US Plans Doubling of Aid To S. Africa After ANC Win

WASHINGTON is poised to unveil a roughly $200 million aid package to shore up South Africa's new, democratically elected government.

The proposal, which represents a doubling of United States aid to South Africa, is likely to be announced by Vice President Al Gore Jr. before he attends the inauguration ceremony of President-elect Nelson Mandela in Pretoria on May 10.

The package will mark a shift of emphasis away from aid for voter and democracy education toward development needs such as low-cost housing, provision of water supplies, and education facilities.

The money represents roughly 10 percent of what Mr. Mandela's African National Congress (ANC) plans in government spending ($2.2 billion over the next five years) on a reconstruction and development program - a blueprint for socioeconomic development to eradicate the disparities left after apartheid.

But the US funds will be the biggest bilateral contribution to the country's pressing needs. ``We are looking at this as a downpayment,'' said a US official who accompanied US Ambassador to the United Nations Madeline Albright on a visit to South Africa last month.

Not enough aid

One senior administration official involved with the aid program is skeptical. ``The president's line is, `We are doubling funds to South Africa.'''

He says the aid does not amount to much, considering the development tasks ahead, and it is really being redirected from other parts of the continent.

``We are borrowing from Peter to pay Paul, and Peter is starving to death,'' he said.

A State Department official counters that Washington's total financial help to Africa remains steady.

The most important measure, he continues, is to promote US business involvement in South Africa, which ``must now be reinforced by sustainable economic growth, and the peace and stability that democracy brings can lead to desperately needed private investment.''

The boosted US help will include US Export-Import Bank guarantees toward the purchase of US products and Overseas Private Investment Corporation (OPIC) financing for US investments.

The current South African finance minister, Derek Keys, has been urging South Africans to bury any resentment they harbor over the withdrawal of US banks during the sanctions era. The US has re-emerged as South Africa's major trading partner after falling to third position during the sanction years.

In recent months, US-South Africa relations have acquired an increasingly commercial flavor. After sanctions against the government were lifted last September, the US hosted a series of South Africa investment conferences. Those were quickly followed by a ``Made in the USA'' trade exposition to South Africa and joint government-corporate delegations.

While US diplomatic sources anticipate a more difficult bilateral relationship on the political level with the ANC government, given the ANC's links with Cuba and Libya, the senior administration official says those frictions could surface on the economic level.

South Africa's high external debt, estimated to be about $15 billion, could make it difficult for the country to borrow money abroad and to lure sufficient foreign investment. Under pressure to make quality-of-life improvements, the ANC could speed up the government printing presses as a means of ``making'' money, says the official.

Among South Africans, expectations are high that the Mandela government will be able to deliver on a host of promises.

But the challenges are formidable.

``If 75 percent of South Africa doesn't have potable water, and 50 percent of black South Africa is unemployed, how much will it cost to effect change?'' the senior administration official asks.

Aid on G-7 agenda

Aid to South Africa will likely be on the agenda when the Group of Seven leading industrial nations meet in Naples, Italy, this summer. But the administration official does not expect much of a G-7 financial commitment.

Scott MacDonald, vice president at the investment firm CS First Boston and an expert on international financial markets, says South Africa is current on its financial obligations. Mr. MacDonald, who has just prepared a survey of South Africa for prospective investors, ticks off a number of short-term problems: a large fiscal deficit, rising labor costs, and persistent capital outflows since 1985 that have curtailed the potential for domestic investment.

``To deal with some of these, the government unveiled temporary measures aimed at sustaining fiscal discipline. Those measures are expected to maintain the course set by the 1992-1993 budget and will be incorporated or supplemented by the next government's budget,'' MacDonald says.

The senior administration official says that course will only be possible if Mandela retains the cautious Central Bank President Chris Stals, and resists the temptation to wield monetary policy as a tool to print money to pay for badly needed projects.

MacDonald expects some of the capital sent overseas to return to the country, attracted by new investment opportunities. He also anticipates official aid from multilateral organizations, such as the World bank and the African Development Bank.