VZCZCXRO2775
RR RUEHDU RUEHMR RUEHRN
DE RUEHSA #2612/01 3360955
ZNY CCCCC ZZH
R 010955Z DEC 08
FM AMEMBASSY PRETORIA
TO RUEHC/SECSTATE WASHDC 6579
INFO RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RHEHNSC/NSC WASHDC
RUEAIIA/CIA WASHINGTON DC
RHEFDIA/DIA WASHINGTON DC

C O N F I D E N T I A L SECTION 01 OF 04 PRETORIA 002612 
 
SENSITIVE BUT UNCLASSIFIED 
SIPDIS 
 
AF/S PLEASE PASS TO A/S FRAZER 
EEB FOR CIP KATHERINE TOWNSEND 
 
E.O. 12958: DECL: 11/18/2018 
TAGS: EAIR ECPS ELTN ENRG PGOV SF
SUBJECT: NEW MINISTER OF PUBLIC ENTERPRISES BRIGITTE 
MABANDLA 
 
REF: A. PRETORIA 2477 
     ¶B. PRETORIA 2403 
     ¶C. PRETORIA 2401 
 
Classified By: Economic Counselor Perry Ball for reasons 1.5 (B) and (D 
) 
 
 ¶1.  (C) SUMMARY: New Minister of Public Enterprises Brigitte 
Mabandla brings little technical experience to her new 
position as government point-person for a diverse, troubled 
portfolio of state-owned enterprises.  There is a high 
probability for delay in state power utility Eskom's capital 
expansion program, including choosing a supplier for new 
nuclear power plants.  Loss-making South African Airlines 
will remain a headache and Mabandla will be confronted with 
requests for more cash.  The rail, ports and pipeline company 
Transnet's expansion program will be more influenced by the 
global credit crisis than Mabandla's tenure.  She will have 
limited influence in the telecom sector where industry seeks 
more liberalization than the Minister of Communications is 
willing to offer.  There is a high likelihood that she will 
adopt a passive steady-as-she-goes posture in managing her 
ministry, given her lack of experience and her role in a 
care-taker government.  Mabandla is not expected to continue 
in a Zuma government.  End Summary. 
 
------------------------------- 
Managing Challenged Parastatals 
------------------------------- 
 
¶2.  (SBU) South African President Kgalema Motlanthe appointed 
new Minister of Public Enterprises Brigitte Sylvia Mabandla 
on September 25, 2008 (Ref A).  She previously served as 
Minister of Justice and Constitutional Development from 2004 
to 2008.  Prior to that, she served as Housing Minister from 
2003 to 2004 and as Deputy Minister of Arts, Culture, 
Science, and Technology from 1995 to 2003, after first being 
elected to Parliament in 1994.  She has been a member of the 
ANC National Executive Council since December 2007.  Mabandla 
was born November 23, 1948.  From 1974 to 1975, she acted as 
youth coordinator for the Institute of Race Relations in 
Durban.  Mabandla obtained a law degree from the University 
of Zambia in 1979.  She lectured on law and English in 
Botswana for the first half of the 1980's.  The rest of the 
decade she spent as a legal advisor to the ANC Lusaka Legal 
and Constitutional Affairs Department.  She returned to South 
Africa as member of the ANC's constitutional and negotiating 
team from 1990 to 1994.  During this period, she was very 
active in the field of human rights, specifically minority 
rights, children's' rights, disabled people's rights, and 
women's rights, working with a variety of NGOs.  Mabandla's 
official biography lists her as married, but does not mention 
children.  A 2006 press report mentions that she had a 
five-month-old baby when she and her husband Lindelwa 
Mabandla were arrested in Durban in 1975 in celebrations of 
Mozambique's liberation. 
 
