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South Africa's growing reputation as a staging post from which to expand into sub-Saharan Africa is gathering momentum, with yet another major international company choosing Johannesburg as its base for international operations mid-May.



Russian mining magnate Viktor Vekselberg and his Renova group plan to use South Africa as a springboard for further projects in Africa. The company, which opened an office in Johannesburg in 2004, controls Sual Group, Russia's number two aluminium producer, headed by South African Brian Gilbertson, and which also has several gold mines in Russia.



The company already owns 49% of United Manganese of Kalahari, which is exploring the world's largest manganese deposit in the desert of western South Africa. That may lead to the construction of a mine with an annual capacity of as much as 2m tonnes, together with a ferroalloy plant to process the ore.



Speaking to the Bloomberg news agency on May 17, Vekselberg said his company was prepared to make significant investments in South Africa. Just as significantly, Vekselberg said he knew of other Russian firms, in the steel, coal and iron sectors, that were looking at opportunities in the country.



Renova Investments Ltd, the South African subsidiary of Vekselberg's group, has also just registered Renova Investments Gabon SARL in Libreville, the capital of Gabon, part of the Russian firm's drive north into Africa. The company has been given the go ahead by the Gabonese government to conduct surveys for deposits of manganese, platinum, uranium and gold, with the company considering committing up to $10m into the search.



According to mining executive Sir Sam Jonah, Russia is set to become a major player in sub-Saharan Africa's natural resource industry. In an address given at the University of Pretoria's Gordon Institute of Business Science earlier this year, he said that Russian investments in the mineral sector would reach at least $5bn over the next five years. If carried through, this level of capital inflow would almost match the $1.4bn South Africa had invested annually in the rest of Africa over the last few years, he said.



Meanwhile, Sandile Nogxina, the director general of the Department of Minerals and Energy, further boosted investor confidence in mid May by publicly stating that the South African government had no intention of nationalising the country's mining industry. Recent events in Bolivia have given investors reasons to be wary of populist moves to nationalise resources in emerging markets.



Nogxina cited two principle reasons why nationalisation was not desirable in South Africa. These were good relations between the government and the mining houses as well as a solid commitment from the industry to be more inclusive of historically disadvantaged peoples in South Africa. This has been underpinned by the mining charter that will ensure that the industry is at least 27% black-owned by 2012.



Capital inflows have continued to acceleration with R25bn ($3.88bn) finding its way into South Africa in the first two months of 2006 alone. With commodities bouncing back after a brief dip in early May, analysts expect there to further interest from foreign resource companies.



With political stability and an increasingly investor friendly government South Africa is looking a choice destination for investors. Perhaps the one cloud hanging over South Africa continues to be the ongoing saga of the Zuma trials. Former Deputy President Jacob Zuma resumed his duties as the deputy leader of the African National Congress after being exonerated on May 8 of rape charges.



However, in July he will be in court again to face allegations that he profited from a "generally corrupt relationship" with his business associate Shabir Shaik. Shaik is currently in prison after being convicted for profiting from murky dealings with the French defence contractor Thales. However, even the charge against Zuma sounds vague, and most commentators believe that there is little chance of a conviction in the forthcoming trail.



Certainly, the unwanted international attention that Zuma's possibly temporary fall from grace has brought to South Africa has not dampened investor enthusiasm, as shown by Renova's expansion and ambitions. Taking into consideration the hunger for commodities, booming consumer demand domestically, an emerging black middle class and high interest rates when compared more mature markets, South Africa looks a good bet.

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