New York Law School
Center for International Law
Symposium

Trade and Investment
Involving Sub-Saharan Africa

Monday, November 3, 1997, 1:30 pm to 5:00 pm
Ernst Stiefel Reading Room
New York Law School, 57 Worth Street, New York City

Speakers:

William Chapman
Manager of International Projects,
Port Commerce Department
The Port Authority of New York and New Jersey

Stephen J. Ellmann
Professor of Law,
New York Law School

Semakula Kiwanuka
Ambassador,
Ugandan Mission to the United Nations

Lamon Rutten
United Nations Conference on Trade and Development
International Trade and Commodities Division

Irving A. Williamson
Deputy General Counsel,
Office of the U.S. Trade Representative

Moderator:

Sydney M. Cone, III
C.V. Starr Professor of Law and Director,
Center for International Law
 

MR. CONE: Good afternoon, can you hear me? I am Sydney Cone, Professor Cone. I am the director of International Law here at New York Law School. We are delighted to present this symposium of Sub-Saharan Africa. A great deal is going on in Sub-Saharan Africa. There is an area of change, and we will have four speakers; indeed, we will have people in the audience also speaking who have knowledge of Sub-Saharan Africa speaking on this subject, the key to which this afternoon is investment and trade

One of the reasons we've had a change to some extent in the faculty for the symposium is that the administration initiative, the US administration initiative with respect to Africa has suddenly become a boil in Washington, and people who were hoping to be here, but found they had to be in Washington today, but we are going to have at least a good as a symposium. Maybe, the French people say that people who are absent are always in the wrong, so maybe we could take advantage of that and say it might even be a better symposium if the people were here.

We are delighted, and I will name them in the order from my left -- my right which, I guess, it should be your right or left: Irving Williamson is the Deputy General Counsel of the United States, of the office of the United States Trade Representative, and we are greatly honored that he's here, particularly since he's an authority on the American initiative with respect to Africa. He can give us a most authoritative and balance presentation on that initiative, which is before the Congress as this symposium takes place. To Irving's right is the Ugandan Ambassador to the United Nations, Ambassador Kiwanuka. He has very graciously agreed to speak to us because Ambassador Ssempala is in Washington for reasons that have already been mentioned and was unable to attend until the very last minute. She had decided to stay in Washington to follow events there and be available there. The Ambassador here will speak after the other three speakers have spoken in order to give us a summary, and he will speak both from the perspective of Uganda and more generally.

From the Ambassador's right is Lamon Rutten with the United Nations Conference on Trade and Development in Geneva, United Conference and Trade and Development, UNCTAD. He flew in yesterday to be with us today. And we're most honored that he is with us. He will talk to us about financing vehicles for trade and for investment involving Sub-Saharan Africa. The gentleman to Mr. Rutten's right, he may look familiar to some of you, Professor Ellmann, who is our own expert on South Africa and will speak to us about South Africa. Mr. Chapman is here from the Port Authority, he is back from South Africa and, hopefully, he will be free to sum up Professor Ellmann's comments.

Now one of the nice things about the symposium that we have here is the quality of the audience that they attract. Today it is an honor; especially, many of you know a great deal about Sub-Saharan Africa. That's why you are here. I hope you will feel free to pitch in with comments or ask questions. We have a more intimate group than what we had originally planned. We should have a very lively interchange of views. I want to encourage that. The first speaker will be Mr. Williamson of the United States trade representative in Washington, and I am delighted that we have such an authority here on the United States initiative. I am pleased to present Mr. Williamson. (Audience Clapping.)

MR. WILLIAMSON: Thank you, Professor Cone. It's a real pleasure to be here today. This is really a great time to be involved in inter-trade investment in Africa. I must have been involved in international affairs for the first time in Africa 30 years ago, and at no time had it been the same focus, the senior levels of the US government on how to help Africa grow. And I think this is what makes it so exciting, the focus is coming from Congress within the administration, and I think, from some fellow trading partners to those experts. Let me try to give you a first start by giving you a history of why, how we got to this point in terms of US government policy, and the legislation that is presently before Congress.

Back in 1994, the end of the year of multi-level round trade negotiations, we had past legislation to implement that, and that comes from Jim McDermott from Seattle, Washington and his chief of staff, Mike Williams, who was supposed to be here, and Mike is really an exceptional individual. He was one of the first who saw the opportunity and said, what is the, Round a multi-level agreement. We talked about all the benefits going on and the United States in particular. What does that have to do with Africa? How is it going to help Africa? And there really wasn't much consideration given. Some of the people were concerned with the fact (inaudible) were not going to help Africa (inaudible) subsidized commodities, and there is that kind of concern. They were also concerned in lower tariffs. (inaudible) The lower tariffs can help them. So, there are these kinds of concerns.

Look at trade and investment in Africa and not became an amendment to that legislation and said the administration had to develop a trade development policy for Sub-Saharan Africa. And we, as part of that amendment, we also promised at the same time, as the administration would, (inaudible) said special exist, we also decide today to ask the US SEED commission which does independent studies cause the Congress (inaudible) respect agency. To also do a detail study and the legislation requires to do development policy and also to report to the Congress. And you realize the president is one that has the prime foreign relations. You know this support, but Congress can also always ask for important reports around also ask to. And so there is in all of the report that was required that legislation that force administrative to this (inaudible) trade involvement and Africa the way it had.

