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Country Commercial Guides for FY 2000: South Africa Report prepared by U.S. Embassy Pretoria, released July 1999 Note*

III. THE POLITICAL ENVIRONMENT

1. Nature of the Bilateral U.S.-South Africa Relationship

Since the historic, first multiracial and multiparty elections in South Africa, the country has undergone a dramatic transformation from a pariah Apartheid state to one with a democratically elected, multiracial government. This democracy was further consolidated with the successful completion of the country's second democratic elections in June 1999, which were free and fair and held under much more peaceful circumstances that the 1994 elections. Similarly, U.S.-South Africa bilateral relations have changed and strengthened during the past five years, as exemplified by President Clinton's visit to South Africa in March 1998. Subsequent to the removal of Apartheid era sanctions by the 1992 South Africa Transition to Democracy Act, U.S.-South Africa bilateral trade and investment have increased markedly. In February 1998, the United States suspended debarment of several South African defense-related firms, including ARMSCOR, Denel, and Fuchs, opening the way towards normalization of bilateral defense trade relations. As a result, the Department of State is once again considering requests for licenses for the export of items on the U.S. Munitions List to South Africa.

The post-Apartheid U.S.-South Africa relationship has been built upon the foundation of an October 1994 agreement signed in Washington, D.C. by Presidents Clinton and Nelson Mandela, which created the U.S.-South Africa Binational Commission (BNC), co-chaired by Vice President Al Gore and then Deputy President Thabo Mbeki. Only the second one of its kind (the U.S.-Russia Binational Commission was the first), the U.S.-South Africa Binational Commission oversees, coordinates, and promotes the development of relations between the two countries across the broadest possible spectrum of activities. This is done through the work of committees in the areas of: trade and business development, agriculture, defense, energy, environment, housing, human resource development, science and technology, as well as justice and anti-crime coordination.

Following the 1994 elections in South Africa, the international community normalized both its diplomatic and economic relations with the new government. Since then, South Africa has not only resumed its full membership with the United Nations and rejoined the Commonwealth, but has also become a member of the Organization of African Unity and the Indian Ocean Rim Association for Regional Cooperation. South Africa also currently serves as the Chair of both the Non-Aligned Movement and SADC.

2. Major Political Issues Affecting the Business Climate

South Africa's Apartheid-era government, while preaching free-market economics, essentially practiced statism. The African National Congress (ANC), many of whose leaders were exiled for years in the Soviet Union and its satellite states, returned to South Africa firmly believing in centralized economic planning and the nationalization of the means of production. However, as South Africa's constitution began to take shape at the multiparty negotiations leading up to the 1994 elections, the ANC began to see the merits of a market-driven economy - including greater competition. The ANC subsequently dropped its traditional nationalization plank from its policy framework and began to support privatization of certain parastatal firms.

Another major factor that has affected the business climate in South Africa, and may continue to do so, has been the extent of violence prevailing in the country. Political violence reached a peak in the pre-1994 election period and, though continuing into the 1995-96 timeframe, has largely begun to disappear as a major issue. As noted earlier, the 1999 national election was practically devoid of political violence. Areas where political violence continues, though in much fewer instances, include parts of the south coast and midlands of KwaZula-Natal and in some of the townships near Cape Town. In both areas, supporters of the ANC continue to clash with supporters of the Inkatha Freedom Party (IFP) and the United Democratic Movement (UDM). However, one positive sign that political violence is likely to continue to wane was the May 1999 signing of a peace pact between the ANC and IFP in KwaZula-Natal.

On the other hand, occurrence of criminal violence is relatively high and can be expected to persist throughout the country's period of transition to social stability. National and provincial governments have unveiled a number of programs aimed at attacking crime in general and South Africa is working closely with donor countries to address this problem.

South Africa's government, under the leadership of Thabo Mbeki, can be expected to largely maintain its policy direction of the past few years. However, the central government will likely begin to shift its focus from political consolidation to redoubling its efforts at speeding up delivery of services to the majority population, moving from a transition phase to one of more rapid transformation. Along with attacking the crime problem, economic growth and development will be a priority and the climate for U.S.-South Africa bilateral trade and investment should benefit.

3. The Political System

As stipulated in South Africa's Constitution, the country's parliament has two chambers: the National Assembly and the National Council of Provinces. The 400 seats in the National Assembly are allocated to political parties on the basis of proportional representation in accordance with their share of the national vote as a whole and the national vote in each of the nine provinces. As a result of the June 1999 elections, the African National Congress, which won 66.35 percent of the vote, now holds 266 Assembly seats, one shy of a two-thirds majority and an increase of 14 seats from 1994. The Democratic Party (DP) increased its support from 1.7 percent in 1994 to nearly 10 percent in 1999. With 38 Assembly seats, the DP assumes the mantle of official opposition. The Inkatha Freedom Party (IFP) holds 34 Assembly seats while the New National Party (NNP) has 28. The new United Democratic Movement moved into parliament for the first time with 14 Assembly seats while the remaining 20 seats are divided among eight additional parties. The 90-member National Council of Provinces (NCOP) consists of ten delegates elected from each of South Africa's nine provinces, selected by the provincial legislatures. The parties in the provincial legislature are awarded a number of NCOP seats based on their share of the provincial vote. As such, the ANC, as it does in the National Assembly, easily controls the voting majority within the NCOP.

