazism as “open terrorist dictatorship” and a governmental system of “political gangsterism”.
Mbeki points out that ANC and government policies are the polar opposite of these crimes against humanity.
Mbeki contends that in drawing parallels between ANC-ruled South Africa and Nazi Germany Vavi is himself guilty of gross misrepresentation and wilful misinformation on a scale that would have won the admiration of Hitler’s propaganda minister Joseph Goebbels.
To counter Vavi’s contention that the government has put a shiny gloss on the situation, Mbeki quotes a Markinor poll which found that 65% of South Africans think the country is moving in the right direction while 84% think it has the capacity to offer a happy future to all of South Africa’s racial, linguistically and culturally diverse communities.
Mbeki ends by quoting a comment by Tony Leon shortly before he relinquished the leadership of the opposition Democratic Alliance. In his quoted response to a question on his attitude to trade unions, Leon implicitly praises Vavi for his tough criticism of the ANC government and expressly wishes Vavi more power when he stands on the “right side of an argument”.
From which Mbeki seems to conclude that Vavi is an unwitting ally of the DA when he accuses the ANC government of resorting to propaganda akin to that of the Nazis.
To revert to the strike and draw its threads together into an overall conclusion: the longer it lasts and the more damage it inflicts on hospitals and schools and the economy in general, the more the Mbeki administration and Cosatu are likely to point accusing fingers at one another as they prepare to do further battle on the succession issues for the ANC’s national conference in December.
Footnote: The strike, according to the government, resulted in 467,000 workers staying away on the first day, among them 80% of the country’s teachers — with hundreds of thousands of school children affected — and 22% of workers in national and provincial government departments. Essential workers, described as those dealing with water supply, the functioning of courts, correctional services, emergency health services, nursing and medical and paramedical services were barred from striking, though there were complaints that some health workers and nurses did — some being dragged from their posts by strikers — resulting in disruption at hospitals in Gauteng, Western Cape and KwaZulu-Natal.
Footnote 2: Fraser-Moleketi told the unions that their demand for a 12% across-the-board increase was not sustainable — it would result in the state’s wage bill soaring from 8.2% to 20% of GDP. The government had added to its 6.5% offer other benefits including “occupation specific dispensations” for various professions which brought the total package up to 12%, she said.
The unions and the government were scheduled to meet in the PSCBC on June 13 to resume talks at which the unions were expected to make a counter proposal.
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Current Affairs - Page 3
Eskom plans 10 nuclear power plants in two decades
SOUTH AFRICA‘S power utility Eskom is planning to erect at least 10 more nuclear power stations within two decades to provide 20,000 megawatts of electricity to augment its current capacity of 36,000MW — but it requires government approval.
Eskom chief executive Jacob Maroga has told journalists at a briefing in Cape Town that in the face of global warming, nuclear power was the “next big viable alternative” to avoid carbon dioxide emissions from coal on which most of SA’s power generation is based.
Maroga also warned of power cuts unless South Africans started saving electricity. Electricity demand — particularly in peak periods — had significantly increased because of the cold weather, he said, and this had put tremendous pressure on the already tight electricity supply system.
“We continue to appeal to everyone to double the efforts to use electricity efficiently and sparingly to avoid the need to go into load-shedding”. At present, the demand for electricity was being managed by using the available generating capacity and reducing the supply to certain agreed customers.
Eskom’s board had made a strategic decision that a significant component of SA’s power should come from nuclear generation and that by 2025, up to 20,000MW should be generated by conventional Koeberg-style nuclear plants. Koeberg’s two generating units’ output was a total of 1,800MW.
Eskom was hoping to obtain a decision by the first half of next year on what could be a fleet of plants, representing a critical mass of business that would enable a supplier to commit resources to the project. The utility had already approved plans for a second nuclear power station as part of a R150-billion (US $21-bn) five-year capital expansion programme and the environmental impact assessment for this had begun.
Five potential sites, one in the Eastern Cape, and the others along the Western and Northern Cape coast, had been identified. Nuclear plants had to be close to large quantities of water, which in SA meant on the coast. Sea temperature also played a role in deciding where they would be sited.
Storage of highly radioactive spent fuel was an issue, and SA “would follow developments around the world for the latest thinking”, Maroga said.
SA’s electricity consumption, which stood at 20,000MW in 1994, reached 36,000MW in the last week of May.
SA’s electricity tariffs were 30% lower than the next global competitor, Australia, and though its new tariffs would have to reflect the R150-bn expansion programme Eskom believed that while the gap would close, SA would still keep its position as cheapest in the world.
