SOUTHERN AFRICA: WRESTLING WITH SOUTH AFRICAN ECONOMIC TIES

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP89S01449R000300220001-2
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 39
• Document Creation Date: December 27, 2016
• Document Release Date: August 21, 2012
• Sequence Number: 1
• Publication Date: May 1, 1988
• Content Type: REPORT

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Directorate of ? Secret
Intelligence
Southern Africa: Wrestling
With South African
Economic Ties
An Intelligence Assessment
tar-
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Agy
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ALA 88-10024
May 1988
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Directorate of Secret
Intelligence
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Southern Africa: Wrestling
With South African
Economic Ties
An Intelligence Assessment
This paper was prepared by Office
of African and Latin American Analysis. It was
coordinated with the Directorate of Operations.
Comments and queries are welcome and may be
directed to the Chief, Africa Division, ALA
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Key Judgments
Information available
as of 5 May 1988
was used in this report.
Southern Africa: Wrestling
With South African
Economic Ties
Despite their common opposition to apartheid, South Africa's neighbors are
still unable to agree on a policy of regional sanctions against Pretoria, as
some struggle to reduce their economic dependency on, while others are
actually expanding ties to, South Africa.' Disagreements among southern
African states over how to approach sanctions stem from wide disparities in
the extent of their economic links to Pretoria and in their political willing-
ness to tackle the difficult task of reducing those ties. Rhetoric aside, we do
not believe that the southern African states will make sufficient progress
over the next two years in lessening ties to South Africa so as to impose wide-
ranging sanctions without causing severe economic damage to themselves.
Moreover, we anticipate that South Africa will continue to strive to deepen
its economic hold over the region because of both the benefits to its own
economy and the higher potential costs of sanctions to neighboring states.
Frustrated and restrained by their own economic dependence on South
Africa, southern African states will very likely call for tougher Western
sanctions against Pretoria and for increased US aid to support initiatives to
lessen regional transport and trade dependency on South Africa. They
would view a larger US role as a way to boost funding for such initiatives as
well as a political gesture that might discourage Pretoria from countering
their steps to reduce dependence. Moreover, any incremental progress in the
rehabilitation of transportation routes in southern Africa could have im-
portant commercial benefits for US firms such as locomotive manufac-
turers, according to US Embassy reporting.
Southern African states face many hurdles in breaking away from Pretoria's
economic grip. Most neighboring countries depend on South Africa for
access to efficient transport, ready investment, engineering and technical
help, jobs for migrant laborers, and, in the case of Zimbabwe, an important
market for exports. Pretoria also has the competitive advantage of being a
close and established source of imports at cheaper prices than other foreign
nations?all of which enables it to reap a large annual surplus in trade with
its neighbors. In addition, the states of the region are keenly aware of South
Africa's willingness to retaliate inasmuch as Pretoria has imposed a number
of short-lived measures over the past several years to demonstrate its ability
to damage neighboring economies.
'In this paper, the terms "South Africa's neighbors" and "southern African states" refer to
black-ruled Angola, Botswana, Lesotho, Malawi, Mozambique, Swaziland, Tanzania, Zaire,
Zambia, and Zimbabwe.
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Zimbabwe and Zambia, despite heavy dependence on South Africa, are in
the forefront of efforts to reduce ties to prepare their economies to
withstand the repercussions of imposing sanctions. Zaire and Malawi,
whose rail connections to South Africa pass through Zambia and Zimba-
bwe, also are looking for alternatives. In contrast, Mozambique, Botswana,
Lesotho, and Swaziland?all more critically dependent on South Africa?
reject sanctions as too costly, and continue to increase economic relations
with South Africa. Angola and Tanzania, despite virtually no economic ties
to South Africa, display only mixed support for sanctions; Luanda is
preoccupied with a South African?backed insurgency while Tanzania is
giving priority to its IMF-supported economic recovery program.
Zambia and Zimbabwe have made the most headway in reducing transport
dependence. By transferring freight shipments to the ports at Dar es
Salaam, Tanzania, and Beira, Mozambique, they have cut transport
through South African ports by about 1.4 million metric tons annually,
down more than a third since 1985. Zambia has transferred all of its
copper exports previously shipped over South African routes to Dar es
Salaam and Beira, thus eliminating dependence on South Africa for
exports. We estimate that Zimbabwe also has cut shipments through South
Africa by more than one-third, but insufficient capacity on non?South
African rails and ports has forced it to continue shipping more than one-
half of its overseas freight through South Africa. In our judgment,
Zimbabwean President Robert Mugabe probably will bow to domestic
pressure to avoid sanctions, while Zambian President Kenneth Kaunda's
concern about worsening economic problems and the potential for domestic
unrest will prevent him from imposing sanctions.
Looking ahead, we believe the rate at which any of the southern African
states can reduce transport dependency on South Africa will slow sharply
over the next two years. Damage by South African?backed insurgents will
keep the Benguela railroad through Angola closed, while in Mozambique,
we estimate that time-consuming rehabilitation projects?particularly on
the Beira railroad and port and the Limpopo railroad to Maputo?will slow
additional transport increases through 1989. Even after rehabilitation is
complete, insurgent disruption and management shortcomings will pre-
clude moving freight at costs and levels of reliability that will be
competitive with South African routes.
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We also do not anticipate that southern African states will make much
progress by 1990 in reducing their reliance on South African imports,
because of the high costs associated with switching from nearby South
African suppliers to overseas sources and the grim state of most of their
economies. Zambian studies indicate that the costs of replacing imports
from South Africa could reach about $70 million annually. Cutting trade
would be even more costly for Zimbabwe because, in addition to its import
dependence on Pretoria, exports of manufactured goods to South Africa
are critical to the survival and prosperity of its manufacturing sector,
which accounts for one-fourth of Zimbabwean GDP, according to US
Embassy reporting.
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Contents
Page
Key Judgments
111
Scope Note
ix
Introduction
1
Economic Dependence and Sanctions
1
Heavy Dependence: Planning for Sanctions
1
Critical Dependence: Reject Sanctions
7
Virtual Independence: Mixed Support for Sanctions
7
Obstacles to Reducing Dependence
8
Troubled Alternative Transport
8
Security Problems
8
Management Deficiencies
10
Rehabilitation Bottlenecks
11
South Africa's Trade Advantage
11
Zimbabwean Dependence on Export Market
13
Risk of South African Retaliation
13
Outlook and Implications for the United States
14
Reducing Dependence
14
Imposing Sanctions
14
Implications for the United States
15
Appendixes
A. Southern Africa: Regional Economic Ties to South Africa
17
B. Zambia and Zimbabwe: Chronology of Sanctions Effort Against
South Africa
19
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Scope Note
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This Intelligence Assessment is part of a continuing research effort by the
Directorate of Intelligence to explore the regional implications of possible
economic sanctions against South Africa by black-ruled neighboring states.
The paper has a two-year focus and deals in broad scope with trends in
southern Africa's economic dependence on South Africa and efforts to plan
for sanctions against Pretoria. The Assessment, though primarily econom-
ic, also addresses political and military factors as they bear on the
sanctions issue.
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Although information on regional ties to South Africa is generally 25X1
adequate, we lack current information on regional transportation flows,
individual country trade with South Africa, and planning for sanctions on
the part of South Africa's neighbors
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Southern Africa: Wrestling
With South African
Economic Ties
Introduction
South Africa's declaration of a nationwide state of
emergency in 1986 in response to escalating black
unrest and the imposition of limited Western sanc-
tions marked a watershed in Pretoria's approach to
the internal opposition and to the international com-
munity. The year also proved to be a watershed for
some of South Africa's southern African neighbors in
planning their opposition to Pretoria. Zimbabwe and
Zambia, the two Frontline states that had long been
in the forefront of rhetoric for international sanctions,
decided to embark on a course aimed at reducing their
economic dependence on Pretoria and imposing sanc-
tions against South Africa. Malawi and Zaire have
followed suit, but other countries in the region have
been more hesitant to challenge South Africa's eco-
nomic predominance
This paper reviews the economic relationships and
policies of southern African nations toward South
Africa and assesses the prospects for initiatives by
some aimed at reducing dependence and imposing
sanctions. It examines barriers to developing alterna-
tive transport facilities, analyzes obstacles to diversi-
fying trade, and assesses problems caused by the wide
variation in regional policies toward South Africa.
