BUSINESS/ECONOMY

Cutting trade ties to Pretoria

Marci McDonald February 11 1985
BUSINESS/ECONOMY

Cutting trade ties to Pretoria

Marci McDonald February 11 1985

Cutting trade ties to Pretoria

BUSINESS/ECONOMY

Marci McDonald

Daily, the ritual runs its stylized course on Washington’s embassy row. At precisely 3:30 p.m. demonstrators assemble 500 feet from the guarded limestone South African Embassy. Waving hand-lettered placards denouncing the country’s apartheid policies they march in a cheery, orderly oval formation, chanting to a drumbeat, “No arms, no aid, no guns, no trade.” Then, they link arms to escort the day’s “messengers”—the volunteers for arrest—to the yellow police line that marks the legal limit of an embassy protest. There, amiable patrolmen bundle such celebrities as Tony Randall and Harry Belafonte into paddy wagons. No violence mars the scene, but the 11-week-old anti-apartheid protests, which began in Washington and have spread to 18 other American cities, have taken on such force that they are posing a serious threat to the $25 billion worth of U.S. trade, banking and investment in South Africa.

Originally organized by black leaders and launched on Nov. 21, the Free South Africa demonstrations have been joined by labor, church and Jewish groups and they have resulted in roughly 1,200 arrests. Among those charged with demonstrating too close to an embassy: 20 members of the House of Representatives and Republican Senator Lowell Weicker, the first senator ever arrested for civil disobedience. That ground swell of support has created unprecedented sympathy in Congress for new legislation to restrict American business with South Africa. Already, the 350 U.S. corporations that have an estimated $2.3 billion invested there are bracing to fight a bill introduced by Senator William Proxmire last month. Bill 147 would ban any new American investment in South Africa, prohibit bank loans to its government, bar the sale of gold Kruggerrand coins and limit exports of nuclear and high-technology equipment destined for military or police use. In addition, three other congressmen are preparing to submit variations on Proxmire’s proposals within the next three weeks.

The executives of firms with major investments in South Africa, including Mobil Corp., Coca-Cola Ltd. and General Motors Corp., acknowledge that the new legislative thrust raises serious dan-

gers. “This is the worst situation we have ever had in Congress,” said Larry Fox, international vice-president of the National Manufacturers’ Association, which is lobbying against the measures. He added, “Most of us are resigned to the fact that some legislation will go through this year, but the question now is to see that it is legislation we can live

with.” Declared William Broderick, international vice-president of the Ford Motor Co., the largest American employer in South Africa with 6,673 workers: “American corporations are the stick that is being used to beat the problem of apartheid.”

For the past four years the Reagan administration has followed a contentious policy of “constructive engagement” with South Africa. That approach was designed to encourage reform in South Africa through quiet diplomacy. But in December the White House began to shift its stance. In a stunning reversal, President Ronald Reagan, at the urging of his wife Nancy, bluntly criticized the South African apartheid policies. In swift succession

Richard Lugar, the influential new Republican chairman of the Senate foreign relations committee, supported the President’s stand. Then, 35 conservative congressmen, most of them Republicans, wrote to the South African government, threatening economic sanctions unless the government ends its practice of segregating the country’s 24-million

black and colored majority.

As a result, many members of the American business community also joined the chorus of criticism. In 1977, 128 U.S. corporations signed the Sullivan Principles—a corporate code of conduct named after Leon H. Sullivan, a U.S. Baptist minister who formulated proposals to promote equality in employment for nonwhite South Africans. And at a meeting in New York last December, representatives from 119 of the 128 firms pledged to work actively to end apartheid by speaking out publicly against it in South Africa.

Those actions have caused concern in South African government circles. For one thing, the United States is Pretoria’s largest trading partner and the

loss of substantial revenues from trade and investment would create serious economic problems. For another, a disruption in trade relations with America would likely increase South Africa’s already pronounced diplomatic isolation. Over the past decade 11 state and five city governments have passed legislation prohibiting the investment of their pension funds in banks or companies with investment interests in South Africa. And the huge Bankamerica has refused to issue any new loans to that government.

