Cablegate: Scene-Setter for Codel Led by Congressman Barney

DE RUEHSA #0584/01 0791446
O 191446Z MAR 08





E.O. 12958: N/A

PRETORIA 00000584 001.2 OF 007

1. (SBU) I warmly welcome the visit of your delegation to
South Africa. My staff and I stand ready to do everything we
can to make your trip a success. You are visiting South
Africa at a particularly interesting time, only a few months
after Jacob Zuma defeated incumbent Thabo Mbeki as leader of
the ruling African National Congress (ANC). Because the ANC
has overwhelming support in the country (70 percent in the
last election), Zuma is now the leading candidate to become
the next national president following parliamentary elections
expected in March/April 2009. However, the December 28
indictment of Zuma on corruption and fraud charges
complicates his political future. Zuma's trial is scheduled
to begin August 14, 2008, and a conviction would derail his
bid for the national presidency. With Zuma in charge of the
ruling party, his rival Mbeki in control of government, and
the court case looming, the upcoming year will test South
Africa's young democracy.

2. (SBU) South Africa is an anchor country in U.S. Africa
policy. Since the end of apartheid in 1994, the ANC-led
South African Government (SAG) has made major progress toward
establishing a vibrant democracy and market-based economy.
The SAG has focused on political and economic transformation:
closing the gap between the historically privileged and
disadvantaged communities -- primarily through
government-provided housing, electricity, and water to the
poor -- and creating educational, skills development,
employment and business opportunities. South Africa,
however, continues to face daunting challenges, including a
lack of public sector operational capacity, a thirty percent
shortfall in mid-to-upper level public sector managers,
skills shortages in all sectors of the economy, growing
infrastructure bottlenecks, energy shortages, income
inequality between haves and have-nots, less than adequate
educational opportunities, massive unemployment, entrenched
poverty in both rural and urban areas, violent crime, and a
severe HIV/AIDS pandemic. These problems are intensifying
political tensions within the ANC-led ruling coalition and
with other political, civil society and private sector
groups. The tense debate at the party's December 16-20, 2007
national conference and defeat of incumbent Mbeki reflected
the growing impatience with the pace of socio-economic change
particularly for those who have not benefited sufficiently
from the modest economic growth.

3. (SBU) Despite its challenges, South Africa remains the
continent's best prospect for establishing a successful
democratic society with expanding prosperity. South Africa
is a leader of aid-recipient countries in their dialogue with
donor nations, plays a key role in promoting peace and
stability in Africa, and is an important voice on global
trade, human rights, conflict resolution and nonproliferation
issues. U.S.-South African relations are stable, as
reflected by President Bush's July 2003 visit to South Africa
and President Mbeki's June 2005 and December 2006 trips to
Washington. We share common objectives on the African
continent and beyond, and we work together on many of them.


4. (SBU) The African National Congress (ANC) dominates the
political scene in South Africa. The ANC won 70 percent of
Qpolitical scene in South Africa. The ANC won 70 percent of
the vote, and 279 of 400 seats in the National Assembly in
the April 14, 2004 elections. Subsequent "floor crossing"
periods, in which parliamentarians were allowed to switch
parties, boosted the ANC's total to 297. The ANC also won 66
percent of the vote nationally in the March 2006 local
elections. The Democratic Alliance (DA) is the largest of
several opposition parties in parliament, with 47 seats. The
ANC leads the administrations in all nine of South Africa's
provinces and in the vast majority of its municipalities.
The most visible exception to this country-wide ANC
domination is the DA's control of the Cape Town municipality
where there have been multiple attempts by the ANC to unseat
the DA-led, multi-party municipal government coalition.

5. (SBU) The December 16-20, 2007 ANC National Conference in
Polokwane, Limpopo significantly shifted power within the
ruling party. New ANC President Jacob Zuma defeated
incumbent, national President Thabo Mbeki, by a vote of 2,329
to 1,505. Zuma,s allies swept the other top five ANC
leadership positions. The Zuma camp also dominated the

PRETORIA 00000584 002.2 OF 007

elections for the ANC's 86-member National Executive Council
(NEC), with sixteen Mbeki Cabinet members (out of 28) losing
their NEC seats. While Zuma,s victory makes him the
front-runner to become national President following the 2009
parliamentary elections, the December 28 indictment of Zuma
on corruption and fraud charges complicates Zuma,s political
future. Zuma,s political allies have alleged that the
corruption case is politically-motivated, a charge
prosecutors and Mbeki strongly deny. Zuma has stated he will
step down as ANC President if convicted. If convicted and
sentenced to more than 12 months imprisonment, Zuma would be
constitutionally prohibited from running in the 2009
parliamentary elections, effectively blocking his succession
to the national presidency.

