Speech by Deputy Minister Aziz Pahad to the Business South African and US Corporate Council on Africa Meeting, Tuesday 13 November 2007, Johannesburg

Mr Spicer,

Distinguished guests,

I wish to express my appreciation for the invitation to address you on SA’s Foreign Affairs perspective on “SA – US relationship”, specifically in the context of the upcoming Corporate Council on Africa’s Business Summit to be held in Cape Town historic event that we enthusiastically welcome.

South Africa ’s first democratic elections in 1994 heralded our entry into the community of nations. Until 1994 South Africa had been a pariah state which had been, expelled or suspended from all major international organisations, interalia, the OAU, the United Nation and the Commonwealth. Also, apartheid South Africa had little or no political, economic, cultural or social relations with the vast majority of countries in the world.

In 1994 when democratic South Africa joined the international community we were confronted with an international paradigm that had been fundamentally restructured.

This was, inter alia, characterised by the:

• Collapse of socialism so starkly manifested by the fall of the Berlin Wall; and
• The unprecedented spread of globalisation.

As the world sought to come to grips with the new very complex and uncertain international political and economical world order we were confronted by the terrorist attacks of 9/11/2001 against United States targets. This led to a marked shift in UN foreign policy and had a further profound impact on international relations. This was inter alia characterised by

• The fight against terrorism becoming a major priority
• The concept of pre-emptive strikes was introduced
• Growing rejection of international treaties
• Weakening of multilateralism.

Multilateralism is central to SA’s foreign policy and hence the exercise of US foreign policy through options such as unilateral action and pre-emptive strikes, can contribute to some bilateral policy differences

It is in the context of this very complex and dangerous world order that South Africa seeks to implement our foreign policy objectives, which is to achieve a “A better South Africa, a better Africa and a better World”

We have identified three main challenges:

1. Poverty alleviation and sustainable development
2. Peace, stability and security
3. Transforming world political and economic governance

Today I will share some perspectives about South Africa’s relations with the Unites States of America to enable us to deal with the three challenges I have just referred to.

A. Poverty alleviation and sustainable development

President Mbeki speaking at the ILO said “poverty constitutes the deepest and most dangerous structural fault in the contemporary world economy and global societies. It constitutes the most challenging structural fault. Logically, this means that the correction of this fault has to be at the centre of the politics, policies and programmes of our thinking.”

We seek to change this structural fault in conditions of the accelerated pace of globalisation. As you are aware, key characteristics of globalisation have been the liberalisation of international trade, the expansion of FDI, mass cross-border financial flows, the growing strength of multinational co-operations, the unprecedented international divisions of labour and the weakness of national states, and the phenomenal development of information technology.

In 2000 the historic UN Millennium Summit Declaration proclaimed that “we believe that the central challenge we face today is to ensure that globalization becomes a positive force for all the world’s people. For, while globalization offers great opportunities, at present its benefits are very unevenly shared, while its costs are unevenly distributed. We recognize that developing countries and countries with economies in transition face special difficulties in responding to this central challenge. Thus, only through broad and sustained efforts to create a shared future, based upon our common humanity in all its diversity, can globalization be made fully inclusive and equitable.”

What has been achieved?

The President of the World Bank, Robert Zoellick, in October 2007:

“Globalisation offers incredible opportunities. Yet exclusion, grinding poverty, and environmental damage create dangers. Globalisation has brought uneven development to billions.

In 2000, the countries of the United Nations established 8 Millennium Development Goals – ambitious targets to halve poverty, fight hunger and disease, and deliver basic services to the poor by 2015.

We fully agree with Mr Zoellick’s assertion that:

“Globalisation must not leave the “bottom billion” behind. Inclusive globalisation is also a matter of self-interest. Poverty breeds instability, disease, devastation of common resources and the environment. Poverty can lead to broken societies that can become breeding grounds of those bent on destruction and to migrations that risk lives.”

Zoellick has identified the resources needed to achieve the MDGs:

Every year, malaria strikes some 500 million people worldwide. Yet we could get close to overcoming this leading killer of African children. It would take an investment of approximately $3 billion a year over the next few years to provide every household vulnerable to malaria with treated bed nets, medicines, and modest amounts of indoor insecticide.

