US embassy cable - 04PRETORIA4786

C O N F I D E N T I A L SECTION 01 OF 02 PRETORIA 004786 
 
SIPDIS 
 
DEPT FOR AF/EPS AND AF/S/TCRAIG AND KGAITHER 
DEPT FOR EB/TRA/AN/CDEMARS, LFAUX-GABLE AND BGRIMM 
TRANSPORTATION FOR SMCDERMOTT, KBHATIA, GRETCH 
COMMERCE FOR 4510/ITA/IEP/ANESA/OA/JDIEMOND 
TREASURY FOR GCHRISTOPULOS, LSTURM, AND AJEWELL 
DEPT PASS USTR FOR PCOLEMAN, WJACKSON AND CHAMILTON 
 
E.O. 12958: DECL: 10/29/2014 
TAGS: EAIR, EINV, ETRD, ECON, SF 
SUBJECT: MINISTER RADEBE ON OPEN SKIES 
 
Classified By: Acting Econ Chief Alan Tousignant.  Reason 1.5 (B/D). 
 
1.  (C) SUMMARY.  U.S. Department of Transportation's (DoT) 
Deputy Assistant Secretary for Aviation and International 
Affairs Susan McDermott met with South Africa's Minister of 
Transport Jeffrey Radebe and Dr. Ian Phillips, Special 
Advisor to the Minister, on October 27, 2004 at the 
Minister's parliamentary office in Cape Town.  The meeting 
followed up on an Open Skies discussion between Radebe and 
U.S. Secretary of Transportation Norman Mineta at the 35th 
ICAO Assembly in Montreal, September 2004.  Radebe 
acknowledged Open Skies benefits outlined by McDermott and 
called for the United States and South Africa to form 
"technical teams" to discuss a proposed Open Skies agreement. 
 Restructuring and new management at Transnet, South Africa's 
administrator of state-owned transportation enterprises, may 
make this an auspicious time to engage South Africa on an 
Open Skies agreement.  The Minister expressed keen interest 
in the organizational structure of the U.S. Department of 
Transportation (DoT).  McDermott invi 
ted Radebe to visit Secretary Mineta in the United States and 
to meet with DoT administrators.  END SUMMARY. 
 
2.  (U) Department of Transportation (DoT) Deputy Assistant 
Secretary for Aviation and International Affairs Susan 
 
SIPDIS 
McDermott met with South Africa's Minister of Transport 
Jeffrey Radebe and Dr. Ian Phillips, Special Advisor to the 
Minister, on October 27, 2004 at the Minister's parliamentary 
office in Cape Town.  The meeting was scheduled to follow up 
on an Open Skies discussion between Radebe and U.S. Secretary 
of Transportation Norm Mineta at the 35th ICAO Assembly in 
Montreal, September 2004. 
 
3.  (U) Radebe (pronounced "ha-Day-bay") and Phillips warmly 
greeted DAS McDermott.  McDermott briefly mentioned the Safe 
Skies for Africa Aviation Security Workshop taking place in 
Johannesburg from Oct. 26-28.  She also thanked Radebe for 
the good relationship that exists between South Africa and 
the United States and expressed her hope that the 
relationship could be expanded through increased aviation 
collaboration. 
 
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AN OPEN SKIES OVERVIEW - DAS MCDERMOTT 
-------------------------------------- 
 
4.  (SBU) McDermott provided a thorough overview of Open 
Skies and detailed likely benefits to tourism, trade, as well 
as more accessible and affordable transportation for 
passengers and cargo.  Although the United States is not 
fully utilizing its current bilateral agreement with South 
Africa, McDermott emphasized the importance of a broad 
aviation framework for future growth.  She said a liberal 
aviation agreement such as Open Skies conveys a message that 
South Africa is "open for business," flexible, and committed 
to unlimited commercial opportunity.  McDermott cited LAN 
Chile as an example of how an Open Skies agreement can not 
only increase regional aviation services, but also 
dramatically improve the profitability and efficiencies of an 
airline.  She said that South Africa is well positioned to 
accomplish similar results in Africa.  McDermott said, 
however, that because of Africa's high cost of transport, 
potential players are squandering many African Growth and 
Opportunity Act (AGOA) preferences and sa 
id, "You can't trade if you can't get there." 
 
