Agreement Between South Africa and Cuba on Economic Assistance Presented to: Select Committee on Trade and International Relations 8 August 2012

2 Purpose and Contents Purpose i) To provide information on SA Economic Assistance Package to Cuba; and ii) To request the Select Committee to advance the process of ratification of the Agreement. Contents i) Introduction ii) Process iii) Source of funds iv)Substantive content v)Modalities for implementation

3 Introduction SA and Cuba have strong political and diplomatic relations. Bilateral trade is undeveloped due to Cuba’s foreign exchange constraints. In 2008, Cuba suffered serious infrastructure damage during the hurricane season. SA sought to assist Cuba address the devastation and to build bilateral trade relations. Despite its embargo, USA is Cuba’s major source of agricultural imports and medical supplies for humanitarian reasons. Several other countries continue to trade with Cuba (eg. Spain, Netherlands, Canada, Brazil, Russia, China) mainly through extension of credit lines.

4 Process (1) In Nov 2010, Cabinet approved an economic assistance package to Cuba to strengthen bilateral trade and investment relations and assist addressing effects of the natural disasters. Cabinet directed Ministers of Trade and Industry and Finance to determine a package. During State Visit to Cuba, 6 December 2010, President Zuma announced Economic Assistance Package of R350 million. An interdepartmental technical committee established to give effect to the announcment. The committee comprised the dti (Chair), DIRCO, DAFF, National Treasury, Export Credit Insurance Corporation and the IDC.

5 Process (2) South Africa (committee) and Cuba initiated engagement in May 2010 to establish an arrangement. The Agreement was concluded in 25 November 2011 after three rounds of engagement. The Agreement was signed on 3 February On 20 March 2012, Cabinet instructed the Agreement be submitted to Parliament for ratification. The Agreement contains: i) Main Text, which sets out the overall framework and main elements; Annex 1 sets out SPS requirements for purchase of SA seeds; and Annex 2 sets out requirements to operationalise other grants and export credit facility.

Sources of Funds DIRCO through African Renaissance Fund provides R100 million (R40 million as grant for seeds; R60 million as a solidarity grant). Savings from the ECIC interest mark-up account provides R110 million (R40 million as a solidarity grant; R70 million for 1 st tranche of credit facility). NT will identify source of R140 million for 2 nd tranche of credit facility following repayment of 1 st tranche (in 2 years). Administrative costs will be financed through the Package. Repayments terms set in Rand at exchange rate at entry into force of Agreement.

Substantive Content Facility A: R40 million grant for purchase of seeds by Cuba of which R5 million to purchase seeds in SA, and R35 million for purchase of seeds from any country including RSA (non-repayable) Facility B: R100 million solidarity grant (non-repayable) Facility C: R210 million credit lines in two tranches of R70 million and R140 million. The credit lines must be repaid. R70 million is available on entry into force of Agreement, to be repaid in 2 years R140 million available after 1 st tranche repaid, and must be repaid over the next five year period (by 2019). 7

8 Modalities The IDC will hold an account for the R350 million (R40 million, R100 million, R70 million for 1 st trance for one year after entry into force of Agreement, R140 million following repayment of 1 st tranche for 5 years). IDC will manage payments on behalf of the dti. Cuba will identify goods it seeks to purchase in SA. IDC pay authorised companies for goods exported to Cuba on receipt of invoices, and supporting documents. No funds (except R35 Million) leave South Africa. All funds (except R35 million) used for purchase of SA goods. Cuba is not required to repay grants (R140 million). On re-payment of first credit (R70 million) in 2 years, Cuba will access 2 nd credit line of R140 million to be re-paid in 5 years. the dti will monitor implementation of the package.

9 THANK YOU!