US embassy cable - 05PRETORIA1220

UNCLAS SECTION 01 OF 02 PRETORIA 001220 
 
SIPDIS 
 
DEPT FOR AF/S/JDIFFILY; AF/EPS; EB/IFD/OMA 
USDOC FOR 4510/ITA/MAC/AME/OA/DIEMOND 
TREASURY FOR OAISA/BARBER/WALKER/JEWELL 
USTR FOR COLEMAN 
LONDON FOR GURNEY; PARIS FOR NEARY 
 
E.O. 12958: N/A 
TAGS: ECON, EINV, EFIN, ETRD, BEXP, KTDB, PGOV, SF 
SUBJECT:  SOUTH AFRICA ECONOMIC NEWSLETTER 
           March 24 2005 ISSUE 
 
 
1. Summary.  Each week, AMEmbassy Pretoria publishes an 
 economic newsletter based on South African press reports. 
 Comments and analysis do not necessarily reflect the 
 opinion of the U.S. Government.  Topics of this week's 
 newsletter are: 
 -  New Vehicle Exports Increase by 49.5% in February; 
 -  Savings Have to Increase for 6% Growth; 
 -  Competition Tribunal to Rule on Airline Collusion; 
 -  Competition Commission Finds Collusion in Car Security 
 Industry; 
 -  Documented Immigrants, Emigrants and Tourists Increase; 
 and 
 -  3.3 Percent Consumer Price Increase Expected 
 End Summary. 
 
NEW VEHICLE EXPORTS INCREASE BY 49.5% IN FEBRUARY 
--------------------------------------------- ---- 
 
2.  South African new vehicle exports increased 49.5 
 percent (m/m) in February to 8,374 units compared to 5,600 
 in January.  Despite the large monthly increase, year-on- 
 year (y/y) exports were 10.6 percent lower in the first 
 two months of 2005 compared with the same period last 
 year.  The National Association of Automobile 
 Manufacturers of South Africa (NAAMSA) expects exports to 
 rise by 31.7 percent to 145,500 units or an average of 
 13,153 units in the remaining ten months of 2005.   The 
 y/y drop is largely due to the end of the production for 
 the "old" BMW 3 series, whose production ended on February 
 7.  BMW exported over 30,000 units in 2004, but due to the 
 model change over, BMW expects to export 25,000 units this 
 year.  Exports of the new 3 series will start around May, 
 so February March and April are likely to see y/y declines 
 for overall exports.  Exports from other manufacturers 
 have increased by 41.8 percent y/y in the first two 
 months.  Source:  I-Net Bridge, March 23. 
 
SAVINGS HAVE TO INCREASE FOR 6% GROWTH 
-------------------------------------- 
 
3.  The current level of savings in South Africa would 
 have to increase substantially for growth to reach 6 
 percent, according to Finance Minister Trevor Manuel. 
 Manuel stated that gross domestic savings and gross fixed 
 capital formation of at least 20 percent and 25 percent of 
 GDP, respectively, were required to achieve this GDP 
 growth rate.  Manuel noted that gross savings as a 
 percentage of GDP were only 16.3 percent in 2003 and 14.8 
 percent in the first three quarters of 2004 and the rate 
 of gross fixed capital formation was 16 percent in both 
 2003 and 2004.  Net household savings showed a declining 
 trend from 0.8 percent of GDP in 2003 to 0.7 percent in 
 the first three quarters of 2004.  Net savings by 
 government fell from negative 1.6 percent of GDP in 2003 
 to negative 2 percent in the first three quarters of 2004 
 as government increased its capital expenditure relative 
 to consumption.   Manuel's comments in a written reply to 
 a question in Parliament come at a time when government is 
 considering raising the economy's growth target above the 
 average of 4.2 percent.  Source:  Business Day, March 22. 
 
COMPETITION TRIBUNAL TO RULE ON AIRLINE COLLUSION 
--------------------------------------------- ---- 
 
4.  The Competition Commission has referred claims against 
 South Africa Airways (SAA), SA Airlink, SA Express and 
 Nationwide to the Competition Tribunal on price collusion. 
 The airlines are accused of agreeing to simultaneously 
 introduce a fuel surcharge on the price of tickets for 
 domestic flights, which resulted in price increases.  The 
 Commission has recommended the airlines each be fined up 
 to 10 percent of their revenue in the previous financial 
 year.   Commissioner Menzi Simelane began the 
 investigation in May 2004 into the Airlines Association of 
 Southern Africa, of which SAA, SA Airlink, SA Express, 
 Nationwide and British Airways (Comair) are members. 
 Comair successfully applied for corporate leniency after 
 admitting to contravening some sections of the Competition 
 Act, but agreeing to assist the commission in the 
 collusion case.  Comair was not referred to the Tribunal, 
 although this situation could change if the leniency is 
 withdrawn.  Simelane said the airlines should have 
 consulted the commission before implementing the fuel tax. 
 Source:  Sapa, March 23. 
 
