US Leads Efforts to Reinvest in South Africa

The high-profile visit of US Secretary of Commerce Ron Brown has built confidence and resulted in a tax treaty and trade councils

SOUTH Africa's trade status and prospects for increased United States investment in the country received a major boost with this week's visit here by US Commerce Secretary Ron Brown and 25 business executives.

Mr. Brown, the highest ranking US official to make an official visit to South Africa in recent times, said he would spend yesterday and today debriefing President Clinton, stressing the need to maintain momentum following the lifting of financial sanctions by the US last week.

``As crucial as the process is between now and April 27 [the date of the country's first non-racial election], nothing is more important than the economic development that is going to come through investment, trade, and commerce,'' Brown told reporters before his departure Wednesday.

During nearly a decade of sanctions and disinvestment by US companies, US fixed investment in South Africa shrank to $1 billion. About 200 US companies withdrew.

Brown announced a series of steps to promote US-South Africa trade and investment and committed the US administration to a major role in uplifting black South Africans and creating a broad managerial and entrepreneurial class among blacks.

``Our presence here has helped to bring black and white South Africans together and to get them communicating,'' Brown said. ``The most important bonds that have to be formed are economic bonds between South Africans.''

The high point of Brown's visit was the signing with Finance Minister Derek Keys of an Overseas Private Investment Corporation agreement, which provides political risk insurance for US fixed investment in the country.

``This is a very significant step,'' says Johannesburg economist Graham Bell. ``It lowers the risk premium substantially for US investors.''

Business Day, the authoritative financial daily, reported Wednesday that more than 20 countries - including France, Germany, and Japan - were likely to follow the US example by signing investment protection and incentive agreements.

Other plans announced by Brown during his visit include:

r A joint US-South Africa Business Development Council to bring present and future South African business leaders into direct contact with their American counterparts.

r A tax treaty between the two countries.

r The International Trade Administration's new long-term strategy, to be announced within weeks, which would list South Africa as one of the world's 10 most important emerging markets.

r The imminent appointment of a special foreign commercial service officer - at minister-counsellor level - in South Africa.

r A regional Southern African task force along the lines of the one announced last week at the Asian Pacific Economic Corporation meeting in Seattle.

WO-WAY trade between the US and South Africa last year amounted to $3.8 billion, making the US the country's second largest trading partner after Britain ($4 billion).

But foreign investors are anxious about the level of political violence before the April ballot.

Brown said he was encouraged by talks with political leaders such as African National Congress President Nelson Mandela, President Frederik de Klerk, and Inkatha Freedom Party leader Chief Mangosuthu Buthelezi.

``There is a recognition that peace without economic growth and political stability will not be possible,'' Brown said.

One of the priorities, he said, was to encourage the black private sector. ``We have to tackle the tremendous gap between those who have succeeded economically and those who have not had a chance to compete.''

But Brown warned that the South African government would have to reduce trade barriers erected to prolong apartheid.

``South Africa is reemerging into a world economy marked by a new North American Free Trade Agreement, an increasingly integrated European market, aggressive Asian-Pacific growth and, hopefully, a new GATT agreement by Dec. 15,'' he told South African businessmen at the American Chamber of Commerce.