Unfortunately, Congress Mr. McDermott were not entirely pleased with the implementation of what we were doing the first year. You have quickly what developing new policies so went to decided to have additional legislation. Out of legislation came the Africa growth opportunity. That's what presently before the Congress, presently before the Congress. I am going to first report which found February filed February '96, and the tenth of February of '97. That second report by that Congress McDermott already introduced legislation as a point in '96. And I am going to talk about key elements that's in legislation because you will see similarities to that administration program I will give now some views because Mike is not here to represent the administration with Congress. It's this that actually leads to senior level attention in Africa. In any case, the legislation had setup criteria and ask we focus particularly on those countries who are doing reforms meaning eligible criteria those that were undertaking economic and political forum in forms and it also said that it had a provision on expanding market access in particularly in terms (inaudible) right trade on.

There are also requirements for stability of high-level forum with annual meetings with choice were involved who were African countries who were undertaking reforms. There was also a plan for free trade agreement and (inaudible) a free trade agreement and then, there were several provision dealing with establishment of infrastructure funds, equity funds, and request that export import bank Of United States do more in terms having more proactive policy in Africa so these are the major elements of the Africa growth opportunity ability which was with introduced by our point in 1996 was still in elements. In the mean time as a result of the requirements of doing a second report on Africa back there which was due in December of '96, February '97. The activity began to talk you the inter- agency process. You must recognize anything that US government particularly the investment which is a very broad area, involves a number of agencies. One chief responsibilities is the officer. Trade representative basically coordinate agencies Commerce Department do export promotion manufacturer (inaudible) Agriculture Department is (inaudible) agriculture exports (inaudible) agriculture imports. Labor department is concerned with billion US workers. State Department which is foreign relations and which has concern about policy and aid policies. Home improvement which is dealing with investment guarantees and tried to promote (inaudible) Treasury Department which have responsibility for its banks and IMF as well as financial markets.

All these agencies have a stake in the national trade investment and you really try to bring agencies together if you want to do anything significant, an that the requirement to do that second report or does to (inaudible) reports is (inaudible) kinds of which force you to think about it to work together and to develop working on Africa, that we had not really had so much the trade investment context. Because primarily up to until now focus (inaudible) development in Africa and play different agencies like because too A policy as to the commercial issues. At the another development was the wheel with a happening in the G submit. Or the response (inaudible) utilized (inaudible) take place every summer. And the summer of '96, there was beginning to focus and have a discussion on trying help (inaudible) country the least (inaudible) the trying to help (inaudible) Africa particularly for us Africans. And the submit leaders call for additional works (inaudible) subject call of development of you note World Bank, the international institutions to do additional work and to you know to add US organizations. To all get together and see what they can do.

Essentially you have both from domestic side and the US Congress. You have a GH submit dialogue and those kind like we now have together talking the (inaudible) advertising (inaudible) the growth in Africa you are talking about. Relationship (inaudible) growth in Latin America last four, five years Brazil back in the mid (inaudible) had a crisis that really -- we finally back 80's, '90 pulling out so you have (inaudible) change increasing eastern you were because collapse so (inaudible) market the many respects Africa is. The last continent in terms of economic reforms, resume economic growth and so it's really quite appropriate we focus on that result come together. So it's that kind of context. It's an important context. Any (inaudible) light of the administration has began to prepare a second report on things that (inaudible) instruct as strike people. Was the fact World Bank study noted the problems of the impact of African trade barriers on Africa economic develop. And the World Bank noted that import tariffs Sub-Saharan banks 26.8 percent which is four times or three times faster than import tariffs some faster countries development -- countries as Asia. You notice Africa countries impose non-tariffs on one third of all the imports. A ratio nine times higher than the ratio of fast economic countries. And they figure that about these Africa import restriction you know restriction that African countries were putting imports including import from their neighbors were costing in terms of development about $11 billion which about the same amount that was being spent in 1991 on development for instance.

So, this restriction of the Department of Treasury -- Department Treasury particularly note for more of a free market more what it's promoting. Free markets, open trade, then some other agencies were more concerned about manufacturing that this allegation. And this particular structure, you realize that as we know ate funds going down to increase growth in Africa. We will never -- the market is something you like to see keeping in and can be making in a contribution of growth its something that needs, to be supported. And it is from that thrust, that the treasury secretary credits, you for supporting the purchasing. Discussion by this Congress that led the administration secretary Africa report of February '96 which sort of limits this trade. And so it kind of set parameters to the initiative at no time of Counsel June '97. And one I think the primary goals we set was how do we promote rapid and unstable economic growth in Africa. And that was our primary goal. One of the things we -- one of the things we need to do was make this particularly positive for the fact there are a lot of countries who already started economic reforms.

We estimate over 30 countries since the early '90s has undertaken economic reform programs. We had a number of countries overtaking political reforms having seen some of these reform programs results, grow in Africa between '91 and '94 is kind of GP growth one point four percent. In 95, it was three-point four percent and in '96, it's -- it was about five point six percent. All of a sudden economic reform was having some impact. All of this economic reform was having some impact and political reform. They really go together. Again, I estimate that. So, the administration initiative was asking how do we support this? We can't make countries grow. We can't make them undertake economic reforms, but we can support it, we can help it, and we can encourage it. And so that was really what was the primary goal of the administrations initiative to promote economic growth, And the way we are doing is to help those countries have an economic reform to continue to do so and I encourage those who haven't started that to do so.

