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Wednesday, February 11, 2009.

From Creamer Media in Johannesburg, I'm Shannon O'Donnell.

Making headlines today:

On Wednesday, steel producer ArcelorMittal South Africa reported a 65% increase in headline earnings for the 2008 financial year, on the back of higher global steel prices early in the year. But, the company warned that earnings in the first quarter of 2009 would fall "substantially".

ArcelorMittal SA said a significantly improved income contribution from the Coke & Chemicals business, and higher gains on foreign exchange transactions and financial instruments also boosted earnings.

However, the company had experienced an "extraordinary" collapse in demand during the fourth quarter of 2008. This was as the impact of the global financial crisis filtered through to the South African economy.

High interest and inflation rates resulted in a slowdown in residential building activity as well as reduced consumer spending on durable goods such as automotives and household appliances. For 2008, as a whole, the company's sales volumes were down by 13% year-on-year.

With the world economy in trouble and the Rand suffering some of its biggest loses in recent years, South Africans will be waiting anxiously to see what the 2009 Budget Speech holds.

Finance Minister Trevor Manuel will be under pressure when he delivers his Budget speech to provide funding for the promises made by President Kgalema Motlanthe in his State of the Nation Address last Friday.

Economists predict that instead of tax cuts, Manuel is expected to announce a budget deficit of about 2% of gross domestic product. This means government will have to borrow more than 40-billion-rand to finance its spending priorities.

Manuel has long defended South Africa's economic policies against calls for greater social spending. He argues that the conservative policies have so far shielded the country from the worst of the global crisis.

But, in October last year, he announced South Africa's first budget deficit since 2005, as exports slowed and commodity prices dropped.

Also making headlines:

State-owned oil and gas company PetroSA says that the Coega refinery project is 'perfectly timed'.
Zimbabwe's central bank welcomes the idea of a South African rand link.
Businesses warn that the mandatory power-savings campaign could dent their earnings.
And, South Africa's manufacturing output shrinks 7% year-on-year.

That's a round up of news making headlines today. For more on these and other stories please visit engineeringnews.co.za.