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THE WHITE HOUSE

Office of the Press Secretary

                         BACKGROUND BRIEFING
                                  BY
                    SENIOR ADMINISTRATION OFFICIAL

May 5, 1994

The Briefing Room

12:13 P.M. EDT

SENIOR ADMINISTRATION OFFICIAL: Still, and always ON BACKGROUND, wanted to do two things, basically, today. The first was to describe to you the phone calls that the President made this morning to Nelson Mandela and to State President F.W. de Klerk.

Then I wanted to walk through with you the trade, aid, and investment package for South Africa. And then we have my cobriefer who will talk about the largest component of that package, which is the U.S. AID development and investment assistance for South Africa.

The President spoke with Mandela and de Klerk separately this morning between about 9:15 a.m. and 9:45 a.m. from the Oval Office. In his conversation with Mandela he congratulated him on the ANC victory in last week's elections. He said that the world had been thrilled by the peaceful and the good-spirited election process. He said that that bodes well for the success of the future government of national unity.

The President praised Mr. Mandela for the spirit of reconciliation and cooperation that he's shown throughout the process, and he said that the United States would be there to assist South Africa throughout the difficult transition to nonracial democracy, after which he outlined the administration's trade, aid and assistance package for South Africa.

Mr. Mandela expressed his thanks for all that Americans in general, and specifically Mr. Clinton has done to support the struggle to eliminate apartheid. In this struggle, Mandela said, and this is a quote, "Our victory is your victory." He said that "the future of South Africa lies in close cooperation with the United States," and, again, that's a quote; and he added that he looks forward to receiving the American delegation to his inauguration, which will be led by the Vice President. They also talked about Hillary's participation in the delegation.

In his conversation with F.W. de Klerk, the President said that de Klerk deserves tremendous credit for leading his supporters through the difficult transition process. He praised the wisdom and the courage that de Klerk has shown, and he noted that this has laid the groundwork for the national party to play two roles in the post-apartheid period; one is a cooperative participant in a new government of national unity, but also as the loyal opposition.

Again, President de Klerk thanked the President for his interest and involvement throughout the historic process of change in South Africa, and he praised the President's direct support at key points during the process of change. He also welcomed the President's commitment to assist South Africa in the future.

In terms of the assistance that the United States will be providing to South Africa for trade investment as well as development, you are all aware that the President lifted sanctions on South Africa last November. And when he did, he instructed all federal agencies to review their programs to see what more they could do for South Africa in the period after the elections, which were set even then for April 26th through 28th.

He said that the principal resources for South Africans'development would have to come from within, but that we had to play our role to ensure that that new government had the resources it needed to address the rising expectations -- the expectations that a new government would lead to jobs, housing, health care, education, electricity, et cetera.

Over the course of the last five months, the government agencies have been doing that. There have been 10 principal agencies involved in this process. And as you're aware, today the President announced his intention to provide a total of $206 million worth of assistance to South Africa during this fiscal year, FY '94, again using the efforts of these 10 federal departments and agencies.

For the Fiscal Years 1994 through '96, the program level of our assistance will reach about $600 million. The package includes both direct grants of assistance as well as leveraged resources from the private sectors, both in the United States and in South Africa. And, in addition, there are a wide variety of other assistance measures which we are not including in that basic $600 million figure. These include things like providing trade preferences for South Africa, which will save substantial amounts of money for South African exporters. We are committed to offering to negotiate trade and investment agreements, working on a bilateral basis as well to enhance external assistance to South Africa in other ways.

I won't go into the detail again on the U.S. AID assistance, but I would like to go briefly through what the other agencies are providing as well. The point that I want to stress here very strongly is that South Africa is not a traditional developing country. It has had a tremendous infrastructure set for development. It has a large private sector, which has been hampered by the aspects of apartheid, as well as the sanctions that foreign countries have placed on it. But there is a tremendous potential for growth in that economy in the very near term.