The International Energy Agency estimates that developing countries will need about $170 billion of investment in the power sector each year over the next decade just to keep up with electricity needs, with an extra $30 billion per year to transition to a low carbon energy mix.

An additional $30 billion per year is needed to achieve the MDG of supplying safe water to 1.5 billion people and sanitation to the 2 billion people who lack these most basic necessities, also improving gender equality in poor countries.

There is a need for another $130 billion a year to meet the transportation infrastructure requirements of growing developing countries, including an estimated $10 billion a year for maritime container terminals to accommodate opportunities in trade.

And to provide primary education for some 80 million out-of-school children, another Millennium Goal, low-income countries will require about $7 billion per year.

The burning question is: do the developed countries have the political will to ensure that these resources required will indeed be provided?

UNSG, Ban Ki Moon in November 2007 said that “what is most important at this time is to have strong political will and strong leadership. We have the resources, we have the technology, we have all the theories, but what we lack the most is political will.

An implementation gap exists between promises and delivery.”

Our foreign policy objective is to bridge the gap between “processes and delivery” because as the Secretary-General observes:

If we go to Africa, particularly in the sub-Saharan region, there is not a single country in the sub-Saharan [region] that are on board. Millions of children die every year before they reach their fifth birthday. And malaria and AIDS, tuberculosis and other infectious diseases are taking their worst toll on countries that can least afford it.

And in many cities in developing countries, more than half the population lives in slums, with little or no access to basic services.

I think that clearly, we are facing an emergency, and in this emergency situation we need an emergency response, collective and emergency actions. .

The 2015 target is a goalpost that can never be moved. The clock is ticking louder and louder every day. To reach the Goals on time, we have to take concerted action now.

Our interaction with the USA, and indeed with the world, is to deal with this “emergency situation “, which demands “collective and emergency actions”.

Chairperson,

Today it is increasingly accepted that Climate Change is intrinsically linked to poverty alleviation and sustainable development. AU studies indicate that Africa will suffer the greatest negative consequences of climate change.

Important negotiations on Climate Change which will take place in Bali, Indonesia, early in December 2007.

I t is clear that we need a significant advance in the multilateral negotiations if we want to build a more inclusive, flexible and environmentally effective climate regime under the United Nations. New initiatives and agreements such as those recently proposed by the US - are welcome, as long as they feed into the multilateral system and are not aimed at displacing it. We engage with countries outside of the Kyoto Protocol regime, especially the USA, to ensure that they are dynamically involved in shaping the post-2012 agreements.

In recent years there has been a growing appreciation in the USA of the importance of Africa to the US’ strategic interests.

Allow me to quote from the Council on Foreign Relations Task Force Report (2006), which I believe captures the growing consensus, in the US at both the government and corporate level, to deal with Africa.

“Africa is becoming steadily more central to the United States and to the rest of the world in ways that transcends humanitarian interests. Africa now plays an increasingly significant role in supplying energy, preventing the spread of terrorism and …the devastation of HIV/AIDS.

Africa’s growing importance is reflected in the intensifying competition with China and other countries for both access to African resources and influence in the region.

Africa is of growing strategic importance to the Unites States.

It is not valid to treat Africa more as an object or charity than as a diverse continent with partners that the United States can work to advance shared objectives.

A business as usual approach will squander historic opportunities to change the course of Africa’s development and advance US interests. Almost all of the five fold increase in the US aid to Africa over the last ten years has been in emergency aid.

Most of the increases in assistance have been in emergency aid, rather than the development aid needed for investments in growth. US trade policies have also worked against aid recipients, inhibiting their ability to reduce their dependence on aid.

Addressing Africa’s poverty will require a more comprehensive understanding of the obstacles to growth and development, long-term commitment to priority programs and investments, and recognition by the US.

Many of the political, economic, and conflict trails that Africa has endured are now beginning to be overcome. Most African governments are now elected, and there has been a marked shift toward market economies, trade liberalisation, and reduction in price and exchange controls. NEPAD sets forth a continent-wide agenda for improved governance, sound economic policies, and regional integration.

However, the composition of African exports over the past three decades has remained unchanged. Africa is still largely an exporter of raw materials. Its share of world trade during this same period declined from 6 to 2 percent. Africa needs to increase sub-regional integration, increase its rural and inland infrastructure, eliminate obstacles to private investment, develop better credit facilities, and undertake customs reform and other forms of trade facilitation.

