VZCZCXRO2310
RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHSA #4751/01 3211443
ZNR UUUUU ZZH
R 171443Z NOV 06
FM AMEMBASSY PRETORIA
TO RUEHC/SECSTATE WASHDC 6964
INFO RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY
RUEAIIA/CIA WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 02 PRETORIA 004751 
 
SIPDIS 
 
SENSITIVE BUT UNCLASSIFIED 
SIPDIS 
 
DEPARTMENT PASS USTR FOR P.COLEMAN 
 
E.O. 12958: N/A 
TAGS: ETRD PREL SF
SUBJECT: AMBASSADOR BOST'S COURTESY CALL ON MINISTER OF 
PUBLIC ENTERPRISES ALEC ERWIN 
 
 
¶1. (U) Sensitive but unclassified, not for Internet 
distribution. 
 
¶2. (SBU) Summary.  The United States wants to strengthen 
economic ties with South Africa, even though some voices on 
Capitol Hill are beginning to ask hard questions about the 
bilateral trade relationship.  South Africa believes the Doha 
Round will eventually be restarted but that a final deal will 
elude negotiators unless Southern views are taken into 
account.  Plans to upgrade infrastructure and build stadiums 
for the 2010 World Cup are underway, although skills 
shortages and the rising cost of capital goods may complicate 
project implementation.  GE is competing against Japanese and 
Australian firms to sell locomotives to Transnet. 
Soon-to-be-released BEE codes will not require black equity 
participation in foreign firms in many cases.  End Summary. 
 
¶3.  (SBU) Ambassador Eric Bost paid a courtesy call on 
Minister of Public Enterprises Alec Erwin on November 13. 
The Ambassador was accompanied by Senior Commercial Officer 
and Deputy Economic Section Chief.  Minister Erwin was 
accompanied by his director of communications and external 
liaison. 
 
------------ 
Trade Issues 
------------ 
 
¶4.  (SBU) The Ambassador opened the meeting by stressing that 
President Bush wants to strengthen the already close 
relationship between the U.S. and South Africa.  Deepening 
economic ties is a key mechanism for achieving this goal, the 
Ambassador stated, noting that bilateral trade would reduce 
unemployment and boost growth rates in South Africa.  The 
Ambassador warned, however, that some members of Congress are 
beginning to ask hard questions about the U.S./South Africa 
trade relationship, especially in the aftermath of the failed 
free trade agreement (FTA) talks.  "People on the Hill see 
that South Africa gets AGOA and GSP, and they ask themselves, 
'What's in it for the U.S.?'," he said. 
 
¶5.  (SBU) Erwin confirmed that South Africa shares the U.S. 
desire for close ties, and he hailed the bilateral trade 
relationship as basically healthy, since both countries have 
low tariffs.  He explained that the broad U.S. approach to 
the FTA, which included provisions on labor, the environment, 
and IPR, had made it difficult for Pretoria to sell the FTA 
to other SACU countries.  He also noted that South Africa 
normally prefers not to make commitments that could pre-empt 
results in WTO negotiations.  He predicted that trade talks 
between the U.S. and SACU would someday be resumed if for no 
other reason than Pretoria's desire to lock in AGOA benefits. 
 
¶6.  (SBU) Erwin was optimistic that the stalled Doha Round of 
trade talks would restart eventually, since business groups 
in the U.S. and Europe will not allow the negotiations to 
fail.  However, the U.S. and the EU cannot make a deal over 
the heads of the South, Erwin warned.  Countries like South 
Africa, China, India and Brazil are now key players in the 
WTO. 
 
---- 
2010 
---- 
 
¶7. (SBU) Erwin was confident that preparations for the 2010 
World Cup are well in hand:  transportation will be upgraded, 
stadiums constructed, broadband capacity installed, and extra 
resources devoted to fighting crime.  Financing projects will 
not be a problem, the Minister said, since the SAG is in such 
strong fiscal shape.  Any obstacles to smooth implementation 
are likely to come in the form of skills shortages and the 
spiraling cost of capital goods.  "China and India are 
sucking in capital equipment and making capital goods very 
expensive," Erwin said, noting, "Building infrastructure 
within budget and on time will be difficult under these 
circumstances."  The Ambassador noted, "In the U.S., we 
gather 100,000 people into different stadiums every Sunday." 
He outlined ways the U.S. could share expertise on crowd 
management with South Africa. 
 
¶8. (SBU) Regarding crime, Erwin claimed that criminal 
syndicates are behind the recent epidemic of high-profile 
bank robberies and armored car heists.  This was the second 
time since 1994, he said, that South Africa has been under 
assault from well-organized crime rings.  The police will 
once again act decisively to break them up, he predicted. 
 
PRETORIA 00004751  002 OF 002 
 
 
 
---------------- 
Commercial Deals 
---------------- 
 
9  (SBU) Erwin noted that Transnet (the port and rail 
parastatal) has opened a tender for locomotives, which GE has 
entered.  GE will be competing with Japanese and Australian 
firms, Erwin said, stressing that the terms of the 
competition were clear and well understood.  He noted the 
historical ties between Transnet and GE, which used to 
operate a locomotive plant in Port Elizabeth.  Erwin also 
said that South Africa has long had a good relationship with 
Westinghouse and that he anticipated a decision on the 
building of new nuclear power plants early in 2007.  Comment: 
 The SAG is considering the construction of both a second 
conventional pressurized water reactor and its first pebble 
bed modular reactor (PBMR).  Westinghouse is already an 
investor in the PBMR project.  GE and Westinghouse both hope 
to be short-listed to bid on the SAG's nuclear projects.  End 
Comment 
 
--- 
BEE 
--- 
 
¶10.  (SBU) The Ambassador reiterated U.S. support for Black 
Economic Empowerment (BEE).  He did indicate, however, that 
many potential U.S. investors are taking a wait-and-see 
attitude about South Africa until the final BEE Codes are 
adopted.  Erwin acknowledged that many U.S. companies were 
"properly concerned" about the equity participation 
requirements of BEE.  The final codes will "clarify" these 
requirements, he promised, adding that in many cases foreign 
multinationals will not be required to sell equity to black 
investors.  Reflecting on BEE, Erwin explained that South 
Africa had a clear choice:  either to build a stable society, 
or to provide an "easy ride" for foreign investors.  He said 
that most businesses understand that BEE is an investment in 
long-term social stability.  He praised the American Chamber 
of Commerce for providing valuable input on BEE. 
 
------- 
Comment 
------- 
 
¶11. (SBU) The overseer of South Africa's huge parastatals, 
Erwin is at the center of plans to expand infrastructure in 
order to lift economic growth and prepare for the World Cup. 
An economist and experienced administrator, there is probably 
no one in the SAG better qualified to tackle this complex and 
important job.  As in past meetings, Erwin impressed post as 
fully on top of his brief and confident he can get the job 
done. 
BOST