And our principal efforts are going to be designed at encouraging the private sector within South Africa and providing opportunities, as the President said, for American investment and American trade.

I think you're aware that U.S. investment in South Africa in the mid-'80s was about $3 billion. And it was focused in about 360 U.S. companies. Because of sanctions and the slowdown of the South African economy, that figure fell to about $1 billion in about 100 companies. Over the course of the last year we've seen some increase in that levels, but with some of the measures that we're proposing here, we are anticipating an even greater increase.

In addition, South Africa is a very important trading partner of the United States. We have about $4 billion of bilateral trade with South Africa. We have a surplus in our trade with the country, and it accounts for more than 50,000 American jobs. All of these figures are based upon a period in which sanctions were remaining to be in place. And so with the lifting of those sanctions a regrowth in the economy in South Africa, we're looking for important trade opportunities in the market as well.

Just to go through the agencies who are participating in this process, the Overseas Private Investment Corporation negotiated its agreement with South Africa at the end of 1993. They have now agreed to use $2 million in their budgetary authority, which will leverage, guarantee $35 million worth of U.S. investment in South Africa. Most of that money will go into joint venture activities with South African firms. And so it is very likely that we will see up to $200 million worth of new investment in South Africa based on OPIC's activities in the country.

You're aware that Ruth Harkin led a very successful trade and investment mission to South Africa. In addition, OPIC has agreed that they will insure at least $50 million worth of American investment in South Africa. And to the extent that more investors want to be insured, they have agreed that they will up that level as well.

The U.S. Trade Representative's office has responded to the President's request to grant special trade preferences for South Africa. And under the Generalized System of Preferences, 4,400 different types of semi-manufactures and agricultural goods will be exported from South Africa duty-free to the United States. That's the best treatment you could possibly get for those products.

In our last year, 1993, $262 million worth of these goods were exported to the United States. And so now they will come in duty-free. It is difficult to come up with the exact figure in terms of savings for South Africa that this would represent. The average American duty on these types of goods tends to be relatively low, maybe 3 to 5 percent. But nonetheless, this could provide $10 million to $15 million worth of savings for South African exporters. This figure is not included in the $600-million package, nor is the $50 million worth of OPIC insurance. We wanted to try to be as conservative, in a sense, in defining the overall value of this package so that we didn't create expectations and we didn't, a year from now, have to come back and explain why we hadn't achieved what we were talking about.

In addition, USTR has agreed that they will work with the new South African government to negotiate a bilateral investment treaty, which will define the rules for U.S. investors in South Africa and vice-versa. The importance of this is that is a very reassuring thing for American investors to have when they look at going into any foreign country.

Ex-Im Bank has agreed that they will essentially do whatever the market will bear in South Africa; whatever good projects they can find, they'll finance. Over the course of the last two years, they've done about $200 million worth of projects in South Africa. We expect that to increase over the course of the next year. Again, we did not put that figure in the overall $600-million package. We could have. These are loan guarantees that provide real resources to South Africa as well.

The Department of Commerce has designated South and southern Africa as a key emerging market. And what that means is that there will be a new range of trade promotion activities in South Africa. Ron Brown has also designated our South African foreign commercial service as his most important priority this year by assigning a new, full-time minister-counselor to our consulate in Johannesburg to encourage trade and investment.

Commerce Department will also shortly announce the launching of a U.S.-South African Business Development Council to further encourage bilateral trade and investment. Just to go briefly through the other agencies, USIA will be increasing their exchange programs for democratization, for education, for governance, training et cetera. In addition, as the President and Vice President referred to, USIA will be hosting, along with members of the Georgia delegation to Congress, a major investment and education conference in Atlanta June 3rd and 4th. We expect literally hundreds of American companies and education institutions, NGOs to participate, along with perhaps as many as 50 to 60 South African counterparts. Vice President Gore will participate in that conference.