Finally, the paper discusses the outlook for regional
economic ties and the implications for the United
States of policies designed to reduce the region's
reliance on South Africa.
Economic Dependence and Sanctions
The policies of South Africa's black-ruled neighbors
toward reducing dependence and implementing sanc-
tions against Pretoria are influenced by the impor-
tance of their economic ties to South Africa and by
political considerations.2 All but two of the neighbor-
ing states?Zambia and Zimbabwe?have clearly
demonstrated their unwillingness to implement mea-
sures that could seriously damage their economies.
1
Driven by their opposition to apartheid, however,
Presidents Kaunda of Zambia and Mugabe of Zimba-
bwe are attempting to reduce economic links to South
Africa to strengthen their ability to impose sanctions
without damaging their own economies. Their initia-
tive also has forced Malawi and Zaire reluctantly to
look for ways to reduce dependence because their
transport connections to South Africa are routed
across Zambia and Zimbabwe, making them hostage
to the sanctions policies of those two countries.
In contrast, Mozambique, Botswana, Lesotho, and
Swaziland believe their economic futures are inescap-
ably tied to that of South Africa because of pervasive
dependency, and they are continuing to foster linkages
with Pretoria. In the case of Tanzania and Angola,
overriding domestic concerns?the civil war in Angola
and economic pressures in Tanzania?have kept both
from supporting sanctions, even though neither has
important linkages to the South African economy that
would have to be sacrificed, and both are positioned to
benefit from the diversion of transport from South
Africa.
Heavy Dependence: Planning for Sanctions
A review of US Embassy and press reporting indicates
that Zambia, Zimbabwe, Malawi, and Zaire have
been forced to rely heavily on the rail links to South
African ports because guerrilla activity as well as
maintenance and operational deficiencies have, until
recently, virtually halted traffic on four of the six
non?South African alternative routes?rail links to
Angola's port at Lobito and Mozambique's ports at
Nacala, Beira, and Maputo. Rehabilitation work on
Mozambique's railroads in 1987, however, has en-
abled Malawi and Zimbabwe to begin shifting some
of their trade through Beira. Zambia also has trans-
ferred copper exports to its rail link with Dar es
See appendix A for a review of regional economic dependence on
South Africa.
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Salaam in Tanzania?despite freight congestion .
there?and to Beira. These shifts cut combined ship-
ments through South Africa by Malawi, Zaire, Zam-
bia, and Zimbabwe from an annual rate of about 4.4
million tons in 1985 to 3 million tons in 1987.3
Zambia and Zimbabwe began their efforts to reduce
economic dependence on South Africa after Kaunda
and Mugabe were forced to back down on public
commitments to impose sanctions.4 Both leaders faced
strong domestic opposition to sanctions from govern-
ment and business officials, who judged that severing
South African ties would have devastating economic
consequences for their countries. The two Presidents'
efforts to impose sanctions were finally aborted after
food riots broke out in Zambia following price in-
creases related to Lusaka's IMF reform program in
1986, convincing Kaunda to back down for fear of
fueling additional public unrest. After meeting with
Kaunda, Mugabe also reluctantly agreed to postpone
sanctions to avoid standing alone against South Afri-
ca, according to the US Embassy in Harare. Since
then, Kaunda and Mugabe have used their positions
as chairmen, respectively, of the Frontline States
(FLS) and the Nonaligned Movement (NAM) to press
for tougher Western sanctions that would be less
likely to rebound directly against their economies.
Zimbabwe's efforts to reduce dependence are critical
to prospects for regional sanctions because its two rail
connections to South Africa (one via Botswana) also
handle all South African transit freight for Zambia,
Malawi, and Zaire. Zimbabwe is also the largest
regional user of South African transport routes and
Pretoria's largest trading partner in the region. Re-
ducing dependence is difficult for Zimbabwe, how-
ever, because Harare exports a wide variety of goods
produced almost exclusively by private corporations
and farms that?unlike Zambia, which formerly
' Data exclude an estimated 900,000 tons of trade with South
Africa.
?See appendix B for a chronology of Zambian and Zimbabwean
efforts to impose sanctions
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Southern Africa: Major Economic Ties
to South Africa
Angola
? No major dependencies.
Botswana
? Transport via South Africa: 80 to 90 percent of
trade.
? Imports from South Africa: 80 to 90 percent either
originate in or transit South Africa, including all of
Botswana's petroleum, 80 percent of food, and most
consumer goods.
? Exports to South Africa: One-fourth of nondia-
mond total.
? Other: 45,000 to 50,000 migrant jobs (19,000 in the
mines); 20 percent of government revenues from
SACU; 40,000 to 50,000 tourists annually; domi-
nant investment in mining.
Lesotho
? Transport via South Africa: All overseas trade.
? Imports from South Africa: 97 percent of total.
? Other: 140,000 to 150,000 migrant jobs (108,000 in
the mines), about three-fourths of Lesotho employ-
ment.
Malawi
? Transport via South Africa: About 95 percent of
trade.
? Imports from South Africa: 30 percent in 1986,
including virtually all petroleum.
? Exports to South Africa: 7 percent in 1986.
? Other: 35,000 migrant jobs (19,000 in the mines);
police and army weapons and training.
shipped a single product (copper) produced by a
government corporation through South Africa?are
cautious about switching from reliable, efficient
South African routes. In addition, Zimbabwe does not
have access to alternative ports capable of handling
the full volume of its trade shipments.
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Mozambique
? Transport via South Africa: Virtually none.
? Imports from South Africa: Third in importance
after US and USSR; principal source of machinery
and raw materials.
? Other: Principal sources of foreign exchange from
transit fees through Maputo and 150,000 migrant
jobs (51,000 in the mines); 60 percent of electricity
supplies for Maputo; $30 million in investment.
Swaziland
? Imports from South Africa: 90 percent originate in
or transit South Africa, including all petroleum,
wheat, and processed foods, one-third of corn, and
most consumer goods.
? Exports to South Africa: One-fourth of total.
? Other: 25,000 to 30,000 migrant jobs (13,000 in the
mines); one-half of government revenues through
the Southern African Customs Union; all railroad
rolling stock on lease; two-thirds of electricity
supplies; $200 million in investment.
Tanzania
? No major dependencies.
Zaire
? Transport via South Africa: 40 to 50 percent of
copper and cobalt exports.
? Imports from South Africa: 75 to 80 percent of the
Shaba region's food, consumer goods, industrial
explosives, and chemicals.
? Other: One-third of railroad rolling stock on lease
from South Africa.
Zambia
? Transport via South Africa: Insignificant since No-
vember 1986.
? Imports from South Africa: About one-third, in-
cluding almost one-half of mining supplies, machin-
ery, and equipment.
? Other: 27-percent ownership of Zambian mining;
investment in suppliers of machinery, equipment,
and parts for mines.
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Zimbabwe
? Transport via South Africa: About one-half of
trade.
? Exports to South Africa: About 10 percent, but 50
to 70 percent of exports by manufacturing industry.
? Imports from South Africa: 15 to 20 percent,
including all coking coal, drill steel for mining,
base oils and lubricants, and animal vaccines, and
most crude fertilizers, explosives, and iron and steel 25X1
products such as sheet steel and tinplate.
? Other: 50 commercial airline flights weekly; about
40 percent of tourist revenue, earning $30-35 mil- 25X1
lion annually; about $500 million in investment;
agreement on relief from double taxation; preferen-
tial trade agreement; own many of largest firms?
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Harare's principal efforts to reduce economic ties to
Pretoria have focused on rehabilitating and providing
security for railroad links to Mozambique's ports of
Beira and Maputo. Although most of the funding for
rehabilitation is being contributed by foreign donors
through the Southern African Development Coordi-
nation Conference (SADCC),5 Zimbabwe's military
'Established to increase economic independence from South Afri-
ca, SADCC membership includes all of South Africa's 10 regional
neighbors except Zaire.
