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UNCLAS SECTION 01 OF 07 PRETORIA 002689 
 
SIPDIS 
 
AF/S PLEASE PASS TO A/S FRAZER 
 
E.O. 12958: N/A 
TAGS: KJUS PGOV KDEM SF
SUBJECT: SCENESETTER FOR A/S FRAZER'S DECEMBER 18-22 VISIT 
TO SOUTH AFRICA 
 
PRETORIA 00002689  001.2 OF 007 
 
 
¶1.  (SBU) Ambassador Bost warmly welcomes your visit to South 
Africa.  The Mission stands ready to do everything it can to 
make your trip a success.  You are visiting South Africa at a 
particularly interesting time, just three months after Thabo 
Mbeki resigned as President under pressure from the ruling 
African National Congress (ANC) and Parliament elected 
Kgalema Motlanthe to serve as caretaker president until the 
2009 elections. 
 
¶2.  (SBU) South Africa is an anchor country in U.S.-Africa 
policy.  Since the end of apartheid in 1994, the 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: 
reducing the gap between the historically privileged and 
disadvantaged communities -- primarily through 
government-provided housing, electricity, and water to the 
poor -- and creating educational, skills development, 
employment and business opportunities. 
 
¶3.  (SBU) South Africa continues to face daunting challenges, 
including a lack of public sector capacity, a thirty percent 
shortfall in mid-to-upper-level public sector managers, 
skills shortages in all sectors, growing infrastructure 
bottlenecks, energy shortages, income inequality, less than 
adequate educational opportunities, massive unemployment, 
entrenched rural and urban poverty, violent and widespread 
crime, xenophobic riots, and a severe HIV/AIDS pandemic. 
These problems intensify political tensions within the ruling 
coalition and with other political, civil society, and 
private sector groups. 
 
¶4.  (SBU) Despite its many challenges, South Africa remains 
the continent's best prospect for establishing a successful 
democratic society with expanding prosperity.  South Africa 
is a leader of aid-recipient countries in their dialogue with 
donor nations.  It plays a key role in promoting peace and 
stability in Africa, and is an important voice on global 
trade, human rights, conflict resolution, and 
nonproliferation issues.  U.S.-South African relations are 
stable, as reflected by President Bush's July 2003 visit to 
South Africa, President Mbeki's June 2005 and December 2006 
trips to Washington, and African National Congress (ANC) 
President Jacob Zuma's visit to Washington in October this 
year.  We share common objectives with the SAG on the African 
continent and beyond, and we work closely on many of them. 
 
------------------------- 
RECENT POLITICAL OVERVIEW 
------------------------- 
 
¶5.  (SBU) The ANC dominates the political scene in South 
Africa but is showing signs of internal strife.  The ANC won 
70 percent of the vote and 279 of 400 seats in the National 
Assembly in the April 14, 2004 elections.  Subsequent "floor 
crossing" periods, where parliamentarians were allowed to 
switch parties, boosted the ANC's total to 297.  The ANC also 
won 66 percent of the national vote in the March 2006 local 
elections.  The Democratic Alliance (DA) is the largest of 
several small opposition parties in parliament, with 47 
seats.  The ANC leads administrations in all nine provinces 
and in the vast majority of the municipalities.  The DA's 
control of the Cape Town municipality is the most visible 
exception to this country-wide ANC domination.  There have 
been multiple attempts by the ANC to unseat the DA-led, 
multi-party coalition, and each unsuccessful attempt has 
Qmulti-party coalition, and each unsuccessful attempt has 
increased the local stature of the DA. 
 
¶6.  (SBU) The December 2007 ANC National Conference in 
Polokwane, Limpopo shifted power within the ruling party. 
New ANC President Jacob Zuma defeated incumbent national 
President Thabo Mbeki by a vote of 2,329 to 1,505.  Zuma's 
allies swept the other top five ANC positions.  The Zuma camp 
dominated the elections for the ANC's 86-member National 
Executive Council (NEC) with sixteen Mbeki Cabinet members 
(out of 28) losing their NEC seats.  Zuma's victory makes him 
the front-runner to become national President following the 
2009 parliamentary elections.  Zuma's successful court 
challenge to his 2007 indictment on corruption and fraud 
charges formed the pretext for the ANC decision to recall 
Thabo Mbeki as President.  Zuma's political allies, who have 
consistently alleged that the corruption case was 
politically-motivated, found in the court ruling what they 
 
PRETORIA 00002689  002.2 OF 007 
 
 
needed to claim Mbeki had engineered a politically-motivated 
case against Zuma. 
 
