Cablegate: Scenesetter for Ambassador Bonnie Jenkins'

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UNCLAS SECTION 01 OF 05 PRETORIA 002271

SENSITIVE BUT UNCLASSIFIED
SIPDIS

FOR AMBASSADOR JENKINS FROM AMBASSADOR GIPS

E.O. 12958: N/A
TAGS: PREL MNUC PARM KNNP TBIO SF
SUBJECT: SCENESETTER FOR AMBASSADOR BONNIE JENKINS'
INTERAGENCY TEAM VISIT TO SOUTH AFRICA, NOVEMBER 8-11, 2009

REF: A. STATE 097420
B. STATE 100237

PRETORIA 00002271 001.2 OF 005

(SBU) I warmly welcome your visit to South Africa. The
Mission stands ready to do everything it can to make your
trip a success. The control officer in Johannesburg/Pretoria
will be Deputy Political Counselor Madeline Seidenstricker,
who can be reached at 27-12-431-4173. Assisting in scheduling
technical meetings will be Energy-Minerals Officer David
Young and Transportation/ICT Officer Daleya Uddin. They can
be reached at 27-12-431-4681 and 4344 respectively.

2. (SBU) You are visiting South Africa at a time of
possibility and promise, following Presidents Obama and
Zuma's agreement on the margins of the G-8 Summit in July to
increase dialogue on international security and arms control,
Secretary Clinton's visit on August 6-9, and Special Advisor
Einhorn's visit on August 24-31. The Secretary called for
greater bilateral engagement on a wide range of issues,
including nonproliferation. Special Advisor Einhorn's visit
extended and deepened the pledge to work with South Africa as
a partner in global security and energy issues and paved the
way for the signing in Vienna of a nuclear R & D agreement in
September. I look forward to your visit as the next chapter
in a promising, enhanced dialogue, and am optimistic that
your South African interlocutors will welcome your message on
possibilities for U.S. programmatic partnerships with South
Africa to address the global threats our two countries face.

3. (SBU) The African National Congress-led (ANC) South
African Government (SAG) has made great progress since the
end of apartheid in 1994. The SAG has focused on political
and economic transformation, i.e., reducing the gap between
the historically privileged and disadvantaged communities.
It remains committed to delivering government-provided
housing, electricity, and water to the poor, and creating
educational, skills development, employment, and business
opportunities for the previously disadvantaged. 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, infrastructure bottlenecks, enormous income
inequality, inadequate educational opportunities, massive
unemployment, entrenched rural and urban poverty, violent and
widespread crime, xenophobia, and a severe HIV/AIDS pandemic.
South Africa remains committed to establishing a successful
democratic society with expanding prosperity despite its many
challenges. Approximately 77 percent of registered voters
participated in the April 22 national elections.

----------------------------------
The Political Landscape Under Zuma
----------------------------------

4. (SBU) The ANC dominates the political scene in South
Africa. In the April 2009 national and provincial election,
the ANC won 66 percent of the vote and 264 National Assembly
seats, earning the right to govern for the fourth consecutive
time since 1994. A new opposition party that broke from the
ANC, the Congress of the People (COPE), gained 30 seats in
the National Assembly in the 2009 election and is now the
Qthe National Assembly in the 2009 election and is now the
third largest national party as well as the official
opposition in three of the nine provinces. Meanwhile, the
non-ANC opposition parties have steadily benefited from ANC
turmoil. The Democratic Alliance (DA) is the largest of
several small opposition parties in the National Assembly,
winning 47 seats in 2004 and 67 seats in 2009. In 2009, the
DA earned 51 percent of the vote in the Western Cape to win
an outright governing majority in the province.