Still, last year American bank loans to South Africa totalled $4.5 billion—an increase of 332 per cent over the total in 1981 when “constructive engagement”

began. American firms control 70 per cent of the South African computer market, 44 per cent of the petroleum products market and 22 per cent of all auto sales.

By comparison, 28 Canadian companies have direct investments in South African companies worth about $250 million. Among the major investors: Alcan Aluminium Ltd.; Falconbridge Ltd.; Massey-Ferguson Ltd.; Canada Wire and Cable Ltd. Canada’s major banks have also actively made loans to South African firms and to the government. Only the Bank of Montreal will reveal its loan total ($54 million at the end of 1984), and no Canadian bank has yet stopped lending to South African firms. But spokesmen for the Royal Bank and

some others say that they no longer give credit to the government or to statecontrolled agencies.

U.S. corporate executives face much stronger political pressures than their Canadian counterparts. As a result, corporate leaders have begun a steady air shuttle to South Africa. And every Wednesday and Sunday, when the PanAm flight from New York lands at Johannesburg’s Jan Smuts airport, it is filled with top American businessmen who are anxious to examine the apartheid system close up, assess the government’s claims of reform and decide on the potential effects of withdrawal on their companies and the black population. Said Stephen Bisenius, executive

director of the American Chamber of Commerce in South Africa: “I have never seen so many chief executives.”

Most of the businessmen appear to have concluded that disinvestment would be counterproductive, causing massive hardship in the black community by increasing unemployment. Said Henry Coe, managing director of the Chase Manhattan Bank in Johannesburg: “I would hate to tell the people who work for us, my young black trainee manager Chris Melefe and my driver, that we are closing down. What would happen to them?” Still, after living closely with the injustices of the apartheid system for three years, Coe says that American business cannot continue to passively participate in segregation.

He added, “We should take a more proactive view and start speaking out and lobbying for change.”

American protesters are calling for a total withdrawal of U.S. interests from South Africa, but most of them say they do not expect that to happen soon. And Broderick, arguing on behalf of the companies who have signed the Sullivan Principles, says that the proposed freeze is similar to disinvestment—“and even more insidious.” He added: “If in a competitive industry like the automobile industry you cannot pump money in to change the design of your cars, you lose out. It is like slow poison.”

Most corporate leaders say that by retaining their investments in South Africa they are actually helping the blacks more than they would by withdrawing. Broderick, for one, claims that corporate efforts at good citizenship have forced the integration of many workplaces, led to equal wage scales, black trade unions and the development of about $100 million in educational and social facilities over the past seven years. “Our efforts have accomplished some things,” he said. “They are not just cosmetic changes.” But spokesmen for the Free South Africa movement contend that American businesses only employ 66,000 black South Africans—one per cent of the country’s black work force. And the Americans argue that the improved status of the employed blacks has not helped their nearly 24 million countrymen. Indeed, a 1984 Carnegie Foundation study showed “a significant increase in the poverty of most blacks, despite improvements in the living standards of a few.”

Some moderate black leaders, including Zulu chief Gatsha Buthelezi, who was in Washington last week, say that the Americans should maintain their ties to South Africa and work for change from within. But many members of the business community in South Africa say that there is now a new militancy among blacks, whose outrage at the Reagan administration’s past support of the Botha regime spilled over into angry protests against Senator Edward Kennedy last month. As a result, the businessmen are reluctant to develop closer contacts with the government and risk angering the blacks even more. They also see dangerous parallels to the growing antiAmericanism that characterized the months leading up to the Iranian revolution. Declared Clifton Wharton Jr., chancellor of the State University of New York, at a House subcommittee hearing on the question: “When the eventual explosion comes in South Africa, world opinion will call us to account. It is a question of national conscience.”

With Allistair Sparks in Johannesburg and Sandy Fife in Toronto.

Allistair Sparks

Sandy Fife