VZCZCXRO6452
RR RUEHDU RUEHJO RUEHMR
DE RUEHSA #2022/01 1361511
ZNR UUUUU ZZH
R 161511Z MAY 06
FM AMEMBASSY PRETORIA
TO RUEHC/SECSTATE WASHDC 3450
INFO RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY
RUEHBU/AMEMBASSY BUENOS AIRES 0241
RUEATRS/DEPT OF TREASURY WASHDC
RUEAIIA/CIA WASHINGTON DC
RHEHNSC/NSC WASHDC
RUCPDC/DEPT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 02 PRETORIA 002022 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPT PLEASE PASS TO DEPT OF HUD 
DEPT PLEASE PASS TO OPIC 
 
E.O. 12958: N/A 
TAGS: EINV EFIN PGOV PREL EAID SF
SUBJECT: SOUTH AFRICA: DEPUTY PRESIDENT MEETS OPIC DURING 
HOUSING AFRICA CONFERENCE 
 
REF: A. PRETORIA 109 (NOTAL) 
     ¶B. PRETORIA 698 (NOTAL) 
     ¶C. PRETORIA 955 (NOTAL) 
 
(U) This cable is Sensitive But Unclassified.  Not for 
Internet Distribution. 
 
¶1. (SBU) Summary. On May 4, Deputy President Phumzile 
Mlambo-Ngcuka met with OPIC President and CEO Robert 
Mosbacher, Jr. and Executive VP John Simon to discuss how 
OPIC could assist with the Accelerated and Shared Growth 
Initiative for South Africa (ASGISA).  The meeting focused on 
two potential areas of OPIC assistance -- offering low-income 
home loans and securitizing pools of micro credit loans to 
boost the small business sector.  The Deputy President 
expressed her frustration with the South African banking 
sector's unwillingness to bear the risk of extending housing 
finance to the low-income market.  OPIC would like to assist 
in this effort, but would prefer to wait until the banks and 
government have determined how the risk will be divided among 
them.  Post encourages OPIC to explore micro credit loan 
options without delay.  The Deputy President also sought 
assistance for a mentoring program to boost the skills 
development of South Africans.  This meeting took place on 
the margins of OPIC's Housing Africa Conference, held May 2-4 
in Cape Town.  End Summary. 
 
Deputy President Meets OPIC 
--------------------------- 
 
¶2. (U) Meeting attendees included: 
-- Ms. Phumzile Mlambo-Ngcuka, Deputy President, Republic of 
South Africa 
-- Ms. Nonhlanhla Mjoli-Mncube, Economic Advisor to the 
Deputy President 
-- Mr. Robert Mosbacher, Jr., President and CEO, Overseas 
Private Investment Corporation (OPIC) 
-- Mr. John Simon, Executive Vice President, OPIC 
-- Mr. Jan van Vollenhoven, Director: USA Directorate, 
Department of Foreign Affairs 
-- Mr. Angus September, Deputy Director: USA Directorate, 
Department of Foreign Affairs 
-- Mr. Christian Merkling, Director, Lazare Kaplan Africa 
(arranged meeting on behalf of Maurice Tempelsman) 
-- Ms. Kary Hintz-Tate, Economic Officer, Embassy Pretoria 
 
¶3. (SBU) On May 4, OPIC President and CEO Robert Mosbacher, 
Jr. and OPIC Executive VP John Simon met with South Africa's 
Deputy President Phumzile Mlambo-Ngcuka.  They discussed how 
OPIC could assist with the Accelerated and Shared Growth 
Initiative for South Africa's (ASGISA) 6% growth target (Refs 
A - C).  Two potential areas of assistance emerged: (1) 
offering low-income home loans for those who do not qualify 
for the full government housing subsidy, but cannot secure 
financing from banks; and (2) securitizing pools of new micro 
credit loans to boost the small business sector.  Mosbacher 
empathized with South Africa's need for financing solutions 
while stating OPIC's view that "low income does not mean high 
risk."  Simon added that OPIC is looking to increase its 
micro lending capacity and is working with institutions who 
already have good track records in this area. 
 
