NEW MINISTER OF PUBLIC ENTERPRISES BRIGITTE

C O N F I D E N T I A L SECTION 01 OF 04 PRETORIA 002612

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E.O. 12958: DECL: 11/18/2018
TAGS: EAIR ECPS ELTN ENRG PGOV SF
SUBJECT: NEW MINISTER OF PUBLIC ENTERPRISES BRIGITTE
MABANDLA

REF: A. PRETORIA 2477

B. PRETORIA 2403

C. PRETORIA 2401

Classified By: Economic Counselor Perry Ball for reasons 1.5 (B) and (D
)


1. (C) SUMMARY: New Minister of Public Enterprises Brigitte
Mabandla brings little technical experience to her new
position as government point-person for a diverse, troubled
portfolio of state-owned enterprises. There is a high
probability for delay in state power utility Eskom's capital
expansion program, including choosing a supplier for new
nuclear power plants. Loss-making South African Airlines
will remain a headache and Mabandla will be confronted with
requests for more cash. The rail, ports and pipeline company
Transnet's expansion program will be more influenced by the
global credit crisis than Mabandla's tenure. She will have
limited influence in the telecom sector where industry seeks
more liberalization than the Minister of Communications is
willing to offer. There is a high likelihood that she will
adopt a passive steady-as-she-goes posture in managing her
ministry, given her lack of experience and her role in a
care-taker government. Mabandla is not expected to continue
in a Zuma government. End Summary.

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Managing Challenged Parastatals
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2. (SBU) South African President Kgalema Motlanthe appointed
new Minister of Public Enterprises Brigitte Sylvia Mabandla
on September 25, 2008 (Ref A). She previously served as
Minister of Justice and Constitutional Development from 2004
to 2008. Prior to that, she served as Housing Minister from
2003 to 2004 and as Deputy Minister of Arts, Culture,
Science, and Technology from 1995 to 2003, after first being
elected to Parliament in 1994. She has been a member of the
ANC National Executive Council since December 2007. Mabandla
was born November 23, 1948. From 1974 to 1975, she acted as
youth coordinator for the Institute of Race Relations in
Durban. Mabandla obtained a law degree from the University
of Zambia in 1979. She lectured on law and English in
Botswana for the first half of the 1980's. The rest of the
decade she spent as a legal advisor to the ANC Lusaka Legal
and Constitutional Affairs Department. She returned to South
Africa as member of the ANC's constitutional and negotiating
team from 1990 to 1994. During this period, she was very
active in the field of human rights, specifically minority
rights, children's' rights, disabled people's rights, and
women's rights, working with a variety of NGOs. Mabandla's
official biography lists her as married, but does not mention
children. A 2006 press report mentions that she had a
five-month-old baby when she and her husband Lindelwa
Mabandla were arrested in Durban in 1975 in celebrations of
Mozambique's liberation.


3. (C) Many industry observers were not excited about
Minister Mabandla's replacement of technocrat and
interventionist Alec Erwin at the helm of the Department of
Public Enterprises (DPE),the department with overall
responsibility for the loss-making national carrier South
African Airways and several other inefficient and troubled
state-owned enterprises. These include the power utility
Eskom; the rail, ports and pipeline company Transnet;
armaments manufacturer Denel; broadband company Infraco; next
generation nuclear power producer Pebble Bed Modular Reactor
Qgeneration nuclear power producer Pebble Bed Modular Reactor
(PBMR); diamond miner Alexkor; and forestry assets manager
Safcol. (Note: Eskom and Transnet generate profits, but are
seeking ambitious capital expansion programs. PBMR is
working on research and its permit to start a small
demonstration plant and requires additional capital. End
Note.) Mabandla does not bring technical acumen to her
position and was not perceived as a good Minister of Justice.
At best, she will have a difficult task getting up-to-speed
with her diverse and challenging portfolio of companies. At
worst, some observers wonder if she has been designated to
preside over breaking up the ministry and spinning the
parastatal companies off to their relevant economic
ministries. Her incumbent Director General Portia Molefe is
viewed as a capable lead bureaucrat in the Ministry, who can
serve as her tutor. Energy Officer has heard her speak
knowledgeably at a number of conferences.

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Eskom Struggles to Provide Power
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4. (C) Power utility Eskom is perhaps Mabandla's weightiest
challenge, given Eskom's supply shortfall in provisioning the
domestic and regional electricity markets and the
controversial load-shedding earlier this year (Ref B).
Industry analysts fear the change at the helm of the ministry
may delay huge capital-intensive projects aimed to expand
electricity generation for the country to mitigate its power
crisis. Standard Bank Economist Johan Botha told the press,
"She has to walk in completely cold. She won't put hand to
paper to approve the big contracts like the nuclear one
before she has been fully briefed." The market is watching
to see how soon, or if at all, Mabandla will give her
approval to plans to build the country's second nuclear
plant, as part of the ambitious goal of a fleet of new
plants. Westinghouse and Areva of France are the qualified
bidders. Westinghouse is confident that the deal will still
be made, despite a series of delays and challenges to Eskom's
financing capacity (Ref C). The Westinghouse local rep told
Energy Officer that Mabandla is expected to adopt a consensus
- rather than an independent - decision-making style, given
her lack of energy experience. Department of Minerals and
Energy Chief Director: Nuclear Tseliso Maquebela told an
energy conference that the government would have to revisit
nuclear plans given the new circumstances, but reaffirmed the
SAG's commitment to increasing nuclear's share in the energy
mix. He said the SAG was waiting for Eskom's decision on the
supplier. Mabandla has quickly embraced the Eskom party line
to brow-beat consumers for not doing enough to help mitigate
the power crisis.


