Press review: South-African economic news from the 2nd to the 13th 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 from the French community on the most important economic matters in the country and region.

 

South Africa and Swaziland’s rail companies announced they would release a study on the feasibility and sustainability of the construction of a railway line between the two countries.

85% of the exports from South Africa into Swaziland are currently transported by road, causing a significant congestion of the roads and border posts. The railway particularly aims at shifting the trade of coal between the two neighbours to rail, therefore easing the congestion, lowering transport costs and participating to the larger objective of building an integrated African railway system. 

The project, steered by a bi-national joint-committee, is estimated to be a 146 Km long line costing R16-billion to R-17 billion. However, neither the exact cost of construction and roll-out, nor the financing structure have been disclosed, and the project still faces critical challenges, such as the 47 bridges still to be built, and potential threats to the environment.

 

According to the International Air Transport Association, African airline companies are the least profitable in the world. 

Their profitability is indeed estimated to be 0,8% of their revenues, which is half of the profitability of European companies and a fifth of those of the Middle-East.

Not only is Africa remote from the most actively growing hubs (particularly East Asia), and badly connected to other continents, but also, the continent lacks harmonization in navigability procedures, and suffers from high taxation and a higher cost of infrastructures and fuel.

 

Towards the end of the 21-weeks long strike in platinum mines?

On the 12th of June, the three major platinum producers in South Africa, Anglo American Platinum, Impala Platinum and Lonmin, announced an agreement had been reached with the independent trade union AMCU (Association of Mineworkers and Construction Union) in order to put an end to the strike affecting the mines since the 23rd of January.   

The three companies however precise that AMCU still needs to discuss the provisions of this agreement with its members in order to seek the mandate to officially terminate the strike.

Nevertheless, if the two parties agreed on the principle and scale of the wage increase for both miners and more skilled workers, issues remain to be solved when it comes to the reintegration of workers fired during the social movement.

According to the South African Chamber of Mines, the strike already led to revenue losses of ZAR 10-billion for the employees and ZAR 23-billion for the three companies.

 

Airbus Defence and Space reaffirms its commitment on the South African market. 

Airbus Defence and Space wishes to maintain its links with the South African aerospace industry, said the head of commercial of the military aircraft division of the European group.

In spite of the cancellation of the order of eight military transporters A400Ms by the South African government, Airbus Defence and Space maintained the production of aircraft parts in the country and insists on continuing the cooperation with the two public companies Denel Aerostructures and Aerosud.

However, the head of commercial warned that the South African fleet was critically aging and that new orders were needed in order to maintain the capacity of the South African Air Force.

The European consortium highlighted its commitment to building strong and lasting economic and industrial ties with local companies all around the world in order to build a worldwide network of partners and foster employment in ordering countries, as the cooperation with Indonesia, Canada or Chile recently proved.

 

The airline South African Airways wishes to open a new hub in Accra (Ghana).

In the strive against competing African airlines Ethiopian Airlines and Kenyan Airways, way better localized geographically, South African Airways (SAA) aims at developing its coverage of the continent. So as to achieve this objective, SAA plans the acquisition of the Togolese company Asky Airlines, and its relocation in Accra.

 

Eskom urge users to use electricity sparingly while facing critical power production shortage.    

Due to the unavailability of some of its generating units and the peak of consumption during winter evenings, the national producer and distributor of electricity, Eskom, demanded that consumers restrain their electricity usage, and urged commercial users to save power.

Eskom insisted that it will use all necessary emergency resources in order to respond to the increase in the demand of electricity. However, should the demand be too high, it will use load shedding. The schedule of the load shedding is public and available (http://loadshedding.eskom.co.za) for Eskom consumers.

 

The modification of the financing structure of the solar power plant of Touwsrivier made official.

Soitec, the constructor and operator of the Touwsrivier (Western Cape) solar power plant, announced that the new financing structure of the 44 MWp plant had been validated by the government. The Government Employee Pension Fund enters the capital and will take an equity stake of 40% of the shares.

In the long run, Soitec, the French leader of semi-conductor materials, will only own a marginal participation in the plant but will remain involved as operator and provider of solar equipment.   

 

Lafarge to merge its Nigerian and South African branches to create Lafarge Africa.

Nigeria country CEO Guillaume Roux announced the merger aimed at increasing products and services range in order to respond to the significant growth of Africa’s new leading economy and to distribute South African products in the whole region.

The new entity will remain on the Lagos Stock Exchange, the French multination owning 73% of its shares. 

 

ENI acquires a 40% interest and operatorship in an offshore exploration block in South Africa.

The Italian petroleum company will cooperate with the South African group in the exploration for hydrocarbons in a wide unexplored area along the coast of KwaZulu-Natal. The permit was granted to Sasol by the South African regulatory institution Petroleum Agency of South Africa in 2013.

This agreement reinforces ENI’s already strong presence on the East African coast, the Italian multinational being presently involved in offshore exploration activities in Mozambique and Kenya. 

 

The mobile company MTN acquires 50% of the shares of the South African internet service provider Afrihost.

This operation will enable MTN to benefit from the large pool of B2C and B2B customers of Afrihost. The acquisition follows a long-lasting cooperation between the two companies and responds to the recent takeover bids of MTN’s competitors Vodacom and Telkom, respectively for the internet corporations Neotel and Business Connexion.

 

French group SFR’s subsidiary Nomosphère has opened its first international branch in Johannesburg.

The French Wifi provider, specialized in public hotspots in restaurants, hotels, malls, stations and other public spaces, seeks to capture a 15 to 20% market share within three years.

Nomosphère announced that the growing demand for high quality internet in South Africa, and the huge growth potential of Sub-Saharan Africa led the group to choose South Africa as their first international location

 

Two rating agencies lower South Africa’s grade.

The two major rating agencies Fitch and Standard & Poor’s lowered South Africa’s grade to “BBB”. If Standard & Poor’s plans a relative stability of the country in the close future, Fitch lowered the economic perspective to “negative” and warns that its grade could be lowered in the long run.

The pessimism surrounding South Africa’s economy is mainly due to the five months long strikes in the platinum mines. But as this crisis is currently being solved, social movements remain recurrent, mainly due to the stringent social inequalities and massive unemployment. Moreover, recurrent electric power shortages hamper the industrial development of the country, whose GDP will only grow by 1,7% this year, instead of the 2,8% planned no longer than six months ago.

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