One of the -- actually, two of the more exciting programs that we're going to be launching in South Africa, or expanding, are the Trade and Development Agency and the Peace Corps. The Trade and Development Agency is one of those agencies that very few people hear about, but it does great work. It promotes feasibility studies in developing countries for projects that have a developmental impact in those countries, but also have the prospect for yielding U.S. exports.

When I was in South Africa, we put together a project which will now produce the first penicillin plant in all of Africa under this program. We financed the feasibility study; OPIC then got involved as did Ex-Im Bank in financing some of the shipments of goods, and we expect relatively soon to have Africa produce its own penicillin -- high quality, low cost.

TDA has agreed to do $1 million worth of feasibility studies in South Africa. Peace Corps is prepared to begin conversations with a new South African government. It will be the requirement for that new government to request Peace Corps' involvement. But once they do, the Peace Corps has agreed that they will be off the mark very quickly into South Africa. What they're looking at primarily is getting involved in small enterprise development, education, teacher training, agriculture. And, again, a very exciting program for a lot of us is that they are going to assist South Africa to develop its own volunteer programs within the country. I should stress that there are safety questions regarding volunteers, and that will obviously affect the entry in terms of personal security.

The Defense Department is about to offer to South Africa $100,000 worth of training for the new South African defense force. In addition, they are hoping to invite South African naval vessels to visit American ports for the first time.

The Department of Treasury has established the negotiation of a tax treaty with South Africa as its top priority. What this would do would be to eliminate the possibility of double taxation, where an American company would be taxed on its profits in South Africa and then again on the same profits in the United States. And as soon as the South African government is ready, we will begin to intensify those negotiations.

And last but not least, in fact perhaps most important of all, the President is trying to engage the heads of the other G-7 countries, as well other donors, to enhance their involvement in South Africa. He has written to the leaders of the other G-7 countries outlining the expanded assistance we intend to provide; urging them to expand their assistance. He is prepared to discuss with the South African government the possibility of other more aggressive means of marshalling international support for a new South African government. And as you heard him say specifically today, he has asked the World Bank, the International Monetary Fund, the African Development Bank, once South African becomes a member if they can also increase their programs in South Africa.

And so what I want to get across here is this is a wideranging approach involving 10 American agencies. It is focused on not only assistance to South Africa, but promotion of trade and investment. Our use of a single figure to put a dollar figure on it was what we believe to be a conservative estimate of the real resources that will flow to South Africa under these types of programs over the next three years.

And I just wanted to conclude by saying the President is fully committed to South African development, to seeing South Africa play a full role in the international economic environment, as well as the international political field.

Before questions, why don't we have the other senior administration official talk, and then we'll take some questions.

SENIOR ADMINISTRATION OFFICIAL: Thank you again. I'll keep my comments brief, but what I would like to do is to give you just a little bit of detail of the economic assistance component of the package, which is a very large part of what we're going to be doing in South Africa over the next three years.

And there are basically three major components of what we will be doing in South Africa. We'll be focusing on private sector development, supporting private enterprise initiatives of the disadvantaged majority in South Africa, focusing on job creation and infrastructure development. This is going to comprise about $268 million of U.S. economic assistance resources. We will focus on housing investment guarantees, infrastructure improvements, such as township electrification, a credit and training program for small black-owned and operated businesses, and training for the marginalized youth -- principally in the townships and in and around the major cities of South Africa.

We will also be providing about $126.4 million in assistance to support democratic and political institutions. We've been engaged for some time in supporting the transition process in South Africa. We want to continue to provide support for the consolidation of the historic change that has taken place there, providing resources to support the consolidation and transformation of national, regional and local governments.

Of course, this will also include technical assistance and training for government workers and the new leadership of the new South African government. We also will continue to provide considerable assistance to the very large nongovernmental organization community which comprises a good part of civil society in South Africa.