We did this kind of round work in February '97 report and then all spring we worked on developing this policy. June 17th, the President had a big certificate Ramon at the white house Africa a.m. borders a large number of people big leaders were there and basically made up this policy. What I want to do is sort of go through some main elements of it. One of the a speculative policy so one of the first thing what about the country who are not undertaking reforms. I mean, because one of the key elements of the policy it tells us like we are going for customers on these countries undertaken academic reform. Select activity which populate criteria. Resource only got limited amount of time, it's no use spending on those who are not ready an not responsive you will have countries who are undertaking reforms.

This is where the eligibility criteria and the Africa growth economic opportunity act that was in Congress because they did a detailed eligibility criteria. And the administration also with our initiative have had similar one's although probably kind of going comprehensive -- more focus had in a sense. Because for us particularly effort trade representatives office, what we are looking for is how are countries going to do trade, sessions open other markets and I mean getting non tariffs barriers, lower the tariffs supplied tariffs, and one of the key ways or normally the way to do this is with the world trade organization. That's the other beauty done. It's a rational form. 40 years the gap is in process. Conduct trade negotiations. Lateral assistants began to promise that it would not raise the tariff. And so what going basically long in reforms we haven't a multi-bilateral body institutional where countries have commitments and that consequence doesn't speak to that. There are consequences if this doesn't speak to that.

For us the key thing what is the country doing in depo -- of course first step maybe member all African countries our members. A lot of members that came about because of reform colonies came. But there are few. Those kinds treaty are that. And so it is important that we do all countries to try to under obligations that are separated and expected since the it's other good thing about the WTO, World Trade Organization it's not a free right country we have to come in meaning. Commercial terms that's what we hope to debate. There are prepared to come in Commercial terms. And so, for us, we want to know very much on what the other countries are doing WTO Africa countries, you know members they may use or usually are bound to agree to small percent of tariffs schedule only 10:30. The tariff schedule is what we call bound. All the others we realized up and down at any time they want. And they don't pay compensation if you are a business person exporting to certain market. You want to know if you make the investments sort of find did buy all kinds of things that you have tariff was 20 percent on the day that you decide to do this is going to 10 percent or lower when you actually start shipping. Shipping for a long period of time you want tariff is 20 percent if you have bound tariff or bound tariff shipping it can rate -- tariff can be 40 percent, next day 60 percent and you may have investment is going realized. So this is the whole thing. WTO's particularly tariffs is important.

The other thing we are looking for to get part of it's holding. This beginning standard is in there. It's an agreement an services trade for first time. We also got to enter private property in and so, these were new areas covered by the WTO you were agree. And we wanted to see African countries take on some of the obligations that we are negotiating due to the United States most export high tech exports you know software, intern industries, foreign industries, and all these products depend on having individual property produced in addition to distribution where they are trying to sell it. African countries to improve strength technical product to invest. We also take countries more bilateral investment treaties where that is going to help. One of these are the same traditional tools policy that we use all around the world that are going to African countries the same way we trade other trade partners. As you know, we have commercial interest, we are going to try to ask them to take those into account the same time we will take their account into account. And which one of the other things people talk about trades about aid is what this is kind of -- what it means. Mike Williams also used this phrase trying to bring powers and sellers together. These are some of the key elements of policy. This guide is ridiculous. That's why for us, particularly world trade organizations a sign of whether or not the country is -- you know, untaken economic reform. Of course there is set world bank. A country of IMF program, infrastructure adjusted how to position its obligations that are going to report.

Two other areas that are important eligibility requirements were some involvement in human resource. How many, what is government doing about investing in education and health. Things like that to improve. Improved manage government manage. Very important it goes to the supreme line of government activity. Making sure the bureaucrats work with the common government officials. Does the judicial system work well? You can't have much trade involvement with people who have no ideals and enforce a contract and try to collect money. They can't do it. Its investments are important. Democracy and political reform are important things. It's so exciting a lot of Africa countries if doing this undertaking they reform. So, this is why it was the right time to bring this policy to fruition.

Those were the eligibility requirements that are very important, the way the legislation is structured, unless the president in terms of country is were undertaking reforms is therefore a requirement of Bill, a lot of benefits considered in initiative are not intending for them particularly certain aspects with the trade commission. Let me sort of go over the key elements with initiative and then save the rest for questions. In terms of as I said earlier said countries will not reform we will our journalized program which is around since 1974 and basically requires imports development countries. One problem is that you have success about multi-level trade negotiation the largest reference go down; in other words, average tariff and import from Africa after under two percent and US tariffs, but still there are some things like Texaco. Tariff will still high. What you are doing is trying to give some incentives for the country to undertake reform basically the vision that the market access that's not provided under the journal had which US included an additional $2,000 interest tariff items for least developmental countries. We were continuing that program, of course. That's still in Congress. The program is only in effect May 31st of 1998.