¶4. (SBU) The Deputy President went on to detail the specifics 
of where assistance is needed.  She noted that South Africans 
who earn between R1,500 and R7,500 per month ($250 - $1,250) 
comprise the population that does not qualify for the full 
housing subsidy (R31,929 or $5,300), and are generally unable 
to secure a loan from a formal banking institution for houses 
under R250,000 ($42,000).  The Deputy President also welcomed 
any innovations in the small business arena (i.e., loans from 
R10,000 to R250,000 or $2,000 to $42,000) that could give a 
large group of people a "starting chance," as the government 
is not looking for smaller, "boutique" solutions. 
 
¶5. (SBU) The Deputy President expressed frustration with the 
banking industry's initiative to fulfill its obligations 
under the Financial Sector Black Economic Empowerment (BEE) 
Charter, signed in 2003.  South Africa's "Big 4" banks 
(Standard, Barclays/ABSA, FirstRand, and Nedcor, which 
together control 85% of the market) and the financial 
services industry agreed to offer low-income home loans 
totaling R42 billion ($7 billion) by 2008 under the Charter. 
 
PRETORIA 00002022  002 OF 002 
 
 
The banks and government, however, have reached an impasse 
over who should bear the risk of offering this financing. 
The Deputy President said that government might have to 
"crack the whip" on the industry to fulfill its Charter 
obligations and shoulder the associated risk, while the banks 
are looking to government to share the risk in line with 
international practice. 
 
¶6. (SBU) The Deputy President's final plea was to seek 
assistance with mentoring programs to contribute to the 
skills development of South Africans.  She explained that 
South Africa has ambitious infrastructure plans, but lacks 
the people with skills to implement the plans.  Government 
has identified 500 people at the entry and mid level who they 
would like to send abroad to receive on the job training and 
mentoring in the next 18 months.  Mosbacher noted that he was 
not aware of any OPIC projects that could assist in this 
effort.  (Note: CDA Teitelbaum recently met with the Deputy 
President's Economic Advisor Mjoli-Mncube on this issue and 
will follow up on this request.) 
 
¶7. (SBU) Overall, the meeting was relaxed and cordial.  The 
Deputy President was candid about the challenges facing South 
Africa.  On two separate occasions, she expressed her 
appreciation for OPIC's innovative Housing for HIV project 
which provides HIV/AIDS treatment for homeowners which are 
insured against mortgage default by South Africa's Home Loan 
Guaranty Company.  The Deputy President said it is crucial to 
keep parents alive and provide shelter, as medication cannot 
provide shelter.  Mosbacher thanked the Deputy President for 
her appreciation and also briefly described other work OPIC 
is doing with South Africa's National Urban Reconstruction 
and Housing Agency (NURCHA), Zambia, Ghana, Kenya, as well as 
two recently approved private equity funds which will operate 
in Southern and West Africa. 
 
Housing Africa Conference 
------------------------- 
 
¶8. (U) On May 2-4 in Cape Town, OPIC hosted a successful 
Africa-wide conference to promote investment in housing 
construction, finance, and infrastructure on the continent. 
Over 250 participants attended from the public and private 
sectors of Africa and the United States.  Topics included: 
Africa's investment climate, housing construction, mortgage 
financing, capital markets/securitization, land/legal issues, 
infrastructure systems, and private equity.  The Special 
Advisor to South Africa's Housing Minister, Mr. Saths 
Moodley, opened the conference alongside Mosbacher, Simon, 
and CDA Teitelbaum. 
 
Comment 
------- 
 
¶9. (SBU) This meeting was one of many meetings the Deputy 
President has led in efforts to seek assistance with her 
ASGISA initiative.  The SAG is hopeful that this meeting will 
lead to additional OPIC programs in South Africa.  OPIC would 
like to assist with low-income home loans discussed during 
the meeting, but is hesitant about getting involved before 
the banks and government have sorted out their disagreement 
on the risk sharing issue.  Once this issue is resolved, we 
encourage OPIC to explore personal home loan opportunities. 
We hope OPIC is able to evaluate without delay any micro 
credit options that could boost the small business sector in 
South Africa. 
 
¶10. (U) OPIC President and CEO Rob Mosbacher cleared this 
cable. 
TEITELBAUM