5.  (SBU) McDermott also reviewed the important role of 
codeshares and alliances in servicing communities and in 
developing a global aviation network.  She explained the 
benefits of anti-trust immunity and said it may be considered 
only for Open Skies partners involved in pro-competitive 
codeshare arrangements.  In conclusion, McDermott said she 
appreciated the opportunity to present two ideas for Radebe's 
consideration:  1) Open Skies as a market development tool 
and a welcome sign for investment; and 2) a vital tool of 
real benefit to South African Airways (SAA) as it moves into 
a global alliance arrangement. 
 
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RADEBE'S RESPONSE 
----------------- 
 
7.  (C) Radebe (previously the Minister of Public 
Enterprises) thanked McDermott for her comprehensive overview 
of Open Skies and agreed that without transport links, trade 
cannot develop to its full potential.  Radebe acknowledged 
that this problem is crippling Africa's development. 
Reviewing the importance of intra-African integration, he 
said that the Yamoussoukro Declaration and Decisions aim to 
liberalize Africa's aviation industry in the same manner as 
Open Skies.  The Minister said that "regrettably" not much 
has been implemented.  However, he said that African 
Ministers of Transport would meet in South Africa during the 
first quarter of 2005 to further the Yamoussoukro accord. 
 
8.  (C) Radebe was clear in his belief that an Open Skies 
agreement would benefit the development of aviation services 
in Africa and said that South Africa was "committed to do 
everything possible" to liberalize Africa's skies.  He said 
that while many fear an Open Skies agreement means South 
Africa would be "gobbled up" by U.S. air carriers, the LAN 
Chile experience was reassuring.  Radebe said his primary 
responsibility as Minister was to oversee the expansion and 
accessibility of transportation (including aviation) services 
rather than the promotion and protection of SAA.  He said 
that Open Skies "looks compelling."  He called on the United 
States and South Africa to form "technical teams" to look at 
the "details" of an Open Skies interaction between South 
Africa and the United States. 
 
9.  (SBU) McDermott responded that Secretary Mineta would be 
encouraged by this development.  When she sought to clarify 
whether these teams should conduct exploratory discussions or 
negotiations towards an Open Skies agreement, Radebe asked 
that they look at "all the details."  He also indicated that 
Department of Transport Director General Wrenelle Stander 
should be contacted to initiate these talks. 
 
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RADEBE CURIOUS ABOUT DoT STRUCTURE 
---------------------------------- 
 
10.  (SBU) Over lunch, Radebe praised South Africa's emerging 
low-cost airline industry, said that privatization is not 
dead, and identified key Yamoussoukro partners (Kenya, 
Ethiopia, Nigeria).  He expressed keen interest in the 
organizational structure of the U.S. Department of 
Transportation.  He questioned McDermott about the role of 
the FAA and asked who has responsibility for rail, roads, 
maritime services, traffic control, and state police.  After 
responding to Radebe's questions, McDermott invited the 
Minister to meet with Secretary Mineta in the United States 
and to see how the various DoT Administrators operate. 
 
11.  (C) COMMENT. Radebe's expression of support for Open 
Skies is encouraging as is his invitation to the United 
States to initiate bilateral talks between "technical teams." 
 Although promising discussions with previous Minister of 
Transport Dullah Omar in the early 2000s failed to produce an 
Open Skies agreement, the commercial environment has changed. 
 SAA has suffered two years of massive hedging losses 
totaling R15 billion (about $2.38 billion).  SAA's Board of 
Directors and senior executive management have been replaced 
in the last year.  In addition, new management at Transnet, 
South Africa's administrator of state-owned transportation 
enterprises, is no longer willing to protect SAA 
inefficiencies.  Transnet's new CEO, Maria Ramos (former DG 
of National Treasury), said earlier this year that she does 
not consider SAA to be a core business of Transnet.  Public 
Enterprises Minister Alec Erwin is publicly supporting Ramos. 
 Accordingly, SAA has been removed from Transnet and is 
currently reporting direc 
tly to the Department of Public Enterprises.  SAA can no 
longer count on the political protection it formerly received 
from the Government.  The recent emergence of new low-cost 
airline competitors (e.g., Kulula, 1Time) may also make this 
an auspicious time to engage South Africa on an Open Skies 
agreement.  Post encourages Washington to follow up on the 
opportunity to further develop bilateral discussions.  END 
COMMENT. 
 
12. (U) This cable was cleared by DAS McDermott. 
 
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