Identifier
Created
Classification
Origin
09PRETORIA1054
2009-05-22 12:44:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Pretoria
Cable title:  

SCENE SETTER FOR CODEL WATSON'S MAY 26-31, 2009

Tags:  PREL PGOV ECON ETRD EINV SF 
pdf how-to read a cable
VZCZCXRO1028
OO RUEHDU RUEHJO
DE RUEHSA #1054/01 1421244
ZNR UUUUU ZZH
O 221244Z MAY 09
FM AMEMBASSY PRETORIA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 8584
INFO RUEHTN/AMCONSUL CAPE TOWN 6880
RUEHDU/AMCONSUL DURBAN 0993
RUEHJO/AMCONSUL JOHANNESBURG 9230
UNCLAS SECTION 01 OF 07 PRETORIA 001054 

SENSITIVE
SIPDIS

AF/S FOR RUSH MARBURG AND ELIZABETH PELLETREAU

E.O. 12958: N/A
TAGS: PREL PGOV ECON ETRD EINV SF
SUBJECT: SCENE SETTER FOR CODEL WATSON'S MAY 26-31, 2009
VISIT TO SOUTH AFRICA

UNCLAS SECTION 01 OF 07 PRETORIA 001054

SENSITIVE
SIPDIS

AF/S FOR RUSH MARBURG AND ELIZABETH PELLETREAU

E.O. 12958: N/A
TAGS: PREL PGOV ECON ETRD EINV SF
SUBJECT: SCENE SETTER FOR CODEL WATSON'S MAY 26-31, 2009
VISIT TO SOUTH AFRICA


1. (SBU) Charge La Lime warmly welcomes the visit of your
delegation to South Africa. The Mission stands ready to do
everything it can to make your trip a success. You are
visiting South Africa at a particularly interesting time,
following South Africa's fourth successful democratic
election on April 22.


2. (SBU) South Africa remains an anchor country in
U.S.-Africa policy. The ANC-led South African Government
(SAG) has made major progress toward establishing a vibrant
democracy and market-based economy since the end of apartheid
in 1994. The SAG has focused on political and economic
transformation, i.e., reducing the gap between the
historically privileged and disadvantaged communities. It
has accomplished this primarily by delivering
government-provided housing, electricity, and water to the
poor, and by creating educational, skills development,
employment and business opportunities for the previously
disadvantaged.


3. (SBU) South Africa continues to face daunting challenges,
including a lack of public sector capacity, a thirty percent
shortfall in mid-to-upper-level public sector managers,
skills shortages in all sectors, infrastructure bottlenecks,
income inequality, less than adequate educational
opportunities, massive unemployment, entrenched rural and
urban poverty, violent and widespread crime, episodes of
xenophobic riots, and a severe HIV/AIDS pandemic. These
problems intensify political tensions within the ruling
coalition and with other political, civil society, and
private sector groups.


4. (SBU) South Africa remains the continent's best prospect
for establishing a successful democratic society with
expanding prosperity despite its many challenges.
Approximately 77 percent of registered voters participated in
the April 22 national elections, indicating a popular will to
build a democratic society. South Africa is a leader of
aid-recipient countries in their dialogue with donor nations.
It plays a key role in promoting peace and stability in
Africa, and is an important voice on international finance,

global trade, human rights, conflict resolution, and
nonproliferation issues. U.S.-South African relations are
stable, as reflected by President Bush's July 2003 visit to
South Africa and President Mbeki's June 2005 and December
2006 trips to Washington. ANC President and then-ANC
presidential candidate Jacob Zuma visited the U.S. October
19-28, 2008. The USG shares common objectives with the SAG
on the African continent and beyond, and the two governments
work closely on many of them.

-------------- ---
RECENT POLITICAL CHANGES INCREASE DOMESTIC FOCUS
-------------- ---


5. (SBU) The ANC dominates the political scene in South
Africa but showed signs of internal strife in the last year.
The strife led to a lessening of support from the electorate.
The ANC won 70 percent of the vote and 279 of 400 seats in
the National Assembly in the 2004 election and 66 percent of
the national vote in the 2006 municipal elections. In the
April 2009 national and provincial election, the ANC won 66
percent of the vote and 264 National Assembly seats, earning
the right to govern for the fourth consecutive time since

1994. The opposition, meanwhile, has steadily benefited from
ANC turmoil. The Democratic Alliance (DA) is the largest of
several small opposition parties in the National Assembly,
Qwinning 47 seats in 2004 and 67 seats in 2009. In 2006, the
DA joined an opposition coalition to govern the city of Cape
Town. There were multiple attempts by the ANC to unseat the
DA-led, multi-party coalition, and each unsuccessful attempt
increased the local stature of the DA. In 2009, the DA
earned 51 percent of the vote in the Western Cape to win an
outright governing majority in the province. A new
opposition party that broke from the ANC, the Congress of the
People (COPE),gained 30 seats in the National Assembly in
the 2009 election and is now the third largest national party
as well as the official opposition in three of the nine
provinces.


