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Volume 10
Issue 29
Wednesday, August 23 2006
This issue highlights:
SOUTH AFRICAN WINE EXPORTS TO UNITED STATES INCREASE
South African wine exports to the United States have grown more than four fold in the last five years since Wines of South Africa (WOSA) began its marketing programme. With sales showing excellent growth from a tiny base, more than 10 191 100 bottles of South African wine were sold in the US in 2005.
Good news is that volume exports in the first half of 2006 increased at more than 50%, according to the latest official South African statistics. The potential for further growth is phenomenal.
The United States will be the biggest wine consuming market by 2008, estimated in excess of 300 million 9 litre cases. In 2004 278 million 9 litre cases were sold in the country, of which California sold 180 million cases, while 73 million cases were imported.
Wine consumption in the US is mainly concentrated along the East and West coast. The markets that have the highest dollar share of imported wines are Miami, New Orleans, Richmond/Norfolk, Columbus and Chicago.
The US domestic wine industry is polarising with giant companies, such as Gallo and Constellation on the one hand, and boutique wineries on the other. There is ongoing consolidation in distribution which, in the past 20 years, has reduced the number of distributors from 10 000 to 1 000. The 10 largest distributors now account for 90% of all US wine sales. It has become very difficult for a smaller or unknown producer to get into a distributor's portfolio, and then harder still to get the sales and marketing focus required to build volumes.
Italy has the biggest share of wine exports to the US, followed by Australia, France, Chile, Spain, Germany, Argentina, New Zealand, South Africa and Portugal.
The success of Australia in the American market has been exceptional. Australia exported approximately 1, 2 million cases to the US in 1993, equal to present South African sales, but reached more than 16 200 000 cases in 2005. The Australian sales have been spurred by consistent investment since the 1980s, with strong brands offering good value and consumer appeal, as well as the popular image of the country built through the electronic media. South Africa has a lot to overcome due the negative image created by years of sanctions and the negative role of the electronic and print news media, especially in the 1970s through to the 1990s. However, South African wines offering superb value and the exceptional varieties are highly rated in the most competitive wine market in the world.
The dollar value for South African wine exports to the US is higher than for any other export market. This is similar to dollar returns for Australian wines from the US, which are a third higher than from the United Kingdom.
Imported wines are growing ahead in the huge, but complex US market (due to the three-tier consolidation in distribution and the individual states all having different regulatory systems). It is far from one homogeneous market, and success in the United Kingdom or Canada will not provide a recipe for success in the US. (Sources include Gomberg Frederikson; WOSA)
AFRICAN ICT INFRASTRUCTURE NETWORK SIGNING CEREMONY
Ministers from Eastern and Southern African countries participating in the NEPAD Information and Communications Technology (ICT) network will attend a protocol signing ceremony in Kigali, Rwanda from August 28 to 29.
The ceremony will be hosted by the NEPAD e-Africa Commission together with the Rwandan Government and the African Union (AU).
The ceremony will enable the Project Steering Committee to fast-track implementation of the NEPAD ICT Broadband Infrastructure Network that, amongst others, involves construction of the 9 900 kilometre submarine cable from Mtunzini, South Africa, to Port Sudan in Sudan.
The 23 countries involved in the network are Angola, Botswana, Burundi, Djibouti, Democratic Republic of Congo, Eritrea, Ethiopia, Kenya, Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Rwanda, Somalia, South Africa, Sudan, Swaziland, Tanzania, Uganda, Zambia and Zimbabwe.
The New Partnership for Africa's Development (NEPAD) recognises the pivotal role that ICT and backbone infrastructure can play in accelerating regional and national socio-economic development, regional integration and trade, wealth creation, employment generation, poverty reduction and meeting the Millennium Development Goals.
According to the current issue of NEPAD Dialogue, the NEPAD ICT objective is to ensure that all African countries are connected to one another by broadband fibre-optic cable systems. The systems will in turn link African countries to the rest of the world through existing or planned submarine cable systems.
