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DE RUEHSA #3339/01 2271457
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R 151457Z AUG 06
FM AMEMBASSY PRETORIA
TO RUEHC/SECSTATE WASHDC 5095
INFO RUEHDJ/AMEMBASSY DJIBOUTI 0230
RUEHLGB/AMEMBASSY KIGALI 0884
RUEHKI/AMEMBASSY KINSHASA 1826
RUEHNR/AMEMBASSY NAIROBI 6095

UNCLAS PRETORIA 003339 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
FOR SENATOR OBAMA FROM AMBASSADOR BOST 
 
E.O. 12958: N/A 
TAGS: OREP PREL PGOV ECON KHIV SF
SUBJECT: SCENESETTER FOR SENATOR OBAMA'S VISIT TO SOUTH 
AFRICA 
 
REF: A. STATE 102469 
     ¶B. PRETORIA 2967 
 
This cable is Sensitive but Unclassified.  Not for Internet 
distribution. 
 
¶1. (SBU) Welcome to South Africa, an anchor country in our 
Africa policy.  Since the end of apartheid in 1994, the 
African National Congress (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 employment 
and business opportunities.  South Africa continues to face 
serious challenges, including income inequality between 
blacks and whites, massive unemployment, entrenched poverty, 
violent crime, and a severe HIV/AIDS pandemic.  Taken 
together, these problems are intensifying political tensions 
within the ANC-led ruling coalition.  The next ANC president 
will not be selected until the party's December 2007 
congress, but rumor-mongering and behind-the-scenes 
electioneering for the top job already are in full swing. 
While the likely victor is unclear, much will depend on the 
fate of former SAG Deputy President (and still ANC Deputy 
President) Jacob Zuma.  Fired from his national position in 
June 2005 after his financial advisor was convicted on 
corruption and fraud charges, Zuma faces similar charges in a 
trial set to begin September 5. 
 
¶2. (SBU) Despite its challenges, South Africa remains the 
continent's best prospect for establishing a successful 
democratic society with widespread prosperity as the SAG 
moves from political to economic transformation.  South 
Africa plays a key role in promoting peace and stability in 
Africa, and is an important voice on global trade and 
nonproliferation issues.  U.S.-South African relations are 
positive, as reflected by President Bush's July 2003 visit to 
South Africa and President Mbeki's reciprocal June 2005 trip 
to Washington.  We share objectives on the African continent 
and work together closely on those issues. 
 
------------------ 
POLITICAL OVERVIEW 
------------------ 
 
¶3. (SBU) The African National Congress (ANC) dominates the 
political scene in South Africa.  President Thabo Mbeki began 
his current five-year term on April 27, 2004.  The ANC won 70 
percent of the vote and 279 of 400 seats in the National 
Assembly at the April 14, 2004 poll.  A subsequent "floor 
crossing" period in September 2005, in which parliamentarians 
were allowed to switch parties, boosted the ANC's total to 
¶293.  The ANC also won 66 percent of the vote nationally in 
March 2006 local elections.  The Democratic Alliance (DA) is 
the largest of several small opposition parties in 
parliament, with 47 seats.  The ANC leads the administrations 
in all nine of South Africa's provinces. 
 
¶4. (SBU) The ANC is part of a tripartite alliance whose other 
members are the South African Communist Party (SACP) and the 
Congress of South African Trade Unions (COSATU).  The ANC-led 
alliance is a broad-based political movement in which schisms 
have appeared in recent years, largely based on the SACP's 
and COSATU's opposition to the government's economic, 
HIV/AIDS, and Zimbabwe policies.  However, the alliance is 
likely to hold together, at least in the short term.  Despite 
their dissatisfaction with many ANC policies, most SACP and 
COSATU leaders remain intensely loyal to the ruling party and 
prefer to lobby for change from inside the alliance.  They 
also likely calculate that splitting from the alliance and 
fielding candidates independently could have catastrophic 
electoral results. 
 