6. (SBU) Part of why the ANC has faced internal problems
stems from the fallout of the December 2007 ANC congress in
Polokwane, Limpopo. Zuma defeated incumbent Mbeki by a vote
of 2,329 to 1,505 for the party presidency. Zuma's allies
swept the other top five ANC positions. The Zuma camp
dominated the elections for the ANC's 86-member National

PRETORIA 00001054 002 OF 007


Executive Council (NEC) with sixteen Mbeki Cabinet members
(out of 28) losing their NEC seats. Zuma's victory
positioned him to be the front-runner to become national
President following the 2009 election. The tense debate at
the party's December 2007 ANC National Conference and defeat
of incumbent Mbeki reflected the growing impatience with the
pace of socio-economic change. It was also in large part a
reflection of the growing restlessness and dissatisfaction
with the ANC's inability to deliver a better life for
everyone. Zuma's subsequent court challenge to his 2007
indictment on corruption and fraud charges formed the pretext
for the ANC decision to recall Mbeki as President in
September 2008 before his five-year term expired. In April
2009, the National Prosecution Authority dropped all charges
against Zuma, alleging official state interference in the
proceedings, relieving him of this taint in the last month of
the campaign for the 2009 election.


7. (SBU) It is too soon to tell whether the results of the
2009 election will lead to changes in SAG policy. Interim
president Kgalema Motlanthe's seven month tenure ended with
the May 2009 inauguration of Zuma, and the newly appointed
Cabinet is only weeks old. Zuma has stressed that as
president he will not make radical policy changes and that he
respects the party's previous policy consensus. His Cabinet
selections, particularly the re-appointment of Public
Enterprises Minister Barbara Hogan (who served as Health
Minister under Motlanthe) and former Finance Minister Trevor
Manuel as Minister of Planning in the Presidency, show that
the ANC wants to improve policy implementation in certain
areas without drastic overhauls. Despite such signals, many
of the new Cabinet appointments -- and some of Zuma's
strongest coalition supporters -- come from the left wing of
South African politics. The Congress of South African Trade
Unions (COSATU) and the South African Communist Party (SACP)
are members of the ANC-led tripartite alliance. These groups
are pressuring Zuma to embrace more leftist or perhaps even
populist positions in the interests of the working-class
poor, and they appointed many of their members to the
Cabinet. On issues like HIV/AIDS and Zimbabwe, this could
lead to SAG policies more closely in line with U.S.
interests. However, on other issues -- like fiscal
management, nationalization of industry/resource sectors, and
trade liberalization -- the shifts in policy might be less
positive from a U.S. perspective. It seems likely that the
new ANC leaders will be more focused on domestic rather than
continental or global issues, which could reduce the SAG's
activist role in international affairs.

--------------
FOREIGN POLICY PROMOTING AFRICAN INTERESTS
--------------


8. (U) South Africa under Mbeki took a high-profile role
promoting Africa's interests and he was successful in getting
the African agenda on a host of multilateral agendas,
including the G-20. South Africa served as the first chair
of the African Union until July 2003 and helped establish
continental institutions such as the Pan-African Parliament
(which sits in South Africa) and the AU Peace and Security
Council. Mbeki was the driving force behind the New
Partnership for Africa's Development (NEPAD),an
African-developed program based on international best
practices and continental peer review to strengthen economic
Qpractices and continental peer review to strengthen economic
and political governance across the continent.
NEPAD is also a framework for African partnerships with the
international community. These initiatives are still early
in their evolution and have not yet become effective
mechanisms for development.


