AMERICAN FIRMS CRITICIZE FOURTH DRAFT OF ICT

UNCLAS SECTION 01 OF 02 PRETORIA 004313

SIPDIS

DEPT FOR AF/EPS DKRZYWDA AND AF/S/TCRAIG
COMMERCE FOR 4510/ITA/IEP/ANESA/OA/JDIEMOND
TREASURY FOR GCHRISTOPULOS, LSTURM, AND AJEWEL
DEPT PASS USTR FOR PCOLEMAN AND WJACKSON

SENSITIVE

E.O. 12958: N/A
TAGS: EINV ETRD EFIN ECIN ECON SF
SUBJECT: AMERICAN FIRMS CRITICIZE FOURTH DRAFT OF ICT
EMPOWERMENT CHARTER

REFTEL: A) PRETORIA 3726
B) PRETORIA 2651
C) PRETORIA 2164
D) PRETOIRA 2092

(U) This cable is sensitive but unclassified. Not for
Internet distribution.


1. (SBU) SUMMARY. The American Chamber of Commerce in South
Africa (AmCham) submitted comments on the fourth draft of the
Information Communication and Technology (ICT) empowerment
charter September 15 to the ICT Charter Working Group.
American businesses described the fourth draft as impractical
and unworkable. Amcham, acting on behalf of U.S. businesses
in South Africa, requested a meeting with Deputy Minister of
Communications Roy Padayachee. A fifth draft of the Charter
will be submitted for governmental review by the end of
September. END SUMMARY.


2. (SBU) The American Chamber of Commerce in South Africa
(Amcham) submitted comments on the fourth draft of the
Information Communication and Technology (ICT) empowerment
charter September 15 to the ICT Charter Working Group. The
document outlines concerns held by U.S. businesses operating
in South Africa. AmCham's document was also sent to the
attention of the Deputy Minister of Communications Roy
Padayachee. AmCham expects to meet independently with
Padayachee to discuss what it perceives to be major flaws in
the fourth draft.


3. (SBU) In private, several executives of U.S. businesses
in South Africa describe the fourth draft as "rubbish",
"disappointing", and "completely unworkable." One official
said the document, was a "giant leap of impracticality" from
the third draft. In public, the companies have identified
the following items as the significant issues of the fourth
draft:

- The scorecard definition of accreditation is incomplete
with major omissions, which make impossible any attempt to
apply the scorecard to real businesses.

- Some targets are punitive and fail to account for special
circumstances.

- The excessive number of indicators creates unwarranted
complexity and inflexibility.

- The Charter lacks clarity on issues, which have major
industry implications.

- The Charter proposes interference in issues, which are of
no significance to BEE and may actively prejudice
multinational companies.

- The appointment and governance of the BEE Council, its
rules and procedures, its powers and methods of appeal of its
decisions are undefined.

- The Charter scorecard contains rigidity and inflexibility,
which do not allow for different business models in a widely
diverse ICT industry.


4. (U) AmCham and several representatives of American firms
in South Africa met with Dali Mpofu, Chairman of the ICT
Working Group and members of the scorecard drafting team.
According to IBM Country Manager, Mpofu acknowledged several
of AmCham's points pertaining to the draft's ambiguity
regarding scoring and bonus points and said the Working Group
would take those into consideration.


5. (SBU) Mpofu also indicated that he plans to submit a
fifth draft of the ICT Charter to the Minister of
Communications by the end of September. The fifth draft
would not be available for public comment at that time.
Mpofu expects to receive government's feedback by the end of
October. He said the BEE Council would be formed between
December 2004 and February 2005. According to Mpofu the
Council must represent the sector, but should also include
labor and include representation from the provinces. (NOTE:
The composition of sectoral councils has been a major
sticking point in the financial services sector and promises
to be a contentious issue in the ICT sector as well. END
NOTE).


6. (U) Complete text of AmCham's submission to the ICT
Working Group will be faxed to the South Africa desk.

FRAZER