¶3.  (C) Many industry observers were not excited about 
Minister Mabandla's replacement of technocrat and 
interventionist Alec Erwin at the helm of the Department of 
Public Enterprises (DPE), the department with overall 
responsibility for the loss-making national carrier South 
African Airways and several other inefficient and troubled 
state-owned enterprises.  These include the power utility 
Eskom; the rail, ports and pipeline company Transnet; 
armaments manufacturer Denel; broadband company Infraco; next 
generation nuclear power producer Pebble Bed Modular Reactor 
Qgeneration nuclear power producer Pebble Bed Modular Reactor 
(PBMR); diamond miner Alexkor; and forestry assets manager 
Safcol.  (Note: Eskom and Transnet generate profits, but are 
seeking ambitious capital expansion programs.  PBMR is 
working on research and its permit to start a small 
demonstration plant and requires additional capital.  End 
Note.)  Mabandla does not bring technical acumen to her 
position and was not perceived as a good Minister of Justice. 
 At best, she will have a difficult task getting up-to-speed 
with her diverse and challenging portfolio of companies.  At 
worst, some observers wonder if she has been designated to 
preside over breaking up the ministry and spinning the 
parastatal companies off to their relevant economic 
ministries.  Her incumbent Director General Portia Molefe is 
viewed as a capable lead bureaucrat in the Ministry, who can 
serve as her tutor.  Energy Officer has heard her speak 
knowledgeably at a number of conferences. 
 
-------------------------------- 
 
PRETORIA 00002612  002 OF 004 
 
 
Eskom Struggles to Provide Power 
-------------------------------- 
 
¶4.  (C) Power utility Eskom is perhaps Mabandla's weightiest 
challenge, given Eskom's supply shortfall in provisioning the 
domestic and regional electricity markets and the 
controversial load-shedding earlier this year (Ref B). 
Industry analysts fear the change at the helm of the ministry 
may delay huge capital-intensive projects aimed to expand 
electricity generation for the country to mitigate its power 
crisis.  Standard Bank Economist Johan Botha told the press, 
"She has to walk in completely cold.  She won't put hand to 
paper to approve the big contracts like the nuclear one 
before she has been fully briefed."  The market is watching 
to see how soon, or if at all, Mabandla will give her 
approval to plans to build the country's second nuclear 
plant, as part of the ambitious goal of a fleet of new 
plants.  Westinghouse and Areva of France are the qualified 
bidders.  Westinghouse is confident that the deal will still 
be made, despite a series of delays and challenges to Eskom's 
financing capacity (Ref C).  The Westinghouse local rep told 
Energy Officer that Mabandla is expected to adopt a consensus 
- rather than an independent - decision-making style, given 
her lack of energy experience.  Department of Minerals and 
Energy Chief Director: Nuclear Tseliso Maquebela told an 
energy conference that the government would have to revisit 
nuclear plans given the new circumstances, but reaffirmed the 
SAG's commitment to increasing nuclear's share in the energy 
mix.  He said the SAG was waiting for Eskom's decision on the 
supplier.  Mabandla has quickly embraced the Eskom party line 
to brow-beat consumers for not doing enough to help mitigate 
the power crisis. 
 
¶5.  (C) Vodacom Chairman Oyama Mabandla, an influential 
business and political leader and the nephew of Minister 
Mabandla, told Economic Counselor and ICT Officer that her 
lack of technical expertise was an advantage in that she 
would be forced to take the advice of technical experts in 
Eskom and the DPE to make the correct decision about the 
nuclear contract, rather than rely on her own opinions.  He 
explained that Erwin was too much of a technocrat and 
intervened unnecessarily in all decision-making processes. 
Oyama Mabandla said his aunt would rely extensively on 
Director General Molefe's expertise, whom he described as 
competent. 
 
--------------------------------- 
South African Airways Bleeds Cash 
--------------------------------- 
 
¶6. (SBU) The aviation industry has greeted new Public 
Enterprises Minister Brigitte Mabandla with two simple 
requests: "No more handouts to South African Airways (SAA)" 
and Open Skies for Africa.  (Note: SAA used to be part of the 
state-controlled freight and transport logistics group 
Transnet, but was purged from Transnet's balance sheet when 
Transnet undertook major restructuring initiatives to 
eliminate all loss-making divisions.  End Note.)  Comair 
Joint Chief Executive Gideon Novick told the press, "Her 
appointment did not come a moment too soon.  The previous 
minister was a disaster and his interventions hurt the 
industry." "The new minister must just give taxpayers a break 
and instead give SAA to people who know how to run an 
airline.  The state has not realized any return on the 
billions of rand pumped into SAA over the years.  These 
subsidies create distortions in the market," added Novick. 
Qsubsidies create distortions in the market," added Novick. 
 
