INPUT FOR PRESIDENT'S 2005 REPORT ON AGOA

UNCLAS SECTION 01 OF 02 PRETORIA 000852

SIPDIS

DEPT FOR AF/S KGAITHER; AF/EPS CAKUETTEH AND MFLEMING
USDOC FOR 4510/ITA/IEP/ANESA/OA/JDIEMOND
COMMERCE ALSO FOR HVINEYARD
TREASURY FOR OWHYCHE-SHAW
DEPT PASS USTR FOR PCOLEMAN AND WJACKSON

E.O. 12958: N/A
TAGS: ETRD PREL SF AGOA USTR
SUBJECT: INPUT FOR PRESIDENT'S 2005 REPORT ON AGOA

REF: (A) STATE 24616, (B) 2004 PRETORIA 4098


1. This cable responds to Reftel A request for post's input
for the President's 2005 report on AGOA drawing on the
template provided.


2. SOUTH AFRICA

Market Economy/Economic Reform/Elimination of Barriers to
U.S. Trade
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The South African government continued to implement prudent
fiscal and monetary policies. Inflation fell to 4.3% in
2004, well within the central bank's target range of 3-6%.
Economic growth, which at 3.7% exceeded the government's
expectation of only 2.9% in 2004, combined with improved tax
collection resulted in a reduction of the budget deficit to
2.3% of GDP, far lower than the predicted 3.5%. The new
budget proposed in February 2005 focused on accelerating
growth and investment. In order to alleviate supply-side
constraints, it called for reducing the regulatory burden on
small business, reducing taxes, improving the supply of
skilled labor and cutting transportation costs. South
Africa is moving slowly forward with the restructuring of
state owned enterprises. The government has made
improvements in the management and efficiency of South
Africa's ports. In 2003 the government divested much of its
interest in Telkom, the state-owned telecommunications
giant. In February 2005 the government finally approved the
shareholding structure of a second national
telecommunications operator (SNO),setting the stage for the
licensing of the new company to begin competing with Telkom
later in the year. South Africa is making progress on
intellectual property rights protection. Police increased
seizures of counterfeit goods, but follow-up and prosecution
have been inadequate. Copyright protection is a problem. A
gap in the counterfeit goods law makes it difficult to seize
pirated goods that transit through South Africa. South
Africa provides national treatment for foreign investors. A
bilateral Trade and Investment Framework Agreement and a
bilateral tax treaty are in force. The negotiations for a
free trade agreement between the United States and the
Southern African Customs Union stalled halfway through 2004
but Ministerial talks in December 2004 set the stage for
getting them back on track in 2005.

Rule of Law/Political Pluralism/Anti-Corruption
-------------- --


3. South Africa is a multiparty parliamentary democracy,
and opposition parties operate freely. While the African
National Congress holds a sizeable majority in the
Parliament, several other parties operate actively and
freely. National elections were held in April 2004. The
government is committed to the rule of law and is working to
strengthen its judicial and regulatory systems. The
judiciary is independent at all levels. While South Africa
faces governance and corruption challenges, the government
has made the fight against corruption a priority.

Poverty Reduction
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4. The government continued to take steps to address
poverty and vulnerability. Priorities for the next three
years are to accelerate economic growth, enhance social
development, and lower inequality. Poverty reduction
measures contained in the February 2005 budget continued the
trend for increased spending for social infrastructure
investment, direct income support and improved basic service
delivery to the poor. The government proposed more funds
for social security grants, rural land restitution, housing,
public transport, teachers and police. Increasing rates of
HIV/AIDS and high unemployment are serious obstacles to
reducing the divide between the rich and poor.

Labor/Child Labor/Human Rights
--------------


5. The Constitution provides for equal protection,
freedom of speech and the press, freedom of assembly, and an
independent judiciary. South Africa provides strong worker
rights protections, including freedom of association and the
right to organize and bargain collectively. Approximately
26 percent of economically active South Africans are members
of trade unions; 485 trade unions are registered. South
Africa has ratified ILO conventions 29 and 105, and
prohibits forced or compulsory labor. In sectors which
unions have found it difficult to organize, such as farming
or domestic work, the Department of Labor has established
sector-wide minimum wages. South Africa is actively engaged
in reducing the incidence of child labor, including the
worst forms of child labor. The government is both taking
preventative measures, including eligibility for income
grants for poor children under the age of 11 and waivers of
school fees for poor children, and actively prosecuting
employers of child labor. The incidence of HIV/AIDS,
however, has led to an increase in the number of child-
headed households. The SAG prohibits child labor for
children under the age of 15 or under the minimum school
leaving age (where the age is 15 or older),and does not
allow the employment of children over age 15 should that
employment be detrimental to the child. Children under age
15 are allowed limited employment in film, entertainment,
sports and advertising, if the employer has applied for and
been granted license by the South African Department of
Labor. South Africa has ratified ILO convention 182 on the
worst forms of child labor. The latest survey of child
labor was conducted in 1999, and found that 36 percent of
children between the ages of 5 and 17 engaged in work of
some type, most frequently fetching fuel and water. The
government has focused high- level attention on the human
rights issues of law enforcement, however deaths due to
excessive force by security forces and deaths while in
police custody were reported. Some police officers have
reportedly beat, raped, tortured, and otherwise abused
suspects and detainees. The government has taken action to
investigate and punish some of those involved.

Public Outreach
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6. Post has engaged actively in public outreach to advance
AGOA throughout the past year. Even before arriving at post,
Ambassador Frazer promoted AGOA in her remarks at a
reception covered by the press at the Corporate Council on
Africa (CCA) and Good Works International in July. She also
advanced AGOA in speeches at the American Chamber of
Commerce and the South Africa Foundation. She routinely
promotes AGOA in her wide-ranging public diplomacy efforts.


7. An Embassy Economic officer, Alan Tousignant, advanced
AGOA in an SABC-TV broadcast on NEPAD; a 30-minute live
radio interview on SABC-FM; speeches at the Metropolitan BEE
Conference and Expo Africa, the Institute of South Africa,
and the Women's Business Network; interviews with Channel
Africa Radio, Engineering News, INet, and African Decisions;
and a digital video conference with 25 African and European
students studying in a Master's Program in International
Trade and Investment with South African universities. The
Economic section also routinely advises U.S. and South
African businesses on AGOA provisions. The Consul General
in Durban, Michael Thurston, promoted AGOA at a recent
National Ports Authority/SA Port Operations hosted
conference for the Enterprise Florida trade delegation and
SA business. Similarly, the PAO in Cape Town, Lou Mazel,
explained AGOA on live interviews with Cape Talk radio.
Cape Town also arranged media events with a focus on AGOA
for such visitors as Codel Goodlatte and Treasury Under
Secretary John Taylor.

SIPDIS

FRAZER