Minister Dlamini Zuma to visit the Russian Federation for Itec 18-21 JULY 2007

Sochi - South African Foreign Minister Dr. Nkosazana Dlamini Zuma will visit Sochi, Krasnodar region of the Russian Federation from Wednesday-Saturday 18-21 July 2007 for the SA-Russia Inter-Governmental Trade and Economic Co-operation (ITEC) meeting co-chaired with Russian Minister of Natural Resources Yuri Trutnev.

Minister Dlamini Zuma has just concluded her visit to India where she led a senior South African delegation to the India-Brazil-SA Ministerial Summit held in New Delhi within the context of consolidating trilateral political, economic and trade relations with India and Brazil and to advance South-South Relations.

ITEC is a mechanism aimed at regulating political, economic and trade relations between South Africa and the Russian Federation. Since the launch of ITEC, great progress has been made in strengthening bilateral political, economic and trade relations between the two countries.

The last session of ITEC was held in Pretoria in February this year in which it was agreed that implementation of agreements through the committee is an area which would be focused on, as the framework for co-operation has already been established.

One of the advances made through ITEC was the establishment of a Joint Business Council between the two countries launched during President Putin's state visit to South Africa.

Economic Bilateral Relations

South Africa's trade with Russia does not reflect its potential and leaves much room for expansion. The establishment of the Joint South Africa/ Russia Business Council is now the means to achieve greater trade and economic co-operation between the business sectors of both countries.

Trade Relations between both countries

The bulk of SA exports are made up of vehicle engines (18.8% of exports); machines & mechanical appliances (14%); Fresh grapes (13.8%); flat-rolled products or iron (10%); pears (6.8%) peaches (3.4%) - amounting to almost 70% of SA exports to Russia. The major import from Russia, accounting for over 65% of SA imports is made up of the nickel group of minerals.

The Russian Federation adopted a Decree in March 2003, following South Africa's recognition of Russia as a market economy in support of WTO membership, to include South Africa in a list of developing countries that would enjoy preferential trade tariffs and duties with regard to exports to Russia. Bilateral relations also expanded significantly under the umbrella of the Intergovernmental Trade and Economic Committee (ITEC) between South Africa and the Russian Federation. Strategic direction and a structured and disciplined policy framework have resulted in substantive action taken by the respective governments in the strategic minerals and energy sectors through inter alia the establishment of a joint Task Force on Minerals in support of BEE objectives. Solid progress in the field of Science and Technology relations, especially in terms of the Presidential policy objective of establishing South Africa as a key player in international astronomy and deep space research, also characterise the relationship.

Russian tourists at the high end of the market visiting South Africa grew by 42%in 2006.The number of Russian tourists is comparable to those from Greece and Argentina. The number of South Africans visiting Russia is growing steadily.

The South African fruit exporting company, Capespan now ranks Russia as its single largest fruit export market surpassing the UK for the first time last year. In 2004 Capespan exported fruit produce worth $20 million to Russia out of a total trade of $56 million and presenting a 30% share of the export market to Russia. Apple and pear exports have registered an increase in their share of the South African deliveries to Russia. Demand for grapes has been booming in Russia, but South African producers have had to fight off competition from South America and even Namibia.

South African Investments in Russia

The SA multinationals Anglo American, Standard Bank, De Beers, JCI, Barlowworld, Capespan and Bateman have substantial interests in Russia. In addition, SAB/Miller has established a brewery in the Kaluga Region, which represented a US$100 million investment, and their product, Golden Barrel Beer, is highly successful in the local market. Standard Bank also has a growing presence in Russia as well as SAPPI, Protea Hotels and Sun International. Recently also the MIHGroup which includes DSTV, and M-Net also has investments in the Russian Federation.

South Africa BEE entities also held meetings with prominent Russian entities including Norilsk Nickel, Renova, Aton Capital, Colliers International, Rusimport, Transneft, MorPort, Sual, Lukoil, Interfinance Developments and Crystal Diamond Company. The meetings were constructive and fruitful and a number of projects of mutual interest were identified. The BEE companies also instituted reciprocal invitations for follow-up meetings in South Africa to their Russian counterparts. The Director of Renova recently visited South Africa and it can be expected that increased interaction between the respective entities would lead to more substantial trade, economic and investment links between South Africa and the Russian Federation.

The joint venture company, United Manganese of Kalahari (UMK), between Black Economic Empowerment groups and the Russian Renova Group of companies, has been established in order to co-operate on the prospecting, mining and processing of manganese ore in the Kalahari basin.

Russia's largest steel maker, Evraz, recently said that it would decide within less than a year whether to buy a bigger stake in Highveld Steel&Vanadium. Evraz currently has a 24,9% share in Highveld. It is possible that Evraz could buy Anglo America's Highveld share of 29,2 % in order to introduce black investors to Highveld.

Issued by Ronnie Mamoepa on 082 990 4853

Department of Foreign Affairs
Private Bag X152
Pretoria
0001

17 July 2007