Eskom was engaged with the national electricity regulator on a tariff “path” that would allow SA to remain internationally competitive, he said.
Footnote: Eskom has spoken of a tariff hike of 18% to help it meet its capital expenditure budget.
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Current Affairs - Page 4
Visitors required to register cellphones before `roaming’
A LONG-AWAITED DECREE by the government that visitors to South Africa will have to register with a local mobile service provider before enjoying “international roaming” on their cellphones is about to be legislated.
The measure comes as part of the Regulation of Interception of Communication Amendment Bill which is being discussed by the parliamentary Portfolio Committee on Justice and which has the aim to help fight against organised crime and the use of cellphones to commit crimes. It requires that personal details of every cellphone user be recorded.
A clause in the Bill states that a non-South African would have to supply full names, passport number and address before getting access to roaming from a local provider.
Immediate concerns are that this regulation could result in lengthy queues at ports of entry and of costly administrative delays for cellphone companies. It could also lead to problems with the arrival of foreigners during the 2010 Fifa World Cup who would have queue up to register their phones before leaving international airports.
Representatives of cellphone companies said the measures would be difficult for their operations. They expected delays at airports.
COMMENT
There is certain to be a protest from the Foreign Correspondents Association. Their members would object to having to give their personal details to become part of a system’s data base. They would see it as potential interference with their freedom to operate in South Africa.
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Current Affairs - Page 4
Economy: Is light the end of tunnel or oncoming train?
SOUTH AFRICA‘S ANNUAL GDP growth rate, having risen steadily during the 1990s, is forecast to attain an average of about 4.5% for the first decade of the 21st century.
A similar positive picture emerges when the focus is switched to the GDP per head between the 1990s to the present situation in 2007.
These encouraging trends are depicted in a series of graphics prepared by researchers at the Institute of Race Relations for the annual slide show presentation of the situation in South Africa by the institute’s CEO, John Kane-Berman.
The graphics, however, do not merely highlight the heartening features of contemporary South Africa. They encapsulate some of the gloomy aspects of post-apartheid South Africa as well.
Looked at in a broader international context, the situation is not particularly hopeful. SA’s per capita GDP growth for the time-span 1990-2004 is a minuscule 0.5%, way behind equivalent figures for the United States (1.9% from a high base figure), Poland and Ireland (4.0% and 7.3%, respectively) and India and China (4.0% and 8.9%, respectively, both from a low base).
A graphic depicting the employment-unemployment situation in South Africa may be described as one that simultaneously offers a glimmer of hope and a reason for concern.
It debunks the myth that SA’s economy is still characterised by “jobless growth”. The data shows that between 1996 and 2006 the number of employed people grew by 38%. But — and it is an important qualification — the number of unemployed people grew nearly three times more quickly, thus underlining the point that the number of potentially economically active people is growing more rapidly than the number of new employment opportunities.
There are, of course, two definitions of unemployed people: firstly, the strict definition that only takes account of unemployed people who are actively searching for employment and, secondly, the expanded definition, which includes those unemployed people who, discouraged at their failure to attain employment, have given up trying.
The relevant statistical data, according to the institute’s calculations, is: strict definition — 4.4-million unemployed, constituting 25.5% of the potential economically active population; expanded definition — 7.6-million, comprising 37.3% of the potential economically active population.
Another pertinent statistic emerges from the above figures, one that is calculated to generate a fair amount of despondency: 3.3-million South Africans are so dispirited by their failure to find work that they have given up.
Whether they should be regarded as potential revolutionaries, or be classified as a-political members of what Karl Marx described as the lumpen-proletariat poised on the brink of degeneration into criminality, is a matter of debate: either way they constitute a worryingly potentially disruptive force.
Before moving on, it is important to note that the majority of new jobs generated by the economy between 1996 and 2006 fall within the informal (or second) economy, which — it is equally important to take cognisance of — accounted for roughly 10% of those employed in 1995 but expanded to account for more than 70% of the employed in 2006.
The categorisation of the employed population is equally important to any assessment of the economy in contemporary, post-apartheid South Africa. There has been a marked shift away from permanently employed employees between 2001 and 2006 and a correspondently conspicuous increase in the number of non-permanent employees.
The increases of non-permanent employees during the five years between 2001 and 2006 is as follows: the number of employees on fixed period — but not permanent — contracts grew from 297,000 to 581,000 or by 95.6%; the number of temporary workers grew over the same timeframe from 979,000 1,414,000 or by 44.4%, while the relevant figures for casual workers grew from 685,000 to 906,000 or 54.6%.