We expect, over the three years, to invest about $133 million in education and health activities in South Africa. In the area of education, we will engage more in basic and primary education, helping the new government focus on policy reform and the development of policies that will lead to a more equitable distribution of the services and help enhance access to education within the country.

We will also engage in health sector activities, with a very heavy focus on child survival activities as well as expanded programs in HIV-AIDS.

The key features of the expanded economic assistance program include designing and providing these resources as quickly and efficiently as possible. As you all know, there are tremendous expectations of the disadvantaged majority that are associated with this important transition to democracy, and we are committed to assisting the new government to respond to these expectations as quickly as possible.

We also intend to provide our assistance in such a way that we can, to the maximum extent possible, leverage additional resources both domestically and from foreign sources.

And, finally, we are going to be providing this assistance in a way to build to the maximum degree possible on our past involvement in South Africa, which has traditionally been through the nongovernmental organization community, but with this democratic transition, for the first time the U.S. government will work directly with the government of South Africa. So our assistance resources will be channeled through the nongovernmental community as well as the new institutions of the new South African government.

Q Out of the $600 million package, you mentioned several things that were not included. What, in addition to the $528 million from AID, what are the other pieces that make up the $600 million?

SENIOR ADMINISTRATION OFFICIAL: The $35 million of investment guarantees that OPIC will finance. That's based on $2 million worth of backing. But OPIC is responsible for that entire $35 million. So that is one of the key elements.

We also have the TDA program, which is $1 million. The USIA program is going to be $3.5 million. All of these figures are in the handout that was provided.

Q There's a military training component, I guess. Is there any expectation, or has there been any talks that the South African military should help out in Rwanda? Is it in thanks for our providing all this aid?

SENIOR ADMINISTRATION OFFICIAL: There's no quid pro quo for the aid that we're talking about here. This is aid in American interest as well to promote bilateral trade and investment possibilities, as well as development. It also has a very important regional role.

South Africa, for the time being, is working on its own integration of its defense forces. As the period of the elections came about, there were some very heavy requirements for internal security. I would suspect that there will be a dropoff in those requirements. And there is a very strong possibility over the course of the next years that South Africa will become involved to a much greater extent in peacekeeping-type operations.

Q Two questions on the first-year funding. The President said Fiscal '94 funding would go from what's now set at $83 million to $143 million. And you and the fact sheet say this year would be $206 million. Was he wrong or --

SENIOR ADMINISTRATION OFFICIAL: No, he was referring to U.S.-AID activities and that's an accurate figure.

Let me say that the $83 million was what was identified at the beginning of the year for FY '94. During the course of the year, because of in part the election assistance that he referred to, that assistance went up during the course of the year. And now we're raising it even higher.

And so, again, I think you have to focus on what is the AID component, which is primarily development assistance as opposed to the overall trade, aid and investment package.

Q A second question on that. Where does this money come from? Does it add to the deficit, or is it offset in other -- are you taking away from some other account or what?

SENIOR ADMINISTRATION OFFICIAL: What basically we've done is identify AID resources that were unutilized, in part because we've closed down other missions; in part because there are recoveries and deobligations from previous years. So, to the extent that it's possible, this is a relatively painless exercise for FY '94. It does not in any way add to the budget deficit.

In upcoming years we will have to rely on those avenues for financing to the extent possible, but we'll have to look at other sources. I can pretty much guarantee you that this will not add to the deficit even in the out years.

Q Is it correct you will have to cap the aid to other countries, including African countries in the next two years?

SENIOR ADMINISTRATION OFFICIAL: Not necessarily. We're going to be looking at means of trying to work through deobligated funds, looking at means of trying to work through deobligated funds, to work through cost-saving mechanisms, et cetera. But I can guarantee you for the first year, this all comes from those resources.

SENIOR ADMINISTRATION OFFICIAL: I would only add that in the out years, as my colleague indicated, we expect to also be able to rely on the recoveries. There may be a need to make some minor adjustments, but there will not be adjustments that will add to the budget deficit or adversely affect our ongoing programs in other parts of Africa.