¶7.  (SBU) The tense debate at the party's December 2007 ANC 
National Conference and defeat of incumbent Mbeki reflected 
the growing impatience with the pace of socio-economic change 
and laid the groundwork for the recent Mbeki 'recall' and 
resignation.  It is also in large part a reflection of the 
growing restlessness and dissatisfaction with the ANC's 
inability to deliver a better life for everyone. 
 
¶8.  (SBU) It is too soon to tell whether the results of the 
ANC National Conference will lead to changes in SAG policy. 
Motlanthe's presidency ends with the 2009 elections.  ANC 
President Zuma stresses that as president he will not make 
radical policy changes and that he respects the party's 
previous policy consensus.  However, many new ANC leaders -- 
and Zuma's strongest coalition supporters -- come from the 
left wing of South African politics.  The Congress of South 
African Trade Unions (COSATU) and the South African Communist 
Party (SACP) are formal members of the ANC-led tripartite 
alliance. These groups are pressuring Zuma to embrace more 
leftist or perhaps even populist positions in the interests 
of the working-class poor. On issues like HIV/AIDS and 
Zimbabwe, this could lead to SAG policies more closely in 
line with U.S. interests.  However, on other issues -- like 
fiscal management, nationalization of industry/resource 
sectors, and trade liberalization -- the shifts in policy 
might be less positive from a U.S. perspective.  It seems 
likely that the new ANC leaders will be more focused on 
domestic rather than continental or global issues, which 
could reduce the SAG's activist role in international affairs. 
 
¶9.  (SBU) The ANC is showing increasing signs of strain after 
former president Thabo Mbeki was recalled on September 21, 
¶2008. Reasons for Mbeki's forced resignation were 
personality-driven leadership competition, the polarization 
of ANC factions supporting Zuma and Mbeki, the Zuma-led 
faction's belief that Mbeki abused executive power by 
interfering with the state prosecutor's decision to file 
corruption charges against Zuma, and disagreements regarding 
the party's operations and future direction.  Zuma's 
supporters interpreted a recent court ruling ending the 
recent corruption case against Zuma as proof that Mbeki led a 
conspiracy to deny Zuma's presidential ambitions.  They acted 
immediately to 'recall' Mbeki in the belief that his removal 
would end the threat of a future prosecution against Zuma. 
Following the recall of Mbeki in September, several of the 
former President's allies created a new political party 
called the Congress of the People (COPE).  Former Defense 
Minister Mosiuoa Lekota and former Gauteng premier Sam 
Shilowa are the two leaders of the party, but there is 
speculation that Mbeki is providing policy input and 
direction.  COPE is competing in by-elections on December 10 
and will hold its party manifesto launch on December  16. 
This is a critical and fluid period in the political 
development of South Africa -- potentially as critical as the 
transition from apartheid. 
 
------------------------------------------ 
FOREIGN POLICY - FOCUS ON PROMOTING AFRICA 
------------------------------------------ 
 
¶10.  (U) South Africa under Mbeki took a high-profile role 
promoting Africa's interests -- the African Renaissance. 
Qpromoting Africa's interests -- the African Renaissance. 
South Africa served as the first chair of the African Union 
until July 2003 and helped establish continental institutions 
such as the Pan-African Parliament (which sits in South 
Africa) and the AU Peace and Security Council.  Mbeki was the 
driving force behind the New Partnership for Africa's 
Development (NEPAD), an African-developed program based on 
international best practices and continental peer review to 
strengthen economic and political governance across the 
continent. NEPAD is also a framework for African partnerships 
with the international community. These initiatives are early 
in their evolution and have not yet become effective 
mechanisms for development. 
 
