Identifier
Created
Classification
Origin
09PRETORIA1190
2009-06-12 14:26:00
CONFIDENTIAL
Embassy Pretoria
Cable title:  

SOUTH AFRICA LIKELY TO RAISE SOME TARIFFS IN

Tags:  ECON ETRD PGOV SF 
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R 121426Z JUN 09
FM AMEMBASSY PRETORIA
TO SECSTATE WASHDC 8788
INFO SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
DEPT OF COMMERCE WASHINGTON DC
DEPT OF TREASURY WASHINGTON DC
C O N F I D E N T I A L PRETORIA 001190 


STATE PASS TO USTR FOR BILL JACKSON

E.O. 12958: DECL: 06/12/19
TAGS: ECON ETRD PGOV SF
SUBJECT: SOUTH AFRICA LIKELY TO RAISE SOME TARIFFS IN
RESPONSE TO GLOBAL CRISIS

REF: (A) PRETORIA 924 (B) PRETORIA 1010


Classified By: Economic Counselor Perry Ball, reasons 1.4 (b) and (d)

C O N F I D E N T I A L PRETORIA 001190


STATE PASS TO USTR FOR BILL JACKSON

E.O. 12958: DECL: 06/12/19
TAGS: ECON ETRD PGOV SF
SUBJECT: SOUTH AFRICA LIKELY TO RAISE SOME TARIFFS IN
RESPONSE TO GLOBAL CRISIS

REF: (A) PRETORIA 924 (B) PRETORIA 1010


Classified By: Economic Counselor Perry Ball, reasons 1.4 (b) and (d)


1. (C) Summary: South Africa is likely to raise "a few"
tariffs to WTO-bound levels in response to the global
economic crisis, according to an official at the Department
of Trade and Industry (DTI). Industrial policy will have
greater prominence under President Jacob Zuma, as Trade and
Industry Minister Rob Davies is likely to play an important
role in the Zuma cabinet. DTI trade negotiators tend to
respond to political pressures and give little attention to
the trade relationship with the U.S., although new activism
on U.S./SACU trade talks might indicate a change. Few
economic policy initiatives will be seen until structures and
relationships in the new South African cabinet are sorted
out. End Summary.

--------------
Tariffs to be Raised
--------------


2. (C) South Africa is likely to raise "a few tariffs" to
WTO-bound levels in response to the global economic crisis,
according to South African Department of Trade and Industry
(DTI) Chief Director (Trade Policy) Mzukisi Qobo. Qobo met
with Deputy Economic Counselor and Trade & Investment Officer
on June 3 to discuss trade policy issues. An academic, Qobo
is working at DTI on a long-term contract to draft a
comprehensive paper on South African trade policy.


3. (C) Qobo stressed that tariffs would be raised in only a
limited range of sectors, explaining, "People in government
understand the international implications of this move, and
they understand that raising tariffs can make the economy
less competitive." He felt, however, that the SAG had little
choice in the matter given the strong protectionist views of
unions and the role labor played in electing Jacob Zuma.
Comment: In February, the South African government released
a "framework" for responding to the global crisis that
identified several policy mechanisms, including bridge loans
to distressed firms, "Buy South Africa" measures, mediation
to avoid layoffs, and trade measures. So far the SAG has not
finalized a plan for implementing the framework. Post
expects that most of the response will continue to take the

form of fiscal stimulus, supplemented by jobs programs, soft
loans to specific firms, and other relatively "surgical"
measures. Post does not expect a sweeping protectionist
response. End Comment.

--------------
Personalities, Politics
--------------


4. (C) Qobo confirmed that industrial policy will have more
prominence under Zuma, predicting, "There will be more
funding for incentives and subsidies for strategic sectors."
He also said that tariffs will play an important role in
industrial policy, with tariffs on some inputs for strategic
sectors being lowered and tariffs on selected downstream
products being raised. According to Qobo, the "long battle"
between National Treasury and DTI over funding industrial
policy is over, with DTI victorious. However, Qobo scoffed
at the idea that the SAG would throw money at strategic
sectors willy-nilly. "The government is more disciplined
than that," he said. Comment: The government is facing
serious budget pressures because of the ongoing recession and
the related decline in taxes and customs revenues. End
Comment.


5. (C) Qobo predicted that Trade and Industry Minister Rob
Davies, a staunch advocate of industrial policy, will play a
"big role" in economic policy under Zuma. "Davies consults
with business, he knows DTI, and he has an incredible command
of policy details," he said. Qobo also observed, "Davies
almost gets down in the weeds too much. Sometimes he
prepares his own Power Point presentations. Sometimes he
does his own research." Qobo said Minister of Economic
Development Ebrahim Patel will also have an important role in
cabinet, "if only because he has the weight of (labor
federation) COSATU behind him." Qobo described Patel as
"smart" but handicapped by an "incredibly difficult
personality." He also said it is unclear what role Patel's
new ministry will play.


6. (C) Speaking of the entire cabinet, Qobo said,
"Everything is fluid. There is no high-level strategizing
taking place on economic issues. No one knows how the new
ministers will relate to each other or to Zuma." Qobo
predicted that "real boldness" will not be seen for at least
six months.

--------------
Trade Strategies
--------------


7. (C) Qobo was surprised to hear that South Africa wants to
breathe life into the long-delayed Trade, Investment and
Development Cooperative Agreement (TIDCA) talks with the U.S.
(reftels). "If there's a push to deepen the dialogue with
the U.S., it's coming from the political level," he
speculated, adding, "At the working level, few trade
officials even mention the U.S. All they talk about is
'African integration' or 'South-South links.'" Qobo
described DTI's trade negotiators as "incredibly
overstretched" by simultaneous engagements with Europe,
India, and numerous African and Latin American countries.
"Most of this activity is a response to political pressures,"
he claimed.


8. (C) Qobo said that DTI urgently needs to step back and
think strategically about key markets and sectors that
present real opportunities for South Africa. He agreed that
the trade relationship with the U.S. does not get the
attention it deserves, given the importance of the U.S. as a
trade partner. (Note: The U.S. was South Africa's largest
export market in 2007 and second largest export market in
2008, after being displaced by Japan. End Note.) Qobo put
much of the blame for this neglect on the South African
corporate sector, saying, "The big companies that trade with
the U.S. rarely engage DTI on trade issues." Qobo also said
that DTI urgently needs to address capacity shortages in its
ranks. "Fixing DTI" will be one of Davies' top priorities, he
said.

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


9. (C) Qobo is correct that economic decision-making is in a
state of uncertainty. The role of Trevor Manuel's new
National Planning Commission is unknown, and Ebrahim Patel's
mandate at Economic Development is murky. Meanwhile, Trade
and Industry Minister Rob Davies, Finance Minister Pravin
Gordhan, and Public Enterprises Minister Barbara Hogan have
yet to emerge as policy leaders. The new economic ministers
reflect the broad ideological diversity of the ANC, and they
may have difficulty working together as a team, especially if
there is no strong leadership from Zuma.


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