Q Can I follow up on that? Either one of you, could you be a little more specific about which programs are losing out this year? I mean, I take it what you're saying is there are countries that didn't spend what they could have spent --

SENIOR ADMINISTRATION OFFICIAL: No, that's actually not accurate. We had for other reasons decided to close several missions in Africa. And we will be reporting specifically to Congress what those missions are.

Q Can you tell us?

SENIOR ADMINISTRATION OFFICIAL: At this point I'd rather not.

Q How many are there?

SENIOR ADMINISTRATION OFFICIAL: Sometime ago, Brian Atwood, the Administrator of the Agency for International Development, indicated the agency's decision to close 21 missions. This information can be provided to you; it's a matter of the record. Nine of those missions are in Africa. We can certainly make those available to you. In terms of your first question, the savings that are being used are coming from recoveries from resources that had been once available for other programs, as well as recoveries that will come from some of those nine missions that we're closing. They include: Cameroon, Zaire, Togo, Burkina Faso, Cape Verde, et cetera, et cetera.

I think we have a list here, or we can provide it to you.

Q Does that mean that those countries are then just not going to receive AID services at all, or what's the -- what does that mean?

SENIOR ADMINISTRATION OFFICIAL: Well, what that means is that AID, in an effort to streamline, to do a much more effective job in achieving our mission, we have basically decided that we need to reduce the number of places we're working in.

We've also decided that in certain circumstances where the relationship is not good and where the partnership is not good, that is, where the country is not performing either for political or economic reasons, that we have decided that we're not going to continue to engage those countries that are not making the best effort that they can to help themselves. And this is basically why we've decided to --

SENIOR ADMINISTRATION OFFICIAL: Can I make one point, and that is that these decisions were taken sometime ago. It had nothing to do with South Africa. The resources are available because of those decisions that were taken by the Administrator a while ago.

Q You mentioned that the Defense Department assistance was worth $100,000?

SENIOR ADMINISTRATION OFFICIAL: A hundred thousand dollars.

Q What exactly -- will it consist of training?

SENIOR ADMINISTRATION OFFICIAL: It's all training. It is the IMET program under which we provide training to military officers from that country in the United States.

And we will also offer to send out Americans to work with the South African Defense Force. Again, we have offered that to South Africa, and we assume that they will accept it.

Q How far are you ready to go -- I mean, that sector if there is an interest on the part of South Africa for more U.S. military aid? Can you give us some estimate?

SENIOR ADMINISTRATION OFFICIAL: This, at this point, is what we're anticipating. We have no plans for additional assistance.

Q On the waiver of the GSP tariffs, can you give us two or three of the lead products that would be benefitting from --

SENIOR ADMINISTRATION OFFICIAL: They're all semimanufactured goods -- toys, sunglasses, simple manufactures, as well as agricultural goods.

Q What's the revenue loss on that?

SENIOR ADMINISTRATION OFFICIAL: It depends for any particular country what mix of goods they're exporting to the United States. The general tariff is somewhere between two, three, four, five percent for those goods. And, so, again, for South Africa who exported $262 million worth of those goods in 1993, one can estimate, depending on what the mix was, anywhere from $8 million to $10 million to $12 million worth of revenue-saving for South African exporters.

Q All these products will come duty-free?

SENIOR ADMINISTRATION OFFICIAL: Absolutely -- 4,400 products.

Q How does this compare overall to the aid that the U.S. has provided to other countries? I'm thinking -- you know, Russia was having some of this --

SENIOR ADMINISTRATION OFFICIAL: Actually, I worked out this figure last night. Our assistance per capita to South Africa is greater than our assistance to the Newly Independent States for the upcoming year.

Q What's the number?

SENIOR ADMINISTRATION OFFICIAL: I understand in our budget the NIS has a $900-million budget. But I would point out they've got six to seven times the population of South Africa.