3
commitment to protect rail lines in Mozambique is
costing Harare about $10 million a year, according to
a press statement by Mugabe.6
6 Other estimates of Zimbabwe's annual military costs in Mozam-
bique have been significantly higher, ranging from $30-40 million,
1, to $150-220 million, according to the
US Embassy in Harare.
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Table 1
Southern Africa: Declining Transport via South Africa a
1985
1987
1989
Thousand
Tons
Percent
Thousand
Tons
Percent
Thousand
Tons
Percent
Total
7,100
7,300
7,300
Trade with South Africa
800
900
900
Overseas shipments
6,300
100
6,400
100
6,400
100
Via South Africa
4,350
69
2,950
46
2,530
40
Non?South Africa
1,950
31
3,450
54
3,870
60
Malawi
775
100
800
100
800
100
Via South Africa
775
100
750
94
550
69
Non?South Africa
0
0
50
6
250
31
Zaire
975
100
975
100
975
100
Via South Africa
325
33
325
33
305
31
Non?South Africa
650
67
650
67
670
69
Zambia
1,250
100
1,250
100
1,250
100
Via South Africa
250
20
0
0
Non?South Africa
1,000
80
1,250
100
1,250
100
Zimbabwe
3,300
100
3,375
100
3,375
100
Via South Africa
3,000
91
1,875
56
1,675
50
Non?South Africa
300
9
1,500
44
1,700
50
a All data are estimated, excludes petroleum imports by Zimbabwe.
Harare also has pressed Zimbabwean importers to
find non?South African sources of supply and has
attempted, unsuccessfully, to take unilateral action on
sanctions. Irked by the refusal of the Frontline States
to cut commercial air links to South Africa last year,
for example, Mugabe gave orders to stop foreign
exchange allocations for imports from South Africa
by Zimbabwean farmers and businesses, according to
the US Embassy
' Although forced to back down a week later
because of opposition by private-sector and Cabinet
officials, Mugabe set up a sanctions task force to work
' Foreign exchange also was forbidden for imports from Israel,
South Korea, and Taiwan, apparently in an attempt to provide a
plausible defense against likely South African claims that it was the
sole target of the sanctions.
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with business groups to promote disengagement in
trade and increased use of the Beira railroad.'
Sanctions continue to be a topic of lively discussion
and planning by the Zimbabwean Cabinet
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/Harare tempo-
rarily banned South African Airways from carrying
cargo shipments from Zimbabwe to South Africa last
year following a dispute with Pretoria over an interna-
tional airline route
Meanwhile, Zambia has made some progress toward
achieving economic independence from South Africa.
Lusaka has ended dependence on Pretoria for trans-
port of exports by transferring, since November 1986,
the proportion of copper exports that it had railed
through South Africa to the ports at Dar es Salaam
and Beira.' Although Lusaka has not cut off imports
from South Africa, it has established the administra-
tive machinery to do so by requiring that Zambia
Consolidated Copper Mines (ZCCM), the government
corporation that is responsible for copper and cobalt
mining, get prior government approval for imports of
South African machinery, equipment, and spare
parts, according to the US Embassy.
Zambia, however, still relies on about 150 Zambian-
registered companies that are wholly or partly owned
by South African firms?principally Anglo-American
Corporation?for essential mining equipment and
high-level skills and technology
South African firms also have bid suc-
cessfully to supply a wide range of machinery and
equipment for Zambian copper-mining development
projects financed by the World Bank,
Jarred by Zambian and Zimbabwean moves toward
sanctions and threats by Mugabe to embargo Malawi-
an transport to and from South Africa, Malawi
quickly negotiated agreements last year to begin
upgrading and using facilities at the ports of Nacala,
Cobalt, Zambia's other bulk export, already was being shipped via
Dar es Salaam.
5
Dar es Salaam, and Beira as possible alternatives to
its outlets through South Africa.
Malawian efforts resulted in three
agreements:
? Mozambique agreed to have Malawi help provide
security for Malawian trains and for the rehabilita-
tion crews working on the Nacala railroad.
? Tanzania agreed to let Malawi build new cargo
transshipment centers for its goods near the port of
Dar es Salaam.
? South Africa agreed to fly goods from Beira to
Malawi in the event of a cutoff of other routes.
Malawi also joined Mozambique in agreeing to allow
a private British firm, London Rhodesia Ltd.
(LONRHO), to invest in improvements to the Nacala
railroad and train about 500 Mozambicans as a
private security force for the line. Malawi yielded
early this year to Zimbabwean pressures to pay about
$4 million annually to help defray Harare's costs for
providing security against insurgent attacks on Mala-
wian truck transport across Mozambique's Tete Prov-
ince to railroads in Zimbabwe, according to US
Embassy reporting.
Surprised by an increase in Zambian railroad tariffs
in mid-1986, Zaire reacted to the Zambian and
Zimbabwean push for sanctions by commissioning
Zaire's mining and transport companies to propose a
plan for alternative transport outlets
Zaire's options, however, are
limited. The combination river/rail route?known as
the Voie Nationale?to Zaire's own port at Matadi
already is operating at capacity and costs about 90
days of transit time and $136 a ton, versus 30 days
and $113 through South Africa
Zaire's route to Dar es Salaam?via railroad,
barge across Lake Tanganyika, and back to rail?is
operating at less than one-half its rated capacity of
100,000 tons annually because of deteriorated facili-
ties, according to the US Consulate in Lubumbashi.
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Southern Africa: Investment by Anglo-American
and DeBeers
South Africa's largest business conglomerate?
Anglo-American Corporation and its corporate part-
ner, DeBeers Consolidated Mines?is a key player in
southern African trade and investment links to South
Africa:
? In Angola, DeBeers has been instrumental in oper-
ating and supplying equipment for diamond mines;
Angolan diamonds are marketed through DeBeers 's
London marketing subsidiary, the Central Selling
Organization
Diamonds are a distant second to oil among Ango-
lan exports.
? DeBeers has been the sole source of investment,
equipment, marketing, and technical and manage-
ment expertise behind an explosion of diamond
production that has kept Botswana's economic
growth rate among the highest in the world over the
past decade. Anglo-American is the majority owner
(93 percent) of Botswana's Morupule colliery, serv-
ing the Botswana Power Corporation, and of BCL
Limited (85 percent), which operates Botswana's
Selebi-Pikwe copper-nickel mine, in which it is
financing a new mine shaft to expand production,
according to the US Embassy. Anglo-American
also is the lead investor, through corporate owner-
ship of African Explosives and Chemicals, Inc., in a
$418 million project to produce soda ash in Bo-
tswana for the South African market.
? Diamonds from the Letseng-la-Tarai diamond
mine, opened and operated by DeBeers, were Le-
sotho's most important export until the mine was
closed in 1983 because of depleted ores.
? Malawi and Swaziland are the only southern Afri-
can countries without important business connec-
tions to Anglo-American or DeBeers.
? Anglo-American Chairman Gavin Relly visited
Mozambique in January 1988 to push efforts to
form a multinational consortium with Brazilian
investors to develop Mozambique's coalfields at
Moatize, according to the US Embassy at Maputo.
Anglo-American also is interested in exploring for
gold and diamonds in Mozambique.
? DeBeers has neared the end of production at Tan-
zania's Mdawai diamond mine, now virtually
worked out.
? Zaire markets its diamonds through DeBeers 's
London marketing subsidiary, the Central Selling
Organization.
? Anglo-American owns 27 percent of Zambian Con-
solidated Copper Mining Company, the government
corporation that is responsible for virtually all of
Zambian mineral output and exports, according to
US Embassy reporting. Anglo-American also holds
ownership shares of a large number of the Zambian
companies that provide equipment and spare parts
to the mining company.
? Anglo-American has had investments in Zimbabwe
for more than 50 years and has invested more than
$100 million in the country since its independence.
Most new investment has been in an expansion
project at the Wankie Colliery administered by the
corporation, but Anglo-American also has recom-
missioned its chrome mine (Zimbabwe Alloys),
sunk and equipped a 900-meter shaft at its nickel
mine (Bindura Nickel Corporation), and expanded
rail transport at its Hippo Valley sugar farm. Other
investments include timber plantations, sawmills,
fertilizer and food processing plants, iron pyrite
mines, and citrus farms.
