VZCZCXRO2072
RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHSA #1320/01 1700902
ZNR UUUUU ZZH
R 180902Z JUN 08
FM AMEMBASSY PRETORIA
TO RUEHC/SECSTATE WASHDC 4803
INFO RUCPDC/DEPT OF COMMERCE WASHDC
RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEHNE/AMEMBASSY NEW DELHI 0495
RUEHJO/AMCONSUL JOHANNESBURG 8113

UNCLAS SECTION 01 OF 02 PRETORIA 001320 
 
SENSITIVE BUT UNCLASSIFIED 
SIPDIS 
 
DEPT PLEASE PASS TO USTR FOR P. COLEMAN 
DEPT OF COMMERCE FOR J. DIEMOND 
STATE FOR AF/S 
 
E.O. 12958: N/A 
TAGS: ECON EINV ETRD CASC IN SF
SUBJECT: INDIAN CONSUL GENERAL OPTIMISTIC ABOUT GROWING ECONOMIC 
TIES, BUT WORRIED ABOUT SA INVESTMENT CLIMATE 
 
REF: A. PRETORIA 00589 
 
     ¶B. PRETORIA 001288 
 
PRETORIA 00001320  001.2 OF 002 
 
 
¶1.  (SBU) SUMMARY: Indian Consul General Navdeep Suri spoke to the 
South African Chamber of Commerce and Industry (SACCI) on June 11 
about the increase in economic ties between South Africa and India. 
Suri described opportunities for the two countries to increase trade 
and investment including the acceleration of preferential trade 
talks.  He was positive in his long-term outlook for growth in the 
Indian market for South African goods, but expressed concern about 
the investment climate in South Africa due to the negative impact of 
power shortages.  End Summary. 
 
--------------------------------- 
Growing Momentum in Economic Ties 
--------------------------------- 
 
¶2.  (SBU) Indian Consul General to Johannesburg Navdeep Suri spoke 
to the South African Chamber of Commerce and Industry (SACCI) on 
June 11 about the increase in economic ties between South Africa and 
India.  Suri noted that the two countries were making up for lost 
time in re-establishing economic relations since 1995 (Reftel A), 
effectively starting from a zero base since the end of the 
long-standing sanctions established during apartheid.  In the first 
quarter of fiscal year 2007-2008 (April-June 2007), bilateral trade 
reached $1.75 billion.  Talks regarding a preferential trade 
agreement with the Southern African Customs Union (SACU) are still 
ongoing.  Suri called for accelerated negotiations for the 
preferential trade agreement to boost bilateral trade volumes. 
 
¶3. (U) Suri announced that his government is also promoting a "Doing 
Business in India" conference to encourage increased bilateral 
trade.  The conference will take place in Johanneburg in September 
¶2008.  He also noted that many Indian companies are already present 
in South Africa and the Indian Government has established an India 
Business Forum to promote them.  Thirty-seven Indian companies have 
already joined the Forum and there is growing interest among 
additional Indians companies. 
 
------------------------------------- 
Trade Balance Favors SA, But There is 
Still Room for Greater SA Exports 
------------------------------------- 
 
¶4. (U) Suri explained that the trade balance between the two nations 
has always been in South Africa's favor.  He noted that despite the 
growth in trade, India was still not one of South Africa's top-ten 
trade partners.  Suri emphasized that South African companies have 
not taken full advantage of the export opportunities to India.  He 
outlined India's growing economic prowess and noted that unlike 
China it was a net importer and still derived most of its economic 
growth from domestic market demand.  According to Suri, South 
African exports to India are dominated by a few products and he 
called for increased diversification if South African companies hope 
to increase their market share in India.  In contrast, India 
exported a diverse basket of goods to South Africa. 
 
¶5. (U) Suri said South African companies could obtain a larger share 
of India's infrastructure projects.  Specifically, he pointed to the 
example of the Airports Company of South Africa (ACSA), which is 
currently leading the expansion project for Mumbai International 
Airport.  Suri stated that there are at least 30 other domestic and 
international airports in India that need upgrading and identified 
Qinternational airports in India that need upgrading and identified 
airport infrastructure projects as an area where South African 
expertise could be utilized. 
 
 
¶6. (SBU) Suri noted that there was a huge potential for skills 
transfer from India that was thwarted by South African visa 
policies.  Suri pointed to the difficulty in obtaining South African 
work visas/permits for Indian IT workers as one factor that was 
limiting skills transfer between the two countries.  He commented 
that it was more difficult to obtain a South African visa than a 
U.S. one.  Indian companies have faced difficulty in both recruiting 
skilled personnel in South Africa and in transferring Indian 
personnel to South Africa. 
 
¶7. (U) Tourism between the two countries has also shown an upward 
trend, but it is still below potential.  Suri called for improved 
air and shipping connections to facilitate increased trade and 
tourism.  The Indian Consulate's figures show a steady growth of 
both inbound and outbound tourists. 
 
   South Africa/India Tourism Trend 
 
PRETORIA 00001320  002.2 OF 002 
 
 
Year   2002  2003  2004  2005 
SA to India 18,238 23,873 32,148  39,234 
India to SA 34,062 41,018 36,172 36,045 
 
 
(Comment.  The Assistant Director for India Tourism Johannesburg 
told Transport Officer that there has been increased demand from 
Indian clients for safari-based tours in South Africa in the last 
year.  As a result, the organization is sponsoring orientation trips 
to South Africa for India-based tour operators.  End Comment). 
 
---------------------------- 
Power Is a Cause for Concern 
---------------------------- 
 
¶8. (SBU) Suri said that Indian companies have been attracted to 
South Africa by its relatively good infrastructure (in comparison to 
domestic Indian infrastructure) and access to neighboring markets, 
but are beginning to hesitate due to concerns about the effects of 
power shortages.  State-owned power company Eskom has not been able 
to guarantee a steady power supply to existing industries. 
Connections to new customers were suspended and have recently 
resumed on a case-by-case basis (Reftel B).  There has been a rise 
in the number of Indian companies that have approached the Consulate 
and have expressed frustration in obtaining power for new projects 
or fear of a general economic downturn due to powers shortages. 
Suri said Indian companies were prepared to deal with the security 
costs associated with high crime in South Africa in the past, but 
the additional concern regarding the availability of power for new 
projects is leading Indian companies to reevaluate investment. 
 
 
¶9.  (SBU) COMMENT: Suri highlighted a trend in increased bilateral 
trade in his presentation.  However, he noted that the countries 
were still not optimizing the potential for growth in trade, 
investment, and tourism.  He pointed to the acceleration of 
preferential trade agreement negotiations, increasing air/sea 
transport links, and the easing of work visa requirements as 
prerequisites to increased bilateral trade and investment.  Power 
shortages, the latest and most critical obstacle to Indian foreign 
investment in South Africa raised by Suri, has been mentioned in the 
press and to the Embassy by other international investors. 
 
BOST