FEBRUARY 1987 - VOLUME 8 - NUMBER 2
U P D A T E S
Keeping the Profit in Apartheid
Anti-apartheid activists won significant victories this winter with the announced divestment of several major corporations and the passage of legislation providing comprehensive sanctions against South Africa. But despite pressure to pull out, many large companies remain in South Africa, and several companies that have announced they will pull out are doing so in name only. And four months after U.S. lawmakers approved the sanctions over President Reagan's veto, many of the law's punitive measures have yet to be applied.
Since November 1, 1986, four major U.S. companies - General Motors, Coca-Cola, IBM, and Eastman Kodak, all prime targets of divestment campaigns - have announced their intention to withdraw from South Africa. But only Kodak will break off all trade with South Africa - shutting down its operations and stopping the supply of goods and services. GM, Coca-Cola, and IBM will still maintain an exclusive hold on their respective markets through licensing and trade agreements.
All three companies plan to sell their subsidiaries to local interests in South Africa and thus will no longer have assets, capital or employees in the country. However, each company plans on supplying these newly formed companies with their products and information. Coca-Cola will supply coke syrup to its new South African owners under an exclusive licensing agreement. IBM is presently negotiating a deal to provide the new South African owned company that will take over its subsidiary with a three-year, renewable contract for importing and selling IBM products and services; a five-year renewable contract for spare parts and services; and a possible agreement granting the new company access to future IBM technology. IBM will also profit from interest on loans it makes to the South African buyers of the subsidiary.
Finally, GM, which has suffered losses at its South African plant since 1981, and has seen its share of the market decrease from 12 to 5 percent, will sell its gross assets - about S180 million - for an undisclosed, though reportedly quite lucrative, amount. The parent company will receive GM licensing fees for the use of its trademarks and income from the sale to the South African plant of auto kits and componew manufactured by GM elsewhere.
Moroaver, b~ selling the subsidiaries to local South African inteYtsts and continuing to sell products to such new owners, GM, B%i, and Coca-Cola will circumvent all Sullivan Principle resumtions. GM and IBM will also be free of the limitations itoiposed by U.S. sanctions prohibiting the sale of products to government, police and military agencies involved in the enforcemaot of apartheid laws.
Spokespersons for national anti-apartheid groups say the latest twists with regard to divestment have created new, though subtle, challenges to be tackkd this year.
The criteria used to define whether a company is doing bi--s in South Africa has become more complex in recent months because of such "qnasi" pull-outs, said Lisa Crooms of the American Committee on Africa.
"The so-called corporate exodus has led to a lot of localities that have already passed divestment legislation facing a question: since these companies are no longer directly operating [in South Africa], are their divestment requirements technically satisfied?" Crooms asked.
Many cities and institutions that previously divested from these companies may repurchase their stock in the wake of the divestment announcements, despite the fact that the companies continue to profit from their agreements with South Africa.
As a result, anti-apartheid activists say they will soon begin fine-tuning existing state and local level sanctions legislation, while continuing to press for a comprehensive national divestment law.
On the sanctions front, a delay in implementation has crippled efforts to signal strong U.S. opposition to apartheid. Although the delay is partly due to sluggish government action, implementation has also been stalled because of imprecision in the way the new law was written.
Vague wording has created a number of loopholes in the law and implementation of sanctions has been delayed until Congress and the administration can agree on exactly what the lawmakers meant to do when they voted in favor of the bill.
The Reagan administration has already issued rulings on some of the provisions in question, and is expected to come out with comprehensive regulations soon.
Sanctions supporters, however, say that in some cases the administration's regulations have had the effect of weakening their intended impact.
The sanctions bill, pieced together from a number of lastminute amendments offered in haste from the Senate floor, is not specific with regard to bans on the import of some iron and steel materials, or products of South African state-owned companies.
In fact, according to an aide on the House Subcommittee on African Affairs, the import ban on iron and steel is so poorly worded that South Africa may be able to circumvent part of the ban by exporting iron and steel blends.
