Press review: South-African economic news from the 16th to the 27th of June.

Here is a short summary of the major economic news of the past two weeks in South Africa.

The Cap40 team will now regularly publish news from the French consulate in Pretoria in order to give you fresh insights on the most important economic matters in the country and region.

 

Platinum producers and Association of Mineworkers and Construction Union (AMCU) reached an agreement putting an end to the five-month strike in the mining sector.

The two British companies Anglo-American Platinum (Amplats) and Lonmin and the South African company Impala Platinum (Implats) announced the settlement of the negotiations in respect of wages and working conditions with AMCU.

This three-year agreement will bring an end to the five-month strike in which the three employers have forfeited revenue of approximately R24 billion and mine-workers have lost earnings of more than R10 billion.

The agreement states that an annual wage increase of R1000 will apply to all workers earning less than R12,500, while other employees will have their salary increased by 7,5% to 8% yearly.

The CEOs noted that “It is their sincere hope that their companies, their industry, their employees and all other stakeholders will never again have to endure the pain and suffering of this unprecedented strike period”.

 

New South African mineral resources minister Ngoako Ramatlhodi to raise concerns about the Mineral and Petroleum Resources Development Act.

Mr Ramatlhodi advised President Zuma not to sign the bill before hearing the concerns of industry officials, and suggested the text be whether sent back to Parliament to review contested clauses or to have a separate petroleum bill distinct from regulations affecting the mining sector.

The bill allows the state a 20% free carried interest in petroleum rights and includes an “uncapped” further participation clause enabling the state to acquire up to a further 80% of the rights. According to Deloitte, this would increase the hurdle rates expected by international investors and could be detrimental for international investments entering the country.

The Nuclear Energy Corporation of South Africa (NECSA) welcomes President Zuma’s strong emphasis on the revitalization of the nuclear energy sector in his State of the Nation Address.

President Zuma confirmed that nuclear power would have a key part in the country’s energy mix in the years to come. The South African minister of energy further noted that a roadmap for the nuclear power sector would be elaborated in the weeks to come, and decided to extend Koeberg nuclear power plant’s life span by three decades.  

NECSA noted that nuclear power was critical to the country to provide base load electricity, reduce its carbon footprint, and provide other sectors such as the automotive, mining and medical industries with critical nuclear components.

 

The public armament group Denel wishes to bring its technology and engineering skills to the rail industry.

The parastatal announced it would cooperate with the rail, port and pipeline company Transnet, in charge of the transport of the freight on South African railways, as well as the Passenger Rail Agency of South Africa.

This cooperation responds to the government’s willingness to push investment in infrastructures, especially in railway transport and services, for which R950 billion will be invested until 2023 in the context of the National Development Plan.

Denel noted that this cooperation also aimed at improving cooperation and synergies within public companies and would increase the share of nationally-produced components and services in final products in order to generate direct and indirect jobs domestically.

 

Mozambican government to release its “Master Plan for Natural Gas”. 

This plan intends to promote the country’s development by further exploring natural resources. The initiatives carried out include not only further exploration and exploitation but also incentives for production of derivative products such as diesel, electricity, fertilizers or methanol.

Core initiatives include the laying of a 2,100Km-long pipeline linking Palma to Maputo, with branches that will supply industries throughout the country, a project in which the South African company Gigajoule is strongly involved.

 

Mozambican government to restrict a public tender to national companies in mining and gas sector.  

The Mozambican ministry of mining resources announced its plans to hold a tender reserved for national companies seeking mining titles for coal prospecting and geological research in the Zambeze basin.

In its effort to better master the domestic economic benefits of mining activities in the Tete province and gas exploitation in the Rovuma basin, the government intends to reform the transmission of mining right and review the taxation of mining activities.  

 

Mozambican national oil company ENH and Dutch multination Shell to sign a protocol to carry out a feasibility study for the set-up of a GTL factory in Mozambique.

In its effort to enable the Mozambican economy to benefit from its large resource endowment and add value to its natural and mineral resources, the state oil and gas company ENH seeks to enable the domestic production of diesel, synthetic fuels, polyethylene and other gas derivatives in partnership with Shell.  

The Dutch petroleum company is a pioneer in this sector, having built the first GTL factory in 1993 in Malaysia and having launched production at the world’s largest GTL factory in Qatar in 2011.

 

Zimbabwe has awarded a $1.3-billion contract to China's Sino Hydro at coal-fired power station, after another Chinese company failed to start the project.

Harare initially awarded the tender to China Engineering and Machinery Company, but after the company failed to start the project according to the initial timeline, the government awarded the tender to Sino Hydro. This contracts aims at increasing the production of Hwange power plant, currently operating at 63% of its capacity.

With a local production of 1,200 KW, Zimbabwe relies heavily on ageing plants and critically lacks investment in the electricity sector. The country faces recurrent black-outs and imports power from Zambia, DRC and Mozambique.  

Harare has licensed several independent electricity producers in order to increase its production, but most projects are yet to take off because of the investor’s concerns over investment law forcing foreign investors to transfer equity to local historically disadvantaged communities.

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