VZCZCXRO7749
RR RUEHDU RUEHGI RUEHJO RUEHMR RUEHPA
DE RUEHSA #1158/01 0811027
ZNR UUUUU ZZH
R 221027Z MAR 06
FM AMEMBASSY PRETORIA
TO RUEHC/SECSTATE WASHDC 2332
INFO RUEHZO/AFRICAN UNION COLLECTIVE
RUEHBU/AMEMBASSY BUENOS AIRES 0223
RUEAIIA/CIA WASHINGTON DC
RHEHNSC/NSC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDC/DEPT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 02 PRETORIA 001158 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EINV EFIN PGOV EAID PINR SF
SUBJECT: SOUTH AFRICA: MOELETSI MBEKI SAYS DONORS HOLD THE 
KEY TO ECONOMIC REFORM IN AFRICA 
 
(U) This cable is Sensitive But Unclassified.  Not for 
Internet Distribution. 
 
¶1. (U) Summary. Donors hold the key to economic reform in 
Africa, says Moeletsi Mbeki, businessman, political analyst, 
and brother of South African President Thabo Mbeki.  In a 
recent address, Mbeki said that donors leverage more power 
than Africa's military or political elite.  Mbeki explained 
that South Africa has succeeded economically relative to the 
rest of Africa due to historical investment in areas such as 
infrastructure, legal systems, and education.  He also 
credited the long-standing roots of the African National 
Congress.  Mbeki described most of sub-Saharan Africa as 
"pre-industrial revolution societies" under siege from the 
dominant political elite.  As a result, Mbeki offered 
investors a bleak description of currently doing business 
with "incompetent and corrupt" African governments.  End 
Summary. 
 
Donors in Charge 
---------------- 
 
¶2.  (U) Donors are the biggest agent for economic change in 
Africa, according to Moeletsi Mbeki, businessman, political 
analyst, and brother of President Thabo Mbeki.  In his March 
8 address to the South African Institute of International 
Affairs (SAIIA), Mbeki repeatedly stated that donor countries 
are the ones with the most leverage over African countries, 
far more powerful than Africa's military or political elite. 
Mbeki cited examples of donors bringing the end to one-party 
states in Zambia, Malawi, and Kenya.  He also noted 
donor-driven privatization successes of railways and 
telecommunications.  Mbeki went on to say that the New 
Partnership for Africa's Development (NEPAD) is "a South 
African invention to pass the buck back to Western 
countries."  He views NEPAD as another "aid window" similar 
to the UK's Blair Commission.  Mbeki said that South African 
businesses want to bring about change in Africa, but that 
South Africa must first become a donor itself for this to 
happen. 
 
Why is South Africa Different? 
------------------------------ 
 
¶3. (U) Mbeki opened his address comparing the economies South 
Africa and the United States, and explaining what sets South 
Africa apart from the rest of Africa.  He stated that South 
Africa generates about 21% of Africa's GDP with only 6% of 
its population while the United States generates about 22% of 
the world's GDP with only 5% of its population.  In summary, 
he emphasized the point that South Africa's economy is to 
Africa as the United States is to the global economy. 
 
¶4. (U) How did South Africa garner this dominant position on 
the continent?  Mbeki listed a number of reasons, but the 
main differences boiled down to what was invested by South 
Africa's colonial powers and the National Party under 
apartheid.  The level of investment in agriculture, 
transportation, financial systems, legal systems, media, 
education, health, and social services all set South Africa 
apart from the rest of Africa.  For example, Mbeki says if 
South Africa did not have its long-standing legal system 
protecting property rights, the country could be "like 
Zimbabwe" and denied the economic growth it is working to 
achieve.  He said that South Africans often focus on what 
they were denied in the past versus recognizing what was 
actually invested and is helping them out today. 
 
¶5. (U) Mbeki also credited South Africa's relative success to 
the African National Congress (ANC)'s history.  The ANC has 
deep historical roots, which is something that most African 
political parties cannot claim.  Other African countries do 
not have a united working class to demand governance, nor any 
ruling class that aligns its objectives with the majority of 
its citizens. 
 
¶6. (U) Mbeki described most of sub-Saharan Africa as 
"pre-industrial revolution societies."  He stated that the 
political elite dominate the private sector and that most 
countries lack the basics, such as investment in 
infrastructure and secure property rights.  The African elite 
do not even have confidence in their own countries, as Mbeki 
pointed out that nearly 40% of Africa's wealth is held 
outside of the continent.  This percentage is stark in 
comparison to 10% in Latin America, 6% in East Asia, and 3% 
 
PRETORIA 00001158  002 OF 002 
 
 
in South Asia.  According to Mbeki, apartheid's strict laws 
against capital flight are to thank for containing most of 
South Africa's wealth within its borders. 
 
Bleak Outlook for Doing Business in Africa 
------------------------------------------ 
 
¶7. (U) Mbeki offered a bleak picture of conducting business 
in Africa.  In order to conduct business in Africa, Mbeki 
said that an investor must have patience and money and be 
willing to work with "extremely incompetent and corrupt 
governments."  He cited various examples, mostly from 
Nigeria, of African political leaders offering him illegal 
business deals that would circumvent the banking system and 
favor those in power.  Mbeki also mentioned an example where 
a company was forced to pull out of Kenya when those in power 
blocked its product distribution channels.  While Mbeki 
himself continues to seek business opportunities in Africa, 
he said that the only people investing in Africa now are oil 
companies and countries such as China, India, Malaysia, and 
Saudi Arabia. 
 
Comment 
------- 
 
¶8. (SBU) Moeletsi Mbeki has often made controversial comments 
about the benefits of colonialism to Africa.  This speech 
highlighted some of the relative benefits that colonialism 
and the apartheid government brought to South Africa. 
Notably, Mbeki dismissed the effectiveness of NEPAD, one of 
his brother's championed causes to empower Africans to help 
bring upon an African Renaissance.  One question Mbeki did 
not address was how donors should be more effective agents of 
change and how South Africa could complement current donor 
efforts.  South Africa has increasingly expressed interest in 
becoming a donor partner on the continent, and is actually 
managing post-conflict reconstruction and reconciliation 
programs in a number of fragile states, including DRC, 
Burundi, and Sudan.  On the other hand, questions remain 
about its capacity to manage its role as a donor. 
TEITELBAUM