Deputy Minister Aziz Pahad to Co-Chair 8th Session of the South Africa - Japan Partnership Forum

Pretoria - South African Deputy Foreign Minister Aziz Pahad will co-chair, together with his Japanese counterpart Senior Vice Minister for Foreign Affairs Yasuhisa Shiozaki the 8th session of the South Africa - Japan Partnership Forum at the Farm Inn in Pretoria scheduled from Thursday - Friday, 6-7 July 2006.

This session will pay tribute to former Prime Minister Ryataro Hashimoto who passed away on 1 July 2006 in Tokyo. Mr. Hashimoto in his capacity as Senior Foreign Policy Advisor to the Prime Minister of Japan and President Mbeki as the Deputy President of South Africa at the time, conducted the first session of the Partnership Forum from 13-14 January 1999 in Pretoria.

Since Japan is a member of the Group of 8, the 8th session of the South Africa - Japan Partnership Forum comes within the context of South Africa's commitment to promote North-South co-operation in support of the African agenda through, amongst others, the G-8. In this regard, Deputy President Phumzile Mlambo-Ngcuka in April this year led a senior government and business delegation on an official visit to Japan.

Deputy Minister Pahad will lead a senior South African government delegation to the Forum consisting of officials from the Departments of Trade and Industry, Arts and Culture, Science and Technology, Health, Education, Agriculture, Treasury and Sports.

Discussions are expected to focus on:

• Bilateral political and economic relations between the two countries;
• The Group of 8 Summit to be hosted by Russia later this month;
• South Africa's Accelerated and Shared Growth Initiative (ASGISA) and the support of Japanese co-operation partners;
• NEPAD;
• African regional issues including the Sudan, the Democratic Republic of Congo, Côte d'Ivoire and Burundi;
• The Tokyo International Conference on African Development (TICAD);
• The World Trade Organisation Talks; and
• Developments in the Six Party Dialogue aimed on alleviating tensions on the Korean peninsula including the non-proliferation of weapons of mass destruction.

Japan's economic policy toward African development taken in its entirety is directed within the Tokyo International Conference on African Development (TICAD) process that was first held in 1993. TICAD has led to the implementation of projects aimed at increasing African human resource capacity, infrastructure development and investment. In the context of the Gleneagles G8 Summit held in July 2005, Prime Minister Koizumi committed Japan to holding TICAD IV in 2008 in an effort at making TICAD the cornerstone of Africa-Japan relations. Japan has long advocated the importance of ownership of the development process by Africa in partnership with the international community.

At the Africa-Asia Summit in April 2005 Japan pledged to double their ODA to Africa in the next three years. Such ODA will amount to 0.7% of Japan's GDP. Japan is of the opinion that, based on the Asian experiences, the key to African economic development is to foster the private sector through he promotion of trade and investment. In line with this, Japan hosted the TICAD Asia-Africa Trade and Investment Conference in November 2004.

For Japan, South Africa is a strategic partner in the furthering of their Africa strategy. Japan views their support to South Africa as a gateway to the rest of Africa and as a result both countries are exploring tripartite co-operation on specific projects as the new frontier for co-operation between South Africa and Japan.

Japan is one of the South Africa's key economic partners in the world and South Africa's largest trading partner in Asia. Furthermore, exports to Japan have increased since 1992 from R4 billion to approximately R33 billion at the end of 2005, whilst imports from Japan in same period have increased from R5 billion to R24 billion, which ensures a positive trade balance of R10 billion. Japan became South Africa's first export partner in 2005, followed by the UK, Germany and US. Japan is South Africa's 4th largest import partner after Germany, China, and the US. In the past decade, South Africa has consolidated its position as Japan's most important trading partner in Africa.

Bilateral Economic Relations

Although Japan has historically been a key partner for South Africa, the relationship was initially based on the export of strategic raw materials and agricultural products from South Africa and the importation of the technology-intensive or value added goods, and as such the relationship remained stagnant.

However, the structure of trade has now changed to include value exports, most notably vehicles (such as BMW 3-series and Mercedes C - Class).

• South Africa supplies Japan with over 70 per cent of its platinum imports (43,535 kg in 2004; or worth Yen 133 billion/approximately US 1.3 billion dollars).
• South Africa also had a 23% market share of motor vehicles exported to Japan (in 2003).
• South Africa is the second largest exporter of citrus to Japan, with over seven million cartons expected in 2005 (primarily grapefruit 6,2 million cartons, and oranges and lemons). South Africa exported 10 per cent of its citrus to Japan in 2004.
• South Africa shipped 27,800 tons of canned deciduous fruit (17 200 tons of peaches, 3 500 tons of pears, 2 500 tons of apricots and 4,600 tons of mixed fruit) to Japan in 2004. This represents a major portion of the 27 per cent of our deciduous exports to Asia.
• Japan is also an important export market for rooibos tea. South Africa exported 286 tons of rooibos tea to Japan in 2004.
• South Africa is the 8th largest wine exporter to Japan exporting 1,230,000 bottles (which accounts for 1% of wine imports to this market) in 2005.
• The Embassy facilitated participation from Limpopo Province in Foodex (agri-processing exhibition and an investment seminar) in Tokyo from 14-17 March 2006 and will assist local importers in INTEX (agri-processing and tourism consumer exhibition) from 1-5 May 2006. The Embassy also hosted in-store agri-processing exhibition in Japanese Departmental stores in Sendai, Kitakyushu and Sapporo. The Embassy is also facilitating that Japanese importers (through EMIA scheme) and journalists (financed by Wines of South Africa), who attended the Cape Wine 2006 held from 4-6 April 2006.