5. (C) Vodacom Chairman Oyama Mabandla, an influential
business and political leader and the nephew of Minister
Mabandla, told Economic Counselor and ICT Officer that her
lack of technical expertise was an advantage in that she
would be forced to take the advice of technical experts in
Eskom and the DPE to make the correct decision about the
nuclear contract, rather than rely on her own opinions. He
explained that Erwin was too much of a technocrat and
intervened unnecessarily in all decision-making processes.
Oyama Mabandla said his aunt would rely extensively on
Director General Molefe's expertise, whom he described as
competent.

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South African Airways Bleeds Cash
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6. (SBU) The aviation industry has greeted new Public
Enterprises Minister Brigitte Mabandla with two simple
requests: "No more handouts to South African Airways (SAA)"
and Open Skies for Africa. (Note: SAA used to be part of the
state-controlled freight and transport logistics group
Transnet, but was purged from Transnet's balance sheet when
Transnet undertook major restructuring initiatives to
eliminate all loss-making divisions. End Note.) Comair
Joint Chief Executive Gideon Novick told the press, "Her
appointment did not come a moment too soon. The previous
minister was a disaster and his interventions hurt the
industry." "The new minister must just give taxpayers a break
and instead give SAA to people who know how to run an
airline. The state has not realized any return on the
billions of rand pumped into SAA over the years. These
subsidies create distortions in the market," added Novick.
Qsubsidies create distortions in the market," added Novick.


7. (SBU) SAA received R11.2 billion (USD$1.1 billion) in
subsidies and bailouts during Erwin's tenure. The money
covered substantial losses incurred as a result of foreign
exchange hedging, impairment of aircraft assets, major
restructuring efforts, and retrenchments. During the March
2007-ending financial year, SAA returned a disastrous set of
results and the airline asked for recapitalization. SAA
announced improved results for the year ending March 2008,
but these results excluded restructuring costs. The airline
reported a significant turnaround to post a R123 million
(USD$12 million) net profit (excluding restructuring costs)
from ongoing operations in March 2008. This compares to a
loss of R883 million (USD$88 million) in the prior year.
Despite industry criticism, Mabandla recently praised SAA CEO
Khaya Ngqula for the implementation of the restructuring
program and confirmed to the press that "no consideration is
being given to replacing the CEO of SAA."


PRETORIA 00002612 003 OF 004



8. (C) Officials from the Department of Foreign Affairs (DFA)
and the Department of Trade and Industry recently confirmed
the financial difficulties faced by SAA during discussions to
increase direct routes to the U.S. These financial
difficulties are the reason why the proposed new direct route
from Johannesburg to Chicago and a number of existing routes
to Europe were canceled in 2007. They told Transport Officer
that SAA had once again approached the government for a
bailout package. DFA officials explained that South Africa's
ability to negotiate bilateral liberalized airlift strategies
would be affected by SAA's balance sheet. They also
confirmed that DPE would not play a major role in initiatives
such as Open Skies for Africa, which falls under the purview
of the Department of Transport and the African Union.

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Transnet Faces Financial Limitations
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9. (SBU) Transnet's expansion plans are not expected to be
influenced by the change at the helm of DPE. However, global
economic conditions and Fitch's recent downgrading of South
Africa's sovereign credit rating could affect Transnet's
ability to borrow from international markets to fund part of
its R80 billion (USD$8 billion) expansions plans. Transnet
plans to expand capacity at its railways, ports, and
pipelines over the next five years. Key projects that have
been approved include: the expansion of the coal railway line
to the port of Richards Bay and the iron-ore railway line to
the port of Saldanha, including upgrades to the rail line and
port system; the widening and deepening of the Port of Durban
entrance channel, including the redevelopment of Durban's
Pier 1 as the container-handling facility and an increase in
the capacity of the Durban car terminal; the widening and
deepening of the Cape Town container terminal; the
refurbishment and renewal of the freight rolling stock; the
continued development of the new Port of Ngqura; and the
construction of a multipurpose pipeline between Durban and
Johannesburg. Transnet CEO Maria Ramos, who was also a
trained economist and rated by Fortune magazine as South
Africa's most powerful businesswoman, has cautioned the
country's policymakers against being "too adventurous" when
shaping future economic policy. She has also urged them to
take full account of the fact that the world economy is
probably entering its biggest crisis since the Great
Depression. (Note: Maria Ramos is also the long-time partner
of Minister of Finance Trevor Manuel. She recently announced
that she will take a new job as CEO of ABSA Bank as of March