Secret
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In seeking alternatives, Kinshasa was assured by
China in October 1987 that the Chinese-constructed
Tazara railroad from Zambia to Dar es Salaam could
handle another 300,000 tons annually, and that Zam-
bia and Tanzania were willing to negotiate transit
rights Although
Zaire apparently has not followed up on this opening,
the country's government-owned copper-mining com-
pany (GECAMINES) has signed a contract with an
Italian company to begin trucking 20,000 tons of
copper and zinc annually from Shaba through Zam-
bia to Dar es Salaam in 1988, according to the US
Consulate in Lubumbashi. Zaire has also supported
efforts by Kaunda to persuade Angolan insurgents to
end attacks against the Benguela railroad to Angola's
port of Lobito, and to interest European investors in
rehabilitating the line.
Critical Dependence: Reject Sanctions
Gaborone and Maputo share a perception that main-
taining a close economic relationship with South
Africa is critical to their future, despite stark con-
trasts in their economic growth?Botswana had the
world's highest economic growth rate and Mozam-
bique the lowest during the period 1981-85,
The key to rapid economic
growth in Botswana has been investment by South
Africa's DeBeers Corporation in diamond mining,
which has pushed Botswanan exports up from less
than $150 million in 1975 to more than $850 million
in 1987. Mozambique continues to rely on foreign
exchange earnings from South African trade ship-
ments through Maputo and on remittances from
Mozambicans working in South African mines
Lesotho and Swaziland are even more closely knit to
the South African economy. Both are members of
South African?dominated institutions?the Southern
African Customs Union (SACU) and the Rand Mone-
tary Area (RMA)?through which Pretoria provides
annual stipends of grant aid in return for acquiescence
in South African control of customs and monetary
policies. Swaziland has publicly opposed economic
sanctions against South Africa, according to US
Embassy reporting. It also has welcomed investment
by South African firms seeking a non?South African
country as the point of origin for their exports to
overseas countries that have imposed sanctions. Swa-
ziland has allowed a significant volume of undeclared
South African goods to pass through its territory for
export via Maputo as Swazi goods, according to
Embassy reporting. Lesotho depends on SACU for
the bulk of its current tax revenues and earns most of
its foreign exchange from migrant labor employed in
South Africa. It also is counting on South Africa to
provide the planning, investment, technical expertise,
and markets for the Lesotho Highlands Water Pro-
ject, which it sees as not only its best but also its only
hope for large-scale development.'
Virtual Independence: Mixed Support for Sanctions
Pressing domestic problems have curbed Angolan and
Tanzanian support for sanctions. Angola continues to
struggle against South African?backed UNITA (Na-
tional Union for the Total Independence of Angola)
insurgents, while Tanzania is heavily involved in
implementing an IMF-backed economic recovery pro-
gram after years of economic decline. Angola's contri-
bution to the sanctions push has been limited to
support for reopening the Benguela railroad which, if
accomplished, would yield significant foreign ex-
change revenues for Luanda. Even though Tanzania
also would profit from diverted freight traffic, Dar es
Salaam has opposed sanctions on the grounds that,
over the long term, they would probably be more 25X1
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9 Looming water shortages in the industrial area around Pretoria
and Johannesburg are the reason for developing the $2 billion
Lesotho Highlands Water Project, which will redirect a number of
Lesotho's rivers through a system of tunnels to provide water for
South Africa.
7
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Obstacles to Reducing Dependence
Major obstacles would have to be overcome before
Zimbabwe and Zambia could impose sanctions with-
out inflicting severe damage on their own economies
as well as those of Malawi and Zaire. Chief among
these are intractable problems with rehabilitating and
operating alternative transport routes, difficulties
with overcoming South Africa's competitive trade
advantage, and the risk that Pretoria might retaliate
with countersanctions.
Troubled Alternative Transport
Although contributions to SADCC by foreign donors
have at least temporarily relieved critical financial
constraints on rehabilitation efforts, capacity limita-
tions and security and management problems stand in
the way of achieving transport independence. The two
railroads through Tanzania and Zaire are unable to
increase freight shipments because of capacity limita-
tions; these two routes combined can carry only about
one-third '? of the total overseas freight (excluding
trade with South Africa) of Zambia, Zimbabwe,
Malawi, and the Shaba region of Zaire, leaving two-
thirds?about 4.4 million tons annually?for the oth-
er routes. Although this tonnage could be accommo-
dated by four railroads and ports in Angola and
Mozambique, daunting security problems in Angola
and security, management, and rehabilitation prob-
lems in Mozambique are seriously impeding efforts to
increase shipping over non-South African routes. So
far, only the railroad to Mozambique's port of Bei-
ra?the shortest route from Zimbabwe and the princi-
pal focus of rehabilitation funding?has been re-
opened to commercial traffic, handling about 1.4
million tons in 1987."
Security Problems. Despite Zambian optimism last
year that UNITA would cease attacks and allow
rehabilitation of the Benguela railroad, the route
remains closed. Angola's port of Lobito had handled
' Included are 1.4 million tons on the Tazara, 600,000 tons via the
Voie Nationale, and about 40,000 tons over a Zairian rail-water
outlet that crosses Lake Tanganyika to Dar es Salaam. (
"In addition, about 730,000 tons of petroleum products (14,660
barrels per day) were shipped by pipeline through Beira.
Secret
Southern Africa: Non-South African Transport
Routes
Benguela Railroad to Lobito Port in Angola
? Length: 1,340 kilometers from Zairian border to
?Lobito.
? Condition: Closed to cross-country traffic by insur-
gent attacks.
? Transit in 1987: No cross-country freight from
Zambia, Zaire, or other regional states; limited
local transport by Angola. (2.3 million tons of
Zairian and Zambian freight in 1974, prior to
closure.)
? Rehabilitation: Preliminary plans for a conference
in Lobito in May 1988 to seek $575 million in
commitments by potential private investors.
? Other: Belgium's Societe Generale de Belgique
(SGB) owns 90 percent of the line's operating com-
pany, Caminhos de Ferro de Benguela (CFB),
through a third company, London-based Tanks
Consolidated Investments.
Voie Nationale to Matadi in Zaire
? Length: 2,665-kilometer rail and river network
between Shaba and Matadi.
? Condition: Railroad from Kamina to the port of
Ilebo on the Kasai River is plagued by shortages of
rolling stock, deteriorated tracks, inadequate main-
tenance and communications, and poor manage-
ment. Ilebo lacks adequate storage and is short of
barges and riverboats.
? Transit in 1987: About 600,000 tons, including
278,000 tons of copper exports.
? Rehabilitation: Program scheduled for 1989-90 will
increase annual mineral export capacity from
300,000 to 400,000 tons, according to the US
Consulate in Lubumbashi. Major financing by the
World Bank.
? Other: Rehabilitation likely to take up to three
years longer than scheduled, according to the Con-
sulate.
Tazara Railroad to Dar es Salaam in Tanzania
? Length: 1,860 kilometers from Kapiri Mposhi,
Zambia, to Dar es Salaam.
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? Condition: Line has been plagued by inefficiency,
badly maintained and inadequate equipment, and
high turnaround and transit times since opening in
1976.
? Transit in 1987: About 1.4 million tons, including
Tanzanian, Zambian, Zairian, Malawian, and
small amounts of Zimbabwean traffic.
? Rehabilitation: $610 million in planned railroad,
port, and other transport projects; many projects
funded and under construction.
? Other: Zamcargo, which handles Zambian copper
and cobalt exports, and its UK-based subsidiary,
Seacargo Intercontinental, account for about 60
percent of freight shipments through Dar es
Salaam.
Railroad to Mozambique's Port at Nacala
? Length: 615 kilometers from the Malawian border
to Nacala.
? Condition: Currently operating, but on a very irreg-
ular and limited schedule. Closed to scheduled
cross-country traffic because of insurgent attacks
on trains, tracks, and rehabilitation crews.
? Transit in 1987: Negligible Malawian tonnage. Port
handled 300,000 tons of local Mozambican freight,
mainly food relief shipments and supplies and
equipment for railroad rehabilitation projects.