¶11.  (SBU) South Africa believes that, by virtue of its 
history and regional political, economic, and military clout, 
it has a responsibility to lead African conflict resolution 
efforts and participate in peace support operations.  South 
Africa continues to play a lead role in conflict resolution 
 
PRETORIA 00002689  003.2 OF 007 
 
 
in Burundi and contributes troops to UN Peace Keeping 
missions in the Democratic Republic of Congo (DRC) and Sudan. 
 South Africa has approximately 3,000 personnel deployed in 
peace support operations in Africa.  The U.S. has a strong 
interest in helping South Africa expand and enhance its 
peacekeeping and disaster assistance capabilities.  South 
Africa participates in the African Contingency Operations 
Training and Assistance program (ACOTA) to enhance the South 
African National Defence Force's (SANDF) capacity to 
participate in multilateral peace support operations. The 
U.S. uses International Military Education and Training 
(IMET) funds to support professional military education and 
technical training of future military leaders.  With the 
January 2008 repeal of the American Servicemen's Protection 
Act (ASPA) prohibitions on provision of military assistance, 
we hope to resume Foreign Military Financing (FMF) programs 
supporting the South African Air Force's C-130 fleet which 
South Africa is using to support troops deployed to the DRC, 
Sudan, and Burundi.  While South African officials have been 
openly critical of U.S. Africa Command, they continue to 
engage with the U.S. in a wide range of military-to-military 
activities.  In October, the U.S. completed the successful 
first visit by a U.S. Navy aircraft carrier to South Africa 
since 1967.  Some observers believe that this visit could 
mark a turning point in military-to-military relations. 
 
¶12.  (SBU) Zimbabwe remains a continuing challenge and 
increasing concern for South Africa.  In March 2007, SADC 
leaders appointed Mbeki as the mediator between Zimbabwean 
President Robert Mugabe and the opposition Movement for 
Democratic Change (MDC) with the goal of leveling the 
electoral field before the March 2008 elections. 
Negotiations made some progress, but human rights abuses 
against the opposition accelerated.  In the March 2008 
elections, the MDC won a small majority of seats in the 
Parliament.  MDC leader Morgan Tsvangirai won a plurality of 
the vote (47 percent) but not enough to avoid a presidential 
runoff.  Presidential runoff elections planned for June 27, 
2008 were preceded by a campaign of state-sponsored violence 
and intimidation that undermined the atmosphere for a fair 
electoral contest.  Some critical observers contend that the 
election may have been stolen before any votes were cast.  As 
a result of the political instability and violence against 
MDC supporters, Tsvangirai dropped out of the race on June 
¶22.  A SADC-brokered power-sharing agreement in September 
remains to be implemented as the Zimbabwe African National 
Union' Patriotic Front (ZANU-PF) refuses to give up key 
ministries and governorships.  Following Mbeki's 'recall' as 
President of South Africa, the SAG and SADC asked him to stay 
on in his role as SADC's chief Zimbabwe negotiator.  In 
November, MDC asked Mbeki to recuse himself from the 
negotiations.  Party principals have not yet agreed to a 
constitutional amendment, negotiated by the three political 
party negotiating teams, that would establish the basis for a 
power-sharing government. 
 
¶13.  (SBU) Overall U.S.-South African relations are positive, 
but South Africa sometimes takes positions on global issues 
that run counter to U.S. interests.  As a non-permanent UN 
Security Council member, and former chair of the G-77 and the 
QSecurity Council member, and former chair of the G-77 and the 
Non-Aligned Movement (NAM), South Africa advocates for a 
greater voice for the "South" relative to the 'North' in 
global finance and international institutions, increased 
development assistance, an expanded and reformed UN Security 
Council, and lower trade barriers (for manufactured and 
agricultural exports to developed countries). 
 
----------------------------------------- 
THE ECONOMY AND THE STRUGGLE TO TRANSFORM 
----------------------------------------- 
 
¶14.  (SBU) South Africa is a middle-income, emerging market 
economy with GNI per capita of $5,670 (2007), akin to Chile, 
Malaysia, or Thailand.  The SAG has pursued prudent monetary 
and fiscal policies, which turned a fiscal deficit of 6 
percent of GDP in 1994-05 to a small surplus of 0.9 percent 
of GDP in 2007-08.  The South African Reserve Bank (SARB) is 
independent. It targets an inflation rate of 3-6 percent, but 
is currently struggling to contain an inflation rate of 13 
percent (August 2008), caused by global food and fuel 
inflation and reinforced by a weakening rand and increased 
inflation expectations.  SARB has lifted interest rates by 5 
basis points since 2006.  Analysts do not expect inflation to 
 
PRETORIA 00002689  004.2 OF 007 
 
 
fall back within the target band until 2010.  Real GDP growth 
averaged 5 percent per year between 2005 and 2007, but is 
expected to drop to about 3.5 percent in 2008 because of 
higher interest rates, serious power shortages and weakening 
commodities prices. 
 