¶5. (SBU) President Mbeki remains securely at the ANC's helm, 
but currently is embroiled in managing internal party 
tensions related to succession, his centralized 
decisionmaking, and former Deputy President Zuma's upcoming 
corruption trial.  Mbeki's popularity, affected by continued 
high levels of crime, unemployment, a delayed response to the 
HIV/AIDS crisis, and the slow delivery of services to South 
Africa's majority population, fluctuated throughout his first 
five-year term.  However, a recent poll showed that 77 
percent of South Africans approve of the job he is doing, a 
figure almost identical to that of Nelson Mandela at the same 
 
point in his Presidency.  Mbeki's standing within the party 
has taken a beating during the past year.  Supporters of 
Jacob Zuma accuse Mbeki of conspiring against his party 
deputy; using charges of rape (on which Zuma was acquitted in 
May 2006) and corruption to ensure Zuma does not become the 
next ANC president.  Many within the party's grassroots think 
Mbeki does not listen to or consult with ANC structures 
before making decisions, such as when he overrode the 
selection of several hundred local candidates by ANC branches 
to ensure gender parity on party lists for the March 2006 
local elections. 
 
------------------------------------------ 
FOREIGN POLICY - FOCUS ON PROMOTING AFRICA 
------------------------------------------ 
 
¶6. (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 
to 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 to strengthen economic and 
political governance across the continent and a framework for 
productive partnership with the international community. 
South Africa led the negotiations which ended the conflicts 
in Burundi and the Democratic Republic of the Congo, and it 
is playing a leading role in the mediation in Cote d'Ivoire. 
 
¶7. (SBU) South Africa recognizes that, by virtue of its 
regional political, economic, and military clout, it has a 
responsibility to participate in peace support operations. 
Approximately 2,615 troops currently are deployed in UN and 
AU Missions in Burundi, DRC, Sudan, Cote d'Ivoire, and 
Ethiopia/Eritrea.  While the U.S. has a strong policy 
interest in seeing South Africa expand and enhance its peace 
support capabilities, our ability to support these efforts 
has been limited by the suspension of FMF and IMET (about $7 
million per annum) military assistance because of the lack of 
an Article 98 agreement with South Africa.  One positive 
development is South Africa's decision to participate in the 
African Contingency Operations Training and Assistance 
program (ACOTA) through which we can work together to enhance 
the capacity of the South African National Defense Force 
(SANDF) for robust participation in multilateral peace 
support operations.  The first ACOTA training exercise will 
take place in late August. 
 
¶8. (SBU) Zimbabwe remains a continuing, and often 
frustrating, challenge for President Mbeki.  While it is 
clear that South Africa wants political and economic reform 
in Zimbabwe, its "quiet diplomacy" policy of 
behind-the-scenes talks has failed to produce results.  SAG 
officials argue that additional pressure, such as sanctions, 
would have little effect on President Mugabe and could 
destabilize Zimbabwe (with spillover effects in South 
Africa).  In recent months, South Africa appears increasingly 
concerned about the deteriorating economic situation in 
Zimbabwe. 
 
¶9. (SBU) While overall U.S.-South African relations are 
positive, South Africa sometimes takes positions on global 
issues that run counter to U.S. interests.  For example, 
South Africa abstained on the IAEA Board of Governor's 
resolution to refer the dossier on Iran's nuclear program to 
the UN Security Council.  As current chair of the G-77 and 
former head of 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. 
 
----------------------------------------- 
THE ECONOMY AND THE STRUGGLE TO TRANSFORM 
----------------------------------------- 
 
¶10. (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 GDP per capita of $5,105 (2005), 
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 nearly balanced 
budget in 2005-06.  The forecast for the 2006-07 fiscal 
deficit is 1.5 percent as a result of expansionary policies. 
 
The South African Reserve Bank (SARB) is independent and 
committed to low inflation.  CPIX (CPI minus mortgage cost) 
inflation has fallen from 12.4 percent at the beginning of 
2003 to 4.8 percent (June 2006), within the SARB's official 3 
to 6 percent target.  Real GDP growth in 2005 climbed to 4.7 
percent from 4.5 percent in 2004 as a result of strong 
consumer spending.  Analysts expect growth to slow to 4.2 
percent in 2006. 
 
¶11. (SBU) South Africa's single greatest economic challenge 
is to accelerate growth.  Moderate growth since 1994, 
averaging 3.2 percent a year, has not been sufficient to 
address widespread unemployment and reduce poverty.  The 
official unemployment rate, currently 26.7 percent, has only 
recently begun to decline, and is significantly higher among 
black South Africans than among whites.  Income inequality 
between white and black South Africans 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 1.5 million low-cost homes have been built to provide 
shelter to six million people, four million households 
provided with electricity, and nine million people connected 
to clean water.  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 in size since 1994. 
 