We assume we will be able to get renewed by this on and off nature of this problem. In terms of other things, also investment support those private investment corporation setting up a couple of economy equity structured quake and funds 150 million to five million for infrastructure fund. You know big guarantees. Investment in foreign countries also, you know has their own programs. It tried partnership with the private sector funds. Also separate cooperation with the investment banks here in New York actually. The agency international development has a couple of programs for regional economic supports. African business relations, another important area, exports import bank of United States which basically does provide financing of federal emergency room items US export there's a lot of complaints that the bank was restrictive in Africa. And they did you know other countries may have payment problems debt countries problems but the bank's feeling was it could be more flexible dealing with Africa countries. Could be picked up. That's available even though. Then the situation may not be good. That in getting things talking about going to countries was to set up a new US trade representative for Africa. That's important because up until USSR has really not had a major focus senior level career level person force customer had on US trade investment with Africa. That's done the opposite general counsel hopes to have full time US trade rep within the next week or so, almost very select candidate.

In addition to the world, treasury, of course, is treasury work with the World Bank IMF funds equity now for countries under taking economic reforms once really the wins that are really the focus of the initiative. Margin preference for because under journalized preference basically tariff are so low it doesn't amount to much. It does and can amount to rightfully a whole bunch. Products not G S P. And those include products; such as, textile, footwear, certain watches certain electronic, certain imports into like electronics, steel, certain agriculture products, I said some of products were a few products included when they so provided the special group least development but a number of Africa countries are doing to the economic well developed -- Congress gave Cameroon, South Africa, Asia. Those countries least developed so right now they are the only way going from the most best access. We are giving outside of say Africa is going to be part of this program. Because, for those countries that undertaking reforms, we said we would provide the same benefits we give to least development plus some additional ones.

After the US international trade commission does a study to see what the impact would be. So certain things like some of manufacturer's good steel, glass, footwear, and other products that offer until products that answer development countries that gain entry level, textiles something that's chronic national legislation approve on problems that textile is most sensitive of the legislation because they basically could give volunteers. It also gives quotas of tariff world textile or covered quota schedule faced next five but in this case a lot of countries, they start off, of course, textile apparel so most force customers on that. Also, we have a large, you know, a lot of textile apparel manufacturer's in the United States. Textile industry depends -- most of imported clothes we imported, but there is work all the countries laid off every where, so one protected item of trade there is. And it's also an ideal mess that's why they protect no domestic work on how to do business and to try to promote growth of receipts. In addition to the market access which is as I said we are giving generalized preference programs also reduction. The treasury got out international -- IMF impact '96 an initiative on heavy poor countries basically methods of giving debt relief for Countries heavy late in debt a lot of Africans basically have debt problems and this is in addition to providing some relief already given to Uganda. They are looking for additional ways. This is really overheads of defective crisis. Major investment. There also is another issue active that some interest is fact that if you are not talking trade an investment not of course this prescribing sector to the most.

But, governments can't and one help is by who do we do talk to. Government officials what countries do sit down and have negotiations with what countries quick. Often asked and business. These countries that the government is most interested in. These ones that we see things happening in the positive because this whole issue has become trying to top private sector to do trade investment and really can we do it. One way to have more intention dialogue on government to government level one to edge current reforms to earn current countries to get trade barriers to deal with problems that crop up. Any time somebody tries to straighten out trade disputes and have problems so, one of the these things they are going to do. The legislation talks. We US Africa economic reform and to have a meeting of very senior level. Presidential meetings on trade investment with Africa countries. Economic reforms of this is something new, as I said, didn't interest a US representative for Africa now. There is really having no kind high levels Ron Brown was an exception and I really can't really not finish without mentioning what he did in terms of trading in African commerce. Talked to government agencies promotes US export and -- but you have to have the institution utilize that.

It might (inaudible) one thing he said is the reason why that legislation is important for them how do you institutionally utilize government involvement, how do you incur a lot of year out Africa. And that's what a lot legislation does. We have said to do administration to that they want to make sure it continues through, but debt element is a very important part. And that also the treasury is working with the World Bank IMF what else can those institutions do, because they have the money in the level to over see the country. To adjust the damages that other countries make the U.S. governments does. So, I want to make sure no program is sending some signal. In the past, there has been a problem for a country to lower tariffs. They wait a minute you medium auto tariffs reach my balance your budget. That's sending just opposites signal from what we are going to send to IMF to work out a problem countries undertaking that reform. Tariffs. Because you can give extra money to makeup budget short falls because we are saying more economic growth lower tariffs and trade, but they need to -- it's whole IMF enter financial institution bothers other major parts. We are talking with products economic summit partners that's very important. There allows agreement with a pattern with Africa. Africa and foreign goods which we are trying to do rather than trying terms promoting development that is the reason that is very important. So, those are really the elements of the initiative.

Of course, they said nicely in New York, that is where that has happened. It has happened with firms of doing what investment banks are doing. What US exporters are doing. People want that investment in Africa. What else telling development to your, communications systems. You got financial services, negotiations come with a W-2. This is center to national services of the world. How do we encourage taking African countries to make more commitments to our insurance companies, investment banks, commercial banks to do for Africa, and so it's the or promising to try to do is to encourage countries, support them, help them make the country better for the private sector to do the job. Thank you.(Audience clapping.)