¶7. (SBU) SAA received R11.2 billion (USD$1.1 billion) in 
subsidies and bailouts during Erwin's tenure.  The money 
covered substantial losses incurred as a result of foreign 
exchange hedging, impairment of aircraft assets, major 
restructuring efforts, and retrenchments.  During the March 
2007-ending financial year, SAA returned a disastrous set of 
results and the airline asked for recapitalization.  SAA 
announced improved results for the year ending March 2008, 
but these results excluded restructuring costs.  The airline 
reported a significant turnaround to post a R123 million 
(USD$12 million) net profit (excluding restructuring costs) 
from ongoing operations in March 2008.  This compares to a 
loss of R883 million (USD$88 million) in the prior year. 
Despite industry criticism, Mabandla recently praised SAA CEO 
Khaya Ngqula for the implementation of the restructuring 
program and confirmed to the press that "no consideration is 
being given to replacing the CEO of SAA." 
 
 
PRETORIA 00002612  003 OF 004 
 
 
¶8. (C) Officials from the Department of Foreign Affairs (DFA) 
and the Department of Trade and Industry recently confirmed 
the financial difficulties faced by SAA during discussions to 
increase direct routes to the U.S.  These financial 
difficulties are the reason why the proposed new direct route 
from Johannesburg to Chicago and a number of existing routes 
to Europe were canceled in 2007.  They told Transport Officer 
that SAA had once again approached the government for a 
bailout package.  DFA officials explained that South Africa's 
ability to negotiate bilateral liberalized airlift strategies 
would be affected by SAA's balance sheet.  They also 
confirmed that DPE would not play a major role in initiatives 
such as Open Skies for Africa, which falls under the purview 
of the Department of Transport and the African Union. 
 
------------------------------------ 
Transnet Faces Financial Limitations 
------------------------------------ 
 
¶9. (SBU) Transnet's expansion plans are not expected to be 
influenced by the change at the helm of DPE.  However, global 
economic conditions and Fitch's recent downgrading of South 
Africa's sovereign credit rating could affect Transnet's 
ability to borrow from international markets to fund part of 
its R80 billion (USD$8 billion) expansions plans.  Transnet 
plans to expand capacity at its railways, ports, and 
pipelines over the next five years.  Key projects that have 
been approved include: the expansion of the coal railway line 
to the port of Richards Bay and the iron-ore railway line to 
the port of Saldanha, including upgrades to the rail line and 
port system; the widening and deepening of the Port of Durban 
entrance channel, including the redevelopment of Durban's 
Pier 1 as the container-handling facility and an increase in 
the capacity of the Durban car terminal; the widening and 
deepening of the Cape Town container terminal; the 
refurbishment and renewal of the freight rolling stock; the 
continued development of the new Port of Ngqura; and the 
construction of a multipurpose pipeline between Durban and 
Johannesburg.  Transnet CEO Maria Ramos, who was also a 
trained economist and rated by Fortune magazine as South 
Africa's most powerful businesswoman, has cautioned the 
country's policymakers against being "too adventurous" when 
shaping future economic policy.  She has also urged them to 
take full account of the fact that the world economy is 
probably entering its biggest crisis since the Great 
Depression. (Note:  Maria Ramos is also the long-time partner 
of Minister of Finance Trevor Manuel.  She recently announced 
that she will take a new job as CEO of ABSA Bank as of March 
¶1.  End Note.) 
 
----------------------------- 
Limited Influence over Telkom 
----------------------------- 
 
¶10. (SBU) Few industry analysts expect major changes in the 
ICT sector or a decline in the government's support of 
state-owned broadband company Infraco with the removal of 
Alec Erwin from the DPE.  BMI-Tech Managing Director Denis 
Smit described the Infraco project to the press as one of the 
few positive government interventions in the sector since it 
is expected to reduce bottlenecks in improving bandwidth 
capacity from undersea cables landing in South Africa.  ICT 
policy in the country is widely recognized as conservative 
and the pace of liberalization slow.  However, it is the 
incumbent Minister of Communications, Ivy Matsepe-Cassaburri, 
Qincumbent Minister of Communications, Ivy Matsepe-Cassaburri, 
who is criticized about the slow pace of liberalization. 
Major industry groups are pinning hopes of ICT sector 
de-regulation to Matsepe-Cassaburri's possible removal from 
the Ministry after the spring elections.  Minister Mabandla 
has formal control over Infraco, but does not directly 
control Telkom as a primarily private entity. 
 