The Treasury Department, which was responsible for deciding the scope of the ban, ruled that ferro-alloys - materials made from a mixture of minerals and iron or steel - will not be included under the ban.
Also unclear was the status of some imports of agricultural and other related goods. One provision in the bill bans the import of agricultural and other products made by parastatals, but permits a one year delay before the ban takes effect. At the same time, another provision, written as an amendment from the floor by Sen. Edward Kennedy, D-Mass., immediately outlaws the import of all agricultural products from South Africa.
Since the Kennedy amendment appeared to supercede the committee's provision on parastatals, the administration has ruled that except for "personal items" - pets, for instance - all agricultural products from South Africa are immediately banned, congressional sources say.
The U.S. Department of Agriculture (USDA) estimates that parastatals produce about 83 percent of U.S. agricultural imports from South Africa. In 1985 alone, the United States imported about $98 million in agricultural goods from South Africa.
A total ban on the import of uranium, a mineral considered crucial to U.S. strategic interests, could also be weakened because of the bill's vague wording. The language in the law specifically prohibits a number of uranium derivatives, but does not include hexafluoride, which sources say can sometimes be used as a substitute for uranium.
Sanctions supporters agree that the law was badly constructed, but contend that lawmakers' intent in passing the bill over President Reagan's strenuous objections was clear.
Given the administration's long-standing opposition to sanctions against South Africa, said one congressional aide, "advocates of sanctions will have to demand that their position be sustained," despite the poor wording.
- Samantha Sparks
Putting Pressure on Pretoria
On November 23 of last year, Barclays Bank announced that it would divest its holdings in Barclays Bank, S.A., South Africa's second largest commercial bank. The announcement marked the most significant divestment move to date, since Barclays owns more than 40 percent of the South African bank and has in the past refused to bow to pressure from antiapartheid activists. The bank - which has lent over 800 million pounds to the Pretoria government - employs 25,000 people throughout the country.
Overall, nearly 20 companies pulled out of South Africa in 1986 including Ashland Oil, Bell & Howell, CBS, General Electric, IBM, Kodak and GTE bringing the total number of companies that have pulled out of South Africa in the last two years to almost 70. But although more and more companies are divesting from South Africa, many others are holding firm to the belief that to leave the country would only hurt efforts to end apartheid.
"At this point we intend to stay," said a spokesperson from USG Corporation, a construction firm and the second largest U.S. employer in South Africa. "We feel that nothing would be gained by the sale of our interests in South Africa. We work very actively against [apartheid] through lawful means and frankly we feel if all U.S. companies go out there is no way they can have any influence at all."
Reiterating the reasoning that has kept approximately 250 U.S. companies in South Africa, a spokesperson from Goodyear International said his company which employs nearly 2,500 people in South Africa has made no plans to divest. "We run a completely desegregated plant in South Africa - there is no apartheid in our company."
In addition to corporate divestment from South Africa, many universities, churches, and states are liquidating assets they have invested in companies that continue to do business in South Africa. More than 50 colleges and universities, including University of California, Columbia University, University of Michigan, Georgetown University, Smith College, and Middlebury College have adopted policies of total divestment. When added to the partial divestment of other universities, this will amount to a total divestment of $7 billion. Others have also agreed to divest, but have added certain stipulations - Swarthmore College will cut faculty salaries one percent to safeguard against any possible fall in their rate of return on investments.
Nonetheless, universities such as Brown and Yale refuse to yield to pressure. On November 2, 1986, Yale finally agreed to sell off investments in companies that have not signed the Sullivan Principles, but it will hold on to about S385 million in stock in other companies operating in South Africa.
In addition to divestment policies, 32 out of the 70 U.S. cities that have adopted some banking and divestment action, have also adopted terms of selective purchasing. Out of the 10 largest cities in the countrv, only Dallas has not passed some sort of divestment legislation. In addition, 19 states have passed laws supporting the divestment campaign.
- Patricia Kelly