? Rehabilitation: Railroad work by Canada (prOvid-
ing new crossties and rails), France (supervising the
project), and Portugal (assisting in communications
with Mozambican labor force). Port rehabilitation
by Finland. SADCC plans are for an eventual
annual capacity of 1.6 million tons, but actual
capacity unlikely to exceed 500,000 tons by 1990.
? Other: Excellent port, not subject to the problems
of river silting that plague Dar es Salaam, Beira,
and Maputo.
Railroad to Mozambique's Port at Beira
? Length: 315 kilometers from the Zimbabwean bor-
der to Beira.
? Condition: Railroad open for scheduled operations,
despite continued attacks by RENAMO. Port and
railroad experiencing slowdowns because of river
silting, inadequate maintenance of loading equip-
ment, poor labor productivity, and severe manage-
ment deficiencies.
? Transit in 1987: About 2.1 million tons, including
1.4 million tons by railroad and 730,000 tons of
petroleum products by pipeline. (The Beira railroad
and port handled 4.5-5.0 million tons annually of
Zimbabwean?then Rhodesian?and Zambian
freight in the early 1960s.)
? Rehabilitation: A $590 million three-phase pro-
gram. First phase of railroad rehabilitation com-
pleted in June 1987, increasing rail capacity (but
not shipments) to about 3 million tons annually.
First phase of port rehabilitation project completed
in October 1987, raising annual port capacity to
about 3.2 million tons; construction of second phase
contracted to Italian companies in February 1988.
? Other: Although the shortest route for Zimbabwe,
mountainous terrain on the western end of the
railroad and a silting problem at the port make
expansion more expensive than for the Limpopo
? route to Maputo.
Railroad to Mozambique's Port at Maputo
? Length: 534 kilometers from the Zimbabwean bor-
der to Maputo.
? Condition: Closed to other than work trains be-
cause of insurgent damage and badly deteriorated
rails, ties, and roadbeds, many of which have not
been-replaced since they were installed by the
Portuguese over 30 years ago.
? Transit in 1987: No cross-country traffic from
Zimbabwe; limited local Mozambican shipments.
? Rehabilitation: Funded by the United Kingdom,
first of two-stage rehabilitation program completed
in March 1988; work not yet begun on second stage,
which is critical to increasing transport to signifi-
cant levels. ,
9
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more than half of Zairian and Zambian copper
exports before 1975, when the Benguela railroad was
first closed to cross-country shipments because of
insurgent attacks. The Angolan Government, in con-
junction with the Belgian majority owner of the
railroad, Societe General de Belgique (SGB) devel-
oped plans earlier this year for a $400 million reha-
bilitation program and more recently has embarked
on an effort to raise $575 million in private investor
financing to reopen the railway
The plans, which are supported by
the Southern African Transport Coordination Com-
mittee (SATCC), include surveys of the track and
proposals for opening the railroad to limited traffic
within 12 to 18 months, according to the US Embassy
in Brussels."
however, UNITA destroyed one of the three major
bridges on the line "?the Cuanza River bridge in
central Bie Province?during an upsurge in the civil
war late last year, thus signaling its unwillingness to
let the line be reopened and effectively ending hopes
for relatively quick reconstruction.
Insurgent attacks by the South African?backed Mo-
zambican National Resistance (RENAMO) are a
severe impediment both to rehabilitation of rail lines
and to increased rail traffic after rehabilitation is
completed. Railroad and oil pipeline facilities in the
Beira corridor were attacked over 100 times by
RENAMO during 1986 and 1987
RENAMO insurgents .have also
attacked construction crews and sabotaged both the
rail line on the Nacala route?more than 50 times in
1987?and the Limpopo railroad to Maputo and have
at least twice pulled up long sections of railroad track
on the Nacala line, according to US Embassy report-
ing. Finally, RENAMO has attacked electric power
facilities at the Beira port, stalling water pumps that
service steam-driven shunting equipment for freight
trains.
'2SATCC is a subcommittee of SADCC and is charged specifically
with transportation projects in member countries.
The Benguela railroad has 120 bridges, two of which are about 80
meters long, and one?the destroyed Cuanza River bridge-160
meters in length.
Secret
Although RENAMO attacks have failed to stall
reconstruction efforts or close down any rehabilitated
line for more than a day or two at a time, they have
slowed increases in freight traffic to Beira and have
increased security costs steeply. Dry cargo shipments
(not including petroleum products) through Beira
actually declined slightly during July-December 1987
because of RENAMO attacks, in comparison with the
850,000 tons shipped during the first six months of
the year, according to press reports. Malawi trans-
ported a small shipment of goods to Nacala in early
September 1987 to test the condition of the railroad,
but the line still is not open to commercial traffic,
Opening these two trans-
port routes, even for shipping at reduced rates, and
providing security for rehabilitation crews on the
Limpopo line to Maputo have required large troop
commitments by Zimbabwe, Malawi, Mozambique,
and Tanzania, as well as British-trained private secu-
rity forces by LONRHO, the major contractor on the
Nacala route.
Management Deficiencies. Compounding security
problems are serious deficiencies in the southern
African countries' ability to manage and operate port
and rail facilities after they are rehabilitated. A South
African estimate indicates the volume of traffic on
non?South African routes using existing equipment
would probably double if they were managed effi-
ciently, according to the US Embassy in Pretoria.
Although management problems exist in all of the
countries that are involved in rehabilitating transport
facilities, they are an especially critical issue on
Mozambique's Beira route because of its role as
Zimbabwe's principal alternative to South African
routes.
Problems began in Mozambique immediately follow-
ing independence in 1975 with the emigration of
Portuguese technicians, resulting in delays and de-
clines in freight through Mozambican ports?even
before RENAMO attacks became an obstacle. Man-
agement problems have reemerged as the Beira route
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has been returned to operation and have tended to rise
sharply as increases in the number of trains and
volume of cargo have added to the complexity of
operating the system. Over 1,800 freight containers
recently were delayed in Beira, for example, many of
which were unrecoverable because they were mired in
mud or misplaced as a result of poor handling and
loading procedures, according to US Embassy report-
ing. Shipments through Beira also have been slowed
because of improperly maintained cranes and fork-
lifts, poor scheduling of rehabilitation that has led to
cuts in the number of useable berths, and bad man-
agement of dredging equipment that has allowed silt
to accumulate in the river channel, according to
Embassy reporting. These problems have induced a
number of Zimbabwean shipping companies to revert
at least temporarily to South African routes in recent
months, according to other Embassy reports.
In discussions
with US officials, a delegation from Malawi's Depart-
ment of Economic Planning and Development com-
plained that Mozambique had a woeful lack of mana-
gerial and technical expertise and that Maputo was
reluctant to accept help from Malawi's railroad train-
ing center. Mozambican management deficiencies
often force a Zimbabwean depot manager in Mutare
to ride trains on the Beira railroad to Gondola,
Mozambique, to cope with station problems such as
derailments and malfunctioning switches'
In our judgment, shipping bottlenecks due to poor
management will rise as increasing traffic puts a
premium on efficient use of facilities. Management
problems, for example, will be compounded by in-
creasing shortages of equipment as transport over
non?South African routes increases, because ship-
ments via Mozambique?on shorter trains and lighter
rails?require four times as many locomotives to
move the same volume of freight, in comparison with
South African routesj
11
Rehabilitation Bottlenecks. Completion of rehabilita-
tion projects will take more time than Zimbabwe and
Zambia originally envisioned, in our judgement.
Beginning later this spring, for example, port capacity
at Beira will be frozen for about three years while
conversion of a number of berths from general cargo
to container facilities takes place, according to US
Embassy and press reporting. The railroad to Nacala
is open only for local Mozambican traffic and occa-
sional trains to Malawi. Although upgrading of
Nacala port is scheduled for completion this spring,
rehabilitation of the railroad to carry higher volumes
of traffic will not be finished until March 1989,
according to Embassy reporting." Although the Lim-
popo railroad is scheduled to be opened to very limited
traffic this spring, upgrading to increase capacity is
still in the planning stage.