5. (SBU) President Zuma's Cabinet selections, particularly
the re-appointment of former Health Minister Barbara Hogan as
Minister of Public Enterprises and former Finance Minister
Trevor Manuel as Minister of Planning in the Presidency, show
that the ANC wants to improve policy implementation in
certain areas without drastic overhauls. Despite such
signals, many of the new Cabinet appointments -- and some of
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 members of the ANC-led tripartite alliance.
These groups are pressuring Zuma to embrace more populist or

PRETORIA 00002271 002.3 OF 005

leftist positions in the interests of the working-class poor,
and they supported the appointment of many of their members
to the Cabinet. In the face of growing dissatisfaction with
government's ability to deliver services to the poor, ANC
leaders will be more focused on domestic rather than
continental or global issues.

6. (SBU) U.S.-South Africa bilateral relations are positive
overall, but South Africa has taken positions in multilateral
fora that run counter to U.S. interests. South Africa
advocates for a greater voice for the "South" relative to the
"North" in an expanded UN security Council and in the
governance of financial institutions, along with increased
development assistance and lower trade barriers. South
Africa plays a lead role in conflict resolution in Burundi
and contributes troops to UN Peace Keeping missions in the
Democratic Republic of Congo (DRC), Burundi, and Sudan.
South Africa has down-sized its forces in Burundi to a small
100-man security force and is due to withdraw all of its
troops by the end of 2009.

7. (SBU) South Africa has approximately 3,000 personnel
deployed in peace support operations in Africa (DRC and
Sudan) and 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
U.S. African Contingency Operations Training and Assistance
(ACOTA) program to enhance the South African National Defense
Force's (SANDF) capacity to participate in multilateral peace
support operations. Motivated, in part, by lingering
suspicions of the U.S. dating to the cold war, South African
defense officials have been openly critical of U.S. Africa
Command in the past, but the Embassy has been making progress
in engaging with the SAG on this issue and continues to
engage in a wide range of military-to-military activities.
In 2008, the U.S. completed the first visit by a U.S. Navy
aircraft carrier to South Africa since 1967. This marked a
turning point in military-to-military relations, though
occasional hiccups still occur.

8. (SBU) South Africa is a middle-income, emerging market
economy with purchasing power parity GNI per capita of $3,206
(2008), 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. However, the
current recession has cut deeply into tax revenues, causing
Finance Minister Gordhan to project a fiscal deficit of 7.7
percent of GDP in 2009/10. The South African Reserve Bank
(SARB) is independent. It targets an inflation rate of 3-6
percent, but is currently struggling with inflation of about
6.4 percent. GDP contracted 6.4 percent and 3 percent in the
first and second quarters of 2009, respectively, owing to
slumps in commodity prices and manufactured exports. South
Africa is now in official recession, and analysts forecast a
fall in GDP of about 2.0 percent in 2009.

9. (SBU) South Africa's financial system has not been
directly affected by recent turmoil in global financial
Qdirectly 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).

10. (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 23.5 percent, 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 African immigrants. Other obstacles exacerbating
South Africa's economic growth and service delivery problems

PRETORIA 00002271 003.2 OF 005

are skill shortages, a brain and skills drain, and education
system weaknesses.

11. (U) South Africa's ability to prepare for and carry off
the FIFA 2010 Soccer World Cup (to be held in South Africa
between June 11 and July 11, 2010) is regarded by many as a
bellwether of the country's commitment to continued progress
in a variety of social and economic areas, including
providing services, expanding and improving infrastructure,
developing tourism, and pursuing the fight against crime.
South Africa's successful hosting of the FIFA Confederations
Cup in June 2009 strengthened confidence that the World Cup
in 2010 will also be managed effectively.

--------------------------------------------- ------
THE RECENT GROWTH OF U.S.-S.A. TRADE AND INVESTMENT
--------------------------------------------- ------

12. (SBU) The U.S. is South Africa's third-largest trading
partner, after Germany and China. U.S.-South Africa trade
grew 12 percent in 2008, totaling $16.1 billion. U.S.
exports rose 18 percent to $6.2 billion, while South African
exports to the United States increased 9 percent to $9.9
billion. South Africa was the third largest beneficiary of
total exports (after Nigeria and Angola) and the largest
beneficiary of non-oil exports under the African Growth
Opportunity Act (AGOA) in 2008. The U.S. was South Africa's
largest export market in 2007 and 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, AGOA and other benefits. Japan displaced the U.S. as
South Africa's largest export market in 2008.