6. (SBU) It is too soon to tell whether the dramatic events
at the ANC National Conference will result in any significant
changes in South African Government policy. Mbeki remains in
control of the government until 2009, and the ANC conference
policy resolutions did not advocate any sweeping changes.
New ANC President Zuma has stressed that he will not make any
radical shifts and would respect the party's previous policy
traditions, statements and consensus. However, many of the
new ANC leaders - and Zuma,s strongest coalition supporters
- come from the left wing of South African politics. The
Congress of South African Trade Unions (COSATU) and South
African Communist Party (SACP), formally members of the
ANC-led tripartite alliance, will likely pressure Zuma to
embrace more leftist or perhaps even populist positions in
the interests of the poor and the working class. On issues
like HIV/AIDS and Zimbabwe, this could lead to SAG policies
more closely in line with U.S. interests, although on other
issues like fiscal management and trade liberalization the
shifts in policy might be less positive from a U.S.
perspective. It is also possible that the newly elected ANC
leaders might be more seized with domestic rather than
continental or global issues, which could alter the country's
current activist role in international affairs.


7. (U) South Africa has taken a high-profile role in
promoting Africa's development. South Africa served as the
first chair of the African Union until July 2003 and helped
establish continental institutions such as the Pan-African
Parliament (which sits in South Africa) and the AU Peace and
Security Council. President Mbeki is the driving force
behind the New Partnership for Africa's Development (NEPAD),
an African-developed program based on international best
practices and continental peer review to strengthen economic
and political governance across the continent and a framework
for productive partnership with the international community.

8. (SBU) South Africa recognizes that, by virtue of its
regional political, economic, and military clout, it has a
responsibility to participate in African conflict resolution
and peace support operations. South Africa played a leading
role in negotiations that ended the conflicts in Burundi and
the Democratic Republic of Congo. Approximately 3,000
personnel are deployed in UN, African Union and bilateral
Qpersonnel are deployed in UN, African Union and bilateral
peace support operations in Sudan, Burundi, DRC,
Ethiopia/Eritrea, and Comoros. The U.S. has a strong
interest in seeing South Africa expand and enhance its
peacekeeping and disaster assistance capabilities. South
Africa participates in the African Contingency Operations
Training and Assistance program (ACOTA) to enhance the
capacity of the South African National Defense Force (SANDF)
for participation in multilateral peace support operations.
We are using International Military Education and Training
(IMET) funds to support professional military education and
technical training of future military leaders and to assist
the SANDF in improving management of its defense
establishment. In light of the January 2008 repeal of ASPA
prohibitions on provision of military assistance, we hope
soon to resume Foreign Military Financing (FMF) programs
aimed at enhancing the South African Air Force's strategic
airlift capability by funding C-130 annual maintenance,
upgrades, technical support and flight simulator training.

9. (SBU) Zimbabwe remains a continuing challenge and
increasing concern for South Africa. In March 2007, regional
SADC leaders appointed Mbeki as official mediator between

PRETORIA 00000584 003.2 OF 007

Zimbabwean President Robert Mugabe and the opposition
Movement for Democratic Change (MDC) with the goal of
leveling the playing field in advance of March 2008
elections. Negotiations made some progress, but human rights
abuses against the opposition continue. Mugabe has shown
little willingness to open the political environment and
allow free and fair elections. While South Africa wants
political and economic stability with reform in Zimbabwe, SAG
officials argued that additional pressure, such as public
criticism or additional sanctions, would have little positive
effect on President Mugabe and could destabilize Zimbabwe
with spillover effects in South Africa. South Africa already
hosts between 1 and 2 million Zimbabwean refugees. In the
elections scheduled for March 2008, there is a limited
possibility that the two challengers could attract sufficient
support to erode Mugabe's ruling ZANU-PF overall majority in
parliament. However, it is not likely that the conditions
for free and fair elections will be in place to produce a
truly competitive poll. Some critical analysts and observers
contend that the election may have been stolen before any
votes were cast.

