Mbeki says S.Africa can overcome power crisis

08/02/2008 12:15

By Paul Simao

CAPE TOWN (Reuters) - South Africa will overcome an electricity "emergency" that has damaged the economy and cast doubts over its hosting of the 2010 soccer World Cup, President Thabo Mbeki said on Friday.

In an annual state of the nation speech to parliament, Mbeki sought to calm fears among local and foreign investors over the power crisis which last month forced gold and platinum mines to shut down for five days.

South Africa is a leading world producer of both metals and the lack of capacity pushed global prices to record highs. The rand currency has fallen 12 percent this year.

"We face an emergency but we can overcome the problems in a relatively short period," Mbeki said.

"We are a minerals-resource economy. We must therefore continue to support the mining industry."

Tourism authorities have raised fears the power crunch, caused by a failure of electricity generation to keep up with the expansion of Africa’s biggest economy, would endanger the staging of the 2010 World Cup.

"I have absolutely no doubt that we will honour our undertaking to (soccer’s governing body) FIFA and the world community of soccer players and lovers to create all the necessary conditions for the holding of the best ever ... soccer World Cup tournament," Mbeki said.

It was Mbeki’s .....continued below

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first state of the nation speech since he was toppled from the leadership of the ruling African National Congress in December by his rival Jacob Zuma.

Mbeki is trying to deflect suggestions he will be a lame duck president until the end of his term in 2009 as Zuma boosts his power by appointing his allies to key party posts.

Investors are concerned about a divided power structure in South Africa because of the split, and possible clashes between state president and head of the dominant party.

"Those hoping for concrete details on how the government will tackle the electricity crisis are likely to have been a little disappointed, with a lot of talk on energy efficiency and little substance," said Nicholas Kennedy of market analysis firm 4castweb.

In his speech, Mbeki said his government would maintain its fiscal policies to support economic growth and he had budgeted 2.3 billion rand ($296 million) for industrial projects.

He planned 5 billion rand in tax incentives over three years to support the industrial programme.

(Reporting by Paul Simao; Writing by Barry Moody)

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