A retreat from apartheid

September 23 1985

A retreat from apartheid

September 23 1985

A retreat from apartheid

Like a tap gradually being turned off, recently the presence of Canadian business in South Africa-through trade, bank loans and investments—has been slowly drying up. After years of withstanding pressure from churches and special interest groups to withdraw their business in order to protest apartheid, Canadian companies are moving to reduce their financial stake in South Africa amid concern that the growing political and economic uncertainty has undermined their holdings. Said Renate Pratt, coordinator of the Task Force on the Churches and Corporate Responsibility,

an ecumenical group that pressures businesses to withdraw from South Africa: “There is a greater bias for disinvestment now than a year ago—there has definitely been a shift.”

That shift is likely to become even more pronounced after last week’s announcement by federal External Affairs Minister Joe Clark urging businesses to adopt a voluntary ban on crude oil shipments and new bank loans to the South African government. Clark added that “full sanctions” would be adopted if apartheid was not dismantled. That action followed announcements earlier last week by U.S. President Ronald Reagan and the European Community foreign ministers of a wide range of economic sanctions against South Africa.

Canadian investors have been growing increasingly nervous as a mounting number of American, British and other

foreign companies have shut or sold their South African operations. In the past 18 months investors worldwide have withdrawn more than $2 billion from South Africa. The capital drain reached crisis proportions three weeks ago when U.S. and European banks began demanding that the South African government immediately repay loans that had come due.

In Canada governments and their agencies have taken the lead in pulling out, citing repugnance of apartheid as their motive. Last July the federal government banned the export of computers and other equipment used by South

African security forces. Early this month Petro-Canada indefinitely held up a shipment of sulphur destined for South Africa.

By contrast, Canadian businessmen have been cautious about disinvesting. Those who have decreased their business ties have made it clear that their actions were based purely on commercial considerations and were not a judgment on South Africa’s apartheid system. Redpath Sugar Ltd. of Toronto, for one, will not renew its contract this October to import sugar from South Africa because it won a better price from Swaziland producers. Said L.R. (Red) Wilson, president of Redpath Industries Ltd., the parent company: “We also decided that with Ottawa considering more sanctions, it would be prudent to avoid signing new contracts.” And in February Ford Motor Co. of Canada Ltd.

merged its 100-per-cent Canadianowned South African subsidiary with another company based in that country in order to dilute its stake in the troubled nation to about 40 per cent. The move was planned a year ago and was based on economics, said a Ford spokesman. “We were losing money in a small market with too many competitors,” he said.

Other Canadian companies said that because Canada’s stake in the South African economy is only about $135 million-compared to direct foreign investment of between $15.5 billion and $17 billion (U.S.)—disinvestment would not have much impact. Still, since the early 1970s organized church groups have repeatedly complained to Canadian companies about their involvement in South Africa. Toronto-based Falconbridge Ltd., for one, this year fended off shareholders who complained about its 25per-cent stake in Western Platinum Ltd. of South Africa. Declared Falconbridge president William James: “The church groups can sell their shares if they want to—it’s a free country.”

Although Canadian companies have been reticent to discuss their South African investments, since 1982 they have been winding down their presence.

According to Statistics Canada, direct Canadian investment in South Africa peaked in 1981, when 28 companies had $239 million invested.

Last year the value of direct investment fell to about $135 million.

Indirect investment—the stake Canadian companies have in South African-owned firms—also fell to $481 million in 1982 from $531 million in 1981, the most recent figures available. And two-way trade between Canada and South Africa has also been falling, to $441 million last year from $550 million in 1980.

Since 1975 most Canadian banks have gradually adopted a policy of not lending money to the South African government. The Royal Bank of Canada, the Canadian Imperial Bank of Commerce, the Bank of Nova Scotia and the Toronto Dominion Bank all say that they now do not make loans to the South African government or its agencies. Only two of the Big Five Canadian banks have re-

vealed the total amount of their loans to South Africa. In 1984 the Bank of Montreal lent about $55 million to the private sector, down $5 million from 1983, and the bank says that by 1987 it will have no more loans outstanding. And the Bank of Nova Scotia has $10 million in loans to South Africa which are scheduled for repayment by next year.

But despite the current instability and the renewed scrutiny by Canadian companies of their South African connections, some corporations say that instead of pulling out they can be more effective in combatting apartheid by pressuring for better working conditions and more jobs for black workers. Montreal-based Alcan Aluminium, for one, owns 24 per cent—$14 million (U.S.)

worth—of Hulett Aluminum Ltd., a South African producer. Said Lome Walls, Alcan’s manager of public affairs: “This year we asked Hulett’s directors to develop their affirmative action program further. They are responding.”

Some companies still strongly committed to South Africa have steadfastly refused appeals from church pressure groups to reveal the details of their employment practices. One of the most controversial is Torontobased Bata Shoes International Ltd., which employs 3,000 black workers at its five South African plants. Last week Montreal police had to drag away anti-apartheid protesters from the entrance to a Bata store.

So far, Canadian companies continue to look to government to take the lead. Said Carl Beigie, chief economist of Toronto-based investment dealers Dominion Securities Pitfield Ltd.: “The business community’s position is that it is up to the government to make clear its stand on the moral issue of investment in South Africa.” Still, if the chaos continues to escalate, companies such as Alcan will face the hard decision on whether to leave. Said Walls: “If we are not realizing a return on our investment, we would consider getting out. But we are not close to that.”

-MICHAEL SALTER with SANDY FIFE in Toronto, BILL LOWTHER in Washington and ALLISTER SPARKS in Johannesburg