10. (SBU) Overall U.S.-South African relations are positive,
but South Africa sometimes takes positions on global issues
that run counter to U.S. interests. As a non-permanent UN
Security Council member, and former chair of the G-77 and the
Non-Aligned Movement (NAM), South Africa has taken up the
cause of a greater "South" voice in international
institutions, increased development assistance, an expanded
UN Security Council, and lower trade barriers (for
manufactured and agricultural exports to developed countries).


11. (SBU) As the dominant and most developed economy in
sub-Saharan Africa, South Africa is markedly different from
other countries of the region. It is a middle-income,
emerging market economy with GNI per capita of $5,670 (2007),
akin to Chile, Malaysia, or Thailand. The South African
government's fiscal and monetary policies are excellent. The
ANC government steadily reduced the fiscal deficit from
nearly 6 percent of GDP in 1994-95 to a small surplus of 0.6
percent in 2006-07 and a projected 0.8 percent in 2007-08.
The South African Reserve Bank (SARB) is independent and
committed to CPIX inflation (CPI excluding mortgage interest
costs) within a target band of 3.0 to 6.0 percent. Inflation
fell from 12.4 percent at the beginning of 2003 to 4.8
percent in June 2006, but has recently crept back up to 8.8
percent in January 2008. Real GDP growth was 5.1 percent in
2007. The South African Department of Finance expects growth
to slow to 4.0 percent in 2008-7 and 4.2 percent in 2009.
However, this growth is measured against an increasingly
strained energy supply which has led to power shortages.

12. (SBU) South Africa's single greatest economic challenge
is to accelerate growth. GDP growth averaged 3.0 percent per
year between 1994 and 2003 and 5.0 percent between 2004 and
2007, but was not sufficient to address widespread
unemployment and reduce poverty. The official unemployment
rate, currently 25.5 percent, has only recently begun to
decline, and is significantly higher among black South
Qdecline, and is significantly higher among black South
Africans than among whites. Income inequality between haves
and have-nots remains high. Poverty is widespread.
Fifty-six percent of black South Africans, but only four
percent of whites, live in poverty. Nevertheless, the
government has made strides in the areas of transfer payments
and public services to close the gap. Nearly 2.5 million
low-cost homes have been built to provide shelter to 7.6
million people, 3.5 million homes have been provided with
electricity, and nine million people have been connected to
clean water. Almost 12.4 million people were benefiting from
social grants in 2007 (compared to the country's five million
individual taxpayers). The government's broad-based Black
Economic Empowerment (BEE) program provides ownership and
employment opportunities to blacks and has helped the black
middle class double to an estimated two million since 1994.
The black middle class has expanded appreciably over the last
year, increasing by 30 percent. Of the approximately 48
million person population, 6 million belong to the middle
class, with 3.4 million being whites and 2.6 million being
blacks. Of course, with the white middle class migrating out
in record numbers, and the black middle class growing

PRETORIA 00000584 004.2 OF 007

rapidly, the black middle class will continue to increase
both in size and as a percent of the total middle class.

13. (U) The success in preparing for and carrying off the
FIFA 2010 Soccer World Cup to be held in South Africa is
regarded by many as a bellwether of the country's commitment
to continued progress in a variety of social and economic
areas, among these being the fight against crime, expanding
and improving infrastructure, providing services, and
developing tourism.

--------------------------------------------- -----------
Environment, Science and Technology - A Delicate Balance
--------------------------------------------- -----------

14. (U) South Africa currently spends 0.6 percent of its
GDP on science and technology and the South African
government wants to increase that figure to 1.0 percent
within the next five to ten years. South Africa has
channeled its S&T focus in the last decade, concentrating on
science for development and on areas of traditional strength,
such as paleontology, astronomy, social science and

15. (U) The Department of Science and Technology (DST) is the
major funder of S&T research, including most S&T
infrastructure projects, such as the Hermanus Magnetic
Observatory. The National Research Foundation (NRF), a DST
agency, provides funding for research and for students.
Research Councils throughout the country fund specialized
research and student scholarships. NRF has just completed a
major strategic planning exercise and is focusing its efforts
on: research and innovation; astro/space/geoscience
infrastructure; biodiversity/conservation infrastructure,
including the South African Environmental Observatory Network
(SAEON); and nuclear science.