9. (SBU) South Africa under Mbeki believed it had a
responsibility to lead African conflict resolution efforts
and participate in peace support operations by virtue of its
history and regional political, economic, and military clout.
South Africa plays a lead role in conflict resolution in
Burundi and contributes troops to UN Peace Keeping missions
in the Democratic Republic of Congo (DRC),Burundi, and
Sudan. South Africa has approximately 3,000 personnel
deployed in peace support operations in Africa and the U.S.
has a strong interest in helping South Africa expand and
enhance its peacekeeping and disaster assistance
capabilities. South Africa participates in the U.S. African
Contingency Operations Training and Assistance program
(ACOTA) to enhance the South African National Defense Force's
(SANDF) capacity to participate in multilateral peace support
operations. The U.S. uses International Military Education
and Training (IMET) funds to support professional military

PRETORIA 00001054 003 OF 007


education and technical training of future military leaders.
The January 2008 repeal of the American Servicemen's
Protection Act (ASPA) prohibitions on provision of military
assistance will permit the resumption of Foreign Military
Financing (FMF) programs supporting the South African Air
Force's C-130 fleet this is used to support South African
troops deployed in the DRC, Sudan, and Burundi. The first
tranche of new FMF funding is expected to be available in
FY2010 South African officials have been openly critical of
U.S. Africa Command in the past, but the Embassy has been
making progress in engaging with the SAG on this issue and
continues to engage in a wide range of military-to-military
activities. Last year the U.S. completed the first visit by
a U.S. Navy aircraft carrier to South Africa since 1967.
This marked a turning point in military-to-military relations.


10. (SBU) Zimbabwe remains a continuing challenge for South
Africa. SADC leaders appointed Mbeki in March 2007 as the
mediator between Zimbabwean President Robert Mugabe and the
opposition Movement for Democratic Change (MDC),with the
goal of leveling the electoral field before the March 2008
elections. Negotiations made some progress, but human rights
abuses against the opposition accelerated. The MDC won a
small majority of seats in the Parliament. MDC leader Morgan
Tsvangirai won a plurality of the vote (47 percent) but not
enough to avoid a presidential runoff in the March 2008
elections. Presidential runoff elections planned for June
27, 2008 were preceded by a campaign of state-sponsored
violence and intimidation that undermined the atmosphere for
a fair electoral contest. Tsvangirai dropped out of the race
on June 22 as a result of the political instability and the
violence against MDC supporters. A September 2008
SADC-brokered power-sharing agreement was reconfigured as a
power-sharing unity government and implemented in February

2009. The SAG and SADC asked former Mbeki to stay on in his
role as SADC's chief Zimbabwe negotiator following his
departure from office.


11. (SBU) Overall U.S.-South African relations are positive,
but South Africa sometimes takes positions on global issues
that run counter to U.S. interests. As a recent
non-permanent, UN Security Council member, and former chair
of the G-77 and the Non-Aligned Movement (NAM),South Africa
advocates for a greater voice for the
"South" relative to the "North" in an expanded and reformed
UN Security Council, in the governance of international
financial institutions, increased development assistance, and
lower trade barriers (for manufactured and agricultural
exports to developed countries).

-------------- --------------
THE NEED TO ACCELERATE GROWTH IN A SLOWING GLOBAL ECONOMY
-------------- --------------


12. (SBU) South Africa is a middle-income, emerging market
economy with purchasing power parity GNI per capita of $3,206
(2008),akin to Chile, Malaysia, or Thailand. The SAG has
pursued prudent monetary and fiscal policies, which turned a
fiscal deficit of 6 percent of GDP in 1994-05 to a small
surplus of 0.9 percent of GDP in 2007-08. However, the
government announced in February 2009 a fiscal deficit of 3.9
percent of GDP for 2009-10, citing the need for stimulus in
the face of a deteriorating economic environment. The South
African Reserve Bank (SARB) is
independent. It targets an inflation rate of 3-6 percent,
Qindependent. It targets an inflation rate of 3-6 percent,
but is currently struggling with inflation of about 8.5
percent. Inflation is expected to fall within the target
band before the end of 2009, which gives SARB space to cut
interest rates further in response to the global economic
crisis. Real GDP growth averaged 5 percent per year
between 2005 and 2007, but fell to 3.1 percent in 2008
because of higher interest rates, power shortages and
weakening commodities prices. GDP contracted 1.8 percent in
the fourth quarter of 2008, owing to slumps in commodity
prices and manufactured exports. Many analysts believe that
South Africa is now in recession, and forecast negative
growth of about 1.0 percent in 2009.