Since non-permanent workers are more vulnerable to dismissal by employers and less open to unionisation, the trade unions are committed to trying to reverse the trend to casualisation of the work force and to recruitment into their ranks of the “emancipated” workers.
But, as Kane-Berman notes in a recent exposition of the situation: “There is a risk that any attempt to put curbs on casualisation will not increase the number of permanent jobs but close off a potential point of entry to the labour market”.
The resultant burden of hardship will, as Kane-Berman notes, fall hardest on the 15-to-24 age cohort, of whom some 50% are unable to obtain employment as it is and of whom more than 37% have been searching for employment for three years or more.
Summing up the situation portrayed in the various graphics, one may conclude that it is hard to decide whether the light visible in the distance is an on-coming train or the end of the tunnel, though — it should be emphasised — the institute does not subscribe to such a dichotomous view.
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Media - Page 5
Optimism on amendments to films Bill turns sour
OPTIMISM THAT THE FINAL amendments to the Films and Publications Amendment Bill which was approved by parliament’s Home Affairs Portfolio Committee had removed the pre-publication censorship fears of the media have been dashed following publication of the Bill in its new form.
Though representations against the censorship features of the original Bill have been met in part there are still sections in the Bill which are raising alarm.
The problems arose when the Home Affairs Department which is piloting the Bill through parliament removed the clauses exempting print members of Print Media SA and broadcasters who are members of the National Association of Broadcasters from the provisions of the Film and Publications Act.
This meant that should the Bill be passed the media would have had to seek classification under the Act for certain types of stories before publication — in reality they would have had to subject themselves to pre-publication censorship on child pornography, propaganda for war, hate speech and incitement to violence, which the media said was not only impractical but also unacceptable.
The parliamentary committee restored the exemptions but only in respect of certain issues and at first sight this appeared to meet the media’s problems. But the committee had ignored representations by the SA Chapter of the Media Institute of Southern Africa that the original exemption for the print media was defective because it excluded more than 500 publications which were not members of Print Media but which played the same role in informing their readers.
The media organisations have asked their legal advisers for an opinion on the revised Bill before making further representations.
Committee chairman Patrick Chauke said the decision to re-insert media exemption in the revised measure was a culmination of robust engagement between the committee, media and others. “This outcome was informed by the engagement with stakeholders — it is evidence that this parliament of South Africa is not a rubber stamp but a parliament that takes peoples’ views very seriously”, he said.
Chauke said under no circumstances would an ANC-led government have passed a law that undermined press freedom. However, he said the committee was happy about the fact that the Bill managed to generate a lot of interest from the media. “After our engagement with the media, they now understand the need … to beef up their self-regulation”, he said.
The Bill will now be forwarded to the National Council of Provinces (NCOP).
COMMENT
Despite Chauke’s assurances, the discussions with the Home Affairs Department and later with the parliamentary committee left the media with the impression that parliamentarians have a poor understanding of the principles that sustain the freedom of the press and how intricate are some of the issues which arise. The media believes it may have to take the matter to the Constitutional Court.
The World Association of Newspapers, whose 18,000 member newspapers sent 1,600 delegates to its annual congress in Cape Town on June 3-6, described the Bill as undesirable.
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Media - Page 6
Beeld wins against attempt at judicial censorship
THE DEPARTMENT OF TRANSPORT was sharply censured by a judge in the Pretoria High Court for attempting to prevent Beeld newspaper from publishing an auditor-general’s report on its new eNaTIS electronic transport information system. The department had applied for an interdict to prevent publication.
Judge Dion Basson said the department had not proved that the national interest would be compromised by publication or that the report contained classified information. The report in fact dealt with failures of management within the department (in the usage of the system) which, the judge added, was nothing new. The constitutionally enshrined freedom of the press and the public’s right to know in this case weighed more heavily than any confidentiality attached to the report.
Minister Jeff Radebe and Transport Department Director General Mpumi Mpofu had insisted the report was confidential and could only be made public once it had been tabled in parliament. They claimed that the revelation of security weaknesses in the Natis system on which the new system was based could fall into the hands of “criminal elements” such as car theft syndicates and would lead to unauthorised persons accessing and compromising the system’s integrity.
The newspaper had claimed that problems with the old and the new system had been known for months and the only conclusion to be drawn from Mpofu’s refusal to answer questions about what had been done to remedy the situation was that nothing had been done.
Indeed, Beeld’s counsel Sias Reyneke, SC, argued there was nothing wrong with the computer system and that it was management problems which had caused the vulnerability of the system and compromised security.
The next day Beeld published details of the report pointing out that this was what Radebe had wanted suppressed. It outlined the deficiencies in managing the system, highlighting “weak passwords and password policies”. It also noted that some passwords were blank, allowing anyone to access the system.