¶15.  (SBU) South Africa's financial system has not been 
directly affected by recent turmoil in global financial 
markets.  The local banking system is well-capitalized and 
strictly-regulated, and banks and other financial 
institutions have relatively little exposure to sub-prime 
debt or other contagion.  Banks raise most of their capital 
domestically.  However, South Africa depends on portfolio 
inflows to finance its large current account deficit (about 8 
percent of GDP).  The recent global 'flight to safety' has 
taken a heavy toll on the Johannesburg Stock Exchange and the 
rand.  Many analysts fear that recession in the U.S. and 
Europe will have a significant impact on South African 
manufactured, agricultural, and commodity exports. 
 
¶16.  (SBU) South Africa's single greatest economic challenge 
is to accelerate growth in a slowing global economy in order 
to address widespread unemployment and reduce poverty.  The 
official unemployment rate, currently 23.0 percent, has only 
recently begun to decline and is significantly higher among 
black South Africans than among whites.  Income inequality 
between haves and have-nots remains one of the highest rates 
in the world. Fifty-six percent of black South Africans, but 
only four percent of whites, live in poverty.  The lack of 
capacity and service delivery at the provincial and municipal 
levels fueled the recent xenophobic attacks on refugees from 
neighboring countries as South Africans from lower 
socioeconomic strata feared that jobs, houses, and other 
services were being given to non-South Africans.  Other 
obstacles exacerbating South Africa's unemployment and 
economic problems are skill shortages, a brain and skills 
drain, and education system weaknesses.  Nevertheless, the 
SAG has made strides in the areas of transfer payments and 
public services to close the gap.  Nearly 2.5 million 
low-cost homes have been built to provide shelter to 7.6 
million people, 3.5 million homes have been provided with 
electricity, and nine million people have been connected to 
clean water.  Almost 12.4 million people were benefiting from 
social grants in 2007.  The SAG's broad-based Black Economic 
Empowerment (BEE) program provides ownership and employment 
opportunities to blacks and has helped the black middle class 
double to an estimated two million since 1994. 
 
¶17.  (U) The success in preparing for and carrying off the 
FIFA 2010 Soccer World Cup to be held in South Africa in 
mid-June 2010 is regarded by many as a bellwether of the 
country's commitment to continued progress in a variety of 
social and economic areas, among these being the fight 
against crime, providing services, expanding and improving 
infrastructure, and developing tourism. 
 
------------------------------ 
U.S.-S.A. TRADE AND INVESTMENT 
------------------------------ 
 
¶18.  (SBU) U.S.-South Africa trade grew 22 percent in 2007, 
totaling $14.3 billion.  U.S. exports rose 23 percent to $5.2 
billion, while South African exports to the United States 
increased 22 percent to $9.1 billion.  South Africa was the 
third largest beneficiary of the African Growth Opportunity 
Qthird largest beneficiary of the African Growth Opportunity 
Act (AGOA) and the largest beneficiary of non-oil exports to 
the U.S. under AGOA in 2007. An impressive 98.1 percent of 
South Africa's exports entered the U.S. with zero import 
duties in 2007 as a result of normal trading relations (NTR), 
GSP, and AGOA.  The U.S. also replaced Japan as the largest 
export market in 2007.  Western Cape citrus farmers rely on 
exports to the U.S., without which they claim they could not 
survive. 
 
¶19.  (SBU) 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 policies, transportation infrastructure, 
sophisticated financial sector, and, by African standards, 
large market are the primary attractions for U.S. businesses. 
 Nevertheless, South Africa has failed to attract a 
proportionate share of global foreign direct investment since 
¶1994.  Reasons include a volatile exchange rate, distance 
 
PRETORIA 00002689  005.2 OF 007 
 
 
from developed country markets, high unit labor costs, strong 
unions, skills shortages, crime, HIV/AIDS, regulatory 
uncertainty, and the impact of Black Economic Empowerment 
policies such as the mandatory sale of equity to previously 
disadvantaged persons.  The U.S. was the second largest 
portfolio investor and the second largest foreign direct 
investor in South Africa after the U.K. ($5.5 billion at 
year-end 2006).  General Motors, Ford, and Timken are among 
the top industrial investors in South Africa.  Westinghouse 
has been competing for a $10-20 billion nuclear reactor 
contract which was recently postponed, but the SAG is still 
looking for a nuclear technology strategic partner for new 
nuclear power plants.  Teletech recently opened a large call 
center in Cape Town and has plans to open smaller centers in 
other parts of the country. 
 
