Analysis - S.African diplomacy reeling from Dalai Lama debacle

JOHANNESBURG (Reuters) - Africa's biggest economy has already shown that it casts a tiny foreign policy shadow and South Africa's most recent diplomatic debacle -- over a visa for the Dalai Lama -- has likely further diminished its stature by showing how easily it can be bullied.

Pretoria's decision to cave into China by denying the Dalai Lama a visa to attend Archbishop Desmond Tutu's birthday party at the weekend has further eroded confidence in the government of President Jacob Zuma, already under fire for fostering cronyism and corruption.

The move has also raised worries about the country's next big diplomatic test, when it hosts global climate talks next month that could collapse without firm guidance.

South Africa failed to rule for weeks on the Dalai Lama's visa to attend Tutu's birthday celebrations so as not to interfere with a high-profile visit by Deputy President Kgalema Motlanthe to Beijing, where he won a pledge for $2.5 billion (1.5 billion pounds) in investments from South Africa's largest trade partner.

Monday, the ANC confirmed it had also sent a high-level economic delegation to Beijing to meet Chinese officials.

Beijing calls the Dalai Lama a dangerous separatist and had pushed Pretoria to deny a visa.

The visa incident came after South Africa found itself on the minority side of global opinion in recent months by supporting entrenched and autocratic leaders in Libya, Syria and Ivory Coast.

Foreign Policy magazine dubbed South Africa a "cowardly lion" while other critics have said the ANC has compromised the ideals it embraced when it fought to end apartheid by pandering to Beijing and continuing to embrace autocratic states in recognition of their past patronage during the ANC's liberation struggle.

"Principles have fallen to such an extent that nobody expects them to do the right thing," said a diplomat in Pretoria.

Pretoria's failure shows diplomatic naiveté, which can be exploited by trade partners, leading economic daily Business Day said in an editorial. South Africa failed to see that mature democracies can build trade with China and also accept the Dalai Lama as a visitor, it said.

"China trades with South Africa because it is in China's interests to do so, and it can be taken as given that they would drop us like a shot if that situation were to change, regardless of our treatment of the Dalai Lama," it said.

British tycoon Richard Branson, who attended the Tutu celebrations, told Talk Radio 702: "It's just very sad that the next generation of South African leaders feels that they need to kowtow to the Chinese. The Chinese, I believe, will not respect them for that."

LITTLE BOUNCE FROM BRICS

South Africa has increasingly tied its diplomatic fortunes to China, which rewarded the Zuma government with membership of the BRICS grouping of major emerging economies that also includes Brazil, Russia and India.

South Africa, with a GDP less than a quarter the size of the smallest BRIC economy, Russia, has hoped accession to the group would increase it trade and prestige but has so far found little to show for membership.

But in an indication of South Africa's small economic standing in the grouping, all major BRIC-related investment funds have excluded South African shares from their portfolios.

A more pressing worry for investors are rigid labour laws that drive up the cost of personnel and regulations that make it difficult to set up shop in the country.

"South Africa's foreign policy shenanigans are already 'priced in', whether it be Zimbabwe, Ivory Coast, Libya, the general behaviour on the Security Council or now this," said Peter Attard Montalto, emerging markets economist for Nomura International.

Pretoria has shown continued support for rulers with poor human rights records, such as Zimbabwean President Robert Mugabe and Swaziland's King Mswati III, while delaying recognition of Alassane Ouattara as the internationally acknowledged winner of Ivory Coast's disputed presidential election.

It abstained from a U.N. vote to punish Syria, a longtime ANC supporter, for its slaughter of anti-government protesters, tarnishing a visit last week to South Africa by Turkish Prime Minister Tayyip Erdogan, who has pushed for the measure and was looking to expand trade.

COP OUT

South Africa's next major diplomatic challenges comes when it hosts the Conference of Parties (COP17) global climate talks in Durban, with countries looking -- not very optimistically -- to heal the ailing Kyoto protocol on emissions cuts targets.

The host country and COP secretariat have been the main power brokers at previous meetings, where they have tried to sort through the complex diplomatic, economic and scientific positions that are part of the bargaining.

Many participants feel South Africa is not up to the challenge.

"South Africa hosting the event does not inspire a lot of confidence. Most of us are looking beyond Durban to the next COP meeting," said one negotiator, who asked not to be named.

South Africa's economic might, trade and to a large extent its diplomatic status, have been based for decades on minerals. It has the world's largest gold reserves and 90 percent of its platinum.

But while commodity prices have boomed over the past decade, mining investment in the world's fifth-biggest mining economy has stagnated and the sector is shrinking due to regulations that stifle foreign investment, concerns about growing corruption in Zuma's government and talk within the ANC of a government takeover of the mines.

Africa's most populous country, Nigeria, an oil producing power, has been vying for diplomatic prestige on the continent by showing it is more in touch with global sentiment.

Nigeria was far quicker to recognise the National Transitional Council as the government of Libya, while Pretoria snubbed the NTC for weeks and insisted that loyalists of deposed leader Muammar Gaddafi have a say in running the country.

(Editing by Giles Elgood)