US embassy cable - 04PRETORIA3480

UNCLAS SECTION 01 OF 02 PRETORIA 003480 
 
SIPDIS 
 
DEPT FOR AF/S TCRAIG; AF/EPS DKRZYWDA 
USDOC FOR 4510/ITA/IEP/ANESA/OA/J DIEMOND 
COMMERCE ALSO FOR HVINEYARD 
TREASURY FOR JEWEL 
DEPT PASS USTR FOR PCOLEMAN 
DEPT PASS USITC, ATTN.: L. SCHLITT 
 
E.O. 12958: N/A 
TAGS: ETRD, EAID, XA, SF, AGOA, USTR 
SUBJECT: USITC STUDY ON U.S.-SUB-SAHARAN AFRICAN TRADE AND 
INVESTMENT 
 
REF:  (A) State 137500, (B) Pretoria 695, (C) Pretoria 3113 
 
1. This cable responds to Reftel A request for post's input for the 
fifth annual USITC study on AGOA. 
 
A.  Major developments in host country economic, trade and/or 
investment policies, or U.S. policies directly affecting host country 
--------------------------------------------- ----------------------- 
 
South Africa welcomed the visit of the U.S. Trade Representative, 
Ambassador Robert B. Zoellick, in February 2004, who met with then 
Trade and Industry Minister Alec Erwin to discuss the way forward on 
the Doha Agenda.  The Minister publicly welcomed Ambassador 
Zoellick's initiative to move the negotiations forward so that 2004 
would not be a lost year.  The private sector worked with the 
government to produce a new charter for the financial services sector 
that promotes Black Economic Empowerment (BEE).  Representatives of 
U.S. companies in the information, communications and technology 
(ICT) sector continue to meet with their South African private sector 
counterparts to develop and ICT Black Economic Empowerment (BEE) 
charter.  The government indicated there would be more BEE charters 
developed for other sectors, including agriculture.  The government 
announced a new program in the film industry that would allow foreign 
investors to a rebate of up to 15% of their costs for qualifying 
productions. 
 
B.  Developments in major regional groupings (COMESA, EC, ECOWAS, 
IGAD, SACU, SADC, WAEMU, IOC, and CEMAC) (where applicable) 
--------------------------------------------- --------------------- 
 
SACU continued to negotiate with the United States for a Free Trade 
Agreement with six rounds of talks from June 2003 to June 2004. The 
first two rounds were held in South Africa.  The FTA negotiation 
marks the first time that SACU is acting as a single body in trade 
talks. 
 
C.  Updated Information on privatization efforts 
--------------------------------------------- ---- 
 
Privatization efforts have been slow. In the telecommunications 
sector, there has been little progress in resolving concerns over 
operational control of the Second National Operator (SNO). 
The government has said it will continue to implement 
concessions, joint ventures, and public private 
partnerships (PPPs) in the case of Eskom, Transnet and 
Denel over the next five years.  The Congress of South 
African Trade Unions (COSATU), however, claimed that the 
government has backed away from its commitment to 
restructure state-owned enterprises. (See reftel C.) 
 
D.  Status of and developments in the host country's relationship 
with the United States and AGOA, especially examples of AGOA-related 
investment, non-traditional export developments, government reform 
efforts, or regional cooperation (where applicable) 
--------------------------------------------- ----------------------- 
 
President Bush visited South Africa in July 2003 and 
advanced our bilateral economic relationship.  South Africa 
continues to take advantage of the duty-free preferences of AGOA by 
exporting in all sectors.  A major U.S. clothing manufacturer, Levi 
Strauss SA, began exporting its 501 jeans to the United States under 
AGOA in mid-2003 using fabric imported from the Levi's textile plant 
in Greensboro, North Carolina.  South African clothing exporters 
appreciated AGOA for enabling them to continue to export to the 
United States, which the stronger rand has made more difficult.  The 
recently declining exports of AGOA clothing is largely due to the 
strong rand. 
 
E.  Examples of U.S. trade capacity-building efforts in the host 
country, and associated effects (where applicable) 
--------------------------------------------- -------------------- 
 
Septel to follow. 
 
2.  In the Economic Update section (chapter 6, page 95) of the 
USITC's Fourth Annual Report on U.S. Trade and Investment with Sub- 
Saharan Africa country profile for South Africa, post suggests 
replacing the first two sentences in the third paragraph (the one 
beginning "The manufacturing sector, which is heavily capital- 
intensive.) with the following:  "The manufacturing sector, which is 
heavily capital-intensive in such areas as automobile manufacturing, 
heavy chemicals, and textiles, also includes the labor-intensive 
apparel sub-sector, and represented approximately 20 percent of GDP. 
A shortage of skilled labor continued to constrain the sector. 
Although the 28% appreciation of the rand in 2003 has put pressure on 
both the mining and manufacturing sectors, strong global and domestic 
growth in early 2004 has ameliorated negative impacts from the 
strengthening of the rand.  Lower inflation and interest rates 
contributed to strong consumer demand." 
 
3. Post suggests the following paragraph to replace the fifth 
paragraph in the Trade Update section (page 97):  "In November 
2002, the United Nations Convention on International Trade 
on Endangered Species of Wild Fauna and Flora (CITES) 
approved proposals from Botswana, Namibia and South Africa 
for a one-time sale of ivory from national stockpiles, 
sourced from culling of elephants or death by natural 
causes.  CITES attached conditions to the sales, which were 
not to take place before May 2004.  The CITES Standing 
Committee met in March 2004 and determined that the 
conditions had not yet been met, so the sales have not 
taken place.  The issue will be revisited at the October 
2004 CITES Conference of Parties in Malaysia." 
 
MILOVANOVIC