MR. CONE: Thank you very much. I appreciate that. I think that a technical point that Mr. Williamson mentioned was that African countries are seeking to export more tax tariffs in the United States. And that, those exports are now subject to quotas in the United States. One of the major areas where quotas still exists in the international trading system, and Mr. Williamson mentioned the quotas are about to be phased out by the year 2005. Actually, that's true, the phase out was negotiated in Uruguay, as they say back ended, not much phasing out is taking place these days. And 2005 is still quite a few years away. And one can expect, as Mr. Williamson's suggested, some lobbyists in Congress and lobbyists undoubtedly remind Congress that part of the agreement that Uruguay is that let them go through the Congress was that these taxed on quotas would be back. It would be very interesting to see if that can be successfully reopened. I'm sure that many of us would like to see that successfully reopened, but who knows what the conclusion will be. Without a long footnote, let me now move onto the sequence that we are hoping to follow here that we can follow here. Next we will talk about South Africa as a particular case. This will be Professor Ellmann. Mr. Chapman, he wants to contribute at that point. Then, Mr. Rutten from UNCTAD will be discussing financial vehicles in the end it will be a pleasure hearing the ambassador speak, who will be in the cleanup position. Professor Ellmann. (Audience clapping.)

MR. ELLMANN: Thank you, Professor Cone. It's a pleasure to be here. My expertise is in South Africa and in particular, really in South African law and in politics. So, I come to this panel from a particular geographical focus and a particular intellectual focus. I will do my best with that to, hopefully, shed some light or at least raise some questions which bear more directly on money, trade and investment, but I will start from politics. And starting from politics, I want to start by asking a couple of, what's called political economic questions, they both were touched on and more than touched on by Mr. Williamson, but I want to ask them to (inaudible) subsidize what he offered. I want to explicitly ask them and try to suggest (inaudible) the best in town are not perfect.

The first question is: Whether it's actually true that promoting democracy in general and in particular in Africa is the path to promotion of economic growth. The -- this is – I would like the answer to be yes. It appeals to politics to say the answer would be answer yes. I want to raise a couple of questions about what might suggest the answer is not all together yes and then we will talk briefly about South Africa particularly, hardly an example, but an example which way to approach these questions.

So, here are my questions: The first is: Just how well is the movement towards democratization in Africa going? My impression, which I am eager to have a discussion of, is that this movement has had a rise and it has also encountered a plateau. If that's right, then, then and if that was the case, it is the case for future economic progress, really turns on future democratic progress, if that plateau sort of exists, there should be a lot of worry. The second concern, the second question is: Whether it's really true that democratization is necessary to economic growth. The one example that may go to this question and an example where we have experts here, is the case of Uganda, which as I understand it, is these days subject to criticism from one western human rights organizations, one of the advisory boards, I don't remember which one, for not conforming sufficiently to the requirements of the standards of American democracy. Now, the fact that this criticism may barely reflect the American synchronism of those organizations, but suppose it is correct that you can say that Uganda does not conform, at least certainly not one hundred percent to American democracy. I suppose it's also accurate to say, as one of the panelists said at lunch, that Uganda these days is like Asia or like some of the Asian countries in its (inaudible) economic growth. While all of that is true at the same time, the conclusion seems to be that at least democracy American style is not necessary to economic growth. If that conclusion is right, then it bears the question about just how much of the United States should be devoting its efforts to promoting democracy American style. If our concern is just in money, dollars and cents that kind of economic progress. I want to say it's -- (inaudible) in favor of democracy including democracy American style, but those reasons might not come all in consideration in particular countries, and if those reasons do not really include democracy American style that is essential to economic growth.

Well, then you have to step back and ask just what is essential for economic growth and what extent is a search for democracy really part of the search for economic progress in Africa and all-- other places in the world. Those are the general questions. South Africa is hardly a typical case, but a case of all these questions. South Africa, it seems to me, is actually evidence for a proposition of democracy, more or less American style, it is a great move to economic progress, but it is evidence for some peculiar reasons, what made South Africa -- what made South Africa unacceptable and rightly so, in international economic circles to some extent became in the last years of apartheid was racism. It was not in truth a lack of democracy. It was racism. The organized system of racism. So, South Africa's end of apartheid freed that country at least of the organized and systematic of racism and thus, re-legitimatizes the country and really parts of the world at the same time. Again, I want to say and happily so because it became democratic, but whether really it's a democratic status is really essential to its economic growth or to assets to the world markets. I think was a very good question, which seems that it is the main opening factor, its new found freedom and organized racism. So, South Africa, it seems to me, is an inconclusive case on whether democracy is really essential to African's economic growth.