16. (U) Capacity building remains a major challenge. The
NRF has instituted a new program aimed at increasing the
number of PhDs fivefold by 2018. Nevertheless, a lack of
capacity continues to hamper scientific research. Scientists
across the country also note that the lack of broadband and
other computing connections impede scientific advancement.

17. (U) South Africa remains committed to conservation and is
a recognized world leader in wildlife management. For
example, South Africa's elephant herds are so numerous that
the government recently announced that culling might become
necessary. Major conservation NGOs such as the World
Wildlife Fund/South Africa and TRAFFIC supported this
decision because the South African government's management
and decision-making policies are science-based and
transparent. However, economic and social pressures can play
a role in environmental decisions. The government recently
rescinded a ban on endangered abalone fishing after numerous
protests from disadvantaged fishing communities.

18. (U) The Department of Environment and Tourism Affairs
(DEAT) walk a delicate balance between promoting climate
change/adaptation policies and advocating economic growth.
South Africa would like to play a role as a green leader
within the developing world. However, it recognizes that its
coal-based energy systems (95 percent of the country's
electric power comes from coal-fired power stations) preclude
certain decisions/actions. In the past 10 years, South
Africa has enacted a series of well-regarded environmental
laws, many based on U.S. EPA criteria or standards and on
Qlaws, many based on U.S. EPA criteria or standards and on
principles found in international agreements. Over the past
four years, South Africa has begun to enact implementation
legislation to enforce these statutes. One key enforcement
tactic has been the establishment of the Environmental
Management Inspectorate (EMI), also known as the "Green
Scorpions". Prosecutors from the U.S. Department of Justice
and investigators from the U.S. Environmental Protection
Agency (EPA) developed and presented training programs for
the initial cadre of EMIs. That program has now been
replicated throughout the country and EMIs are found not only
at the national level, but also in provincial and
metropolitan environmental agencies.


PRETORIA 00000584 005.2 OF 007

19. (U) South Africa is a water-scarce country given that
much of the country is semi-arid, but nevertheless subject to
periodic flooding. South Africa's water policy is based on
managing scarce water resources to ensure that water is used
to support equitable and sustainable social and economic
transformation. The government aims to ensure provision of
water services - potable water and safe sanitation - to all
people, but especially to the poor and previously
disadvantaged. The National Water Act of 1998 transformed
the way water is controlled, from a system of rights based on
land ownership to a system designed to allocate water
equitably, efficiently, and sustainable in the public
interest. The National Water Resource Strategy targets
progressive decentralization of responsibility and authority
for water resources management to catchment management
agencies and local water user associations.

20. (SBU) South Africa now faces electricity supply
shortages and load-shedding, given strong demand growth and
delays in the construction of sufficient new supply.
State-owned electricity supplier Eskom has now embarked on
the building of new coal-fired plants. The Government has
undertaken a plan to diversify its energy mix by greatly
expanding its portfolio of nuclear power plants.
Westinghouse and Areva of France are competing for up to
20,000 MW of new nuclear power plants over the next twenty
years. The Government seeks to augment use of renewable
energy and energy efficiency. South Africa is a oil importer
and has built up a significant coal-to-liquids technology
capability to reduce its reliance on oil imports.
Automobiles in the interior of South Africa run on
coal-derived fuel.

--------------------------------------------- -----
--------------------------------------------- -----

21. (U) South Africa's transport infrastructure is
well-developed and is the best in Africa. There are sizable
and efficient ports, a road network that is mostly excellent,
and good air links, particularly to Europe and the U.S., and
increasingly to Asia and the rest of Africa. The network of
rural secondary roads is less well-developed. Transport
policy has led to a shift from rail to road since the
liberalization of transport in the mid-1980's and a relative
lack of investment in rail. Lack of control over
heavy-vehicle overloading has led to significant damage to
the road network and substantial backlogs in maintenance.