COMMENT
The judge did not comment on the point raised by the SA National Editors’ Forum (Sanef) that the interdict had been sought by the department only after the newspaper, adhering to professional journalistic practice, had sent a request to the department to comment on the information it had in its possession about management deficiencies.
Though the court found for the newspaper, with costs awarded against the department, the paper and no doubt others will consider carefully what action they may expect a government department to take before they submit information for comment.
It can only be a matter of time before newspapers adopt a policy that they publish first and then accommodate a response later. This would obviate the opportunity to institute a court action to stifle publication.
Footnote: The Democratic Alliance has announced that it will request that Radebe and Mpofu explain why three reports on eNaTIS were not brought to Radebe’s attention.
“The department must urgently account for its inability to bring the three Auditor-General’s audit reports, which warned of the significant risks inherent to eNaTIS, to the attention of the Minister of Transport”, the DA’s Stuart Farrow stated, adding that the department’s conduct showed a “blatant disregard” for the AG’s constitutional requirement to report on and audit state departments and thereby strengthen constitutional democracy.
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Business - Page 6
Reserve Bank raises prime by 0.5% over inflation fears
RESERVE BANK GOVERNOR Tito Mboweni, concerned at the deteriorating inflation outlook — inflation in April breached the Bank’s 3%-6% target range for the first time in four years — has raised the bank’s key lending rate by 50 basis points to 9.5%. This will raise prime rate to 13%.
The move was greeted with mixed feelings in the market place, some economists arguing that it was too little too late and that the bank should have raised the rate earlier this year while the dealing room at Rand Merchant Bank reportedly erupted into applause and cheers.
Mboweni said inflation deterioration had been mainly brought on by unexpectedly high fuel and food prices together with strong consumer consumption and credit demand.
He said, “The committee continues to view the risks to the outlook strongly to the upside”, repeating the point to emphasise its importance. “The MPC (Monetary Policy Committee) will continue to monitor developments which have a bearing on inflation outcomes and will not hesitate to adjust the policy stance as may be appropriate”.
Mboweni’s tough stance has been interpreted by analysts as a signal that there will be another rate hike at the next MPC meeting in August.
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Business - Page 7
SA is glossing over concern at burgeoning BoP deficit
By a Special Correspondent
ABOUT ONE THIRD of South Africa’s massive deficit on the current account of the balance of payments last year was because of the flow of dividends to non-resident owners of SA shares.
This is not surprising — foreign buying of SA equities has been central to the funding of the BoP deficit — but it is a trend that seems to be a little glossed over by most SA economists and by the country’s economic policymakers.
It is not a critical situation — or certainly a long way from it yet. But it is also something that can’t just be taken for granted, as seems largely to be the case at present.
The key point is that it is yet another reminder that nothing is for nothing in economics, that there is no such thing as a free lunch.
This overall situation can certainly be justified on immediate and even medium-term bases. SA is intent, rightly, on expanding as fast as possible its total productive base.
That means by definition big rises in new gross fixed investment, or gross capital formation (GCF) as the Reserve Bank now formally calls it. Indeed, the aim is to get the ratio of GCF to gross domestic product (GDP) back up to the 25% level that prevailed in the 1970s.
In 2002, the ratio was only 15.0%, marginally less than it was in 1992. But the overall figure for 2006 was a much healthier 18.6% and in the final quarter of last year the annualised rate was up to 19.2%.
Obviously, however, this significant upturn requires large imports of plant, machinery and equipment. That reasonably is why the huge upturn in the BoP current deficit — from R13.6-billion (US $1.9-bn) in 2003 (there was a surplus of R9.7-bn — $1.4-bn in 2002 — to a shortfall of a whacking R111.1-bn ($15.5-bn) in 2006 — has provoked little alarm in SA.
It has been seen largely as a welcome trend overall.
There is certainly much to be said for that view. SA needs a strong domestic output base if it to achieve the annual economic growth target of 6.0%-plus within six-seven years that have been targeted.
Also, of course, SA hopes that this additional productive capacity will also increase export potential which, among other advantages, will offset the foreign exchange cost of imports.
So far, so good. But even the best intended plans still have to be soundly based. SA is not the United States. It cannot run large trade deficits indefinitely (and there have been warnings for a long time now that not even the Americans can either) and just take it for granted that foreign financing will simply be there to meet the bills.
Crucially, the financing that comes by way of sales of SA shares and bonds comes with a price — outflows of dividends on foreign-held shares and similar cash exoduses to meet interest rate charges on bonds owned by non-residents.
