Identifier
Created
Classification
Origin
06PRETORIA2022
2006-05-16 15:11:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Pretoria
Cable title:  

SOUTH AFRICA: DEPUTY PRESIDENT MEETS OPIC DURING

Tags:  EINV EFIN PGOV PREL EAID SF 
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VZCZCXRO6452
RR RUEHDU RUEHJO RUEHMR
DE RUEHSA #2022/01 1361511
ZNR UUUUU ZZH
R 161511Z MAY 06
FM AMEMBASSY PRETORIA
TO RUEHC/SECSTATE WASHDC 3450
INFO RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY
RUEHBU/AMEMBASSY BUENOS AIRES 0241
RUEATRS/DEPT OF TREASURY WASHDC
RUEAIIA/CIA WASHINGTON DC
RHEHNSC/NSC WASHDC
RUCPDC/DEPT OF COMMERCE WASHDC
UNCLAS SECTION 01 OF 02 PRETORIA 002022 

SIPDIS

SENSITIVE
SIPDIS

DEPT PLEASE PASS TO DEPT OF HUD
DEPT PLEASE PASS TO OPIC

E.O. 12958: N/A
TAGS: EINV EFIN PGOV PREL EAID SF
SUBJECT: SOUTH AFRICA: DEPUTY PRESIDENT MEETS OPIC DURING
HOUSING AFRICA CONFERENCE

REF: A. PRETORIA 109 (NOTAL)

B. PRETORIA 698 (NOTAL)

C. PRETORIA 955 (NOTAL)

(U) This cable is Sensitive But Unclassified. Not for
Internet Distribution.

UNCLAS SECTION 01 OF 02 PRETORIA 002022

SIPDIS

SENSITIVE
SIPDIS

DEPT PLEASE PASS TO DEPT OF HUD
DEPT PLEASE PASS TO OPIC

E.O. 12958: N/A
TAGS: EINV EFIN PGOV PREL EAID SF
SUBJECT: SOUTH AFRICA: DEPUTY PRESIDENT MEETS OPIC DURING
HOUSING AFRICA CONFERENCE

REF: A. PRETORIA 109 (NOTAL)

B. PRETORIA 698 (NOTAL)

C. PRETORIA 955 (NOTAL)

(U) This cable is Sensitive But Unclassified. Not for
Internet Distribution.


1. (SBU) Summary. On May 4, Deputy President Phumzile
Mlambo-Ngcuka met with OPIC President and CEO Robert
Mosbacher, Jr. and Executive VP John Simon to discuss how
OPIC could assist with the Accelerated and Shared Growth
Initiative for South Africa (ASGISA). The meeting focused on
two potential areas of OPIC assistance -- offering low-income
home loans and securitizing pools of micro credit loans to
boost the small business sector. The Deputy President
expressed her frustration with the South African banking
sector's unwillingness to bear the risk of extending housing
finance to the low-income market. OPIC would like to assist
in this effort, but would prefer to wait until the banks and
government have determined how the risk will be divided among
them. Post encourages OPIC to explore micro credit loan
options without delay. The Deputy President also sought
assistance for a mentoring program to boost the skills
development of South Africans. This meeting took place on
the margins of OPIC's Housing Africa Conference, held May 2-4
in Cape Town. End Summary.

Deputy President Meets OPIC
--------------


2. (U) Meeting attendees included:
-- Ms. Phumzile Mlambo-Ngcuka, Deputy President, Republic of
South Africa
-- Ms. Nonhlanhla Mjoli-Mncube, Economic Advisor to the
Deputy President
-- Mr. Robert Mosbacher, Jr., President and CEO, Overseas
Private Investment Corporation (OPIC)
-- Mr. John Simon, Executive Vice President, OPIC
-- Mr. Jan van Vollenhoven, Director: USA Directorate,
Department of Foreign Affairs
-- Mr. Angus September, Deputy Director: USA Directorate,
Department of Foreign Affairs
-- Mr. Christian Merkling, Director, Lazare Kaplan Africa
(arranged meeting on behalf of Maurice Tempelsman)
-- Ms. Kary Hintz-Tate, Economic Officer, Embassy Pretoria



3. (SBU) On May 4, OPIC President and CEO Robert Mosbacher,
Jr. and OPIC Executive VP John Simon met with South Africa's
Deputy President Phumzile Mlambo-Ngcuka. They discussed how
OPIC could assist with the Accelerated and Shared Growth
Initiative for South Africa's (ASGISA) 6% growth target (Refs
A - C). Two potential areas of assistance emerged: (1)
offering low-income home loans for those who do not qualify
for the full government housing subsidy, but cannot secure
financing from banks; and (2) securitizing pools of new micro
credit loans to boost the small business sector. Mosbacher
empathized with South Africa's need for financing solutions
while stating OPIC's view that "low income does not mean high
risk." Simon added that OPIC is looking to increase its
micro lending capacity and is working with institutions who
already have good track records in this area.