22. (U) State-owned Transnet owns and operates port
facilities, including the Port of Durban, the largest in
Africa. Transnet Freight Rail (formerly known as Spoornet)
runs an extensive rail network, including spurs to transport
coal from Mpumalanga coal-fields to the Richard's Bay Coal
Terminal and iron ore from the Western Cape to the port of
Saldanha. The government has not allowed private investment
in rail lines. There has been substantial under-investment
in locomotives and rolling stock. South Africa Airways has
direct flights to the U.S., Europe, and Asia, and is a
world-class airline. It cannot effectively position itself
as an international hub, because of its location at the end
of the African continent, so it has focused more recently on
travel within


23. (U) The United States Government has contributed
approximately $1.2 billion toward South Africa's development
since 1994, including $201 million in credit guarantees. Our
development assistance program currently focuses on
strengthening the healthcare system, addressing unemployment
through job-skills training and education, creating models
for efficient service delivery, reducing gender-based
violence as part of the President's Women's Justice and
Empowerment Initiative (WJEI), and responding to HIV/AIDS
through PEPFAR. A wide range of U.S. private foundations and
NGOs are also at work in South Africa. Among them are the
Gates Foundation (HIV/AIDS), the Ford Foundation (higher
education), and the Rockefeller Foundation (adult education).

24. (U) Twenty-eight U.S. government entities are represented

PRETORIA 00000584 006.2 OF 007

at the U.S. Mission in South Africa (Embassy Pretoria and the
three Consulates in Cape Town, Durban, and Johannesburg).
The Mission has 281 U.S. employees and 564 local employees.
More than 40 percent of Mission staff provides regional
services to other U.S. embassies in Africa. The Mission has
embarked on an ambitious program to build safe office
facilities. In FY 2005, the Mission completed the new
Consulate compound in Cape Town, and in FY 2006 broke ground
on a new Consulate building in Johannesburg. In FY 2009, the
Mission intends to break ground on a new 155-desk office
annex in Pretoria.


25. (SBU) U.S.-South Africa trade grew 22 percent in 2007,
totaling $14.3 billion. U.S. exports were up 23 percent at
$5.2 billion, while South African exports to the United
States increased 22 percent at $9.1 billion. In 2006, South
Africa was the 37th largest trading partner of the United
States, equivalent to Turkey or Chile. It is the largest
U.S. export market in sub-Saharan Africa, twice the size of
Nigeria and equal to Russia or Argentina. South Africa was
the third largest beneficiary of AGOA in 2007, and the
largest beneficiary of non-oil exports to the U.S under AGOA.
South Africa's AGOA exports totaled 25 percent of the
country's total exports to the U.S. in 2007. An impressive
99.6 percent of South Africa's exports entered the U.S. with
zero import duties in 2005 as a result of normal trading
relations (NTR), GSP and AGOA benefits. Only 0.4 percent of
the value of South Africa's exports to the U.S. was subject
to duty or $26 million out of $5.9 billion in exports in
2005. The U.S. also replaced Japan as the largest export
market in 2007. The U.S. is the third most important two-way
trade partner, after Germany and China. Over 600 U.S. firms
have a presence in South Africa with 85 percent of these
companies using the country as a regional or continental
center. South Africa's stable government, sound fiscal and
monetary policy management and, by African standards, large
market are the primary attractions for U.S. businesses.
South Africa has, however, failed to attract a proportionate
share of foreign direct investment since 1994. Reasons
include: high unit labor costs, labor regulations, skills
shortages, crime, HIV/AIDS, regulatory uncertainty and the
impact of Black Economic Empowerment policies. The U.S. was
the second largest portfolio investor and source of foreign
direct investment in South Africa ($5.1 billion at year-end
2005), after the U.K.

26. (SBU) Following six rounds of negotiations over three
years, the U.S. and the Southern African Customs Union (SACU:
South Africa, Botswana, Lesotho, Namibia, and Swaziland)
agreed in April 2006 that they could not conclude
negotiations on a free trade agreement (FTA) by their target
date of December 2006. Negotiators subsequently agreed to
deepen the bilateral relationship through a Cooperative
Agreement on Trade, Investment and Development (TIDCA).
Discussions are currently underway for the signing of a
framework agreement for the TIDCA.


