Keep Us Strong WikiLeaks logo

Currently released so far... 51122 / 251,287

Articles

Browse latest releases

Browse by creation date

Browse by origin

A B C D F G H I J K L M N O P Q R S T U V W Y Z

Browse by tag

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Browse by classification

Community resources

courage is contagious

Viewing cable 04PRETORIA4876, SOUTH AFRICA ECONOMIC NEWSLETTER

If you are new to these pages, please read an introduction on the structure of a cable as well as how to discuss them with others. See also the FAQs

Understanding cables
Every cable message consists of three parts:
  • The top box shows each cables unique reference number, when and by whom it originally was sent, and what its initial classification was.
  • The middle box contains the header information that is associated with the cable. It includes information about the receiver(s) as well as a general subject.
  • The bottom box presents the body of the cable. The opening can contain a more specific subject, references to other cables (browse by origin to find them) or additional comment. This is followed by the main contents of the cable: a summary, a collection of specific topics and a comment section.
To understand the justification used for the classification of each cable, please use this WikiSource article as reference.

Discussing cables
If you find meaningful or important information in a cable, please link directly to its unique reference number. Linking to a specific paragraph in the body of a cable is also possible by copying the appropriate link (to be found at theparagraph symbol). Please mark messages for social networking services like Twitter with the hash tags #cablegate and a hash containing the reference ID e.g. #04PRETORIA4876.
Reference ID Created Released Classification Origin
04PRETORIA4876 2004-11-05 15:11 2011-08-24 01:00 UNCLASSIFIED Embassy Pretoria
This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS SECTION 01 OF 03 PRETORIA 004876 
 
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 
           NOVEMBER 5, 2004 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: 
-  Trade Deficit Narrows; 
-  Tourism Increases Although Signs of Decline; 
-  Manufacturing Activity Slows; 
-  Another Strong Month for Vehicle Sales; 
-  Poverty in Africa Expected to Worsen by 2015; 
-  Real Health Care Spending 4.8 Percent Lower in 2003; 
-  Increasing Welfare Grants Crowd Out Other Government 
Expenditures; and 
-  First Bank Account Identification Deadline Passed 
 End Summary. 
 
Trade Deficit Narrows 
--------------------- 
 
2.  The trade deficit narrowed in September to R0.3 
 billion from a deficit of R3.1 billion in August, 
 recording its sixth consecutive decline this year.  The 
 value of exports increased by 29.2 percent to R27.9 
 billion in September from August's R21.6 billion.  The 
 value of imports increased by 14 percent to R28.2 billion 
 compared to August's level of R24.7 billion.  For the 
 first nine months of this year, the cumulative deficit 
 stands at R6.6 billion compared with a R16.4 billion 
 surplus recorded during the same period in 2003.  In 
 September, South Africa had a trade deficit with most of 
 the regions except for Africa and Oceania, with the Asian 
 trade deficit reaching R5 billion, the highest regional 
 trade deficit.  South Africa had the highest trade surplus 
 within the African region, reaching R2.7 billion.  In the 
 near future, imports are expected to remain high and 
 exports will be under competitive pressure.  As oil 
 imports account for 10 percent of the country's total 
 imports, continuing high global oil prices will put 
 continuing pressure on growth in imports.  In addition, 
 the recent rand strength implies that imports will be 
 high.  The July, August and September monthly average rand 
 per dollar exchange rates were 6.09, 6.42 and 6.51 
 respectively.  Even though the rand depreciated between 
 July and September, it has strengthened recently leading 
 most to expect a future deterioration in the current 
 account and increased pressure on exports.  Source: 
 Standard Bank, Foreign Trade Alert, October 29; Business 
 Day, October 30. 
 