13. (SBU) South Africa's financial system has not been
directly affected by recent turmoil in global financial
markets. The local banking system is well-capitalized and
strictly-regulated, and banks and other financial
institutions have relatively little exposure to sub-prime
debt or other contagion. Banks raise most of their capital
domestically. However, South Africa depends on portfolio
inflows to finance its large current account deficit (about
8 percent of GDP). The global "flight to safety" in the

PRETORIA 00001054 004 OF 007


second half of 2008 took a heavy toll on the Johannesburg
Stock Exchange and the rand. The rand has strengthened in
recent weeks as a semblance of confidence has returned to
global markets.


14. (SBU) South Africa's single greatest economic challenge
is to accelerate growth in a slowing global economy in order
to address widespread unemployment and reduce poverty. The
official unemployment rate, currently 21.9 percent, is
significantly higher among black South Africans than among
whites. Income inequality between haves and have-nots
remains one of the highest rates in the world. Fifty-six
percent of black South Africans, but only four percent of
whites, live in poverty. The lack of capacity and service
delivery at the provincial and municipal levels fueled the
recent xenophobic attacks on refugees from neighboring
countries as South Africans from lower socioeconomic strata
feared that jobs, houses, and other services were being given
to non-South Africans. Other obstacles exacerbating South
Africa's economic growth and service delivery problems are
skill shortages, a brain and skills drain, and education
system weaknesses. Nevertheless, the SAG has made strides in
the areas of transfer payments and public services to close
the gap. Nearly 2.5 million low-cost homes have been built
to provide shelter to 7.6 million people, 3.5 million homes
have been provided with electricity, and nine million people
have been connected to clean water. Almost 13.4 million
people were benefiting from social grants in 2008. The SAG's
broad-based Black Economic Empowerment (BEE) program provides
ownership and employment opportunities to blacks and has
helped the black middle class double in size to an estimated
two million since 1994.


15. (U) The success in preparing for and carrying off the
FIFA 2010 Soccer World Cup to be held in South Africa in
mid-June 2010 is regarded by many as a bellwether of the
country's commitment to continued progress in a variety of
social and economic areas, among these being the fight
against crime, providing services, expanding and improving
infrastructure, and developing tourism.

-------------- --------------
THE RECENT GROWTH OF U.S.-S.A. TRADE AND INVESTMENT
-------------- --------------


16. (SBU) The U.S. is South Africa's third-largest trading
partner, after Germany and China. U.S.-South Africa trade
grew 12 percent in 2008, totaling $16.1 billion. U.S.
exports rose 18 percent to $6.2 billion, while South African
exports to the United States increased 9 percent to $9.9
billion. South Africa was the third largest beneficiary
(after Nigeria and Angola) and the largest beneficiary of
non-oil exports under the African Growth Opportunity Act
(AGOA) in 2008. The U.S. was South Africa's largest export
market in 2007 and an impressive 98.1 percent of South
Africa's exports entered the U.S. with zero import duties in
2007 as a result of normal trading relations (NTR),GSP, AGOA
and other benefits. Japan displaced the U.S. as South
Africa's largest export market in 2008.


17. (SBU) Over 600 U.S. firms have a presence in South
Africa, with 85 percent using the country as a regional
center. South Africa's stable government, sound fiscal and
monetary policies, transportation infrastructure,
sophisticated financial sector, and, by African standards,
large market are the primary attractions for U.S. businesses.
Qlarge market are the primary attractions for U.S. businesses.
Nevertheless, South Africa has failed to attract a
proportionate share of global foreign direct investment since

1994. Reasons include a volatile exchange rate, distance
from developed country markets, high unit labor costs, strong
unions, skills shortages, crime, HIV/AIDS, regulatory
uncertainty, and the impact of Black Economic Empowerment
policies such as the mandatory sale of equity to previously
disadvantaged persons, many of whom are connected to the ANC.
The U.S. was the largest portfolio investor and the second
largest foreign direct investor in South Africa after the
U.K. ($6.6 billion at year-end 2007). General Motors, Ford,
and Timken are among the top industrial investors in South
Africa. Teletech recently opened a large call center in Cape
Town and has plans to open smaller centers in other parts of
the country. Westinghouse is competing for a multi-billion
dollar contract to build a fleet of AP1000 nuclear reactors.
Lockheed recently signed a contract with state-owned aviation
manufacturer and services provider Denel for Denel to open a
licensed service center to repair, maintain and overhaul
Lockheed C-130s from Africa and the Middle East.