1. End Note.)

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Limited Influence over Telkom
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10. (SBU) Few industry analysts expect major changes in the
ICT sector or a decline in the government's support of
state-owned broadband company Infraco with the removal of
Alec Erwin from the DPE. BMI-Tech Managing Director Denis
Smit described the Infraco project to the press as one of the
few positive government interventions in the sector since it
is expected to reduce bottlenecks in improving bandwidth
capacity from undersea cables landing in South Africa. ICT
policy in the country is widely recognized as conservative
and the pace of liberalization slow. However, it is the
incumbent Minister of Communications, Ivy Matsepe-Cassaburri,
Qincumbent Minister of Communications, Ivy Matsepe-Cassaburri,
who is criticized about the slow pace of liberalization.
Major industry groups are pinning hopes of ICT sector
de-regulation to Matsepe-Cassaburri's possible removal from
the Ministry after the spring elections. Minister Mabandla
has formal control over Infraco, but does not directly
control Telkom as a primarily private entity.


11. (C) The South African Government's relationship with
state-controlled fixed-line operator Telkom is complicated by
the dual desires to increase Telkom profits and to reduce ICT
costs. The Mbeki cabinet approved the sale of Telkom's
controlling interest in mobile-operator Vodacom to UK-based
Vodafone. Some analysts predicted that the new regime would
reverse this Mbeki cabinet decision. Nevertheless, the
incoming South African cabinet embraced the decision, and the
transaction is expected to be completed shortly. Vodacom
Chairman Oyama Mabandla told Economic Counselor and ICT
Officer the proposal received wide-support because the Zuma
camp wanted to send pro-market signals to international
investors. Additionally, the transaction will result in the

PRETORIA 00002612 004 OF 004


influx of more than USD$2 billion in foreign direct
investment into South Africa at a time when global economic
conditions are adding pressures to country's current account
deficit.

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Mabandla and SAPS Commissioner Jackie Selebi
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12. (C) Former Justice Minister Mabandla has been
compromised in the eyes of many South Africans by her failure
to prosecute former South African Police Service (SAPS)
Commissioner Jackie Selebi, who is the subject of corruption
allegations. Oyama Mabandla told the Economic Counselor last
year that he had asked his aunt at a family function if
Selebi was "a crook." She agreed that he was. When her
nephew then asked why she went along with the suspension of
Vusi Pikoli, the National Prosecutors Authority head who was
prosecuting Selebi for corruption, she implied that it was
difficult to go against the wishes of President Mbeki. Given
Zuma's publicly stated belief that he was persecuted by the
Mbeki government, while other Mbeki loyalists like Selebi
were protected, Minister Mabandla is fortunate to still have
a job with the Motlanthe government. Oyama Mabandla said she
was kept on, along with any other ministers who chose to
remain, to reduce the destabilizing impact of President
Mbeki's departure. He told the Economic Counselor earlier
this month that he did not think she would be asked to
continue into the next government. "She is not part of the
Zuma camp. She has not been told that she will leave," he
said, "but she expects that to happen."

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Long-Standing Family Ties in the U.S.
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13. (C) Minister Mabandla has an older sister-in-law, age
75, and a brother-in-law who emigrated to the U.S. in 1962,
during the apartheid years. They settled in San Diego,
California where one or both of them was on the faculty of
the University of California at San Diego. Oyama Mabandla is
the child of another brother-in-law. Oyama Mabandla went to
live with his relatives in San Diego for six months in the
early 1990s before he got a place of his own. He lived in
the U.S. for almost ten years and got all of his tertiary
education there, including an a BA degree in Political
Science at UC San Diego and a law degree in Corporate Law at
Colombia University. He once had a green card and has a
child who is a U.S. citizen. He said he was very fond of the
U.S. and in many respects regarded the U.S. as his second
home. "I feel a deep sense of connection to the country," he
said, "even though the feeling is sometimes not exactly
reciprocated, especially by the immigration officials." He
voluntarily gave up his green card the last time he left the
U.S. He is currently in the process of applying for a
tourist visa to visit Washington and New York during and
after the Presidential inauguration on January 20. Oyama
Mabandla is a strong Obama supporter.


14. (C) Comment: Minister Mabandla presides over much of the
"commanding heights" of the economy, controlling the key
sectoral parastatals in power, aviation, and transport - and
to a lesser extent, telecom. The Embassy does not expect her
to produce radical policy changes. She now sits in a key
position for advancing the SAG's potential decision on the
next nuclear power plant supplier, but the final decision
Qnext nuclear power plant supplier, but the final decision
will not be hers. That is because any decision that is made
regarding this or any other major infrastructural project
will have to be made at the cabinet level.
LALIME