13. (SBU) Over 600 U.S. firms have a presence in South
Africa, with 85 percent using the country as a regional
center. South Africa's stable government, sound fiscal and
monetary policies, transportation infrastructure,
sophisticated financial sector, and, by African standards,
large market aQ 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
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. The U.S. was the largest portfolio investor and
the second largest foreign direct investor in South Africa
after the U.K. ($6.6 billion at year-end 2007). General
Motors, Ford, and Timken are among the top industrial
investors in South Africa. Teletech recently opened a large
call center in Cape Town and has plans to open smaller
centers in other parts of the country. Westinghouse is
competing for a $60 billion dollar contract to build a fleet
of AP1000 nuclear reactors in the Western and Eastern Cape
provinces. Lockheed recently signed a contract with
state-owned aviation manufacturer and services provider Denel
for Denel to open a licensed service center to repair,
maintain and overhaul Lockheed C-130s from Africa and the
Middle East.

14. (SBU) The U.S. and the Southern African Customs Union
Q14. (SBU) The U.S. and the Southern African Customs Union
(SACU: South Africa, Botswana, Lesotho, Namibia, and
Swaziland) suspended free trade agreement negotiations after
three years and six rounds of negotiations in April 2006.
Negotiators agreed to pursue a Trade, Investment and
Development Cooperative Agreement (TIDCA) in an effort to
preserve some of the progress made in the FTA talks. A
framework agreement for the TIDCA was signed at the AGOA
Forum in Washington on July 14, 2008. South Africa has
recently expressed interest in stepping up the pace on TIDCA,
and negotiators may begin work soon on agreements to promote
private sector contacts and reduce existing barriers to
bilateral trade. There may be movement on TIDCA in the
run-up to the AGOA Forum in August.

----------------Q------------------
ONGOING U.S. SUPPORT FOR SOUTH AFRICA
-------------------------------------

15. (U) The USG has contributed approximately $1.9 billion
toward South Africa's development, including $250 million in
credit guarantees, since 1994, and $100 million in education,

PRETORIA 00002271 004.2 OF 005

$120 million in economic growth, and $88 million in democracy
and governance since 1998. Our current 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'Q
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).

16. (U) Twenty-eight U.S. government entities are
represented at the U.S. Mission in South Africa (Embassy
Pretoria and the three Consulates in Johannesburg, Cape Town
and Durban). The Mission has 292 Direct Hire (USDH)
positions and 608 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. The
Mission completed the new consulate compound in Cape Town in
2005 and a new consulate building in Johannesburg in April
2009. Future projects include construction of a new annex
for USAID and CDC. The construction of this much-needed,
155-desk office annex on the Embassy compound in Pretoria was
deferred by the Office of Buildings Operations (OBO) from
2009 to 2022.

--------------------------------------------- -----------
HIV/AIDS AND RELATED ILLNESSES CONSTITUTE A GROWING CRISIS
--------------------------------------------- -----------

17. (U) The PEPFAR program in South Africa is the largest
recipient of PEPFAR resources world-wide to date, having
received a total of $2.0 billion, including $551 million in
FY2009. 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 dQh. 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. Achieving the
MDGs is the SAG's highest priority, but South Africa is
moving further away from these goals in both child and
maternal mortality as a result of HIV/AIDS.

18. (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 younger. An estimated 18.8 percent
of adults between 15 and 49 are HIV-infected and women in the
Qof 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.

19. (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

PRETORIA 00002271 005.2 OF 005

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.

20. (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 South African public health system has a need
for: expanded clinical and laboratory facilities;
strengthened health care infrastructure, particularly for
chronic disease, which includes HIV and TB; increased
coverage of HIV treatment; HIV prevention; and TB control and
treatment. The country has made impressive progress towards
expanding access to ART, but the current number of people on
ART is less than 30 percent of those who need it. The number
of new infections also greatly exceeds the number of new
people placed on ART.

21. (U) 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.

GIPS

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