Africa enjoys low tariffs of preferential treatment on manufactured goods, but it faces high tariffs, non-tariffs barriers, and subsidies in the US and EU that greatly reduce its agricultural exports. Yet agriculture, which employs two-thirds of Africans, has considerable potential. The EU and US spend $350 billion each year on protectionist measures and trade subsidies for their respective farming interests. The World Bank estimates that $270 billion of these support payments are trade-distorting. For some agricultural products, US tariffs are high as 200%. US cotton subsidies, which had a negative impact on some of Africa’s poorest farmers, were recently ruled WTO illegal. The WTO issued a similar ruling against EU sugar subsidies.

President Bush, at the UN in September 2005 promised to eliminate all subsidies, tariffs, and other obstacles to agricultural trade if all other countries would do so as well.

An agreement on agricultural barriers has become the major obstacle to an overall agreement in the current Doha trade round.

What do governments and the private sector, in partnership, do to deal with the untenable situation.

The Task Force recommends that the US advance a policy to help integrate Africa more fully into the global economy. The new policy would also mean making Africa as active partners in US programmes to ensure safe and reliable supplies of energy, combat terrorism, reduce conflict, control pandemic diseases and enlarge the world community of democracies.

The Task Force identified certain priorities from a comprehensive US policy on Africa.

• Integrate Africa into the global economy.
• Reform and prioritise US assistance
• Confront the true scale and complexity of the HIV/AIDS pandemic
• Promote a reliable supply of energy from Africa
• Build security against failed states and other sources of terrorism
• Answer China’s challenge

SA’s foreign policy engagement with the USA seeks to deal with many of the fundamental issues that the Task Force has identified.

Bilateral relations

Like most countries in the world, SA experiences all the challenges that emanate from dealing with such a dominant global economic power as the US.

• The same democratic principles inform both SA and US policy formulation and actions. These sentiments have been echoed in various discussions that transpired between the Presidents over the past few years and have been publicly contained within the Presidential Joint Media Communiqué released in June 2005. This communiqué identified areas for the enhancement of bilateral co-operation within the broad areas of peace-building and security, expansion of democracy and freedom, as well as spreading economic growth and well-being.

SA has identified its own strategic and priority areas that underpin its economic relations, including the imperatives of job creation and sustained economic growth in the framework of a developmental state, and these priorities have received the support of the US government and in varying degrees the business sector.

• The overall bilateral co-operation continues to grow with vast potential for enhanced interaction.

• Government, private sector and public relations between the US and SA have continued to grow exponentially.

• Growing interactions with the US have served to highlight the important role that the US plays in supporting key initiatives of national importance to SA, such as:
• The NEPAD;
• The fight against communicable and infectious diseases, including HIV/AIDS;
• Trade and investment relations;
• Support for democratic reform and stability on the African continent;
• Military to military co-operation (Africa Contingency Training Programme {ACOTA} and the Phidisa programme); and
• Enhanced energy co-operation.

• As many think tanks in the USA have indicated, the political and economic relationship between SA and the US should be viewed against the background of:

• The increasing importance of Africa as a source of energy and specifically oil for the US;
• The US security concerns;
• The effect of HIV/AIDS and other infectious diseases.

Bilateral Economic Relations

This morning you discussed details of the “good news.”

• Total US-SA trade is approaching the R 80 billion mark.

• The US is currently the second largest destination of SA exports with a 5.2% increase noted over the past year.

• The trade balance swung in favour of SA for the first time in 2000

The United States is a net importer of 64 “strategic and critical” minerals and metals. Varying levels of reserves are held in the National Defence Stockpile, the cornerstone of US minerals policy. The US is almost totally dependent on imports for materials such as chromium, cobalt, manganese, bauxite, and the platinum-group metals, which is found in abundance in SA. Over half of the US imports of chromium and platinum-group metals and about one third of manganese comes from South Africa.

This increase in exports from SA was mostly driven by increases across several product groups including platinum, diamonds, iron and steel, passenger vehicles and auto components and aluminium.

What is encouraging is that t hese exports from SA to the US reflect the changing nature of SA’s export basket, from a supplier of mostly primary products to complex manufactured goods. This changed export basket reinforces South Africa’s industrial policy, which advocates more value added export growth.

