TRADE LINKAGES DRIVING SOUTH AFRICA'S BILATERAL

C O N F I D E N T I A L SECTION 01 OF 03 PRETORIA 004748

SIPDIS

DEPT PASS USTR FOR PCOLEMAN

E.O. 12958: DECL: 10/28/2014
TAGS: AO ETRD PREL SF EINV
SUBJECT: TRADE LINKAGES DRIVING SOUTH AFRICA'S BILATERAL
RELATIONSHIP WITH ANGOLA


Classified By: Ambassador Jendayi E. Frazer for reasons 1.4 (b & d)


1. (C) Summary: Conversations with several Angola watchers
from government, business, and academia yielded the common
theme that South Africa's relationship with Angola will over
the coming years be defined by burgeoning trade linkages
between the two. South African firms are investing heavily
in nearly all sectors of the Angolan economy, and no one sees
signs of this abating. Government-to-government relations
are cordial and focused on facilitating increased economic
integration, although underlying historical, cultural, and
racial tensions will likely keep the two governments from
cultivating close ties. No contacts gave much credence to
speculation of a growing political rivalry between the two
countries, as Angola's inward focus and South Africa's desire
to bolster its global and regional influence are markedly
divergent priorities over at least the next 10 years. End
summary.

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CHECKERED HISTORY STILL AFFECTS RELATIONSHIP
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2. (U) South Africa's long and checkered history in
Angola-particularly the pre-1994 apartheid government's
attempts to undermine Angola's independence movement and,
later, the MPLA government-still mars relations that are
increasingly cordial but hampered by latent tensions. The
apartheid regime's involvement began in the mid-1960s, when
Pretoria began seconding military assets to the Portuguese
military to help it combat the insurgency that began in 1961.
After the MPLA took power after independence in 1975, South
Africa swung its support to UNITA in an attempt to topple the
communist-oriented government. From 1975 until the early
1990s, Pretoria plied UNITA with military assistance and,
during the mid-1980s, sent South African forces to fight
against Cuban troops backing the Angolan Government. Many of
the South African combatants came from the infamous 32
"Buffalo" Battalion, which was mostly made up of native
Angolan troops. Several thousand 32 Battalion members and
their families still live in South Africa today.


3. (C) On the flip side, relations between the ANC in exile
and the MPLA were never close. The Angolan Government was
always too occupied with its own troubles to play a
meaningful role in assisting the ANC or pressuring the
apartheid regime through international and regional forums,
playing the role of "free rider" in SADCC and the Frontline
States. CEO of the South Africa-Angola Chamber of Commerce
Roger Ballard-Tremeer also notes that underlying racial and
ethnic tensions further undermined relations. (Comment:
Ballard-Tremeer is a former diplomat who served as South
Africa's Ambassador to Angola from 1994 to 1996 and retired
in 2001 after more than 25 years of DFA service. He also
serves as a private consultant to South African firms looking
to invest in Angola.) He said that after the accession of
Jose Eduardo dos Santos to the presidency in 1979, there was
an increasing perception by ANC members that mulatto Angolans
were beginning to wield an inordinate amount of power in the
Angolan Government, creating mistrust and a mutual dislike
between the two sides. These tensions have largely abated
today. However, Ballard-Tremeer said that his successor as
Ambassador to Angola told elements of the South African
Government in the late 1990s that Angola's black people "were
not free," a story corroborated by Dr. Sehlare Makgetlaneng,
the southern Africa director at the Africa Institute of South
Africa. Ballard-Tremeer also recounted an anecdote of how
after the Angolan Government allowed the ANC's military arm,
Umkhonto we Sizwe (MK),to open a camp on Angolan soil, the
MK immediately surrounded the camp with landmines. This was
not done to protect the camp from UNITA or the South
Africans, but rather to keep its MPLA "allies" from stealing
supplies and equipment.


4. (C) After South Africa's 1994 transition to majority
rule and Angola's 1994-98 cessation of hostilities, relations
improved beyond outright hostility but still remained cool.
Ballard-Tremeer noted that the only substantive involvement
of South Africa in Angola in the 1994-2002 period was in
attempting to mediate between UNITA and the government, often
sending a South African envoy (usually former general
Constand Viljoen) to meet Savimbi secretly. Luanda knew of
these meetings and was not happy about them. Dr.
Makgetlaneng of the Africa Institute of South Africa also
noted that Luanda thought Pretoria was not doing enough
during this time to rein in Anglo-American's dealings with
UNITA, while Angola's involvement in the Democratic Republic
of Congo was another bone of contention in the bilateral
relationship. Nonetheless, relations during this time were
characterized more by benign neglect than outright
bitterness. Ballard-Tremeer noted, for example, that limited
visits by senior South African officials-notably Mandela and
former Foreign Minister Alfred Nzo-were the result of health
and security concerns rather than any anti-Angola agenda.

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BUSINESS TIES BOOMING SINCE SAVIMBI'S DEMISE
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5. (SBU) The February 2002 death of UNITA leader Jonas
Savimbi marked a turning point in bilateral relations between
Angola and South Africa, with the desire of South African
firms to gain access to the untapped Angolan market spurring
increased bilateral cooperation. Ballard-Tremeer said that
South African entrepreneurs started looking seriously at
Angola almost immediately after Savimbi's death, and in March
2003 Ballard-Tremeer founded the Angola-South Africa Chamber
of Commerce to facilitate greater South African investment.
F.J. Lourenco Fernandes, Angola's Trade Representative in
South Africa, echoed similar sentiments. He said that he
opened Angola's trade office in Johannesburg in 1996 but that
there was virtually no interest in Angola until 2002. Since
that time, the previously one-man operation has taken on six
staff members to cope with the demands of liaising with the
South African Government and local businesses. He also noted
that the daily flight between Johannesburg and Luanda is
nearly
always full, mostly with businessmen.