TOURISM INCREASES ALTHOUGH SIGNS OF DECLINE 
------------------------------------------- 
 
3.  According to Statistics SA, tourist arrivals increased 
 3.3 percent (y/y) in August, even though overseas tourist 
 arrivals declined by 2.1 percent.  Visitors from Africa 
 increased by 4.6 percent and accounted for 71 percent of 
 the total increase in tourist arrivals.  Visitors from six 
 neighboring countries make up more than 91 percent of 
 foreign visitors to South Africa.  August's rand 
 depreciation had a greater impact on other non-neighboring 
 African arrivals since they view South Africa as a 
 shopping destination.  The number of non-African visitors 
 to South Africa fell to 152,544 in August, with German and 
 French visitors dropping 14 percent and Spanish visitors 
 by 23 percent.  Arrivals from the United Kingdom, the 
 leading country of origin of overseas visitors, increased 
 by 3.9 percent while U.S. visitors increased by 1.4 
 percent.   The number of arrivals from China showed the 
 biggest increase, increasing 66.5 percent from 2,672 in 
 2003 to 4,450 in August 2004.  The number of immigrants 
 arriving in South Africa increased 12.3 percent y/y in 
 August.  Most immigrants came from Nigeria (133), Pakistan 
 (98), UK (93), Zimbabwe (88) and China (70).  Of the total 
 immigrants to South Africa, 91 percent were not 
 economically active, as the majority were spouses and 
 students.   Of those economically active, 41 percent were 
 managers, administrators or executives.  Source:  Business 
 Day, November 2; Standard Bank Tourism Gauge, November 1. 
 
MANUFACTURING ACTIVITY SLOWS 
---------------------------- 
 
4.   The Investec Purchasing Managers Index, measuring 
 manufacturing activity, fell to 56 in October compared to 
 September's 59.1 level.  This drop may indicate a future 
 slowdown in the manufacturing sector, which accounts for 
 roughly 20 percent of South African gross domestic 
 product.  However, a value above 50 still signals 
 expansion.  The Investec survey showed a decline in new 
 sales orders, with its index dropping to 58.9 compared to 
 September's value of 63.8.  The employment index dropped 
 below 50, signaling future job losses.  High oil prices, 
 slowing global demand, and the recent strength of the rand 
 are current growth constraints facing the manufacturing 
 sector.  Helped by August's reduction in interest rates, 
 strong consumer demand should offset weakening exports. 
 Source:  Business Day, November 2. 
 
ANOTHER STRONG MONTH FOR VEHICLE SALES 
-------------------------------------- 
 
5.  According to the National Association of Automobile 
 Manufacturers (NAAMSA), motor vehicle sales increased 22.9 
 percent in October, with strong growth in commercial 
 vehicles fueling total vehicle sales growth.  Passenger 
 cars increased 17 percent y/y, a rate slower than 
 September's 21.2 percent annual growth.  An average of 
 1,087 new cars were sold each day in October 2004 compared 
 to October 2003's average of 895.  Sales of commercial 
 vehicles grew by 35 percent in October, with bus sales 
 showing the highest growth at 46 percent.  Lower 
 inflation, falling real car prices, and strong consumer 
 demand all explain 2004's substantially higher vehicle 
 sales.  Source:  Standard Bank Motor Alert, November 2. 
 
POVERTY IN AFRICA EXPECTED TO WORSEN BY 2015 
-------------------------------------------- 
 
6.  Half of the world's poor will live in Sub-Saharan 
 Africa by 2015, despite significant inroads made in 
 reducing global poverty.  This figure is up from 27 
 percent in 1999 according to the South African Institute 
 of Race Relations' latest issue of the South Africa 
 Survey.  More than 400 million people are expected to live 
 on less than $1 a day in 2015, up from 315 million in 1999 
 while global poverty will be reduced by a third.  The 
 report shows that regions such as South and East Asia will 
 show dramatic gains in reducing poverty because of the 
 faster growth of countries such as China and India.  The 
 main reason for Sub-Saharan Africa's poor track record in 
 reducing poverty was a lack of good governance.  South 
 Africa Survey shows that income levels in South Africa 
 have grown disparately among various race groups since 
 1960, with Indians gaining the most and whites showing the 
 lowest growth.  Between 1960 and 2005, Indian incomes rose 
 384 percent, black incomes grew 208 percent, incomes for 
 coloreds increased 177 percent, while white incomes grew 
 66 percent.   University graduation statistics shows 
 differences among race groups as well, with black students 
 comprising over half of university students, but making up 
 a quarter of business graduates, 28 percent of computer 
 science graduates and 22 percent of engineering graduates. 
 White students, accounting for 33 percent of the overall 
 university student body, make up 56 percent of business 
 graduates, 55 percent of computer science graduates, 65 
 percent of engineering graduates and 48 percent of 
 mathematical science graduates.  South Africa was the only 
 developing country with low and declining levels of 
 entrepreneurship in 2003.   The number of people employed 
 in the informal sector, which consists largely of 
 entrepreneurs, declined by 22 percent from 2000 to 2003. 
 Source:  Business Day and I-Net Bridge, November 3. 
 