COMPETITION COMMISSION FINDS COLLUSION IN CAR SECURITY 
INDUSTRY 
--------------------------------------------- --------- 
 
5.  South Africa's Competition Commission has uncovered 
 further evidence of collusion and price fixing among some 
 of South Africa's largest vehicle- tracking companies, 
 including Netstar and Tracker.  The Commission also found 
 that 15 manufacturers of gearlocks and alarm systems were 
 contravening competition laws.  Two firms it named were 
 Sherlock, part of JSE Securities Exchange SA-listed 
 Control Instruments, and Grip-Tech.  These companies all 
 face fines of up to 10 percent of their annual revenue. 
 The commission has referred two complaints against the 
 vehicle tracking, gearlock and alarm companies to the 
 Competition Tribunal for adjudication.  The probe into 
 security accessories comes as a result of a probe into the 
 vehicle industry.  Commission investigations into the 
 vehicle and related industries originated with one 
 complaint about Toyota imposing minimum resale prices on 
 dealers, which resulted in the commission imposing a R12 
 million fine ($1.87 million using 6.45 rands per dollar, 
 the average 2004 exchange rate) on Toyota in 2004.  This 
 fine led to an investigation into minimum resale pricing 
 by other car makers, whose final results have not been 
 released.  The investigation has taken longer than 
 expected because it revealed possible collusion in sectors 
 associated with vehicle manufacturing.  The vehicle 
 industry contributes up to 5.7 percent of South Africa's 
 GDP and employs more than 260,000 people.  Source: 
 Business Day, March 23. 
 
DOCUMENTED IMMIGRANTS, EMIGRANTS AND TOURISTS INCREASE 
--------------------------------------------- --------- 
6.  In 2003, documented immigration, self-declared 
 emigration and tourist arrivals increased 61 percent, 48 
 percent and 1.4 percent respectively.  Both documented 
 immigration and self-declared emigration demonstrated wide 
 fluctuations from 1970 to present.  Documented immigration 
 showed two major peaks in 1975 and 1982.  From 1990 
 onwards, there was a downward trend until 2001 when the 
 trend began to increase.  In 2003, the number of 
 documented immigrants to South Africa was 10,578 compared 
 to 6,545 in 2002, with 47 percent coming from other 
 African countries and 90 percent being economically 
 inactive.  Emigration data showed three major peaks, 
 occurring in 1977, 1986, and 1994.  In the post-1994 
 period, the trend in self-declared emigrants has been 
 relatively flat up until 2001 when emigrants began to 
 increase annually.  In 2003, the number of self-declared 
 emigrants increased to 16,165 compared to 10,890 in 2002, 
 an increase of 48 percent.  For self-declared emigrants, 
 65 percent were economically active while 35 percent were 
 not.  During 2003, Nigeria was the top source of 
 immigrants while the United Kingdom was the leading 
 destination country of self-declared emigrants.  Foreign 
 tourist arrivals in September 2003 increased 1.4 percent 
 in 2003, totaling 6.6 million, with approximately 68 
 percent of arrivals coming from other African countries. 
 Overseas arrivals increased 0.1 percent in 2003, with the 
 United Kingdom at 24 percent, Germany at 13 percent, and 
 the United States at 10 percent, as the major sources of 
 foreign tourists.  Source:  Business Day, March 23; Stats 
 SA Reports 03-51-02/03, March 22. 
 
3.3 PERCENT CONSUMER PRICE INCREASE EXPECTED 
-------------------------------------------- 
 
7.  South Africa's consumer price index excluding mortgage 
 rate changes (CPIX) is expected to increase 3.3 percent in 
 February, according to an I-Net Bridge survey of 
 economists.  CPIX increased 4.3 percent in January and is 
 the inflation target used by the South African Reserve 
 Bank (SARB).  February's increase should be well within 
 the SARB inflation target range of 3 to 6 percent. 
 February's overall consumer price (CPI) should increase 
 2.7 percent, compared to January's 3 percent increase. 
 Statistics SA will release the official February consumer 
 inflation data on March 30.  Source:  I-Net Bridge, March 
 24. 
 
FRAZER