Country Report South Africa January 2009

Outlook for 2009-10

• South Africa's next general electionto be held in April or May 2009is certain to return another African National Congress (ANC) government.
• South Africa's president-in-waiting, Jacob Zuma, may face a third corruption trial even as the country gears up for national elections. Such a trial will not prevent him from becoming president if the ANC wins.
• ANC rebels, angered by the "left-wing" takeover of the ruling party, formally launched a new partythe Congress of the People (Cope)at end-2008. Cope will struggle, however, to secure a mass defection of voters from the ANC.
• Global de-leveraging and moves to reduce risk exposure will hit South Africa, and the Economist Intelligence Unit now forecasts real GDP growth of 1% in 2009 and 3.1 % in 2010.
• The rand will make up some of its recent losses against the US dollar, but will depreciate to average R9.35:US$1 in 2009 and R10.1:US$1 in 2010.
• Inflation is now forecast to subside to 6.6% in 2009 and 5.8% in 2010, helped by the introduction of a new, re-weighted price index in January 2009 and weaker international commodity prices, for oil in particular.
• The current account is forecast to remain deeply in deficit because imports of goods and services will continue to outpace exports.

Monthly review

• The new party launched by ANC rebels in mid-December, Cope, elected Mosiuoa Lekota as leader and Mbhazima Shilowa as deputy, but the ANC is fighting back with a high-cost, high-profile election campaign.
• The South African Reserve Bank cut the benchmark interest rate by 50 basis points to 11.5% in December, the first cut in more than three years. Inflation remains high but is falling, and more aggressive rate cuts are likely in 2009.
• Although BEE will suffer from a shortage of finance, some deals will go through. Several sector charters will be finalised, including plans to introduce a verification system, but some aspects will remain controversial.
• The new health minister, Barbara Hogan, has promised new initiatives in the fight against AIDS, the country's main health challenge.
• The International Finance Corporation has agreed in principle to lend Eskom US$5bn over five years to help to fund electricity expansion. The parastatal has suspended bidding for a second nuclear power station.

Source: Country Report

This report covers the following industry codes:
SIC Code: 49
NAICS Code: 22