South Africa's Trade Advantage
South Africa's competitive trade advantage has so far
thwarted efforts by Zambia, Zimbabwe, Malawi, and
Zaire to reduce their trade links with Pretoria. Collec-
tively, Pretoria's 10 neighbors generally experience
combined trade deficits with South Africa averaging
$1-2 billion annually, according to our estimates
based on a review of trade data. A number of factors
account for South Africa's competitive advantage in
supplying imports to the region:
? Proximity, which results in cheaper transport and
easy access to markets and products. In Zambia,
feasibility studies of replacing imports from South
Africa indicate that alternative sources for more
than 300 individual items would have to be found
and that the probable cost?including additional
inventories to compensate for longer delivery times
from overseas?would come to about $70 million
annually
? Investment in neighboring states, which results in
imports by subsidiaries from their parent firms in
South Africa. Franchise agreements between the
contractors that supply the government-owned min-
ing industry in Zambia and South African compa-
nies guide import decisions for more than $10
In the 1990s, annual capacity on the Nacala railroad will be
expanded to 1.6 million tons,
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Table 2
Southern Africa: Trade With
South Africa
1980
1985
Million
US $
Share of
Neighbor's
Trade
(percent)
Million
US $
Share of
Neighbor's
Trade
(percent)
Imports
8,743
6,937
From South
Africa
2,513
29
1,526
22
Of which:
Angola
25
2
NEGL
NEGL
Botswana
600
87
450
75
Lesotho
450
97
350
95
Malawi
163
37
105
40
Mozambique
50
7
50
10
Swaziland .
561-
93
225
80
Tanzania
14
1
27
3
Zaire
42
5
25
2
Zambia
173
16
125
23
Zimbabwe
435
30
169
19
Exports
8,020
7,026
To South
Africa
605
8
222
3
Of which:
Angola
100
5
NEGL
NEGL
Botswana
33
7
35
6
Lesotho
24
41
20
95
Malawi
9
3
21
7
Mozambique
15
3
8
5
Swaziland
106
30
35
20
Tanzania
12
2
NEGL
NEGL
Zaire
0
0
0
0
Zambia
,7
1
0
0
Zimbabwe
299
22
103
11
million annually in name brand products (Allis-
Chalmers crushers, Wilkinson roller bearings, and
David Brown gearboxes, among others)(
Secret
Southern Africa: Temporary Surge in Trade
A review of trade data suggests that Zimbabwe,
Zambia, and Malawi have at least temporarily in-
creased trade with South Africa since the beginning
of 1986:
? Zimbabwean imports from South Africa jumped by
more than one-third to $214 million during the first
11 months of 1986, and exports to South Africa
rose by more than one-fourth to $122 million in the
same period, according to US Embassy reporting.
Preliminary data indicate that imports rose by an
additional 5 percent in 1987.
? Statistics published by the Bank of Zambia show
that more than one-half of the money allocated for
imports by the Zambian foreign exchange monitor-
ing committee during the first half of 1987 went for
imports from South Africa, up from about one-
fourth in past years.
? In December 1987, Malawi doubled the number of
truck convoys, from three to six each week, that it
makes across Mozambican territory to depots on
Zimbabwean railroads leading to South Africa.
We believe that this trade surge was probably the
result of importers' building up inventories of South
African commodities?and South African importers'
stocking up Zimbabwean goods?as a precaution
against shortages if they lost access to established
suppliers in the event of sanctions. It is also possible,
according to reporting by the US Embassy in Harare,
that increased imports by Zimbabwe reflect private-
sector attempts to offset foreign exchange shortages
by purchasing raw materials from the quickest and
cheapest source. With inventories of imported raw
materials drawn down because of Zimbabwe's foreign
exchange shortages, quick access to components
available in South Africa has become of paramount
importance to many Zimbabwean firms, according to
the US Embassy.
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? Mining technology, which is suited for African
mining conditions. Zimbabwean mining companies
import their entire supply of drill bits from South
Africa, because South African bits are made from a
special type of stainless steel suitable for the re-
gion's hard rock conditions,
? Relatively large production facilities, which provide
economies of scale. Zimbabwe has found it to be less
expensive to import virtually all of its coking coal
and mining explosives from South Africa than to
establish its own production facilities:5
? Large farm surpluses in most years, which enable
South Africa to serve as a regional granary. Malawi
signed a barter agreement in December 1987 for
20,000 tons of South African corn in exchange for
10,000 tons of Malawian peanuts to help offset
shortages caused by poor weather and heavy de-
mands to feed Mozambican refugees.
Zimbabwean Dependence on Export Market. In con-
trast to the import picture, Zimbabwe and Lesotho
are alone among the regional states in depending
heavily on South Africa as an export market. South
Africa purchases most of Zimbabwe's exports of
wood, lumber, oilcake and meal, significant shares of
tobacco, tea, and coffee, and is by far the biggest
export market for Zimbabwean manufactured goods,
Manufac-
tured exports to South Africa are critical to the
survival and prosperity of Zimbabwe's manufacturing
sector, which accounts for one-fourth of Zimbabwean
GDP, according to US Embassy reporting. Harare's
unique success in penetrating the South African
market for manufactured goods is the result of a 24-
year-old preferential trade agreement that was signed
by Pretoria mainly to give Zimbabwe?then Rhode-
sia?special access to the South African market when
it was subject to international sanctions before inde-
pendence. Under the agreement, which remains in
" Although Zimbabwe is constructing plants to reduce its depen-
dence on South Africa for explosives and coking coal, the new
facilities are partially owned and will be operated by South African
companies
13
force, South Africa not only allocates generous import
quotas for a number of Zimbabwean manufactured
products, such as furniture, textiles, and footwear, but
also provides 5- to 20-percent reductions in its cus-
toms duties on these goods.
Risk of South African Retaliation
The South African Government would come under
heavy domestic pressure to retaliate in the event that
Zimbabwe and Zambia imposed sanctions, according
to the US Embassy in Pretoria. South African offi-
cials say their government would probably respond
with particular harshness against Mugabe, whom
they view as a dedicated Marxist held in check only
by his pragmatic advisers, according to Embassy
reporting. South African officials have said Pretoria
would respond to sanctions by prohibiting transit via 25X1
South African facilities of any commodities that are
sanctioned from purchase in South Africa.
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Punitive economic measures by South Africa over the
past several years, however, generally have been short
lived, reflecting Pretoria's desire to demonstrate its
capability to damage neighboring economies without
actually taking steps that might rebound against the
South African economy. Examples of temporary
countermeasures by Pretoria to date include:
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? A ban on recruitment of Mozambican workers by
South African mines that was later reversed, proba-
bly to signal Pretoria's approval of Mugabe's and 25X1
Kaunda's decision to postpone sanctions and in
response to heavy pressure from the South African
Chamber of Mines, which relies on migrants?
including 51,000 from Mozambique?for about 40
percent of its labor force.
? Foot-dragging on a Zimbabwean request for railway
tank cars to transport petroleum products purchased
by Zimbabwe from South African firms, designed
to pressure Harare to discuss the matter at the
ministerial level, thus acquiring a degree of diplo-
matic recognition.
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? A "traffic survey" that caused temporary delays in
truck traffic from Zimbabwe, and requirements for
government permits to import Zimbabwean goods,
to protest rhetoric by Mugabe threatening
sanctions.
? Requirements for deposits on Zambian imports over
South African ports and railroads, to protest similar
rhetoric by Kaunda.
? Increased apprehensions and repatriations of illegal
migrant workers in South Africa, to reduce labor
dependence on neighboring states.
South Africa also seeks to raise the potential costs to
Zimbabwe and Zambia of imposing sanctions and
preserve the considerable economic benefits that it
reaps from regional economic relations. Trade with its
African neighbors provides South Africa with a large,
much-needed surplus. Dividends and profits from
investment, plus earnings from transport and techni-
cal services, also provide significant flows of foreign
exchange income to Pretoria. South Africa's sensitiv-
ity, for example, to the potential for losing transporta-
tion business to the shorter Mozambican routes has
induced Pretoria to hold down the differential be-
tween its fares and those via Beira by allowing
Zimbabwean shippers to negotiate special rates below
the levels of standard fees based on distance and
tonnage. Zimbabwean officials involved in rehabilitat-
ing the Beira route have complained about price-
cutting maneuvers by Durban and other South Afri-
can ports, according to US Embassy reporting.