Now the second question is whether in truth, free markets, liberalized economists, capitalists, growth is really the path to African development. Now, I think this is a serious question, but I have to say it is a lot less serious of a question than 10 years ago, not necessarily because capitalism is a better path 10 years ago, but it was the only game in town. But given that is true, it is a great mistake to African countries or any others to not play that game and that is an example of what China's suggests, to reach that conclusion as well and vigorously capitalists (inaudible), the nomenclature that exists; nonetheless, it isn't -- it seems to be absolutely evident that the opening of any given country to foreign investment, the liberalization in free market terms of its economy will actually be good for all of the citizens or even most of the citizens. Now, let me take you back a bit about South Africa again on this. South Africa is a place, which this is not merely something that is outside that is discussed, but to which there is, in fact, a heated internal discussion of the -- it's called the capitalist road. Let me press this by saying South Africa is unique in its riches, in its infrastructure, in its strength of corporate organization and wealth, but it's not as unique as one might think, I think so, also. I believe that at this moment something on the order of 30 to 40 percent of the South African adult population, almost all of whom, these are black South Africans, have no, I believe, formal employment now. That's an incredibly high figure, and it is one of the many industries on which it turns out, when you look past the tremendously developed infrastructure in which, primarily whites controlled business for many years, operate under apartheid, as it turns out, there is a great many poor in South Africa, and that economy is going to have to grow extremely fast for that poverty to be eliminated.

So, in essence, South Africa is not unique. It faces the rise of massive dissatisfaction that it has no simple economic response to, no simple economic response by policy makers devoting themselves to coming up with effective responses, and my sense is there are at least two different responses that have been articulated in South Africa, a dominant one, the policy; heretofore, the first socialist African National Congress, personified in its former communist leader, Antodo Becky (phonetic) who is the deputy (inaudible) to invite foreign investment and to cause the country to achieve and to lead to participate in, what Becky calls, the vision of the African renaissance via empire, foreign capitalization. That's the government's position. I think give or take a qualification, but it is certainly not the universal position of South Africans. In particular, it's not an universal position of the African National Congress at least one of those sub-parts; in particular, policy makers say, and I wouldn't get the words exactly, but I can get the flavor, who say the big problem facing South Africa was the deal with potential domination of local capital. Now, that's not the same language as Antodo Becky, as he put it mildly, and that division reflects the perception of parts – of parts of the African National Congress, certainly parts of most of the labor in South Africa, that the liberalization of South Africa is an extremely risky course for the country to follow so far as the well-being of the less well-off citizens, less well-off black and white citizens.

Now, let me give you a couple of examples of what is going on in South Africa. The general picture in the N & C policy is set in government rather than by its various subgroups, and the government is pursuing a policy of, I think, sober economics of opening the country to foreign investment of trying to build a successful capitalistic economy. Here are a couple of details that maybe worth keeping in mind: What is the question of whether in order to protect the foster capitalist growth, you have to protect property in your constitution? The answer to that question seems to be no. My impression is there are quite a number of vibrant capitalistic economies around the world which do not, in so many words, protect property in their constitution, and South Africa is although not an example, is a certain example of a country where capitalism flourishes the protection of private property in the constitution is less than absolute. South Africa's property clause and its bill of rights envisions its undertaking of property for less than it's fair market value in circumstances where doing so is justified on the grounds of correction and past impression.

Now western investment is not directly responsible for its past oppression, but still considered on paper, South Africa is a place for rich investment is actually secure. In practice, it seems to be a place where investment is extremely secure and that suggests again, an example is commerce China, that it may not matter so much what is seen on pieces of papers, but what may most matter what government is it up to and how much is dependent on government to continue to be up to that. The second issue just to keep in mind, South Africa has basically left most wealth in the hands in which it was held prior to the end of apartheid. Stability of ownership of property is a great plus for foreign investment in that sense this is obviously the smart move for encouraging foreign investment.

At the same time, South Africa's distribution of wealth is egregiously unequal and still egregiously unequal on race grounds in particular, and South Africa's government has the full pamphlet of tasking powers that any western government would have. Powers that are more than sufficient if you use them to massively redistribute wealth and yet again, South Africa's macro-economic policies seem conservative and there seems to be real perspective for better or for worse. Obviously, for better or for worse, (inaudible) for massive redistribution through taxation either So, South Africa is a country in which the power to redistribute, to move towards socialism still exist, but the sentiment is no longer there at least not by laws of government and according to the country seems to be from the point of view of western investors (inaudible). To the extent that reality is reproduced in different African countries or different countries around the world; obviously, for a crucial potential investment.

Let me say one more thing about South Africa's political economics. So far, I talked about what really came from the point of view of politicians, political groups who might aspire to readjust to hopes in South Africa. Certainly, it is an important aspect of looking at any country. So, South Africa, however, is also a country with a particular economy. It is more or less a capitalistic economy, but it is also a notably a pogopolistic monopolistic economy. I believe, the New York Times recorded a few weeks ago that a single company, I mention (inaudible). A single company, South African breweries controls, I think, it's 98 percent of the bear drinking in South Africa. This may not seem like a great injustice or cause for particular concern, but if you generalize it, statistically three or four companies control something on the order of 50 or 60 percent of the capitalization of the South African stock market which will not (inaudible) economic power, which is not actually distributed the way that much resembles our, at least, our 19th century version of a free market. I would say -- in order to say that, South Africa is a target for investment. I am unable to judge whether it is a promising target or not. It is a place in which you have to have existing economic order, which is rather controlled or controlled mostly by private hands or controlled by public hands; but nonetheless rather controlled and surely, the degree of such control, the rate in which such control to access the economy is already looked up. The aspect of whether a country's actually going to be receptive to foreign investment.

