Cablegate: Scene-Setter for Codel Berman's July 1-6 Visit To

DE RUEHSA #1396/01 1781538
P 261538Z JUN 08




E.O. 12958: N/A

REF: A. STATE 62586
B. STATE 68515

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 seven 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.

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:
reducing 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 and widespread
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.
The recent xenophobic and inter-ethnic violence -- which
resulted in more than 60 deaths and tens of thousands of
displaced persons around the country -- is also in large part
a reflection of the growing restlessness and dissatisfaction
with the ANC's inability to deliver a better life for
everyone, especially when it comes to employment and housing
(which was constitutionally promised to everyone).

3. (SBU) Despite its many 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 objectives in common on
the African continent and beyond, and we work closely
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
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 2007 ANC National Conference in

PRETORIA 00001396 002 OF 007

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
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
frontrunner 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. However, with the slow movement
of the judicial process, it is highly unlikely that Zuma,s
trial will begin prior to the 2009 parliamentary elections,
practically assuring that he will become South Africa,s next

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,s 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, nationalization of industry/resource
sectors, 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 reduce the country,s current activist
role in international affairs.

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7. (SBU) Visa ineligibilities related to anti-apartheid
activities pose a significant strain on the U.S.-S.A.
bilateral relationship. South African leaders routinely
raise the frustration and humiliation they associate with
trying to travel to the U.S. despite what have been good
faith efforts by the Consular Bureau (CA) and others to
expedite their travel. These efforts include expedited
Qexpedite their travel. These efforts include expedited
waivers of ineligibility, including a multi-year and
multiple-entry waiver for highly regarded former President
Nelson Mandela, facilitated personally by Secretaries Rice
and Chertoff. Other high profile persons such as businessman
and anti-apartheid activist Tokyo Sexwale have also been
affected. Legislation which placed high-level officials and
heroes of the anti-apartheid movement into the category of
"terrorist" undercuts our efforts to influence South African
government policy on issues such as the designation of
terrorist supporters and financiers at the United Nations
Security Council.

8. (U) On April 9, 2008, Secretary Rice spoke before a
Congressional hearing regarding the visa waiver issue and
advocated the need to change the legislation. In May 2008,
the House passed, and the Senate is currently considering,
legislation lifting terrorism ineligibilities from certain
South Africans. The new legislation allows the flexibility
to end visa ineligibilities for anti-apartheid activists
whose only crime was fighting the odious apartheid regime. It
is important to note that the ineligibilities stemmed not
from membership in the ANC (they affected non-ANC members

PRETORIA 00001396 003 OF 007

also), but from activities occurring during the apartheid


9. (U) South Africa has taken a high-profile role in
promoting Africa's development - the African Renaissance.
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. These initiatives have not
progressed beyond talk-shop stages and have not advanced to
become effective mechanisms for development.

10. (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 is playing a
leading role in negotiations to end the conflicts in Burundi
and the Democratic Republic of Congo. Approximately 3,000
personnel are deployed in UN, African Union, and bilateral
peace support operations in Sudan, Burundi, DRC,
Ethiopia/Eritrea, and the 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 Defence 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.

11. (SBU) Zimbabwe remains a continuing challenge and
increasing concern for South Africa. In March 2007, regional
SADC leaders appointed Mbeki as official mediator between
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 continued. 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
Qeffect 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
March 29, 2008 elections, the MDC won a small majority of
seats in the Parliament, and its leader Morgan Tsvangirai
officially won a majority of the vote (47 percent) but not
enough to avoid a runoff with incumbent president Robert
Mugabe. Presidential runoff elections planned for June 27,
2008 have been preceded by a terrible campaign of
state-sponsored violence and intimidation that has undermined
the prospects for a free and fair electoral contest. Some
critical analysts and observers contend that the election may
have been stolen before any votes were cast. As a result of
the political instability, Tsvangirai dropped out of the race
on June 22.

12. (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 voice for the "South" relative to the

PRETORIA 00001396 004 OF 007

"North" in global finance, international institutions,
increased development assistance, an expanded and reformed UN
Security Council, and lower trade barriers (for manufactured
and agricultural exports to developed countries).


13. (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, but
have been criticized as being too conservative by the
increasingly influential COSATU, SACP, and ANC Youth League.
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 0.9 percent in 2007-08. The South
African Reserve Bank (SARB) is independent and committed to
returning 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 10.4
percent (April 2008). The SARB now does not believe
inflation will return to within the maximum level of the
target band until the end of 2010. Real GDP growth was 5.1
percent in 2007. The South African National Treasury expects
growth to slow to 4.0 percent in 2008 and 4.2 percent in
2009. However, this growth is measured against an
increasingly strained energy supply which has led to power
shortages. Because of this, rising inflation and higher
interest rates, some local economists expect growth to slow
to as little as 3.0 to 3.5 percent.

