Deputy Minister Pahad to hold Bilateral Discussions with Spanish Counterpart Dr Bernadino Leon Gross

Pretoria - South African Deputy Foreign Minister Aziz Pahad will hold bilateral political and economic discussions with his Spanish counterpart Secretary of State Dr Bernadino Leon Gross at the Diplomatic Guesthouse in Pretoria on Wednesday, 5 July 2006.

Deputy Minister Pahad's consultations with his Spanish counterpart come within the context of South Africa's priority to consolidate the African agenda through the promotion of North-South co-operation through, amongst others, the European Union.

In this regard, the Spanish government has a greater awareness and commitment to challenges facing the developing world inter alia Africa. Prime Minister Zapatero has undertaken to significantly increase funding (up to UN benchmark of 0,7% of GDP for development co-operation inter alia in Africa, and recently announced an increase in ODA to Africa from Euro 200m to Euro 400m. He also announced the Cancelletaion of African debt of approximately Euro 200m. Spain is also currently exploring a new foreign policy with Africa, and hosted a seminar on 'Africa as a new policy priority' in May 2005 in which Deputy Minister Pahad participated.

Issues on the agenda of discussions between Deputy Minister Pahad and Secretary of State Gross are expected to include, among others:

• Bilateral political and economic discussions between both countries;
• The Spanish "New Plan for Africa";
• Proposed trilateral co-operation projects in Burundi, the Sudan and Côte d'Ivoire;
• Conflict resolution and peacekeeping in Africa including Côte d"ivoire, the Sudan, the Democratic Republic of Congo, Burundi, Equatorial Guinea and Western Sahara;
• The Middle East crisis;
• The Iranian nuclear issue;
• Negotiations between the Spanish government and the ETA;
• The Alliance of Civilizations initiative; and
• The comprehensive reform of the United Nations.

Secretary of State Gross is expected to depart from South Africa on 5 June 2006.

Bilateral Economic Relations

The Spanish economy is becoming well represented in South Africa. South Africa was in 2004 the first receptor of Spanish outward investments in Africa. In the period between January to June 2005, South Africa received Spanish investments worth €48 million. This amount was mainly due to the Acerinox acquisiton of another 12% in Columbus Steel for €47.5 million. In the same period South Africa was the 12th destination for Spanish outward investments moving from position 43rd that she had occupied on the same period in 2004.

Sectors where Spanish companies have invested their money in South Africa (2000 to 2004) are metals (€245 million); manufacturing on non-metallic minerals (€119 million); automobiles (€26 million); wood and cork (€26 million) construction (€15 million) and chemicals (€4 million).

It is worth noting that Samancor Ltd (a South African subsidiary of BHP Biliton plc) and the Industrial Development Corporation of South Africa Ltd, are the three equal partners in the Columbus Joint Venture, which owns and operates an integrated stainless steel mill for flat products at Middleburg in Mpumalanga Province. The mill is one of only two facilities in the world with the potential to make use of liquid ferrochrome in the production process. Upon completion of the transactions, the Acerinox Group has become the world's third largest stainless steel producer with an annual capacity of 2,5 million Mt.

Moreover, in 2001 the Spanish multinational automotive component group Molan Pino announced the establishment of a R12 million high technology plant in East London, to complement the Daimler-Chrysler Mercedes Benz production in the Eastern Cape.

Most of the Spanish companies are not just selling products in South Africa but are using South Africa as a platform to produce and export to markets in the region and beyond

In the period between January and December 2005, South Africa exported products worth R8.7 billion to Spain in comparison to R7.14 billion for the same period in 2004 and R6.15 billion in 2003. In 2005, South Africa imported products worth R5.61 billion from Spain in comparison to R4.32 in 2004 and R3.84 in 2003.

The recent signing of the Non-Double Taxation Agreement by Minister Manuel on 23 June 2006 (together with the Agreement on the Promotion and Reciprocal Protection of Investments of 1999) is expected to create a good base for further economic engagement as Spanish companies will begin to see South Africa as a safe destination with all the legal protection they require.

In addition, the visit of the Spain's Deputy Minister of Trade, Industry and Tourism with a delegation of 30 CEOs of major Spanish companies on 25 to 27 September 2006 is seen as a significant initiative to further boost bilateral economic ties.

Thus, given the healthy growth of the Spanish economy and the strong international outlook of Spanish companies, there exists significant potential for increased foreign direct investment from Spain to South Africa in the following sectors: automobile, agro-food processing, textiles, chemicals, tourism infrastructure and based metal sectors.

Co-operation Projects between South Africa and Spain

• Establishment of African Tourism Institute by the Spanish for the training of trainers and other capacity building projects (R 20 million project with continued funding)
• Spain hosted in South Africa, and in partnership with South Africa and the NEPAD Tourism sector, an Africa Tourism Development Conference this year.
• Spain has publicly indicated that the increased ODA will be targeted at Africa and South America
• Progress in 2005 included South Africa partnering the Spanish in hosting the African Regional Tourism Workshop (June 2005, Randburg) and assisting Spain in cultivating relations with the following 2 NEPAD sectors:
• establishing co-operation with the National Farmers Union in SA for broader co-operation in the NEPAD Agriculture sector; and
• linking water management with the Zaragoza Expo 2008, which has its focus on water management. These initiatives have provided Spain with genuine avenues to initiate its policy shift towards Africa.
• Current initiatives for building closer co-operation include Exploration of trilateral co-operation in respect of NEPAD projects, where for example, the Spanish have indicated their willingness to assist Equatorial Guinea with 'state building' initiatives, but would like to approach this as a joint co-operation project with South Africa.

Issued by Ronnie Mamoepa on 082 990 4853

Department of Foreign Affairs
Private Bag X152
Pretoria
0001

4 July 2006