C O N F I D E N T I A L SECTION 01 OF 02 PRETORIA 004768

SIPDIS

STATE FOR NP/NE, AF/S
DOE FOR NE-2.4 AND NNSA/NA-241, NA-243
USDOC FOR 4510/ITA/MAC/AME/OA/JDIEMOND

E.O. 12958: DECL: 10/21/2014
TAGS: EMIN EPET ENRG KNNP TRGY PINR SF
SUBJECT: SOUTH AFRICA: AMBASSADOR MEETS MINISTER OF
MINERALS AND ENERGY

Classified By: Ambassador Jendayi E. Frazer, Reasons: 1.4 (b) and (d)


1. (C) SUMMARY. Ambassador Jendayi Frazer called on Minister
Phumzile Mlambo-Ngcuka of the Department of Minerals and
Energy (DME) on October 19, 2004. Ambassador Frazer stressed
the need to move ahead on scheduling our first Joint Standing
Committee on Nuclear Energy Cooperation and to bring closure
to our research and development agreements on nuclear energy
and on nuclear materials safeguards technologies.
Mlambo-Ngcuka mentioned DME's objective to encourage oil and
gas exploration on South Africa's continental shelf. She was
disappointed that Forest Oil (Denver) and PetroSA were unable
to locate more natural gas in their offshore Ibhubesi field,
but was appreciative of the support that the U.S. Trade
Development Agency had provided the project and PetroSA. She
mentioned DME's intention to develop the jewelry industry in
South Africa, but that this first required loosening controls
on the possession of precious metals and diamonds in South
Africa. Mlambo-Ngcuka said that she wanted to bring the
interagency dialogue on DME's Vehicle Emissions Strategy to a
close by the end of this year. She said that if MMT, the
fuel additive sold in South Africa by Afton Chemical
(Richmond, Virginia), were disallowed, the government would
have to devise an "elegant exit" for Afton. End Summary.

Introduction
--------------


2. (SBU) Ambassador Frazer made her introductory call on
Minister Mlambo-Ngcuka on October 19. Also attending the
meeting was Acting Head of Ministerial Services Sandile Tya
Tya and Econoff. Mlambo-Ngcuka, who has a reputation as one
of the more effective ministers, began her second term as DME
minister in April. During her first term, she supervised the
creation of the country's first black economic empowerment

charters in the liquid fuels and minerals sectors.
Mlambo-Ngcuka also was temporarily the acting Minister of
Science and Technology when the post fell vacant in the run
up to national elections in 2004.


3. (SBU) Comment: In 2002-04, Mlambo-Ngcuka's husband and
former Director of Public Prosecutions, Bulenani Ngcuka,
headed a corruption investigation involving Deputy President
Jacob Zuma. In the course of the investigation, Zuma
supporters accused Ngcuka of being a former spy for the
apartheid regime, and of abusing his authority. In 2004,
President Mbeki commissioned a hearing that exonerated
Ngcuka. The spotlight took its toll, however, and Ngcuka
resigned his position in August 2004. He is now involved in
a black economic empowerment enterprise Amabubezi along with
some well known black business leaders. Mlambo-Ngcuka
appears to have emerged unscathed from all the publicity
surrounding her husband. End Comment.

Nuclear Energy Cooperation
--------------


4. (SBU) Ambassador Frazer began the meeting by stressing the
need to establish a United States-South Africa Joint Standing
Committee on Nuclear Energy Cooperation (JSCNEC) and to
decide on an inaugural date as soon as possible. The United
States was prepared to come to South Africa December 1-3 to
facilitate the inaugural meeting, but needed confirmation as
soon as possible. Ambassador Frazer also emphasized the need
to bring closure to two research and development agreements
in the area of nuclear energy and materials safeguards
technologies. These agreements established the framework
within which cooperative technical projects could be pursued.
Mlambo-Ngcuka said that she would look into the JSCNEC and
the agreements and get back to the Ambassador by October 21.
(Note: On October 28, Sandile Tya Tya told Econoff that
Minister Mlambo-Ngcuka still needed to be briefed by Deputy
Director Nelisiwe Magubane and Chief Director Tseliso
Maqubela on these subjects, but that Maqubela had told Tya
Tya that holding the JSCNEC inaugural meeting in December
"was most likely." Maqubela also told him that the
agreements were in advanced stages, i.e., "ready to be
signed." Earlier, the Department of Foreign Affairs (DFA)
informed the Embassy that an interagency meeting scheduled on
October 22 to discuss the JSCNEC and R&D agreements had been
postponed to October 29, to ensure the participation of all
relevant officials. The Embassy continues to actively press
for an inaugural JSCNEC and the conclusion of the R&D
agreements.)

Ibhubesi Gas Field
--------------


5. (C) Mlambo-Ngcuka was a bit disappointed that Forest Oil
and PetroSA were not able to locate more natural gas reserves
in the Ibhubesi field off the Western Cape during their
recent drilling campaign. She said that the Petroleum Agency
of South Africa (PASA) was doing everything it could to
promote oil and gas exploration on South Africa's continental
shelf. The problem had been that, until now, not much
resource had been found. She was appreciative of the U.S.
Trade and Development Agency's support for Ibhubesi project
and technical assistance to PetroSA. Econoff mentioned that
Forest Oil felt it had enough reserves at this time to
justify a small power plant in the Western Cape, and that
such a plant would provide valuable peaking power to the
region. Mlambo-Ngcuka agreed, adding that one of DME's
objectives was to diversify away from coal for environmental
reasons. She also mentioned that on October 22 South Africa
would sign an agreement with Namibia, Angola, Botswana, and
the Democratic Republic of the Congo on the development of a
$4 billion hydroelectric dam at the Inga Rapids on the Congo
River.

Adding Value: Jewelry
--------------


6. (SBU) Mlambo-Ngcuka explained DME's objective to create a
domestic jewelry industry. South Africa was an important
source of gold, platinum, diamonds, and semi-precious stones.
She saw no reason why South Africa should export these
commodities to Italy when they could be fashioned into
jewelry in South Africa and used to advance black economic
empowerment. First, the government had to modify the law to
allow the development of an indigenous industry by loosening
the controls so that small businesses could acquire precious
metals and stones for the purpose of manufacturing jewelry.
She hoped that South Africa would be exporting jewelry to the
United States under the African Growth and Opportunity Act
within five years. (Note: South Africa may export most
jewelry items to the U.S. duty free under the Generalized
System of Preferences.)

Vehicle Emissions Strategy: MMT
--------------


7. (SBU) At the close of the meeting, Econoff mentioned Afton
Chemical's effort to receive a fair hearing on the use of
MMT, a fuel additive and replacement for lead, in South
Africa. South Africa had been considering banning MMT as
part of its Vehicle Emissions Strategy. Mlambo-Ngcuka agreed
that whatever South Africa decided to do with MMT, it should
be fair and based on sound science, but added that there
seemed to be a balance of scientific research for and against
the fuel additive. She said that one idea had been for the
government to give the consumer a say (e.g., through labeling
at the pump), but the Department of Environment and Tourism
seemed to be "dead against it." Whatever the government
decided, she said that it would need to take into account all
of the costs and benefits. If it turned out that MMT were
disallowed, then the government would have to devise "an
elegant exit" for Afton Chemical and the refiners that used
MMT -- meaning some sort of phase out over a number of years.
One way or the other, she wanted to bring deliberations on
the Vehicle Emissions Strategy to a close by the end of the
year.
FRAZER