PRETORIA 00001054 005 OF 007



18. (SBU) The U.S. and the Southern African Customs Union
(SACU: South Africa, Botswana, Lesotho, Namibia, and
Swaziland) suspended free trade agreement negotiations after
three years and six rounds of negotiations in April 2006.
Negotiators agreed to pursue a Trade, Investment and
Development Cooperative Agreement (TIDCA) in an effort to
preserve some of the progress made in the FTA talks. A
framework agreement for the TIDCA was signed at the AGOA
Summit in Washington on July 14, 2008. South Africa has
recently expressed interest in stepping up the pace on
TIDCA, and negotiators may begin work soon on agreements to
promote private sector contacts and reduce existing
barriers to bilateral trade. There may be movement on TIDCA
in the run-up to the AGOA Summit in August.

--------------
ONGOING U.S. SUPPORT FOR SOUTH AFRICA
--------------


19. (U) The USG has contributed approximately $1.9 billion
toward South Africa's development, including $250 million in
credit guarantees, since 1994, and $100 million in education,
$120 million in economic growth, and $88 million in democracy
and governance since 1998. Our current development
assistance program focuses on: supporting South Africa's
response to HIV/AIDS and TB through the U.S. President's
Emergency Plan for AIDS Relief (PEPFAR); addressing
unemployment through financing and business development
services for SMEs, job-skills training and education;
reducing gender-based violence as part of the President's
Women's Justice and Empowerment Initiative (WJEI); enhancing
the quality of education through teacher training; and
partnering with the SAG in third countries engaged in
post-conflict rebuilding. South African NGOs have also
received Trafficking in Persons (TIP) grants over the past
few years to assist in the global fight against trafficking
in persons. A wide range of U.S. private foundations and
NGOs are also at work in South Africa. Among them are the
Gates Foundation (HIV/AIDS),the Ford Foundation (higher
education),the Rockefeller Foundation (adult education),and
the Clinton Foundation (HIV/AIDS and Climate Change).


20. (U) Twenty-eight U.S. government entities are
represented at the U.S. Mission in South Africa (Embassy
Pretoria and the three Consulates in Johannesburg, Cape Town
and Durban). The Mission has 292 Direct Hire (USDH)
positions and 608 local employees. More than 40 percent of
Mission staff provides regional services to other U.S.
embassies in Africa. The Mission has embarked on an
ambitious program to build safe office facilities. The
Mission completed the new consulate compound in Cape Town in
2005 and a new consulate building in Johannesburg in April

2009. Future projects include construction of a new annex
for USAID and CDC. The construction of a much-needed,
155-desk office annex on the Embassy compound in Pretoria was
deferred by the Office of Buildings Operations (OBO) from
2009 to 2023.

-------------- --------------
HIV/AIDS AND RELATED ILLNESSES CONSTITUTE A GROWING CRISIS
-------------- --------------


21. (U) The PEPFAR program in South Africa is the largest
recipient of PEPFAR resources to date, having received a
total of $1.45 billion, including $591 million in FY2008.
South Africa has the largest number of HIV-infected citizens
in the world. HIV/AIDS-related illnesses, particularly due
Qin the world. HIV/AIDS-related illnesses, particularly due
to HIV/tuberculosis (TB) co-infection, are the country's
leading cause of death. Despite South Africa's overall
wealth, life expectancy at birth has decreased from 67 to 52,
the regional average, due to HIV/AIDS and HIV/TB
co-infection. Under-five mortality, with the Millennium
Development Goal (MDG) of 24 per 1,000 in 2015, has increased
from 60 to 67 per 1,000 between 1990 and 2006. Achieving the
MDGs is the SAG's highest priority, but South Africa is
moving further away from these goals in both child and
maternal mortality as a result of HIV/AIDS.


22. (U) An estimated 5.4 million South Africans are
HIV-positive including 2.7 million women and about 300,000
children 14 years old or less. An estimated 18.8 percent of
adults between 15 and 49 are HIV-infected and women in the
age group of 25-29, the most seriously affected, have
prevalence rates of up to 40 percent in some areas. An
estimated 530,000 new infections occur annually. In 2006,
350,000 adults and children died from AIDS; an estimated 1.8
million deaths have occurred since the start of the epidemic;

PRETORIA 00001054 006 OF 007


and 71 percent of all deaths in 15 to 41-year-olds are due to
AIDS. In the last few years, there is an indication that
prevalence may be starting to decline. Prevalence in
antenatal care fell from 29 percent in 2005 to 28 percent in

2008. At least 1.6 million children, approximately 10
percent of South Africa's youth, have had at least one parent
die and 66 percent of these have been orphaned by AIDS.
Continuing AIDS-related mortality will create millions of new
orphans and generate additional social and economic
disruption, in part due to orphans being raised by extended
families or in child-headed households.


