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TRADE SANCTIONS AGAINST South Africa, adopted in various forms by most
governments of the industrialized world, have failed to spark major changes
in that nation's policy of apartheid. The primary cause of this disappointment
is the failure of sanctions to reduce significantly foreign trade with
the racist regime in Pretoria. Despite the sanctions, many multinational
companies continue to conduct large scale and very profitable business
with the South Africa regime. Japan--which bans all direct investment in
South Africa--and the United States, which adopted bans on a variety of
South African imports in 1986, remain Pretoria's two largest trading partners.
Economic relations with these and other industrialized nations are vital
to the prosperity of South Africa's economy. An estimated $21.5 billion,
10 percent of South Africa's total investments, are derived from direct
foreign investments. As recently as 1985, more than 90 percent of the total
foreign investment in South Africa was held by transnational companies
based in Britain, the United States, France, West Germany and Switzerland,
according to a United Nations survey. Foreign trade plays a crucial role
for Pretoria as well, generating some 55 percent of South Africa's gross
domestic product. Roughly 70 percent of that total foreign trade is conducted
with Japan, the United States, West Germany and Britain. As of 1985, these
four nations supplied more than 75 percent of South Africa's machinery,
electrical equipment and chemical imports, 89 percent of its motor vehicle
imports and 95 percent of its railway equipment.
Japan Moves Up
In 1987, Japan surpassed the United States as South Africa's
largest trading partner, with bilateral trade of $4.27 billion. During
the first six months of 1988, Japan's trade with South Africa was $2.15
billion. The Japanese government, sensitive to criticism over increased
trade with South Africa, sought to downplay the figure by pointing out
that South African imports had declined 9.2 percent, to slightly over $1
billion, in the first six months of the year. "It can be said that the
Japanese government's request calling for business to restrain their trade
with Pretoria in a voluntary manner is having an effect," said one ministry
official. The decline in imports, however, was more than offset by Japan's
$1.13 billion in exports to South Africa, which created a net increase
in bilateral trade of 13.3 percent in the first half of 1988.
Non-Equity Links: Big Bucks for Auto Makers
Although the Japanese government forbids
direct investment in South Africa by Japanese firms, Japanese companies
may legally establish subsidiaries there. With such "non-equity" links,
Japanese auto companies relinquish profits and direct control of the subsidiary's
production and marketing activities in exchange for the subsidiary paying
licensing royalties and buying parts and unassembled, "knockdown" vehicles.
In just the first half of 1988, the Toyota Motor Corp. subsidiary Toyota
South African Manufacturing, Ltd.--a company wholly owned by South Africans--imported
47,927 cars and knockdown vehicles from the parent company in Japan for
assembly in South Africa. The Toyota subsidiary has become South Africa's
largest automaker, and Japanese cars are estimated to total 55 percent
of all automobiles sold on the South African market. Japan sold a total
of $954.5 million worth of completed and unassembled vehicles to South
Africa in 1987, comprising almost half of all Japanese trade with that
country.
In response to Japanese government pressure and international
criticism, the Japanese auto industry announced in August 1988 that it
would voluntarily reduce auto exports to South Africa, in terms of the
yen value of the exports. But, because the yen has increased in value relative
to other currencies, the industry's announcement was disingenuous. In yen
terms, Japanese-South Africa trade for the first half of 1988 fell 3 percent,
to 272 billion yen. In U.S. dollars, however, bilateral trade jumped 213
percent, to $2.2 billion. Favorable currency exchange rates would permit
the Japanese auto industry to "reduce" exports on paper, even if the exports
were increasing. Because the auto makers did not reveal the size of their
proposed reduction, it is impossible to tell whether it is an accounting
trick or legitimate.
Pretoria considers its economic relationship with
Japan so important that it lifted apartheid restrictions on the 800 Japanese
business people and their family members living in South Africa, granting
them the status of "honorary whites." Mine Yoichi, an activist with the
non-governmental Japan Anti- Apartheid Committee, called the honorary racial
status "a shameful situation for us." West Germany's Bayerische Motoren
Werke (BMW) and Audi also assemble cars at South African facilities and
export South Africa-made auto parts back to West Germany. Volkswagen recently
launched an expansion program in South Africa, while Daimler Benz has invested
more than $100 million in the country since 1981.