¶20.  (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) 
suspended free trade agreement negotiations in April 2006. 
Negotiators subsequently agreed to deepen the bilateral 
relationship through a on Trade, Investment and Development 
Cooperative Agreement (TIDCA).  A framework agreement for the 
TIDCA was signed at the annual AGOA Summit in Washington on 
July 14, 2008.  Negotiators will soon begin work on customs 
cooperation and technical barriers to trade (TBT) agreements 
to reduce existing barriers to bilateral trade. 
 
----------------------------- 
U.S. SUPPORT FOR SOUTH AFRICA 
----------------------------- 
 
¶21.  (U) Since 1994, the USG has contributed approximately 
$1.9 billion toward South Africa's development; including 
$250 million in credit guarantees, and, since 1998, $100 
million in education, $120 million in economic growth, and 
$88 million in democracy and governance.  Currently, our 
development assistance program focuses on:  supporting South 
Africa's response to HIV/AIDS and TB through the U.S. 
President's Emergency Plan for AIDS Relief (PEPFAR); 
addressing unemployment through financing and business 
development services for SMEs, job-skills training and 
education; reducing gender-based violence as part of the 
President's Women's Justice and Empowerment Initiative 
(WJEI); enhancing the quality of education through teacher 
training; and partnering with the SAG in third countries 
engaged in post-conflict rebuilding.  South African NGOs have 
also received Trafficking in Persons (TIP) grants over the 
past few years to assist in the global fight against 
trafficking in persons.  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), the Rockefeller Foundation (adult 
education), and the Clinton Foundation (HIV/AIDS and Climate 
Change). 
 
¶22.  (U) Twenty-eight U.S. government entities are 
represented at the U.S. Mission in South Africa (Embassy 
Pretoria and the three Consulates in Cape Town, Durban, and 
Johannesburg). The Mission has 318 approved U.S. positions 
(only 241 are filled) and 570 local employees.  More than 40 
percent of Mission staff provides regional services to other 
U.S. embassies in Africa.  The Mission has embarked on an 
ambitious program to build safe office facilities.  In 
FY2005, the Mission completed the new consulate compound in 
QFY2005, the Mission completed the new consulate compound in 
Cape Town.  In FY 2009, the Mission will complete a new 
consulate building in Johannesburg.  In FY 2010/2011 the 
Mission intends to break ground on a new 155-desk office 
annex in Pretoria. 
 
-------------------------------------- 
HIV/AIDS: A CRISIS OF EPIC PROPORTIONS 
-------------------------------------- 
 
¶23.  (U) South Africa has the largest number of HIV-infected 
citizens in the world.  HIV/AIDS-related illnesses, 
particularly due to HIV/tuberculosis (TB) co-infection, are 
the country's leading cause of death.  Despite South Africa's 
overall wealth, life expectancy at birth has decreased from 
67 to 52, the regional average, due to HIV/AIDS and HIV/TB 
co-infection. Under-five mortality, with the Millennium 
Development Goal (MDG) of 24 per 1,000 in 2015, has increased 
from 60 to 67 per 1,000 between 1990 and 2006.  While 
 
PRETORIA 00002689  006.2 OF 007 
 
 
achieving the MDGs is the SAG's highest priority, South 
Africa is moving further away from these goals in both child 
and maternal mortality as a result of HIV/AIDS. 
 
¶24.  (U) An estimated 5.4 million South Africans are 
HIV-positive including 2.7 million women and about 300,000 
children 14 years old or less.  An estimated 18.8 percent of 
adults between 15 and 49 are HIV-infected and women in the 
age group of 25-29, the most seriously affected, have 
prevalence rates of up to 40 percent in some areas.  An 
estimated 530,000 new infections occur annually. In 2006, 
350,000 adults and children died from AIDS; an estimated 1.8 
million deaths have occurred since the start of the epidemic; 
and 71 percent of all deaths in 15 to 41-year-olds are due to 
AIDS. In the last few years, there is an indication that 
prevalence may be starting to decline.  Prevalence in 
antenatal care fell from 29 percent in 2005 to 28 percent in 
¶2008.  At least 1.6 million children, approximately 10 
percent of South Africa's youth, have had at least one parent 
die and 66 percent of these have been orphaned by AIDS. 
Continuing AIDS-related mortality will create millions of new 
orphans and generate additional social and economic 
disruption, in part due to orphans being raised by extended 
families or in child-headed households. 
 