Trade Statistics (2002-2005)

Investment

• The pattern of Japanese investments in South Africa is perceived to resonate with Japan's post-war activities in East-Asia, ie closely tied to a programme of industrialisation.
• Japan investment in South Africa amounted to R19.86 billion in 31 December 2002 (according to The South African Reserve Bank: SA Survey 2003/2004). In this amount direct investment amounted to R3.9 billion and non-direct investment to R16.42 billion.
• In the automotive sector the Toyota Motor Corporation (TMC) has invested approximately R4.4 billion (including R1 billion in a water-based paint plant) in South Africa since 2003.
• The doubling of export volume at the Toyota South Africa Motors Plant in Prospecton, Durban to 220 000 units (Hilux and Corolla) by 2007 has necessitated expansion and new investments by Toyota Motor Corporation and their affiliated automotive supplier companies in South Africa. Nissan has also to increase expanded production in the Rosslyn Plant in South Africa.
• Toyota Tsusho Africa (TTAF) plans new investments which totals R155 million (by
• December 2006). TTAF plans a Joint Venture with Mittal Steel to establish a new
• Plant (18,000 sqm) in Southgate and this represents another fairly large investment.
• Japanese automobile component companies that have invested in South Africa in the past year include Denso, Aisin Seki, and Yazaki.
• In the minerals sector, Mitsubishi Corporation owns 51 per cent of Hernic Ferro Chrome Mine and recently invested approximately R500 million (building a fourth furnace) to increase their production capacity from 260 000 tons to 420 000 tons per annum.
• Mitsubishi Chemical Corporation's investment in the acrylates plant (in Sasolburg) and was yielding unexpectedly high exports (of chemicals). The company is investigating expanding the existing plant.

Direct investment in South Africa by Japan

• Fiscal 2002: 5 cases, 12,9 billion yen
• From Fiscal 1993 to fiscal 2002, total:39 cases, 95 billion yen.
• which include among others:

Nissan Diesel Motors Co. (Auto)
Mitsubishi Chemicals (Chemicals)
Itochu Corporation (Metals - Ferro manganese)
Sumitomo Corporation (Metals)
Marubeni (ICT)
Toyota Motor Corporation (Auto)

The investment has contributed in a marked degree to the creation of jobs as well as having other down-stream results. The transfer of technology, which has also accompanied Japanese investment, is of long term importance to South Africa. There is a concerted effort being made to develop and co-operate in the food and textile industry.

Black Economic Empowerment

Important BEE agreements have been recently concluded with Japanese industry, ie:

• The signing of an agreement between Transnet and MITSUI & COMPANY AFRICAN RAIL SOLUTIONS PTY LTD (MARS) provides for the supply of 110 new electric AC/DC locomotives for the Coal line at a total cost of R3.5 billion over 5 years. This agreement marks the first major investment in Spoornet's projected R35 billion capital investment programme for the next 5 years. MARS is a partnership between Mitsui and Co. Limited, Sibambene Trade and Services Holdings (Pty) Limited and African Sky Innovative Solutions (Pty) Limited. MITSUI has a 59% share in the company and the BEE partners own the remaining 41%. The main subcontractors are Union Carriage and Wagon Partnership, made up of Duduza Rail and Union Carriage and Wagons, and Toshiba, a major Japanese locomotive manufacturer. In fact, there are approximately 43 companies involved in this project with BEE ranging from 5% to 100%. Transnet CEO, Maria Ramos stated that the involvement of BEE in the high tech rail manufacturing industry and the knowledge and skills transfer that will accompany it, on this scale, is a first for the country. Furthermore, 50% of the contract value will be executed in South Africa and will result in an additional 1 500 direct and indirect employment opportunities. Also it is Spoornet's intention to outsource the maintenance services envisaged in the contract to Transwerk, a division of Transnet, with MARS providing technical support.
• Sanko Shipping Company of Japan acquired in 2005 a stake in two South African Black Economic Empowerment companies, ie a 20% share in Marine Bulk Carriers and a 10% share in Marine Crew Services. This partnership has been aimed at increasing the country's interest in the international shipment of cargo (mainly coal and iron ore) and creating job opportunities for South Africans. It is expected that Sanko would absorb most of these trainees and also gradually increase the number of South Africans employed on their vessels.
• Kashikey Company Ltd (announced 8 July 2005) together with another Japanese company, Nagahori invested US one million dollars (for a 20 per cent share) in a BEE inclusive (Sphere Holdings with a 20 per cent share headed by Itumeleng Kgakoesele) diamond beneficiation project in Cullinan.

Issued by Ronnie Mamoepa on 082 990 4853

Department of Foreign Affairs
Private Bag X152
Pretoria
0001

4 July 2006