¶11. (C) The South African Government's relationship with 
state-controlled fixed-line operator Telkom is complicated by 
the dual desires to increase Telkom profits and to reduce ICT 
costs.  The Mbeki cabinet approved the sale of Telkom's 
controlling interest in mobile-operator Vodacom to UK-based 
Vodafone.  Some analysts predicted that the new regime would 
reverse this Mbeki cabinet decision.  Nevertheless, the 
incoming South African cabinet embraced the decision, and the 
transaction is expected to be completed shortly.  Vodacom 
Chairman Oyama Mabandla told Economic Counselor and ICT 
Officer the proposal received wide-support because the Zuma 
camp wanted to send pro-market signals to international 
investors.  Additionally, the transaction will result in the 
 
PRETORIA 00002612  004 OF 004 
 
 
influx of more than USD$2 billion in foreign direct 
investment into South Africa at a time when global economic 
conditions are adding pressures to country's current account 
deficit. 
 
-------------------------------------------- 
Mabandla and SAPS Commissioner Jackie Selebi 
-------------------------------------------- 
 
¶12.  (C) Former Justice Minister Mabandla has been 
compromised in the eyes of many South Africans by her failure 
to prosecute former South African Police Service (SAPS) 
Commissioner Jackie Selebi, who is the subject of corruption 
allegations.  Oyama Mabandla told the Economic Counselor last 
year that he had asked his aunt at a family function if 
Selebi was "a crook."  She agreed that he was.  When her 
nephew then asked why she went along with the suspension of 
Vusi Pikoli, the National Prosecutors Authority head who was 
prosecuting Selebi for corruption, she implied that it was 
difficult to go against the wishes of President Mbeki.  Given 
Zuma's publicly stated belief that he was persecuted by the 
Mbeki government, while other Mbeki loyalists like Selebi 
were protected, Minister Mabandla is fortunate to still have 
a job with the Motlanthe government.  Oyama Mabandla said she 
was kept on, along with any other ministers who chose to 
remain, to reduce the destabilizing impact of President 
Mbeki's departure.  He told the Economic Counselor earlier 
this month that he did not think she would be asked to 
continue into the next government.  "She is not part of the 
Zuma camp.  She has not been told that she will leave," he 
said, "but she expects that to happen." 
 
------------------------------------- 
Long-Standing Family Ties in the U.S. 
------------------------------------- 
 
¶13.  (C) Minister Mabandla has an older sister-in-law, age 
75, and a brother-in-law who emigrated to the U.S. in 1962, 
during the apartheid years.  They settled in San Diego, 
California where one or both of them was on the faculty of 
the University of California at San Diego.  Oyama Mabandla is 
the child of another brother-in-law.  Oyama Mabandla went to 
live with his relatives in San Diego for six months in the 
early 1990s before he got a place of his own.  He lived in 
the U.S. for almost ten years and got all of his tertiary 
education there, including an a BA degree in Political 
Science at UC San Diego and a law degree in Corporate Law at 
Colombia University.  He once had a green card and has a 
child who is a U.S. citizen.  He said he was very fond of the 
U.S. and in many respects regarded the U.S. as his second 
home.  "I feel a deep sense of connection to the country," he 
said, "even though the feeling is sometimes not exactly 
reciprocated, especially by the immigration officials."  He 
voluntarily gave up his green card the last time he left the 
U.S.  He is currently in the process of applying for a 
tourist visa to visit Washington and New York during and 
after the Presidential inauguration on January 20.  Oyama 
Mabandla is a strong Obama supporter. 
 
¶14.  (C) Comment: Minister Mabandla presides over much of the 
"commanding heights" of the economy, controlling the key 
sectoral parastatals in power, aviation, and transport - and 
to a lesser extent, telecom.  The Embassy does not expect her 
to produce radical policy changes.  She now sits in a key 
position for advancing the SAG's potential decision on the 
next nuclear power plant supplier, but the final decision 
Qnext nuclear power plant supplier, but the final decision 
will not be hers.  That is because any decision that is made 
regarding this or any other major infrastructural project 
will have to be made at the cabinet level. 
LALIME