BUSINESS/ECONOMY

Exxon pulls the plug

TOM FENNELL January 12 1987
BUSINESS/ECONOMY

Exxon pulls the plug

TOM FENNELL January 12 1987

Exxon pulls the plug

BUSINESS

The 200 employees of Esso South Africa (Pty.) Ltd. and Exxon Chemical (Pty.) Ltd. of Johannesburg were still celebrating the Christmas holiday when the announcement came. The firms’ parent, the giant Exxon Corp. of New York, last week became the latest in a list of companies to sell its South African holdings and

pull out of that troubled country in the past two years. The withdrawal was widely interpreted as another victory for the opponents of apartheid, the oppressive political system that enshrines the dominance of five million whites over 24 million voteless blacks. The two Exxon petroleum distribution operations accounted for just 0.2 per cent of the parent company’s $129.5 billion in revenues last year, but the decision by one of the world’s largest firms to join the flight from South Africa increased the pressure on companies still in the country to follow suit. Said Exxon president Lawrence Rawl: “The deterioration of the South African business climate caused by the continuing internal constraints has affected our potential for growth.”

Exxon was the latest of some 65 international firms that have retreated from South Africa in 1986. Those include such U.S. heavyweights as Eastman Kodak Co., General Motors Corp., IBM Corp. and the Coca-Cola Co., and Britain’s Barclays Bank PLC. Last November Bata Ltd. of Don Mills, Ont.,

one of the world’s largest shoemakers, became the first major Canadian firm to announce its intention to pull out of the African country. Bata had 3,200 employees, most of them black, in South Africa. Dominion Textile Inc. of Montreal also said in October that it would sell its 50-per-cent interest in a South African textile operation. But

about 14 Canadian companies still carry on a small amount of business in the African country through subsidiary or joint-venture operations. They include Ford Motor Co. of Canada Ltd., Falconbridge Ltd. and Moore Corp. Ltd., a Toronto-based business communications company. And spokesmen for some of those firms say that they are not convinced that leaving is the answer. Said Anthony Fredo, Ford’s director of public affairs: “Will our departure from South Africa help bring down apartheid? We think we can help to bring about change by working from within the system.”

Advocates of divestment generally say that it should be a temporary sanction, aimed at isolating South Africa and crippling its economy until it repeals apartheid laws. But Lome Seitz, senior vice-president of the international affairs division of the Canadian Chamber of Commerce, said that some divestment strategies may not be damaging the country’s economy to any great extent. The reason is that some companies are selling out at

exceptionally low prices to wealthy South African firms. A consortium led by the Anglo American Industrial Corp. purchased Barclays Bank’s local operation, giving the giant South African mining firm an even bigger role in the nation’s economy. And Seitz said that there is ample cash available to finance such takeovers because Pretoria has applied tight monetary controls, making it difficult for South Africans to remove money from the country.

Yusuf Saloojee, who is chief representative of the African National Congress office in Toronto, also said that he has some doubts about the effectiveness of divestment. It often merely transfers control to white corporate barons, he said, while the former owners maintain marketing and even buyback agreements. IBM, for its part, is selling its South African marketing firms to local buyers, but IBM products will continue to be sold there. CocaCola will sell its stake in a bottling plant but will still supply it with syrup.

Saloojee said he fears that as the foreign-controlled sector of the economy is turned over to white South Africans, black wage rates will drop and many of the social programs that are I now sponsored primarily by - U.S. corporations to aid black o workers will disappear. In Ex8 xon’s case, Rawl said that the company will try to maintain such programs by building them into the sales agreement transferring ownership. He said that Exxon plans to lend new management an undisclosed amount to purchase both firms, but only if the new owners agree to maintain an existing profitsharing plan and continue a social and education fund for black and Asian South Africans.

But Saloojee said that the departing companies would have greater impact if they followed the Kodak example. Instead of trying to find a buyer, Kodak simply shut its doors in November and dismissed its workers. By removing itself entirely, Saloojee said, it puts far more pressure on the South African government. But even as pressure to divest mounts, abandoning lucrative subsidiaries will not likely find favor with many Canadian businessmen. Said Falconbridge president William James: “We’re trying to get out, but we don’t think it helps blacks to sell out at 10 cents on the dollar.”

-TOM FENNELL with CHRIS ERASMUS in Johannesburg and THERESA TEDESCO in Toronto

CHRIS ERASMUS

THERESA TEDESCO