• Base metals which represent 18.6% of all South African exports to the US;
• Vehicles/transport equipment represents 7.8%;
• Chemicals represent 7.7%; and
• Machinery and electrical equipment represents 7.2% of South African exports to the US.

As you have discussed, in May 2000, Congress approved AGOA as the new US trade and investment policy for sub-Saharan Africa (SSA). US trade with and investments in SSA have comprised only 1-2% of total US global trade. AGOA extends preferential treatment to imports from eligible countries that are pursuing market reform measures. Data shows that US imports under AGOA are mostly energy products, but imports of other products are growing.

During 2005 - 2006, US imports from SSA rose to $59.2 billion. This increase in imports can be ascribed to a 20% increase in the value of crude oil imports, as well as increases in the importation of platinum, diamonds and iron and steel. South Africa is the largest and most diversified supplier of non-fuel products under AGOA and its GSP provisions, with exports from South Africa amounting to $1.8 billion in 2006 (US Customs figures). These AGOA exports constituted 24% of total South African exports to the US.

Although the SACU-US Free Trade Agreement reached an impasse, we welcome the decision by both parties to work towards the conclusion of concrete trade and investment enhancing agreements.

Investment

The US is an important source for South Africa’s foreign direct investments (FDI) and since 1994 has become South Africa’s largest source of FDI. As of December 2004, the cumulative value of US FDI in South Africa is $5.0 billion, accounting for nearly 9% of total FDI. The US is also the largest portfolio investor in South Africa, comprising 41% of the total.

Approximately 700 US companies have a presence in South Africa. Approximately 200 firms have a direct presence through a subsidiary or sales office, and about 500 are represented through a South African agent, distributor or representative.

Some concrete US-SA projects :

• Ambassador Courville, formerly Special Assistant to U.S. President George W. Bush and Senior Director for Africa at the National Security Council, is a noted African expert, was accredited as US Ambassador to the AU on 22 December 2006. The first Ambassador from a non-African country accredited solely to the African Union.
• The US Government has been supportive of the South African Government efforts to provide bilateral and trilateral assistance in the Africa region. Examples of their support include: the SA Government and US Government partnership on the OECD review of the Implementation of the Paris Declaration of AID Effectiveness; inputs received from the US Government representatives regarding an alternative donor structure to the SA National Treasury; and the participation of the US Embassy officials in the South African Government diplomatic training programme developed for and participated in, by Southern Sudan officials; etc.

US Trade and Development Agency is involved in many ASGISA related projects. Other areas of co-operation include : police co-operation, immigration officials’ training; training of prosecutors/magistrates; co-operation to combat trafficking in persons, military-to-military co-operation,; various programmes on the advancement of human rights with special emphasis on women and children.

The second major challenge we have to confront is:

Peace, Stability and Security:

• T he US National Security Strategy published in September 2002, states that “ Africa's great size and diversity requires a security strategy that focuses on bilateral engagement and builds coalitions of the willing”. Thus, the US will focus on countries with major impact on their neighbourhood such as South Africa, Nigeria, Kenya, Ghana and Ethiopia, who are anchors for regional engagement and merit focused attention.
• According to the National Security Strategy, Africa is viewed as a ‘playground’ for terrorists due to the weakening of governments/ state control and power. This created, according to the US, an environment conducive for terrorists to launder funds and plan further attacks. Therefore, the US will continue to be actively concerned with areas of conflict in Africa, and will seek to support African states from becoming havens for terrorists.
• HIV / AIDS

HIV/AIDS is perceived by the US as a critical element that contributes to the further weakening of states and their capacity / ability for effective control. To this end, under the National Security Strategy, HIV/AIDS was classified as a national security risk.