The members of the National Assembly elect the President who is vested with broad executive powers, including the power to appoint a cabinet. In Thabo Mbeki's new cabinet, of the 28 ministerial-level positions (including the Deputy President, ANC's Jacob Zuma), the ANC holds 25 positions while the Government of National Unity formula offering three seats to the IFP was continued.

South Africa's highest judicial courts are the Constitutional Court, which sits in Johannesburg and has the power to invalidate laws and executive actions found to violate the South African Constitution, and the Appellate Division, seated in Bloemfontein, which hears and decides appeals from a system of provincial Supreme Courts.

Local elections took place in 1996 in all nine provinces and the ANC won control in the lion's share of localities. South Africa's second round of local elections is slated to occur sometime in the year 2000.

3.1 Orientation of the Major Political Parties

Thirteen parties are now represented in the National Assembly after the 1999 elections, compared to only seven after 1994. The dominant African National Congress (ANC) has a predominantly black membership, although it enjoys growing support within the liberal white community, and all races are represented within the ANC's leadership and cabinet appointees. Representing the pre-1994 national liberation movement, the ANC is now overwhelmingly occupied with the critical need to provide adequate employment, education, health care, and housing to the majority of South Africans whose standard of living was depressed under Apartheid.

Second in size, the Democratic Party (DP) is the largely white, socially liberal but economically conservative party that grew exponentially between 1994 and 1999. Taking only 1.7 percent of the 1994 vote, under the leadership of Tony Leon the DP became an outspoken critic of ANC policy in the National Assembly and parlayed Leon's tough-talking and personal recognition to claim nearly 10 percent of the vote and the mantle of official opposition in the 1999 elections. Much of the increase in the DP's support base came at the expense of the New National Party (NNP), in the form of Afrikaans-speaking whites, who saw Leon and the DP as a more effective opposition to the ANC than the NNP.

The NNP, formerly known as just the National Party, ruled South Africa for 46 years prior to 1994. It was responsible for creating the Apartheid policy, but later, under F.W. De Klerk's leadership, abandoned it and entered into negotiations with the ANC. After the 1999 election, the NNP lost much of its national support and seems to have become largely a regional party, centered in Western Cape Province, which it governs in coalition with the DP and where it relies primarily on white and colored middle-class voters.

The third largest party, after the ANC and the DP, is the Inkatha Freedom Party (IFP), whose support is heavily concentrated in the KwaZula-Natal Province. The IFP made a strong appeal to Zulu ethnic pride prior to the 1994 election, which proved especially effective in rural areas of the province. While slipping from 11 percent to roughly 9 percent of the vote nationally in 1999, the IFP still managed to hold sway in KwaZula-Natal, again sweeping most rural areas of the province. The party's policies have long favored federalism as a check on the powers of the central government; its economic policy is generally characterized as free-market oriented.

The are nine other parties represented in the National Assembly. The United Democratic Movement (UDM) was formed in late 1997 and is led by former Transkei strongman and ANC evictee Bantu Holomisa and former NP stalwart Roelf Meyer.

The UDM espouses free-market economic principles and stresses the need for a nonracial South Africa. In the 1999 elections the UDM gained 14 Assembly seats.

The African Christian Democratic Party (ACDP), with 6 Assembly seats, has a religious bent and views politics largely from a moral perspective.

The Freedom Front (FF), with 3 seats, represents the right-wing Afrikaner community, some of who still hope to establish their own geographically designated, politically autonomous territory to serve as their cultural homeland, or "Volkstaat".

The Afrikanische Eenheidsbeweging (AEB), with just one seat, similarly represents far right-wing Afrikaners.

The Pan Africanist Congress (PAC) has a left-wing, mostly black membership, though the PAC did make attempts to appeal to all races prior to the 1999 election, which saw its share of the vote drop to under one percent and the number of Assembly seats cuts from 5 to 3.

Another former liberation movement and far left-wing party, the Azanian People's Organization (AZAPO), performed dismally in the 1999 elections, taking just .17 percent of the vote and gaining one Assembly seat.

The United Christian Democratic Party (UCDP) is a relatively new party, led by former Bophuthatswana leader Lucas Mangope, and centered almost exclusively in Northwest Province, where the party will sit as official opposition to the ANC in the provincial legislature in addition to occupying 3 seats in the National Assembly.

The Federal Alliance (FA) has 2 Assembly seats and is led by former South Africa Rugby Union boss Louis Luyt. The FA attracted mostly disgruntled white voters searching for an alternative to the ANC and the NNP.

Finally, the Minority Front, based in Durban, owes its one seat in the National Assembly to its strong showing in Durban's South Asian community.