23. (U) The epidemics of HIV and TB are interlinked. TB is
the most common infectious disease in sub-Saharan Africa and
approximately 50 percent of HIV patients in South Africa also
have TB. A high overall prevalence rate of HIV, HIV/TB
co-infection, and lack of continuity in treatment contribute
to the increasing incidence of active TB, including multi-
and extensive-drug-resistant TB strains (MDR- and XDR-TB).
The piloting of an SAG-approved rapid test for MDR-TB may
allow more rapid identification and initiation of appropriate
treatment, but staff shortages and skills challenges impede
an effective response to TB. Failure to adequately control
and treat TB
may undo all the gains South Africa has made in HIV care and
treatment thus far.


24. (U) The South African National Strategic Plan for HIV &
AIDS and Sexually Transmitted Infections 2007-2011 (NSP)
provides a road map for responding to this crisis and sets
out goals of reducing new HIV infections by 50 percent by
2011 and increasing access to anti-retroviral treatment
(ART). The appointment of Hogan as Health Minister under
Motlanthe signaled new initiatives in health, particularly
pertaining to HIV and TB. Hogan was outspoken in affirming
the link between HIV and AIDS and galvanized support from
government and non-governmental organizations (NGOs) to reach
the NSP targets. The South African public health system has
a need for: expanded clinical and laboratory facilities;
strengthened health care infrastructure, particularly for
chronic disease, which includes HIV and TB; increased
coverage of HIV treatment; HIV prevention; and TB control and
treatment. The country has made impressive progress towards
expanding access to ART, but the current number of people on
ART is less than 30 percent of those who need it. The number
of new infections also greatly exceeds the number of new
people placed on ART.


25. (U) The U.S. President's Emergency Plan for AIDS Relief
(PEPFAR) is in its fifth year of implementation and has
recently been re-authorized for a second five-year period.
PEPFAR is implemented in South Africa by five USG agencies:
the U.S. Agency for International Development (USAID); the
U.S. Department of Health and Human Services (HHS),which
includes the Centers for Disease Control and Prevention
(CDC); the U.S. Department of State; the U.S. Department of
Defense; and the Peace Corps. PEPFAR and its implementing
agencies work with the public and private sector to deliver
programs for HIV prevention, care, and treatment. In doing
this, PEPFAR and its implementing agencies align their goals
with that of the NSP. PEPFAR directly supported 305,356
people on ART through programs in all nine provinces as of
March 2008. The South African military has expanded HIV
prevention, care, and treatment programs with PEPFAR funding,
Qprevention, care, and treatment programs with PEPFAR funding,
and collaborates with the U.S. military and the National
Institutes of Health (NIH) on HIV/AIDS and TB research.


26. (U) South Africa has the strongest research and training
capacity of any country in the region, making it
an important partner in HIV/AIDS and TB efforts. USG
agencies work with national and provincial health
departments, the South Africa military, universities, and
NGOs to strengthen primary health care, disease
surveillance, and research. NIH provides approximately $300
million in funding to South African researchers per
year, with 90 percent of this focused on HIV/AIDS and TB
research. The U.S. Mission has prepared a five-year
strategic plan in coordination with the SAG for HIV
prevention, care, and treatment for not only adults, but
also for orphans and other vulnerable children (OVCs). The
USG team will work with the SAG to develop a Partnership
Compact outlining a joint five-year strategy on mutual
financial, operational, and programmatic commitments.
South Africa is moving into a transition phase with an
expected 75 percent budget reduction in PEPFAR funding
during the next three years (from $591 million in FY2008 to
$150 million in FY2011. This reduction will correspond

PRETORIA 00001054 007.2 OF 007


with increased emphasis on technical assistance and human
capacity development coupled with greater funding and
program implementation by the SAG. Although Hogan did not
retain the Health portfolio, Post expects to work
cooperatively with new Health Minister Aaron Motsoaledi on
the development and implementation of this five-year strategy
and collaboration.

LA LIME