----------------------------- 
U.S. SUPPORT FOR SOUTH AFRICA 
----------------------------- 
 
¶12. (U) Since 1994, the United States Government has 
contributed approximately $1.217 billion toward South 
Africa's development, plus $201 million in credit guarantees. 
 Currently, our development assistance program focuses on 
HIV/AIDS and strengthening the healthcare system, addressing 
unemployment through job-skills training and education, 
creating models for efficient service delivery, and reducing 
gender-based violence as part of the President's Women's 
Justice and Empowerment Initiative (WJEI).  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). 
 
¶13. (U) Nineteen U.S. agencies, including the FBI, CDC, 
Customs, and USAID, are represented at our Mission in South 
Africa: Embassy Pretoria and the three consulates in Durban, 
Cape Town and Johannesburg.  The Mission has 281 U.S. 
employees, and 564 local employees.  More than 40 percent of 
Mission staff provide regional services to other U.S. 
embassies in Africa.  The Mission has embarked on an 
ambitious program to build safe office facilities.  In FY05 
we completed the new Consulate compound in Cape Town, and in 
FY06 we will award the design/build contract for the new 
Consulate building in Johannesburg. 
 
------------------------------ 
U.S.-S.A. TRADE AND INVESTMENT 
------------------------------ 
 
¶14. (SBU) U.S.-South Africa trade grew 7 percent in 2006, 
totaling $9.5 billion.  U.S. exports were up 22 percent at 
$3.6 billion, while South African exports to the United 
States declined 1 percent at $5.8 billion.  In 2005, South 
Africa was the 35th 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 2005.  Its AGOA 
exports grew strongly in 2003 and 2004 but fell 17 percent in 
2005 due to declines in vehicle, iron/steel and clothing 
exports.  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 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: crime, uncertainty about Black 
Economic Empowerment policies, labor regulations, HIV/AIDS, 
and the slow process of privatization.  The U.S. is the 
second largest foreign direct investor in South Africa ($4.9 
billion at year-end 2004). 
 
 
¶15. (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 Trade and Investment 
Cooperation Agreement.  The U.S. and SACU may meet later this 
year to develop the specifics of the agreement. 
 
-------------------------------------- 
HIV/AIDS: A CRISIS OF EPIC PROPORTIONS 
-------------------------------------- 
 
¶16. (U) South Africa has the second largest number of HIV 
infections in the world.  HIV/AIDS is the country's leading 
cause of death.  Five to six million South Africans are 
HIV-positive, including 2.9 million women.  In 2005, an 
estimated 800,000 more citizens became infected and over 
300,000 died from AIDS.  AIDS-related deaths will create 
millions of orphans and generate additional social and 
economic disruption.  The number of AIDS-related deaths and 
AIDS orphans is expected to climb by 2010 to 5.2 million and 
1.5 million respectively.  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 expand the national antiretroviral treatment program. 
 
¶17. (SBU) It is estimated that approximately 200,000 of the 
five to six million HIV-positive South Africans are receiving 
antiretroviral (ARV) treatment.  At the end of 2003 the SAG 
prepared and endorsed an operational plan to treat AIDS using 
ARVs in public facilities.  Implementation of the plan has 
been slow in all provinces except Gauteng and Western Cape. 
It is likely that ARV drugs will not be widely available 
through government programs until late 2006 or 2007.  South 
Africa has been a major recipient of Global Fund resources 
with major grants awarded to the Western Cape Health 
Department and a public-private consortium in KZN.  Both 
provide some treatment funding. 
 
¶18. (SBU) The President's Emergency Plan for AIDS Relief 
(PEPFAR) is beginning its third year of implementation 
working with public and private sector prevention, treatment, 
and care programs.  To date, the U.S. has provided almost 
$239 million through PEPFAR to support HIV/AIDS programs in 
South Africa, making it the largest recipient of Emergency 
Plan resources.  The FY 2006 PEPFAR budget in South Africa is 
$221 million.  After three years of funding, the Emergency 
Plan supports nearly 75,000 people in ARV treatment through 
programs in all provinces.  In addition, the South African 
military has expanded prevention programs and publicly 
collaborates with the U.S. military and NIH on ARV-based AIDS 
treatment research.  The Cabinet has endorsed a comprehensive 
public sector HIV/AIDS treatment plan. 
 
¶19. (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 
(including USAID, DHHS, DOD, and the Peace Corps) have worked 
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 last July a 
mutual commitment to expand HIV/AIDS collaboration, 
particularly through the Emergency Plan.  The 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 children. 
 
Bost