One last thing I have to say about South Africa. I don't know that this relates to foreign investment, but I don't think I can leave South Africa without saying this: I have said that capital in South Africa primarily has been controlled by whites, that remains to be true. It's also true that those white-owned companies are engaged in a particularly blunt, I might even say crass effort to ensure their future's security by speeding off sufficient chunks of their structures, so as to create a class of black professionals and black businessmen who they know doubt hold will contribute to the security of capital and capitalism in South Africa. From the point view of western investment, that's probably mostly a good thing. From the point of poor South Africans, in particular poor black South Africans, the creation of this new class of rich black South Africans, I am afraid which is a mixed blessing, but, nonetheless, that is the South African scene. I can say, I guess I can say that is a balance, especially, since that is the only game in town. South Africa has a reasonable chance for playing the game and a reasonable chance for being in a place where others can play it, and it will benefit African people rich and poor. Now all of that on South Africa is called a target for investment. I want to talk a bit about South Africa as a source of investment, in order to give roughly what competition is or what part of the competition is for Americans to even invest in western Africa and partly to name specifics of areas of potential investment to not (inaudible) but, perhaps, enough to give us specifics to talk about.

So, let me mention six areas of South Africa and sometimes American trade with Africa. I will start with NASDA, which is soldiers. South Africa is known for its, not its governmental, I suppose, it does have an (inaudible) which is not negligible, but I am speaking not of the official export, but the unofficial export, soldiers in the form of an organization called Executive Outcomes, a gorilla organization, not a gorilla organization, a mercenary organization, which has found our country in lucrative contracts in a number of places in Africa, perhaps, out of Africa. I mention that both because it's depressing and because I want to add that South Africa is not unique in this form of export. I read recently that at the Cobinda oil installation, Cobinda is part of Golla, actually they are geographical separate from the rest of Angola, which is facing some measure of domestic strive. In Cobinda, I think, Shell owns it or half owns the oil in Cobinda, the United States military government (inaudible). I believe the United States quasi mercenary organization which links to our defense department (inaudible) Cobinda oil station.

So, I want to identify the one element of western investment in South Africa and America and other countries as well, namely the military force. Here's a second, more benign, infrastructure. South Africa's infrastructure is for business purposes, excellent for the purposes of many of its poor citizens, it's not excellent at all, but nonetheless for business purposes, the roads are there, the telephones are there, the cell phones are there, the computers are there, et cetera. But that, obviously, is not true for much of Africa. One of the things South Africans are doing are investing in infrastructure in countries to South Africa; for example, hydroelectric power, and, I believe, also, if not South Africa, other groups in Africa, in the opening of transport powers, the creation of transport systems to move goods from one part of Africa to another. As I recall, as recently as a few years ago, the areas between two parts of Africa, the oil trade by areas between two different parts of Asia and European cities, there have been plenty of building infrastructure in Africa. The third area is mining, here I move this part from again from the benign to the (inaudible). A lot of what happened there is a lot of wealth in African soil. South Africa's wealth is largely built on the wealth of the gold, the platinum and other minerals, I believe, underneath South African's ground. South African companies are engaged in mining elsewhere, diamonds in a number of different places. But I think various companies have been engaged elsewhere as well not always in the prettiest of fashion.

One of the moments in the fall of Zaire and the rebirth of the Congo was, if I recall correctly, a fight for the mining concessions that (inaudible) seized power completely and among others, the United States companies were pressing their claims versus South African competitors. One of the ways those claims were pressed, as I recall, I think that at least one United States mining company or United States mining company delivered (inaudible) for use, well before the war ended. I might say (inaudible), but the image it presents, let's put it in a perpetual form of companies ceasing whatever advantage it can, it is not a pretty one, I am afraid, it is not under crisis. A particular point it seems to be raising a real question about is the overall desirability of calling moral character of western investment here. Here's a fourth thing, another thing, agriculture. I suspect in South Africa, there is a lot of imperfectly farmed land in Africa, and that would stand a reason to say to the extent farming calls for modern technology and capital investments. Those are things that African countries are short of.

Well, one thing that some African, I think in particular the Congo and Mozopeek have recently gained in Africa more farming in South Africa, who appear to have concluded their expertise in working in African countries is transferable and that, I must say, not only have concluded, but apparently, the coast countries also have concluded the arrival of these politically, these quite conservative, white farmers. It is a good thing for the progress of agriculture in this country. A fifth theory, tourism. I think there is a lot of tourism in Africa. I would personally enjoy to live in Africa, I think some people here as well.

Let's look at the tourism industry, well at least a chuck. It has, I believe, shall run South Africa, in particular through a chain of hotels, the Sun chain of hotels, which, I mention both because tourism is working for and because the former owner of the Sun chain of hotels, a man whose name is Saul Kerzner, has now diversified (inaudible).