MR. MITCHELL: Two more questions.

Q How did you come up with the new figure, and were you under any pressure from the Black Caucus, for example, to come up with even more money and didn't have it? Can you talk about that?

SENIOR ADMINISTRATION OFFICIAL: No. The President received a letter from a number of members of Congress, including a number of Black Caucus members, who basically asked for a level of assistance almost exactly at what we're providing in terms of the direct assistance. And, again, we are not counting all of the Ex-Im Bank activities, the OPIC investment insurance, the trade preferences, et cetera.

This was a bit of a happy coincidence; I really stress that. Although we have, of course, been working very closely with the Black Caucus as well as the African appropriators and authorizers in Congress, as well as a number of outside groups.

The beauty of the South African program in the past has been that it has gone exclusively to nongovernmental organizations. And we have done a tremendous job within South Africa of creating a civil society, creating an alternative to the apartheid-based government. We are not going to be abandoned in that. And because of that, we will continue to work with the PVOs and the NGOs.

SENIOR ADMINISTRATION OFFICIAL: At the question of whether or not there was something from the Caucus, I just add that the administration has been working internally for months on trying to put this package together for South Africa.

SENIOR ADMINISTRATION OFFICIAL: Can I mention one program that I think we are -- I am particularly proud that AID has been able to put together? And that is the Tertiary Education Linkages Program. And this, I think, typifies in a lot of ways what AID is doing. Over the course of the next 10 years, South Africa will benefit from $50 million worth of aid under this program.

And what it does is, it links American universities, with an emphasis on historically black colleges and universities, with South African universities -- primarily the historically black universities there. It provides a little bit of seed money to get those relationships going. And then, essentially over the course of the next five to 10 years, the colleges and universities themselves will engage in exchange programs for professors, students going back and forth, educational training programs, etc. It is a good way, again, to leverage private sector money -- in this case academic money and assistance -- building linkages between the two societies.

Q Are there any plans to have a donor-style conference, as they did for Russia and for the Gaza Strip and Jericho? And just as part of that question, has there been a World Bank survey of what needs to be done in South Africa the way there was for Gaza and Jericho and for Russia?

SENIOR ADMINISTRATION OFFICIAL: The World Bank has been in South Africa for about a year and a half now doing those types of surveys. They've gone through sort of sector by sector -- the education sector, the electrification sector, the housing sector. They will be, as this process moves ahead, working on the resource implications of those questions.

In terms of a donors' conference or a collaborative group, the President has indicated that he would take the lead from the South Africans on that.

To the extent that Mr. Mandela, Mr. de Klerk and the other partners in the Government of National Unities request the United States participation, cooperation, co-hosting of such a conference, we would be delighted to do that. And we've indicated that, in fact, to the South African leaders on a number of occasions.

Let me stress that this would not be a traditional donors' conference where people walk to the table and put checks on the table, because South Africa is not a traditional country. We will certainly have that aspect to it if that's what the South African government requests. But at the same time, we will be talking about what we can all do to promote business ties, to promote investment, to promote trade. It's an exciting new opportunity for a lot of us.

Thank you.

Q Did you say Hillary is going with the --

SENIOR ADMINISTRATION OFFICIAL: Yes. Just to review that, in terms of the official participants on the mission that the Vice President will take, Mrs. Gore, Hillary, Mike Espy -- Secretary Espy, and Secretary Ron Brown will be the official participants. We are just putting the final touches on the private sector participants, and I hope we'll have that list available sometime later.

Q Members of the vote delegation -- are they going to be part of the official delegation? Mr. Jackson?

SENIOR ADMINISTRATION OFFICIAL: Some of them are -- Mr. Jackson certainly will. I should also say that I think it's 10 to 12 members of Congress will also participate in that delegation.

THE PRESS: Thank you.

END12:51 P.M. EDT