6. (SBU) In terms of areas of investment, every contact
points to nearly endless possibilities. Fernandes and
Ballard-Tremeer laid out a laundry list of sectors about
which they have had discussions with South African firms:

--Infrastructure is probably the preeminent area for South
African investment, with companies showing interest in
rehabilitating buildings, roads, and railroads. Fernandes
said five South African firms are working on rehab projects
at the moment and that there were ongoing discussions on
rehabilitation of the Benguela corridor.

--Fernandes said his government is keen to rejuvenate the
long dormant tourist industry, and he said a South African
company is at the moment rebuilding two hotels in Lobito.

--In agriculture, a South African firm has signed an
agreement to cultivate sugar cane in Benguela, and he has had
discussions with South African companies about investing in
cotton, sunflowers, beans, and nuts.

--Fernandes also pointed to the mining industry, particularly
the diamond sector, as an area ripe for South African
investment.

--Ballard-Tremeer said there is extensive interest by South
African businessmen, including heavyweights like Tokyo
Sexwale, in Angola's booming oil and gas sector, although
little has of yet resulted. Pipeline reconstruction is
another area of interest.


7. (SBU) Despite the extensive interest and an improved
business environment, Ballard-Tremeer notes that South
African firms still encounter many problems when getting
involved in Angola, particularly because they still do not
have the proper understanding of Angola's business culture.
The Angolans have a "Mediterranean" attitude toward business,
based around the development of personal relationships, and
Ballard-Tremeer notes that it is not uncommon for an Angolan
minister to host an "open house" for businessmen that begins
at 11PM and lasts until dawn. These customs are quite
foreign to South African businessmen, who, by contrast, work
hard to establish contacts but are poor at maintaining them.
Another difficulty is the fact that Angolans generally speak
poor English, although this is changing among the younger
generation, and South Africans speak even less Portuguese.

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INVESTMENT DRIVING POLITICAL RELATIONSHIP
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8. (C) Every contact Poloff spoke with described the
political relationship as much better since 2002. Deputy
President Jacob Zuma has visited Angola twice since 2002,
most recently in May, while Angolan Foreign Minister Joao de
Miranda visited Pretoria in 2003. Cecilia Baptista,
Political Minister Counselor at the Angolan Embassy in
Pretoria, waxed enthusiastic about the state of bilateral
ties in the past two years, noting that the two countries
have signed agreements dealing with agriculture, education,
and health. She said Pretoria has been extremely helpful in
the health arena, providing extensive training for health
care professionals. Baptista also noted that a reciprocal
promotion of investment agreement was on the verge of being
signed, an act that Ballard-Tremeer and others thought would
prove a major boon to trade expansion. DFA Angola Desk
Officer Willie de Groot (who has been on the desk for six
years) shared similar sentiments about the stark improvement
since 2002. He said this was helped in part by the attempts
of current Angolan Ambassador Isaac Maria dos Anjos to
cultivate bilateral ties, whereas his predecessor distrusted
Pretoria. Nonetheless, de Groot still described Angola as
"corrupt as hell," though he noted that pressure from the IMF
and United States was changing this. (Comment: The American
Chamber of Commerce in South Africa, based in Johannesburg,
is also considering organizing a visit of interested members
to Angola in 2005 in pursuit of commercial opportunities.)


9. (C) Dr. Makgetlaneng's view of these improved ties was
that the business "tail" was wagging the political "dog." He
opined that Pretoria's foreign policy is a delicate balancing
act between not playing a domineering role in the region and
also trying to open up regional markets for South African
firms. In the case of Angola, the potential for business
investment is so great that Pretoria treats Luanda with kid
gloves, especially in the political arena, because it does
not want to jeopardize these potential business ties.
Further complicating the political and business relationship,
he noted, is the fact that many firms interested in Angola
are Black Economic Empowerment concerns, headed by
businessmen with close ties to the ANC.

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REGIONAL POLITICAL RIVALRY PROBABLY NOT IN THE CARDS
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10. (C) Some analysts have pointed to Angola's amazing
economic potential, newfound political stability, and
powerful military as factors that could lead it to play a
more prominent political role in the region, possibly even
challenging South Africa's regional hegemony some day. No
one Poloff spoke with gave this hypothesis any credence, with
most contacts noting that Angola has shown no greater
interest in engaging in international, pan-African, or
regional forums since 2002. Ballard-Tremeer said that
Angolan representatives still are often absent or
non-participatory in multilateral meetings, while de Groot
described Angola's ongoing tenure on the United Nations
Security Council as a non-event from a South African
standpoint. The only grouping in which Angola seemed to show
much interest was in PALOP, the African lusophone union.
Overall, contacts believed that Angola would continue to be
motivated above all else by self-enrichment, avoiding greater
multilateral commitments unless they made economic sense.
Hence, South Africa's role as the regional superpower seems
secure for the foreseeable future.
FRAZER