2.1Relation between development and security

2.2African conflicts

2.3Middle East and Far East

2.4 Nuclear non-proliferation

South Africa-USA security co-operation bilaterally

• Most of US assistance in Africa falls under the Africa Contingency Traning Programme (ACOTA programme) which is aimed at the establishment of a peacekeeping training programme. By design, the ACOTA programme is meant solely for Sub-Sahara African military forces to develop and improve their capacity and inter-operability for deployment and conducting of peace support and humanitarian relief operations in Africa. Currently, 23 countries are ACOTA partners.
• The United States has been forthcoming in offering material and technical support to AU and UN peacekeeping operations in Africa. It has also consistently offered support to South Africa’s participation in such operations.
• IMET (international military educational training): Waiver by US President to non-signature countries of the Art 98 agreements that freed the restrictions on IMET funding at the end on 2006.
• PHIDISA: Medical research programme with specific emphasis on combating HIV/AIDS within the SANDF. Focus enhancement of military operability. Envisage $5.5 mil to fund ARVs for SANDF personnel and family members for HIV/AIDS treatment.
• $4 mil PEPFAR support for the SANDF Masibambisane HIV/AIDS education awareness, care and treatment programmes.

AFRICOM

• Africom, in terms of its stated function and structure, would be a comprehensive or centralised institution to deal with the multitude of challenges inherent in Africa’s new found strategic importance.
• Africom is a ‘one-stop shop’ for dispensing US development assistance whilst also providing security-related training and support under the banner of transformational diplomacy.

Human rights, good governance, anti corruption.

South African perspectives of “force feeding” of democracy

APRM

• Resulting from the US-SA Presidential meeting in 2005, a Human Rights Focus Group was established to facilitate senior level consultations on human rights with specific emphasis on women and children. At the review meeting held at the US Embassy ( Pretoria) on 12 April 2006, a number of international initiatives relating to children in armed conflict, and women’s rights in the global arena, were discussed. The challenge remains to translate the strong political will and commitment to women and children into concrete results.
• At the level of the African continent, there are initiatives to mainstream a gender perspective into all AU programmes. The discussions of the previous SA-US Human Rights Task Team meeting on 3 November 2005, had identified closer co-operation on the African continent, with the AU and specifically within the NEPAD Framework, on human rights including on women’s and children’s rights, as areas to follow-up.
• The UNSC has been seized with the issue of “Children in Armed Conflict” since 1999, however the abuse of children in conflict areas continues unabated, while the demobilisation, disarmament and reintegration of child soldiers remains a challenge due to a lack of resources. At UNGA61 two important new reports added to the debate: the Secretary-General’s Report on Violence against Women and a UN Independent Expert Study on Violence against Children. SA proposed further discussion between SA and the US on strengthening mutual action following the release of these two reports.
• The US, with regard to the Optional Protocol on Children in Armed Conflict, established two programmes, “Displaced children and Orphans Fund” and the “War Victims Fund”, to assist people with disabilities resulting from war. Bilateral co-operation is further needed to consider possible actions in priority areas.

The 3 rd major challenge we confront is :

Transforming global governance, political and economic

The UN must become more effective, efficient, results-orientated, transparent, accountable and democratic.

Co-operation in UNGA and UNSC

Tactical differences, interalia, Myanmar and the recent rape resolution.

Bilateral relations have reached a level of maturity that enables us to non-antagonistically tackle differences that might arise in multilateral institutions.

Conclusion

There are times in human history when change seems to flood us, cascading in torrents over national structures, social orders and the common wisdom itself. Depending on the response of nation, societies and people, the result can either be a liberating washing away of problems, or a threatening erosion of the foundations of civilisation itself. We are living in just such an age today.

We are operating in an international order that is a fundamentally transformed paradigm that is constantly changing, forever throwing up new challenges and threatening our very existence.

Former SG of the UN, in September 2006 said “we face a world whose divisions threaten the very notion of an international community upon which the UN stands for.

The events of the last 10 years have not resolved but instead, sharpened the challenges of our unjust world economy, world disorder and contempt for human rights and the rule of law. “

We therefore believe that our vision of a global discourse must be comprehensive and must include the socio-economic and political domains. Such a vision for the 21 st century must be centrally concerned with: social justice and injustice, exclusion and inclusion; human rights and the denial of human rights; a clear role for the developmental state; providing equality of opportunities; developing social inclusion and cohesion; promoting peace and stability regionally and globally; promoting sustainable growth and development; ecological and environmental sustainability; and dealing with the glaring unequal division of wealth on global, national, and regional levels.

This is the context within which SA seeks to develop its all round relationship with the US, both at government and non-government levels.

Thank you.

Issued by Department of Foreign Affairs
Private Bag X152
Pretoria
0001

13 November 2007