Finally, people, the trading people; heretofore, I have -- I cannot be more particularly happy, South Africa plays in southern African, perhaps, in the larger African area a role not altogether in like that of the United States. It has, relatively speaking, a vibrant economy, it attracts foreign workers to some extent in its industries. And to some extent, South African people today display a xenophobia; in other words, other Africans well-motivated in comparison to Americans toward foreign (inaudible) this country. The trading people is a conflicted one in Africa and elsewhere. Well, I have to say all of this honestly amidst most examples are bleak, and I have to own up to that bleakness. There are aspects of South African's investment, their western investment in Africa that deserve to looked at with skeptical eyes. At the same time, actually capitalism is the only game in town, but a better game in town than we discovered so far, so (inaudible) negative aspects of what I described hereby, but by saying to me the task of those concerns concerned with investment in Africa is to find ways to cause investment in Africa to be not perfect, I will not speak of that, but as benign as helpful as possible of the people of African countries. Thank you. (Audience clapping.)

MR. CONE: Thank you. Mr. Chapman does have a few comments on South Africa. I hope that it will be brief, so we have time to have a break and then we will have Mr. Lamon Rutten, of the United Nations Conference on Trade and Development, UNCTAD, in Geneva and then, go to the Ambassador, who has kindly come here. Thank you. Mr. Chapman? (Audience clapping.)

MR. CHAPMAN: My name is William Chapman. I have come back from South Africa after about three years. I am working for the Port Authority of New York and New Jersey. We had an office in South Africa to promote trade of Congo movements of that sort of investment and other things. It was a very unique experience watching new South Africa and we have had a number of investors come over there. We have given a speech; basically, I will give it to you right now very quickly.

South Africa is for South Africans, that's the number one issue. As an investor going there, you need to have a partner on the ground or have representation that has extensive contact in South Africa. Mr. Wolly Ford (phonetic) back here, he travels to South Africa about once a month. Every time I turn around, I see Wolly. It is an interesting place, but they are really looking for a partnership in, so what you have to bring to the table is money. That's what they are looking for is money. If you come with a great idea, they will say thank you, we have a lot of great ideas. They need money. We will try to work with that.

Also, you need a lot of interaction, so just by the fact that you bring money, you need to have that interaction on the ground or representation. Lastly, I will just say that you need to deliver on your promises. Americans, particularly African Americans have a bad reputation in South Africa as a result of breaking promises who go over there, and will basically, promise the world and try to give them a picture and come back home and after six months, they don't -- you tell the people you got board approval and as a result of that, South Africa in six months, you come back with a phone call and say, your responsibility is no longer going to use. You hear about problems that you have to confront, the real problem is you need to bring plenty of capital, ask Pepsi Cola. You would think Pepsi has enough money to invest in South Africa, but they ran up against South African (inaudible), and they also ran up against Coca Cola who had to withdraw from South Africa and are presently out of business. So, it's an unique environment there, and it is a first world country, but really it's a third world country, so I will leave it at that, and if you have any questions that I can answer, I would love to contribute. Thank you. (Audience clapping.)

MR. CONE: Why don't we take a ten-minute break. There are refreshments there. Then, we will come right back, and Mr. Rutten will talk to us about financial vehicles for trade and investment involving Sub-Saharan Africa. Thank you. (Audience clapping.) (Recess taken.)

MR. CONE: Mr. Rutten is going to speak now. We have now Mr. Lamon Rutten from the United Nations Conference on Trade and Development in Geneva, who will talk about financial vehicles for African trade and investment. Thank you. (Audience clapping.)

MR. RUTTEN: Thanks. So, I will talk about getting financing into Africa. I will start with a brief introduction as to related finances going into Africa, and I will talk about ways to improve this process. There have been many ways to get financing into Africa. From direct investments into projects, venture capital, participating in joint venture, taking money to share in efforts of African companies, stocks, of which is the stock exchange, syndicated government loans, Eurobonds to market with African governments are looking at it, project finance which is for banks, trade finance, asset-backed securities, multi-lateral and bilateral aid.

Now 10 years ago, basically the only brief forum of long term in money into Africa was about the aid (inaudible). That has not changed. Last year for the first time, private flows (inaudible) in Africa were larger than the official flows. These are some figures for two years. This is for Africa and South Africa natural resources. The net flows have gone up, despite a reduction in official flows. Private sector flows have gone up quite a bit, seven to almost twelve billions dollars. Portfolio investment flows invest stock exchange went down largely. If you look at these figures; however, you should know two things: First, is that South Africa needs consultation of money for South Africa and local Egypt (inaudible).

Secondly, most of the money is needed for natural resources, commodities. As it happens, commodities are an import of Africa. It's more than 18 percent of the exports of virtually all African countries. It's more than half of imports of all of them. It's very important. The major parts of Africa's population works in its commodities; nevertheless, there are possibilities for financing for those countries (inaudible). Appetite for financing Africa. It is determined by three factors. The first factor is the country's risk appetite. The second is the availability of investment vehicles, and thirdly, availability of funds for international investment. The country's risk appetite is, I think, it's important to say is determined by both objective factors and subjective factors. Objective factors are things like economic growth, legal and regulatory framework and economic and political stability, infrastructure, human resources availability, things like that. Subjective factors are basically perception and past experience. And we will see both objective and subjective factors that have been proved. Availability of investment vehicles. Again, this is all vehicles, they are availability important availability found for internal investment. Over the past years, these steps are the most recent cash on Wall Street. The amounts of funds able to transfer in international investment, it has increased more than 40 percent for (inaudible) dollars. That is a lot of money. Basically, that means there is a lot of money floating around internationally looking for places