4. (SBU) The Deputy President went on to detail the specifics
of where assistance is needed. She noted that South Africans
who earn between R1,500 and R7,500 per month ($250 - $1,250)
comprise the population that does not qualify for the full
housing subsidy (R31,929 or $5,300),and are generally unable
to secure a loan from a formal banking institution for houses
under R250,000 ($42,000). The Deputy President also welcomed
any innovations in the small business arena (i.e., loans from
R10,000 to R250,000 or $2,000 to $42,000) that could give a
large group of people a "starting chance," as the government
is not looking for smaller, "boutique" solutions.


5. (SBU) The Deputy President expressed frustration with the
banking industry's initiative to fulfill its obligations
under the Financial Sector Black Economic Empowerment (BEE)
Charter, signed in 2003. South Africa's "Big 4" banks
(Standard, Barclays/ABSA, FirstRand, and Nedcor, which
together control 85% of the market) and the financial
services industry agreed to offer low-income home loans
totaling R42 billion ($7 billion) by 2008 under the Charter.

PRETORIA 00002022 002 OF 002


The banks and government, however, have reached an impasse
over who should bear the risk of offering this financing.
The Deputy President said that government might have to
"crack the whip" on the industry to fulfill its Charter
obligations and shoulder the associated risk, while the banks
are looking to government to share the risk in line with
international practice.


6. (SBU) The Deputy President's final plea was to seek
assistance with mentoring programs to contribute to the
skills development of South Africans. She explained that
South Africa has ambitious infrastructure plans, but lacks
the people with skills to implement the plans. Government
has identified 500 people at the entry and mid level who they
would like to send abroad to receive on the job training and
mentoring in the next 18 months. Mosbacher noted that he was
not aware of any OPIC projects that could assist in this
effort. (Note: CDA Teitelbaum recently met with the Deputy
President's Economic Advisor Mjoli-Mncube on this issue and
will follow up on this request.)


7. (SBU) Overall, the meeting was relaxed and cordial. The
Deputy President was candid about the challenges facing South
Africa. On two separate occasions, she expressed her
appreciation for OPIC's innovative Housing for HIV project
which provides HIV/AIDS treatment for homeowners which are
insured against mortgage default by South Africa's Home Loan
Guaranty Company. The Deputy President said it is crucial to
keep parents alive and provide shelter, as medication cannot
provide shelter. Mosbacher thanked the Deputy President for
her appreciation and also briefly described other work OPIC
is doing with South Africa's National Urban Reconstruction
and Housing Agency (NURCHA),Zambia, Ghana, Kenya, as well as
two recently approved private equity funds which will operate
in Southern and West Africa.

Housing Africa Conference
--------------


8. (U) On May 2-4 in Cape Town, OPIC hosted a successful
Africa-wide conference to promote investment in housing
construction, finance, and infrastructure on the continent.
Over 250 participants attended from the public and private
sectors of Africa and the United States. Topics included:
Africa's investment climate, housing construction, mortgage
financing, capital markets/securitization, land/legal issues,
infrastructure systems, and private equity. The Special
Advisor to South Africa's Housing Minister, Mr. Saths
Moodley, opened the conference alongside Mosbacher, Simon,
and CDA Teitelbaum.

Comment
--------------


9. (SBU) This meeting was one of many meetings the Deputy
President has led in efforts to seek assistance with her
ASGISA initiative. The SAG is hopeful that this meeting will
lead to additional OPIC programs in South Africa. OPIC would
like to assist with low-income home loans discussed during
the meeting, but is hesitant about getting involved before
the banks and government have sorted out their disagreement
on the risk sharing issue. Once this issue is resolved, we
encourage OPIC to explore personal home loan opportunities.
We hope OPIC is able to evaluate without delay any micro
credit options that could boost the small business sector in
South Africa.


10. (U) OPIC President and CEO Rob Mosbacher cleared this
cable.
TEITELBAUM