14. (SBU) South Africa's single greatest economic challenge
is to accelerate growth. GDP growth averaged 3.0 percent per
year between 1994 and 2004 and was not sufficient to address
widespread unemployment and reduce poverty. The official
unemployment rate, currently 23.0 percent, has only recently
begun to decline and is significantly higher among black
South Africans than among whites. Income inequality between
haves and have-nots remains one of the highest rates in the
world. Poverty is widespread. Fifty-six percent of black
South Africans, but only four percent of whites, live in
poverty. The lack of capacity and service delivery at the
provincial and municipal levels has fueled the recent
xenophobic attacks as South Africans from lower socioeconomic
strata feared that jobs, houses, and other services were
being given to refugees from neighboring countries. Other
obstacles exacerbating South Africa,s unemployment and
economic problems are skill shortages and education system
weaknesses. The media reports regularly about a growing
brain-drain of technically skilled workforce professionals,
including medical staff, to other countries. 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
Q7.6 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, 6.0 million belong to the middle
class, with 3.4 million being whites and 2.6 million being

15. (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.

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PRETORIA 00001396 005 OF 007

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16. (U) South Africa's transport infrastructure is well
developed and is the best in Africa. There are sizeable 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-1980s 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.

17. (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 Richards 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, however, because of its location at
the end of the African continent, so it has focused more
recently on travel within Africa.


18. (U) Since 1994, the United States Government has
contributed approximately $1.2 billion toward South Africa's
development, including $201 million in credit guarantees.
Currently, our development assistance program 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), as well as 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).

19. (U) Twenty-eight U.S. government entities are represented
at the U.S. Mission in South Africa (Embassy Pretoria and the
three Consulates in Cape Town, Durban, and Johannesburg).
The Mission has 318 approved U.S. positions (only 241 are
filled) and 570 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. In FY 2009, the Mission will complete a new
consulate building in Johannesburg and in FY 2010 intends to
break ground on a new 155-desk office annex in Pretoria.


20. (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
Q$5.2 billion, while South African exports to the United
States increased 22 percent at $9.1 billion. In 2007, South
Africa was the 34th 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 and the largest
beneficiary of non-oil exports to the U.S. in 2007. Its AGOA
exports totaled 25 percent of the country's total exports to
the U.S. in 2007. An impressive 98.1 percent of South
Africa's exports entered the U.S. with zero import duties in
2007 as a result of normal trading relations (NTR), GSP, and
AGOA benefits. Only 1.9 percent of the value of South
Africa's exports to the U.S. was subject to duty, or $174
million out of $9.1 billion in exports, in 2007. The U.S.
also replaced Japan as the largest export market in 2007.
The U.S. is the third-largest two-way trade partner, after

PRETORIA 00001396 006 OF 007

Germany and China. Over 600 U.S. firms have a presence in
South Africa with 85 percent using the country as a regional
or continental center. South Africa's stable government,
sound fiscal and monetary policy management, its
transportation infrastructure, sophisticated financial
sector, and, by African standards, its 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 such as the mandatory sale of
equity to previously disadvantaged persons. The U.S. was the
second largest portfolio investor and the second largest
foreign direct investor in South Africa after the U.K. ($5.5
billion at year-end 2006).

21. (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 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). A framework
agreement for the TIDCA is scheduled to be signed at the
annual AGOA Summit in Washington on July 14, 2008. The next
steps will be to establish working groups in the areas of
sanitary and phytosanitary measures (SPS), technical barriers
to trade (TBT), customs, and trade promotion.


22. (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 prevention, 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 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 some areas. In 2005, an estimated 800,000 more citizens
became infected, and in 2006, 350,000 adults and children
died from AIDS. An estimated 1.6 million children, or
approximately 10 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 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 households.

23. (U) In April 2007, the South African Government released
its National Strategic Plan (NSP) for HIV, AIDS, and Sexually
Transmitted Infections. The NSP has the goal of reducing new
QTransmitted Infections. 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. 371,731 people
were receiving anti-retroviral (ARV) treatment as of 2007,
while a further 511,269 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. The Global Fund also provides funding to
the National Department of Health to refurbish multi-drug
resistant TB centers and other areas to strengthen the
country,s approach to TB-HIV.

24. (SBU) The President's Emergency Plan for AIDS Relief
(PEPFAR) is in its fifth year of implementation working with
public and private sector prevention, treatment, and care
programs. To date, the U.S. has provided $1.45 billion
through PEPFAR to support HIV/AIDS programs in South Africa

PRETORIA 00001396 007 OF 007

including $591 million in FY 2008, making it the largest
recipient of Emergency Plan resources. The Emergency Plan
directly supported 305,356 people in ARV treatment through
programs in all nine provinces as of March 2008. The USG
PEPFAR team in South Africa includes U.S. Agency for
International Development (USAID), Department of Health and
Human Services (HHS) (which includes the Centers for Disease
Control and Prevention (CDC) and the Office of International
Health (OIH)), Department of State, 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, care, and
treatment programs and collaborates with the U.S. military
and NIH on AIDS treatment research.

25. (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 South
African government, a five-year strategic plan focused on
treatment, prevention, palliative care, and the provision of
care for orphans and other vulnerable children. Currently,
the U.S. Mission, in coordination with the South African
Government, is defining new priorities, gaps, and needs that
will shape our program for the coming year.

26. (U) The epidemics of HIV and tuberculosis (TB) are
interlinked. TB is the most common infectious disease
associated with HIV in sub-Saharan Africa and approximately
50 percent of HIV patients in Southern Africa also have TB.
A high overall prevalence rate for HIV, people co-infected
with TB and HIV, and 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 presence of effective TB chemotherapy.

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