In addition to encouraging investment and trade with
neighboring states by private South African firms,
Pretoria has established an unsuccessful alternative to
SADCC, called the Southern African Development
Bank (SADB), to provide financial inducements for
greater economic integration. South Africa also has
maintained its preferential trade agreement with
Zimbabwe, and agreed recently?in conjunction with
Portugal?to repair and help provide security for the
electric powerline from Mozambique's Cahora Bassa
dam to the South African electricity grid, thus provid-
ing a new source of foreign exchange earnings for
Maputo.
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Outlook and Implications for the United States
Over the next two years, Zimbabwe and Zambia?
under their present leadership?will continue to
search for ways to reduce their economic dependence
and that of other southern African states on South
Africa. Frustrated and restrained by their own eco-
nomic vulnerability to Pretoria, however, Harare and
Lusaka are likely to avoid unilateral sanctions while
calling for tougher Western sanctions and for in-
creased US aid to support initiatives intended to
reduce regional transportation and trade dependence
on South Africa.
Reducing Dependence
In our judgment, Zimbabwe and Zambia are unlikely
to succeed in reducing their dependence on South
African transport routes over the next two years on a
scale that would enable them to impose sanctions
without causing severe damage to their own econo-
mies and to those of Malawi and Zaire. Although
some additional progress in opening Mozambican
transport routes is likely, we believe that the rate at
which freight shipments are transferred from South
African to non?South African routes will slow sharply
over the next two years, relative to the decline of 1.4
million tons achieved in the two years through 1987.
Security and management problems, in addition to
time needed to complete rehabilitation projects, will
be the principal obstacles to faster progress.
Similarly, we do not foresee major progress in reduc-
ing dependence on trade with South Africa during the
next two years. Both Zimbabwe and Zambia will
continue to find it too costly, in the face of South
Africa's competitive trade advantages, to develop
alternative import sources and export markets.
Imposing Sanctions
We do not believe that Zambia and Zimbabwe?or
any other southern African state?will impose any
broad-ranging economic sanctions against South Afri-
ca in the period through 1989. Although Mugabe will
continue to call for regional sanctions, especially if
Zimbabwe's railroad to Maputo is reopened on
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Southern Africa: Continued Transport Dependence
Because of security, management, and rehabilitation
constraints, we believe that additional traffic over the
next two years will be limited to no more than about
200,000 tons each over the Beira and Nacala rail-
roads, and 20,000 to 50,000 tons distributed among
the Tazara, Voie Nationale, and Limpopo routes.
The Benguela railroad almost certainly will remain
closed through 1989 because of guerrilla activity. At
most, therefore, increases in freight shipments over
non?South African routes will equal no more than
about 400,000 to 450,000 tons from now through
1989, according to our estimates.
Although Malawi and Zimbabwe will be the main
beneficiaries of this increase, both countries will
continue to route one-ha/for more of their overseas
freight via South Africa:
? Increases in freight shipments by Malawi over the
Nacala route will be limited to no more than about
200,000 tons, according to our estimates. The re-
maining 600,000 tons of Malawian freight will most
likely be divided with about 50,000 tons shipped via
Beira and Dar es Salaam and 555,000 tons?about
two-thirds of total overseas Malawian shipments?
shipped via South Africa.
? Increases in freight shipments by Zimbabwe over
the Beira and Limpopo routes also will be limited
to about 200,000 tons, mainly on the Beira, accord-
ing to our estimates. About 1.7 million tons of
Zimbabwean overseas shipments?one-half of Zim-
babwe's total?therefore, will continue to flow over
South African routes. The distribution of ship-
ments by Zambia, which already has eliminated
exports through South Africa, and Zaire will
change very little through 1989, in our judgment.
schedule in 1989, he probably will be forced by
opposition at home to shun measures that might hurt
Zimbabwean economic interests. We also believe that
Kaunda's concern over the potential for civil unrest
Reverse Blank
15
because of worsening economic problems precludes
sanctions by Zambia. In addition, both leaders are
keenly aware of South Africa's ability to apply eco-
nomic countermeasures against them.
In our view, Kaunda and Mugabe will become in-
creasingly active in international and regional forums
urging stricter sanctions by Western countries. Minis-
ters from Zambia and Zimbabwe, for example, are
scheduled to attend the UN Special Session in June
this year to push for tougher sanctions, according to
the US Embassy in Harare.
Implications for the United States
Lusaka and Harare will very likely point to the
relatively larger contributions to SADCC by Europe,
Canada, and Australia as an argument for increased
US aid. They see increased US participation not only
as important for funding, but also as a political
gesture that might discourage Pretoria from counter-
ing efforts by its neighbors to reduce dependence.
Earlier this year, for example, the head of the Mo-
zambican delegation to the annual SADCC confer-
ence recited to US officials the growing involvement
of other Western donors in rehabilitating Mozambi-
can railroads, and said that US participation would be
an important political gesture.
Finally, any incremental progress in transport reha-
bilitation in southern Africa will have important
commercial implications for some US firms. US
manufacturers, for example, will have a significant
competitive edge in forthcoming bidding for railroad
locomotives to operate on rehabilitated rail lines,
according to the US Embassy in Maputo. Locomo-
tives already operating in Mozambique are all made
by General Electric, and railroad workers and offi-
cials there would prefer new equipment of the same
make because of their familiarity with its mainte-
nance and operation. General Motors Corporation
also plans to bid on contracts to supply locomotives,
according to US Embassy reporting. The World Bank
will open bids for about $30 million in new locomo-
tives for Mozambique in early 1989, and the US
Agency of International Development plans to supply
17 locomotives for the Tazara railroad, according to
reporting from US embassies.
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Appendix A
Southern Africa: Regional
Economic Ties to South Africa
The economies of the southern African states are
interwoven with the South African economy by trade,
investment, institutional, employment, transportation,
and services ties. While these links benefit both
Pretoria and its neighbors, they also serve to strength-
en South Africa's economic influence over the small-
er, less developed southern African states.
Transportation Links
All 10 of South Africa's regional neighbors-Angola,
Botswana, Lesotho, Malawi, Mozambique, Swazi-
land, Tanzania, Zaire, Zambia, and Zimbabwe-are
linked by rail to South Africa's six ports and to a
South African-controlled port in Namibia. The same
rail system also links these countries to six non-South
African ports-one each in Angola, Zaire, and Tan-
zania, and three in Mozambique.
The 10 neighboring states on the rail system rely on
South Africa for about 6,000 to 7,000 railroad cars to
supplement their own inventories, according to the US
Embassy in Pretoria. Malawi, Mozambique, Swazi-
land, Zaire, Zambia, and Zimbabwe also are leasing
about 50 locomotives from South Africa at an annual
cost of over $20 million, according to industry report-
ing. Although planning has been initiated for con-
struction of railroad repair and maintenance shops at
Francistown, Botswana, the 10 states still rely almost
exclusively on South African shops for work on their
locomotives and other railroad equipment. Also
planned are a factory to make concrete railroad
crossties, a quarry, and a soldering plant in Mozam-
bique to replace South Africa as an important source
of materials for rehabilitating non-South African
railroads.
Trade and Investment Ties
Although the largest export markets for the southern
African countries are overseas, they spend most of
their foreign exchange earnings in South Africa.