FUTURE OF SOUTH AFRICAN SME DEVELOPMENT PROGRAMME
A replacement programme for the Small, Medium Enterprise Development Programme (SMEDP) that ends on August 31 has still to be announced by the South African Department of Trade and Industry (DTI).
DTI still has to consider whether the current SMEDP will be extended or if a new programme should be introduced in its place.
BIOMETRIC CHECKS EXPANDED TO NEW US PORTS OF ENTRY
Visitors to the United States are subject to biometric screening at two new points of entry in California and Louisiana, according to the US Department of Homeland Security (DHS).
As of August 15 biometric measures are being used at Fresno Yosemite International Airport in Fresno, California, and in the recently constructed Erato Street Cruise Terminal in New Orleans, Louisiana.
The Department also plans to introduce biometric screening at the new pre-flight inspection centre at Halifax International Airport in Halifax, Canada.
Biometric entry procedures to the United States were introduced in 2004 under the United States Visitor and Immigrant Status Indicator Technology programme to increase border security yet "keep America's doors open", according to the programme's motto.
The procedures consist of digital, inkless finger scans and digital photographs as a routine, primary inspection process at airports and seaports with international arrivals, in the secondary inspection areas of US land border ports of entry, and at US consulates around the world.
In most cases biometric cases has in fact decreased processing time at US borders, according to Department of Homeland Security officials. The programme helped to stop over 1 200 criminals and immigration violators from entering the United States.
COUPLE OF FREE TRADE AGREEMENTS MOOTED FOR SOUTH AFRICA
A couple of free trade agreements (FTAs) in which South Africa would be involved are presently being considered. This comes shortly after the US-SACU1 free trade talks collapsed, with the United States proposing instead a Trade and Investment Cooperation (TICA) agreement to pave the way toward a future FTA. The proposal is at present being evaluated by the SACU negotiators. An US/SACU meeting was held in Pretoria yesterday to discuss the American TICA proposal.
A trilateral FTA between Mercosur2, SACU, and India is likely to be proposed at the triangular IBSA (India, Brazil and South Africa) political summit on September 13 in Brazil. The aim is to promote the aggregate trilateral trade flows among Mercosur-SACU, Mercosur-India and SACU-India from US$4 billion to $10 billion in the short term in an attempt to develop trade convergence between the three groups. Such an FTA could also create a market of 1, 2 billion people, US$1, 2 trillion of gross domestic product (GDP) and foreign trade worth $300 billion.
A free trade agreement between Singapore and SACU is also being mooted at present.
Meanwhile, SA President Thabo Mbeki is expected to visit President George W. Bush, probably in the first quarter of 2007. The South African Minister of Trade and Industry is also expected to address business groups in New York and the American capital early next year. There is considerable concern in South African government circles about the slow flow of foreign direct investment (FDI) from the United States to South Africa. Investment flows from the European Union are the largest source of FDI in South Africa, with the United Kingdom leading the pack.
UNITED STATES FOREIGN POLICY AND ISLAMIC RENEWAL
The United States still lacks an integrated and sustainable strategy to confront religious extremism in the Muslim world, says Dr. Abdeslam Maghraoui, Director of the Muslim World Initiative of the United States Institute of Peace.
The major argument, in a report recently published by the Institute, is that the problem of "religious extremism" in the Muslim world is an ideological challenge best confronted by drawing on Islam's humanist and progressive relations.
Dr. Maghraoui argues that US policymakers have failed to recognise that the challenge is not only a conflict with the West but also involves ideological shifts within the Muslim world. These shifts have precipitated a major battle for the future of Islam as a faith and civilisation.
He suggests that the single most important initiative the US can take to combat Islamist extremism is to support "Islamic renewal", a diffuse but growing social, political, and intellectual movement of which the goal is profound reform of Muslim societies and polities. The US, Maghraoui suggests, must engage moderate Islam because core aspects of the religion have an enormous moderating and modernising potential that policy makers have overlooked.
Previous efforts to address the challenges of the Muslim world have often contradicted one another and worked at cross-purposes. There is a visible misunderstanding of the region's political culture, particularly regarding the questions of terrorism, extremism, and political reform. Security cooperation with authoritarian regimes to deal with the terrorist threat has reinforced negative attitudes about the US and its policies.