The SA Reserve Bank says in 1999 payments of dividends to non-residents totalled only R8.0-bn ($1.1-bn). That was hardly a major item in the overall balance of payments figures.
In 2006, however that figure was up to nearly R44-bn ($6.2-bn). This is also a figure that will increase, even on the present base, as dividend payments rise, let alone any further hike in foreign SA share purchases (which is bound to happen because SA needs the capital inflows from share buying to meet ongoing current account deficits for many years to come).
These payments will become increasingly onerous. So long as more capital keeps flowing in that won’t matter, or not in the medium-term anyway. But if anything should happen negatively to the foreign capital appeal for emerging market countries generally, or SA, in particular, the burden of servicing non-resident owners of SA shares and bonds will increasingly make itself felt.
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Business - Page 7
Coega’s problems: absence of local power, weak rail
SOUTH AFRICA’s FIRST LARGE industrial development zone at Coega in the Eastern Cape, started six years ago as part of the government’s vision of turning SA into a world manufacturing centre, has two major weaknesses that could curb foreign investment, according to Coega Development Corporation executive manager Themba Koza.
He told parliament’s Trade and Industry Portfolio Committee that these were a weak rail infrastructure and the source of electricity power generation being more than 1,500km (nearly 1,000 miles) away in Mpumalanga Province. Potential investors were worried about a lack of locally generated electricity.
“When prospective investors learn that electricity that we use at the site is being drawn all the way from the Mpumalanga Province, they become really concerned and some never bother to come back”, he said.
He said negotiations with the Minerals and Energy Department to arrange for a local electricity source were not progressing as fast as the corporation would like.
With most companies at Coega, which is south of Port Elizabeth, having to source raw materials such as iron and manganese from Sishen in the Northern Cape, Koza said the weak rail infrastructure between Port Elizabeth and the mines was also of great concern to investors.
Transnet, Koza said, had so far been slow in its response to the rail infrastructure problems highlighted by the corporation.
COMMENT
Koza omitted to say that foreign investors could not have been impressed by the tardiness with which two major government infrastructural organisations have reacted to serious weaknesses in a major government enterprise on which billions of rands had already been spent.
When investors learn of these problems and also that there seems to be a reluctance to deal with them, their confidence in official determination to ensure that this enterprise is a success must be seriously diminished.
It appears to be the first time that these problems have been publicly aired by Coega. It probably explains why the corporation has experienced difficulties over a long period to gather an industrial support base for the enterprise.
It may also be that Koza, in despair over the lack of response from the government and Trans Net, has decided to go public on the problems to an influential parliamentary committee in the hope that pressure can be brought to bear on the two parastatals to react positively.
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Business - Page 8
Car sales drop in May while medium, heavies hold up
WHILE SALES of bakkies (pick-ups), minibuses and trucks improved in May, overall new vehicle sales were down on the previous month and down year-on-year, Naamsa (National Association of Automobile Manufacturers of South Africa) has reported.
This was due to a sharp drop in new car sales — 31,491 units down 3,554 units or 10.1% compared to the 35,045 new cars sold during May, 2006. Naamsa attributed the drop to consumer demand continuing to moderate as a result of last years’ interest rate rises, new car price inflation and high personal debt levels. For the fourth successive month in just under four years, the comparison of monthly car sales with the corresponding month of the previous year had been negative.
In the event, aggregate new vehicle sales at 51,684 units registered a decline of 892 vehicles or 1.7% compared to the 52,574 new vehicle sales of the corresponding month last year.
Sales of medium and heavy vehicles were bakkies and minibuses, 16,904, up 2,278 on last year’s 14,626 sales; medium trucks, 1,391, up 84 on last year; and heavy trucks and buses, 1,898, up 302.
Naamsa said aggregate export sales showed an increase of 688 to 14,787 in May 2007, resulting in a “moderate improvement” in exports for the first five months of the year.
During May motor dealers spoke of losses running into millions of rands as a result of the defective eNaTIS registration system. The Gauteng Business Barometer (GBB) said the system had a “negative effect” on the economy in Gauteng.
The GBB, which measures Gauteng’s economic activity on a monthly basis, was particularly weak in April, probably the weakest since it was launched in June last year, said T-Sec economist Mike Schussler, one of the promoters of the barometer.
The main reason for this was the negative impact of higher interest rates and inflation, the civil debt burden and slower employment growth, in addition to the eNaTIS problems, the impact of which was difficult to quantify.
The GBB for April slipped to 146.4 index points from 150.4, in March, indicating a 2.7% drop in business activity levels and a 5.9% decrease when compared to the corresponding month last year when it touched the 155 level.
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