Excluding Angola and Tanzania, which import very
little from South Africa, they rely on South Africa for
17
Table 3
Southern Africa: Selected Economic Data a
GDP Popula- Average Foreign
(billion tion Annual Debt
US $) (million) GDP (billion
Growth US $)
(percent)
South Africa
61.6 33.2 1.1 23.0
Southern Africa
23.6 101.4 1.0 25.6
Of which:
Angola
Botswana
Lesotho
4.7
1.1
0.3
8.0
1.1
1.6
-9.0
10.8
1.0
5.0
0.4
0.2
Malawi
Mozambique
Swaziland
Tanzania
1.2
1.2
0.4
4.4
7.3
14.0
0.7
22.5
1.5
-9.0
1.5
0.5
0.9
3.0
0.3
3.3
Zaire
Zambia
Zimbabwe
3.0
1.6
5.7
30.9
6.9
8.4
0.9
-0.1
2.6
6.0
4.6
1.9
a Data are estimated. GDP growth is for the period 1981-85, and
other entries are for 1986 and 1987.
about one-third of imports, including more than three-
fourths of the imports of Botswana, Lesotho, and
Swaziland. Despite a decline in the dollar value of
trade because of local currency devaluations, the
volume of trade with South Africa by the 10 neigh-
boring countries has been fairly constant since 1980,
according to our estimates.
All of the regional countries except Angola earn
foreign exchange from South African tourism and
take advantage of South African technical and mana-
gerial services. Southern African countries also rely
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on South Africa for food imports; roughly 80 percent
of the cereals consumed annually in Botswana, for
example, are imported from South Africa, according
to US Embassy reporting. Angola, Botswana, Tanza-
nia, and Zaire sell their diamond exports through the
Central Selling Organization, an international mar-
keting system operated by South Africa's DeBeers
Corporation, according to industry data.
South African firms also are a major source of capital
investment in the region. South Africans own the bulk
of foreign investment in Botswana, Lesotho, and
Swaziland, roughly one-third of direct foreign invest-
ment in Zimbabwe, and major shares in Zambia's
copper mining industry, according to US Embassy
estimates and press reports. Regional investments by
South African companies cover a broad range of
products and services, including food and beverage
production and marketing, textiles, tourism, minerals,
and wood products. South African retail and whole-
sale trade chains, banks, and construction and engi-
neering firms operate in neighboring states. Interna-
tionally known South African companies such as
Anglo-American and DeBeers have extensive holdings
in mineral extraction, processing, and marketing in
the region
Employment and Institutional Connections
Remittances by migrant workers in South Africa
generally offset a significant share of the area's trade
deficit with South Africa and are an important source
of foreign exchange for Botswana, Lesotho, Malawi,
Mozambique, and Swaziland. Remittances earned by
some 223,000 foreign black workers employed by
South African gold and coal mines totaled about
$200-300 million in 1986, according to US Embassy
reporting. Additional amounts are remitted by as
many as 750,000 other migrants employed legally and
illegally in other South African mines and by farming
and manufacturing.
Botswana, Lesotho, and Swaziland also are closely
tied to the South African economy by their member-
ship in SACU and?except for Botswana?the RMA.
Pretoria adds a substantial grant to the customs
revenues that it collects and distributes for SACU,
with the result that SACU revenues account for about
one-fifth of Botswana's government revenues and 50
Secret
Table 4
Southern Africa: Migrant Workers
in South African Mines
Thousand workers
1980
1987
Total
215
210
Of which:
Angola
a
.a
Botswana
17
19
Lesotho
121
108
Malawi
14
19
Mozambique
38
51
Swaziland
18
13
Tanzania
...a
Zaire
Zambia
.a
.a
Zimbabwe
7
a Ellipses indicate fewer than 5,000 workers.
to 70 percent of the government revenues of Lesotho
and Swaziland, according to US Embassy reporting.
Membership in the RMA makes the Lesotho and
Swazi currencies interchangeable with South Africa's
rand at a 1:1 ratio, and ensures the two smaller
countries access to South African financial markets.
This relationship, however, forces Lesotho and Swazi-
land to sacrifice control over monetary policies to
Pretoria.
Lesotho, Mozambique, and Swaziland rely on South
Africa's Electric Supply Commission, a state-run
enterprise, for major shares of their electricity sup-
plies. Botswana and Zimbabwe also are connected to
the South African electricity grid and occasionally
purchase small amounts of electricity from South
Africa to supplement domestic production.
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3-4 August
5-8 August
8 August
13 August
Appendix B
Zambia and Zimbabwe:
Chronology of Sanctions Effort
Against South Africa
The following is a chronology of the abortive effort by Presidents Kaunda of
Zambia and Mugabe of Zimbabwe to impose sanctions against Pretoria in 1986.
Six Commonwealth heads of government (Australia, The Bahamas, Canada,
India, Zambia, and Zimbabwe) declared after meeting in London that adopting
the Nassau sanctions measures had become a "moral and political imperative to
which a positive response can no longer be deferred," and that the Commonwealth
would in addition begin to seek international sanctions against South Africa.'6
Kaunda and Mugabe declared that they will impose the Commonwealth measures,
and both countries tasked ministerial contingency committees to plan measures to
cushion the effects of sanctions
Pretoria began temporarily imposing refundable fees on Zambian imports transit-
ing South Africa, and delaying Zambian and Zimbabwean trucking to South
African markets.
The Bank of Zambia suspended further letters of credit for imports from South
Africa, but lifted the suspension two days later.
29 August
Mugabe announced that the Commonwealth sanctions package took precedence
over Harare's recently renewed preferential trade agreement with South Africa.
A Commonwealth meeting in Nassau, The Bahamas, in October 1985 unanimously adopted a
program to impose a number of economic sanctions against South Africa.
19
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1-6 September
At a summit meeting in Harare, the Nonaligned Movement agreed on a package
of 13 voluntary sanctions against South Africa and established a fund?called the
Africa Fund?to help offset shortages in Frontline States caused by South African
retaliation against sanctions.
10 September
Kaunda urged Zambian importers to find alternatives to South Africa for imports,
according to press reports.
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6 October The passing of sanctions by the US Congress tended temporarily to stifle
antisanctions sentiment in Zambia and Zimbabwe
15 October At the end of a meeting at Victoria Falls, Kaunda and Mugabe claimed that a pro-
visional date for imposing sanctions had been set for late October.
19 October
The determination of the two leaders to impose sanctions was bolstered by their
suspicions that the death of Mozambican President Samora Machel in an airplane
crash had been caused by South African interference in Mozambican air traffic
control radio transmissions.
31 October The President of the Zimbabwean Congress of Trade Unions predicted that
sanctions would cost 15,000 Zimbabwean transport jobs.
3 November
5 November
An antisanctions mood was developing among many sectors of Zambian society
because of the potential economic damage, according to the US Embassy in
Lusaka.
Zambian Foreign Minister Mwananshiku said that Zambia would impose limited
sanctions?at least cut commercial airlinks?by the end of the year, according to
US Embassy reporting.
Harare began constructing a gold refinery to eliminate dependence on Pretoria for
processing domestically mined gold, Zimbabwe's most important export.
21
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30 November
5 December
11 December
The Zambian and Zimbabwean Foreign Ministers drew up a tough list of
sanctions, including a ban on overflights to South Africa, transit trade through
South Africa, and imports from South Africa in addition to the full list of
Commonwealth measures, at a meeting in Lusaka in preparation for an early
December summit meeting in Addis Ababa, Ethiopia, of the members of the
Preferential Trade Area for Ea?tern and Southern African States (PTA), accord-
ing to US Embassy reporting."
Kaunda said that firm agreement had been reached with Zimbabwe for both
countries to sever commercial airlinks to South Africa, according to US Embassy
reporting.
Riots that left over 20 people dead started in Zambia's northern copper-mining
area because of rising food prices resulting from government measures to adhere to
IMF austerity guidelines.
17 December
21 December
Secret
Mugabe told a Politburo meeting of the Zimbabwean African National Union
(ZANU) that he would push for the immediate introduction of sanctions from the
Commonwealth package, including the cutting of commercial airlinks to South
Africa.
An expected decision during a FLS meeting in Lusaka to impose sanctions was
sidetracked by the lack of support by Botswana and Mozambique, waffling by
Zambia on the issue of cutting airlinks, and the abrupt departure of Kaunda
during the meeting because of the death of his son.
"Members of the PTA include Burundi, Comoros, Djibouti, Ethiopia, Kenya, Lesotho, Malawi,
Mauritius, Rwanda, Somalia, Swaziland, Tanzania, Uganda, Zambia, and Zimbabwe.
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31 December After meeting with Kaunda at Kariba on 30 December, Mugabe announced that
sanctions would be postponed until further preparations were completed.
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