27. (U) South Africa has the largest number of HIV-infected
Q27. (U) South Africa has the largest number of HIV-infected
citizens in the world and HIV/AIDS is the country's leading
cause of death. South Africa has a generalized, mature HIV
epidemic and HIV-related care and treatment services are
required across the population. An estimated 5.4 million
South Africans are HIV-positive, including 2.7 million women
and approximately 300,000 children aged 14 or less. An
estimated 18.8 percent of the adults between 15 and 49 are
infected. Women in the age group 25-29 are the most
seriously affected, with prevalence rates of up to 40
percent. In 2005, an estimated 800,000 more citizens became
infected and in 2006, 350,000 adults and children died from
AIDS. An estimated 2-3 million children, or approximately 15
percent of South Africa's children, have had at least one
parent die. Sixty-six percent of these children had been
orphaned as a result of AIDS. The number of AIDS-related
deaths since the start of the epidemic is estimated at 1.8
million, with 71 percent of all deaths in the 15-41 year old
age group being due to AIDS. Continued AIDS-related

PRETORIA 00000584 007.2 OF 007

mortality will create millions of new orphans and generate
additional social and economic disruption, including orphans
being raised by extended family members or in child-headed

28. (U) In April 2007, the South African Government released
its National Strategic Plan for HIV, AIDS, and Sexually
Transmitted Infections (STIs) for 2007-2011 (NSP). The NSP
has the goal of reducing new HIV infections by 50 percent by
2011 and also aims to boost provision of anti-retroviral
treatment (ART) in South Africa. However, South African
public health facilities suffer from an acute shortage of
skilled personnel and laboratory and clinical infrastructure.
Considerable investment in human resources and
infrastructure is necessary to meet the NSP's national
anti-retroviral treatment targets. Approximately 230,000
people were receiving anti-retroviral (ARV) treatment as of
2006, while a further 540,000 people needed, but were not
receiving, treatment. The Global Fund has provided major
grants to the Western Cape Health Department and a
public-private consortium in KZN.

29. (SBU) The President's Emergency Plan for AIDS Relief
(PEPFAR) is in its fourth year of implementation working with
public and private sector prevention, treatment, and care
programs. To date, the U.S. has provided $857.8 million
through PEPFAR to support HIV/AIDS programs in South Africa,
with an additional $590 million to be funded in FY 2008,
making South Africa the largest recipient of Emergency Plan
resources. The Emergency Plan directly supported 204,692
people in ARV treatment through programs in all nine
provinces as of September 2007. The USG PEPFAR team in South
Africa includes U.S. Agency for International Development
(USAID), Centers for Disease Control (CDC), Department of
State, Department of Health and Human Services (HHS),
Department of Defense, and Peace Corps. The team works to
ensure that the PEPFAR strategic plan is aligned with the
goals of the NSP. The South African military has expanded
prevention programs and collaborates with the U.S. military
and NIH on AIDS treatment research.

30. (U) South Africa has the strongest research and training
capacity of any country in the region, making it an important
partner in the fight against HIV/AIDS. USG agencies work
with national and provincial health departments, the
military, universities and NGOs to strengthen primary health
care, prevention, disease surveillance and research.
President Bush and President Mbeki confirmed a mutual
commitment to expand HIV/AIDS collaboration, particularly
through the Emergency Plan. The U.S. Mission has prepared,
in coordination with the government, a five-year strategic
plan focused on treatment, prevention, palliative care, and
the provision of care for orphans and other vulnerable

31. (U) The HIV and tuberculosis (TB) epidemics are
interlinked. TB is the most common infectious disease
associated with HIV in sub-Saharan Africa and between 50 and
88 percent of TB patients in Southern Africa are
HIV-positive. A high overall prevalence rate for HIV and a
lack of continuity in treatment contributes to the increasing
incidence of active TB disease, including multi-drug
resistant (MDR) strains. In conjunction with HIV, TB is
linked to substantially higher fatality rates, even in the
Qlinked to substantially higher fatality rates, even in the
presence of effective TB chemotherapy.

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