US embassy cable - 05PRETORIA425

C O N F I D E N T I A L PRETORIA 000425 
 
SIPDIS 
 
DEPT FOR AF/EPS AND AF/S/TCRAIG AND KGAITHER 
COMMERCE FOR 4510/ITA/IEP/ANEWSA/OA/JDIEMOND 
TREASURY FOR BRESNICK, LSTURM, AND AJEWELL 
DEPT PASS USTR FOR PCOLEMAN, WJACKSON AND CHAMILTION 
 
E.O. 12958: DECL: 01/30/2010 
TAGS: EINV, ETRD, ECIN, ECON, SF, FEFIN 
SUBJECT: DTI OFFICIAL DISCUSSES MNC EQUITY OWNERSHIP 
STATEMENT 
 
 
Classified By: Minister Counselor Jeff Hartley.  Reason 1.4 (b,d). 
 
1.  (C)  Department of Trade and Industry (DTI) Director of 
Black Economic Empowerment Jeffrey Ndumo explained to Econoff 
in a January 26 meeting that an imminent Statement on 
Ownership for Multinationals would not provide a blanket 
exemption to black economic empowerment equity requirements 
for foreign companies operating in South Africa.  However, he 
said that exemption mechanisms such as that developed by the 
information communications and technology (ICT) industry 
would be acceptable. 
 
2.  (C)  He said that while the DTI does not strongly favor 
equity equivalents - where companies could overscore in one 
area to compensate for deficiencies in another - the 
Statement would elaborate on the appropriate use of such a 
mechanism and what might qualify as acceptable equity 
equivalents. 
 
2.  (C)  He said that the Statement would likely abolish the 
practice of differentiating between direct and indirect 
ownership as they have been distinguished in the Financial 
Services Charter.  This would require that the Financial 
Services industry redraft that ownership section in its 
Charter, resulting in greater pressure on foreign banks to 
satisfy this scorecard component through the Financial 
Services equity equivalent of financing black economic 
empowerment (BEE) transactions. 
 
3.  (C)  Ndumo praised the work of Dali Mpofu, Chairman of 
the information communications and technology (ICT) Charter 
Working Group.  He said that the DTI had learned a great deal 
from Mpofu's strategy, particularly in the way he engaged 
with various stakeholders (including multinational 
companies).   Local Managing Directors of U.S. ICT companies 
operating in South Africa, however, have criticized Mpofu for 
the manner in which he restricted their interaction to the 
issue of equity ownership while avoiding engagement on other 
topics. 
FRAZER