South Africa
as we see it

December, 1994
Keidanren
(Japan Federation of Economic Organizations)

1. KEIDANREN dispatched a high powered Economic Mission of 45 delegates, headed by Mr. Yukio Kasahara, Chairman of the Committee on Sub-Saharan Africa, to the Republic of South Africa from 27 November 1994 through 1 December 1994.

   During its stay in South Africa, Keidanren Mission met with the leaders of the Government of South Africa, including Vice Presidents Thabo Mbiki and Frederik Williem de Klerk, Minister of Mineral and Energy Affairs R.F. Botha, Minister of Foreign Affairs Alfred Nzo and Minister of Constitutional Development and of Communications R.P. Meyer. The mission had opportunities to hold broad-ranging discussion with leading members of the South African business community, such as the South African Chamber of Business (SACOB). Furthermore, the Mission took the advantage of this opportunity not only to visit senior executive of major business corporations in South Africa, but also to make site visits to factories and other facilities. The mission also extended the exchange of views with local representatives of such organizations as the Commonwealth Development Corporation (CDC), the United States Agency for International Development (US-AID), the United Nations Development Programme (UNDP), the World Bank (International Bank for Reconstruction and Development) and the International Finance Corporation (IFC).

2. Almost a half year has passed since President Nelson Mandela assumed the Presidency and, as the people of South Africa are now being united in their nation-building efforts under the new Government, we believe that the visit by Keidanren Mission to South Africa was quite timely for assessing the situation of the nation.

   Overall, the Keidanren Mission is under the impression that the political stability in South Africa is far better than we had expected. In addition, it was felt that the coalition Government, headed up by the African National Congress (ANC), is adopting reasonably realistic and consistent polity measures based on a very firm consensus building mechanism with the National Party (NP) and other leading parties.

   The new government explained the mission that it has set its top priority in improving its relations with the international community. Regarding the Reconstruction and Development Programme (RDP), which the ANC had publicly pledged during the recent election, RDP has been steadily implemented by maintaining sound financial stance. A consensus achieved within the current coalition Government, the mission was told, is to implement the RDP in a manner which will not place undue burden on the national budget by allocating each year 2.5 billion rands over the next five years. Furthermore, prudent approach is being taken to foreign borrowing so as not to place fiscal burdens on the national economy in the future. While Japan and other advanced countries have recently announced aid package to be extended to South Africa, the government of South Africa is, first of all, making serious attempts to procure necessary 'capital' on international capital markets. The mission was told that the South African government is in a process of integrating such efforts and foreign aid packages. The mission members found that the South African government's policies are very prudent and sound, indeed, with a good sense of realism.

3. The mission hopes for the early implementation of the Japanese government aid package to assist South Africa (announced in July, 1995, amounting to US$1.3 billion to be extended over the next two years in the form of US$300 million in Official Development Assistance (ODA), US$500 million Export-Import Bank loan and a US$500 million trade insurance. However, after having had various discussion with related officials in the South African government, the mission is concerned about a possible delay of the implementation of the Japanese aid package.

   The mission was told that countries of Europe and the United States are extending their assistance through non-governmental organizations (NGOs), which often can make flexible and speedy response to the real needs of the South Africa. The mission would like to suggest to the Japanese government to give a thought to such a flexible way of implementing Japanese assistance to South Africa.

4. The leaders of the government of South Africa strongly urged the mission to encourage Japanese investments in the country. At the same time, the mission requested the government of South Africa to understand the need to abolish foreign exchange controls and import tariffs in a gradual and steady manner.

   While it is expected there will be an increase in Japanese private-sector investments, especially in mineral resources sector, the South African government representatives expressed their hope that Japanese investments will be made in high value-added and export-oriented sectors that would contribute to strengthening South Africa's economic international competitiveness. However, the mission fears that such Japanese investments would not take place in an immediate future.

   Furthermore, the South African government representatives expressed their hopes that Japanese investments would contribute to expanding employment opportunities and increasing the incomes of black South Africans, who account for more than 70% of the population. Specifically, the mission was urged to promote joint ventures projects with black South African entrepreneurs to encourage the development small and medium enterprises. However, without the governmental assistances, Japanese corporations will face difficulties to meet such expectation.

   Recognizing that such investments are most desirable to support economic reconstruction and development efforts, which was initiated by President Nelson Mandela, the Keidanren mission believes that the Japan International Development Organization Ltd. (JAIDO), established by Keidanren and the Japanese Government, may be a suitable actor to seek for ways and means for implementing these projects. For example, should support of the Japanese government be available, JAIDO may be able to cooperate with such institutions as the Southern Africa Enterprise Development Fund (SAEDF), newly established by the U.S. government, in developing joint projects for South Africa.

   With a view of assisting in the promotion of small and medium enterprises in South Africa, and in addition to the aid package described above, it would be quite important for the Japanese government to extend to the South Africa technical cooperation through the sponsorship of seminars, the activities of Japan International Cooperation Agency (JICA), the Association for Overseas Technical Scholarship (AOTS) and the Japan Overseas Development Corporation (JODC), in order to transfer technological knowhows and policies for small and medium enterprises into South Africa.

5. The Republic of South Africa plays an important role for the development of the economy of sub-Saharan Africa, and through the expansion of economic exchanges, it is essential that Japan, too, cooperate for nation-building efforts in South Africa. We understand that President Mandela's visit to Japan is being scheduled in June 1995. The Keidanren Mission is prepared to engage itself in various follow-up works with a view to accelerate the economic relations between our two countries.

   In closing, we would like once again to express our gratitudes to the Japanese Ministry of Foreign Affairs, Ministry of International Trade and Industry, the Japanese Embassy in South Africa and the Japan Chamber of Commerce in South Africa for their great assistance in making the dispatch of this Mission possible.