Democracy promotion
"Democracy promotion efforts are likely to empower fundamentalists in many Muslim countries. Although desirable in principle, free elections may not be the best mechanisms to negotiate substantive political issues, and deep suspicion toward formal authority structure persists in Muslim societies," says Dr. Maghraoui.
He adds: "Islamic renewal seeks to reclaim the region's heritage from extremist, traditionalist, and fundamentalist groups. Today's reformers have a long history and cultural tradition to draw upon. Since the early period of Islam, when the Prophet Muhammad saw himself as a religious reformer, to the adoption of modern public and international law, Islam has shown great potential to adapt and modernise. Today the movement is on the ground and has the capacity to make a scattered cluster of reformist ideas on social and political issues coherent.
The main objective of the United States Institute of Peace's Islamic Renewal Project is to "mobilise the moderates" in the Muslim world by broadening societal support for modernist Islam around a coherent vision. The object is to translate that vision into enduring pacts, viable institutions, and concrete policies.
SHIFT INTO RETAIL BANKING BY AMERICAN BANKS
The shift into retail banking reflects a fundamental shift by the United States banking industry, according to an August 9 article in The New York Times. A decade ago, most big banks were shedding their branches, not building more. They steered their customers away from teller lines and encouraged them to use automated cash machines and telephone banking services, which were less expensive to operate. Many had grand visions of Internet banking, even if consumer-friendly technology had not yet arrived.
Today, there has been a serious change of mind in the United States. Banks now view their branches as gold mines and not expensive liabilities. Their cheque accounts can generate a steady stream of fee income and their tellers can sign customers up for new products, spurring overall sales. All the while, branches can collect millions in cheap deposits that can be lent out at higher rates. Even as they offer options like online banking and kiosks in convenience stores, banks still hope to lure customers inside a physical property.
UNITED STATES AIMS TO RESTART GLOBAL TRADE TALKS
The United States Trade Representative (USTR), Susan Schwab, is conducting an intensive round of bilateral talks with other trade ministers. The talks would determine if it were possible to find sufficient "convergence" on the key issues to restart more formal negotiations after the collapse of the World Trade Organisation's Doha Round of Trade Negotiations.
The USTR said in a television interview on August 20 that the US continues to pursue an agreement that will open markets significantly, cut domestic agricultural subsidies and substantially increase trade flows.
Schwab spoke prior to a trip between August 22-29 that will take her to a meeting of economic ministers from the Association of Southeast Asian Nations (ASEAN) in Kuala Lumpur, Malaysia, and bilateral meetings with officials in Singapore and China.
She said the US is continuing active negotiations for bilateral free-trade agreements (FTAs) with a number of nations, even though the congressional trade-promotion authority (also known as "fast track" authority) is set to expire in July 2007.
She noted that the US currently has 15 free-trade agreements, plus two more - Colombia and Peru - that have been completed but not yet approved by the US Congress. Negotiations on FTAs with South Korea and Malaysia are under way, while the US also is supporting Vietnam's accession to the WTO.
Stating that US exports to China have been rising by 20% or more annually over the last four to five years, Schwab commented that the key question is whether China is providing a "level playing field" and meeting its World Trade Organisation (WTO) obligations. Recently the US has raised the issue of tariffs on auto parts as well as long-standing concerns over intellectual property rights (IPR).
She added that she would rather have China fix the problem, whether it's a market access problem or a problem related to intellectual property.
The US is not yet satisfied with China's protection and enforcement of IPR. On the other hand, according to Schwab, the growing importance of Chinese movies, music and entrepreneurial activity means that "the Chinese are slowly beginning to understand that it is in their best interest to do a better job to protect intellectual property". She cited China's recent decision to load software onto all new computers before they leave the factory as a major step in combating software piracy.
1South Africa, Botswana, Namibia, Lesotho & Swaziland
2Argentina, Brazil, Paraguay & Uruguay
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