¶25.  (U) The epidemics of HIV and TB are interlinked.  TB is 
the most common infectious disease in sub-Saharan Africa and 
approximately 50 percent of HIV patients in South Africa also 
have TB.  A high overall prevalence rate of HIV, HIV/TB 
co-infection, and lack of continuity in treatment contribute 
to the increasing incidence of active TB, including multi-and 
extensive drug-resistant TB strains (MDR- and XDR-TB).  The 
piloting of an SAG-approved rapid test for MDR-TB may allow 
more rapid identification and initiation of appropriate 
treatment, but staff shortages and skills challenges impede 
an effective response to TB.  Failure to adequately control 
and treat TB may undo all the gains South Africa has made in 
HIV care and treatment thus far. 
 
¶26.  (U) The South African National Strategic Plan for HIV & 
AIDS and Sexually Transmitted Infections 2007-2011 (NSP) 
provides a road map for responding to this crisis and sets 
out goals of reducing new HIV infections by 50 percent by 
2011 and increasing access to anti-retroviral treatment 
(ART).  The recall of Mbeki and the subsequent appointment of 
Barbara Hogan as the new Minister of Health under Motlanthe 
promises new initiatives in health, particularly as they 
pertain to HIV and TB.  Hogan, unlike her predecessor, Dr. 
Manto Tshabalala Msimang, has been outspoken in affirming the 
link between HIV and AIDS and has galvanized support from 
government and non-governmental organizations (NGOs) to reach 
the NSP targets.  The South African public health system 
suffers from deterioration of the existing health 
infrastructure, need for expansion of clinical and laboratory 
facilities, and a strengthening of the health care 
infrastructure, particularly for chronic disease, which 
includes HIV and TB; increased coverage of HIV treatment; HIV 
prevention; and TB control and treatment. Although the 
country has made impressive progress towards expanding access 
to ART, the current number of people on ART is less than 30 
percent of those who need it. 
 
¶27.  (U) The U.S. President's Emergency Plan for AIDS Relief 
Q27.  (U) The U.S. President's Emergency Plan for AIDS Relief 
(PEPFAR) is in its fifth year of implementation and has 
recently been re-authorized for a second five-year period. 
PEPFAR is implemented in South Africa by five USG agencies: 
the U.S. Agency for International Development (USAID); the 
U.S. Department of Health and Human Services (HHS), which 
includes the Centers for Disease Control and Prevention 
(CDC); the U.S. Department of State; the U.S. Department of 
Defense; and the Peace Corps. PEPFAR and its implementing 
agencies work with the public and private sector to deliver 
programs for HIV prevention, care, and treatment.  In doing 
this, PEPFAR and its implementing agencies align their goals 
with that of the NSP.  To date, the PEFPAR program in South 
Africa is the largest recipient of PEPFAR resources, i.e., a 
total of $1.45 billion, including $591 million in FY08.  As 
of March 2008, PEPFAR directly supported 305,356 people on 
ART through programs in all nine provinces.  With PEPFAR 
funding, the South African military has expanded HIV 
prevention, care, and treatment programs and collaborates 
with the U.S. military and the National Institutes of Health 
(NIH) on HIV/AIDS and TB research. 
 
PRETORIA 00002689  007.2 OF 007 
 
 
 
¶28.  (U) South Africa has the strongest research and training 
capacity of any country in the region, making it an important 
partner in HIV/AIDS and TB efforts.  USG agencies work with 
national and provincial health departments, the South Africa 
military, universities, and NGOs to strengthen primary health 
care, disease surveillance, and research.  NIH provides 
approximately $300 million in funding to South African 
researchers per year, with 90 percent of this focused on 
HIV/AIDS and TB research.  The U.S. Mission has prepared a 
five-year strategic plan in coordination with the SAG for HIV 
prevention, care, and treatment for not only adults, but also 
for orphans and other vulnerable children (OVCs).  As we move 
in the second five-year period of PEPFAR, the USG team will 
work with the SAG to develop a Partnership Compact outlining 
a joint five-year strategy on mutual financial, operational, 
and programmatic commitments.  South Africa is moving into a 
transition phase with an expected 75 percent budget reduction 
in PEPFAR funding during the next three years (from $591 
million in FY08 to $150 million in FY2011. This expected 
reduction will correspond with increased emphasis on 
technical assistance and human capacity development coupled 
with greater funding and program implementation by the SAG. 
The current change in SAG leadership will greatly facilitate 
the development and implementation of this five-year strategy 
and collaboration. 
BOST