REAL HEALTH CARE SPENDING 4.8 PERCENT LOWER IN 2003 
--------------------------------------------- ------ 
 
7.  The South Africa Survey shows that healthcare spending 
 in 2003 was 4.8 percent lower in real terms than in 1996, 
 with large inequities still existing between the 
 provinces.  Some provinces spent as little as 75 rand 
 ($1.23 using 6.1 rands per dollar) per capita per annum, 
 where the government goal is 200 rand.  Two of the 
 provinces with the highest HIV/AIDS infection rates, 
 Gauteng and Mpumalanga, failed to spend all the money 
 allocated to them in conditional grants to fight the 
 pandemic in 2002/03.  Gauteng spent only 52 percent of its 
 funds, while Mpumalanga spent only 38 percent.  In 1995 an 
 estimated 85 percent of companies were providing benefits 
 to their pensioners, while in 2003 this number had fallen 
 to only 43 percent. The government increased the value of 
 the old-age social pension by 13 percent between April 
 2002 and April 2003.  During the same period, the number 
 of beneficiaries of child support grants increased by 45 
 percent.   Between 1997 and 2003, the number of welfare 
 grant beneficiaries in South Africa grew by 124 percent 
 from 2.5 million to 5.6 million.  Source:  I-Net Bridge, 
 November 3. 
 
INCREASING WELFARE GRANTS CROWD OUT OTHER GOVERNMENT 
EXPENDITURES 
--------------------------------------------- ------- 
 
8.  Welfare grants will comprise over 40 percent of the 
 government expenditure increases for the next three years. 
 Finance Minister Manuel allocated R20.8 billion ($3.4 
 billion using 6.1 rands per dollar) of the R50 billion 
 ($8.2 billion) for welfare grants.  Two million people 
 were added to the beneficiary lists for various grants 
 between April and September this year alone, pushing the 
 total number of recipients to nine million, about one in 
 five of the total population.   Much of the increase was 
 in the unexplained escalation in disability and foster 
 care grants, which Manuel said was most likely due to poor 
 administration.  Manuel said that in some provinces, 
 officials were adding applicants to the list without any 
 checks, families were registering their own children as 
 foster children and government officials were illegally 
 claiming childcare support for their own children.  The 
 government has no figures on the number of people claiming 
 disability grants as a result of HIV/Aids and there are no 
 firm guidelines on their eligibility.   In addition, there 
 are plans to raise the ceiling for child grants from 10 to 
 13 years through 2008.  Welfare grant administration will 
 be shifted to a national social welfare agency in 2006, 
 but Manuel moved this week to limit the damage to other 
 services by shifting welfare funds from the equitable 
 share paid to provinces to the conditional grants that go 
 to these regional governments.  The change would mean that 
 overruns would be the responsibility of the national 
 department even though distribution would remain a 
 provincial responsibility until March 2006.  At present, 
 welfare claims take precedence over other provincial 
 expenditure.  Provinces have had to cut back on critical 
 health and education budgets or have taken out bank 
 overdrafts to pay welfare grants expected to total R38.4 
 billion ($6.3 billion) in the current financial year, 
 rising to R47 billion ($7.7 billion) in the 2007/08 fiscal 
 year.  In the financial year through March 2004, Northern 
 Cape overspent on welfare grants by 8.6 percent, KwaZulu- 
 Natal by 7.2 percent, Eastern Cape by 7.7 percent and 
 Gauteng by 4.1 percent. Western Cape and North West 
 provinces under spent in this regard.  Source:  Business 
 Times and I-Net Bridge, November 3. 
 
FIRST BANK ACCOUNT IDENTIFICATION DEADLINE PASSED 
--------------------------------------------- ---- 
 
9.  The first "Know Your Customer" deadline for banks 
 based on the South African Financial Intelligence Center 
 Act (FICA) passed on October 31.  All account holders for 
 trusts, partnerships and banks' 20 percent of its most 
 active clients were required to identify themselves to the 
 bank.  If account holders have not presented themselves, 
 the banks are required to freeze the accounts within 15 
 days of the deadline.  FICA is part of an international 
 effort to reduce money laundering by keeping track of 
 large financial transactions.  In June, Finance Minister 
 Manuel set forth a revised timetable of "Know Your 
 Customer" deadlines.  The next deadline for the remaining 
 most active clients is December 31, 2004.  All medium to 
 low activity customers have to be identified before 
 September 30, 2006.  Source:  Business Day, November 1. 
 
FRAZER