Strategic Minerals: Pretoria's Insurance Policy
A common excuse for continued trade relationships with
South Africa, particularly in the United States, is the enormous mineral
wealth of the country and neighboring Namibia, a former German colony illegally
controlled by Pretoria. The United States relies on South Africa for all
of its andalusite imports, 58 percent of its chromium, 46 percent of its
platinum-group metals and 27 percent of its manganese imports, according
to the General Accounting Office (GAO). Because these minerals are needed
in numerous military applications, they have been declared "strategic minerals"
by President Reagan, exempting them from the import restrictions contained
in the 1986 U.S. sanctions law. South African hard metal exports to the
United States have almost doubled in the last year as U.S. buyers have
stockpiled their inventories in anticipation of a total ban on South African
mineral imports. The buyers hope augmented inventories will tide them over
until alternative sources of supply become available. This dependency cuts
both ways.
In 1985, South Africa pulled in some $11 billion in mineral
export earnings. Moreover, in exchange for its strategic minerals, South
Africa's white minority regime obtains from its industrialized foreign
trading partners nuclear technology, transport equipment, computers and
other vital electronic items.
In an October 1987 report, the U.N. Council
for Namibia accused multinational companies--essential to these modern
sectors of the South Africa economy--of reinforcing the country's apartheid
system. "Since the benefits from those sectors accrue almost exclusively
to whites, it can be said that transnational corporations are of particular
importance to the preservation and growth of the privileges enjoyed by
the white minority," the report stated.
Fuelling Apartheid
The United Nations, as well as many anti-apartheid groups and activists, place particular blame
on foreign oil companies for helping the apartheid regime maintain its
grip on power, noting that South Africa's dependence on imported oil could
be a powerful lever for reform.
South Africa imports two-thirds of the
oil it needs. "Almost all crude oil shipped to South Africa originates
from countries that forbid their oil to be sold to the apartheid regime,"
the United Nations has found. Most of South Africa's oil is imported from
Caltex Petroleum Corp. and Mobil Corp., both of the United States, British
Petroleum, PLC, Royal Dutch/Shell and Total-Compagnie Miniere et Nucleaire
of France.
The United States, Britain and France, not surprisingly, have
consistently used their veto powers in the U.N. Security Council to block
a measure--already adopted by the General Assembly and the Organization
of Petroleum Exporting Countries (OPEC)-- calling for a mandatory oil embargo
against South Africa. Caltex and Mobil play a crucial role in the South
Africa economy, supplying and refining an estimated 55 percent of South
Africa's oil. Last December, when the United States adopted an anti-apartheid
measure requiring U.S. firms in South Africa to pay taxes to the United
States in addition to the taxes already being paid to the South African
government for profits earned in South Africa, Mobil defiantly refused
to pull out. Mobil's office in Cape Town said the new law would increase
the company's tax rate from 57.5 percent to 72 percent, "significantly
increasing the cost of doing business in South Africa." "Mobil nevertheless
reiterates its determination to make its presence in South Africa an effective
force for social change."
Undoubtedly, Mobil's decision to stay in South
Africa was influenced by its $400 million presence in the country. British
Petroleum and Royal Dutch/Shell supply Pretoria with oil and hold investments
in South African gas stations, coal mines and petroleum refineries. The
British engineering firm of Brown and Root was reported in March of 1987
to be trying secretly to recruit some 100 oil workers from the North Sea
oil fields to work in South Africa's offshore gas field in Mossel Bay,
east of Cape Town. Production there is expected to begin in 1991. Another
U.S. multinational, Fluor Corp., has been managing two of South Africa's
three oil-from-coal conversion plants as part of a $1 billion contract.
West Germany's Lurgi GmbH company also helps operate the coal conversion
facilities.
In 1984, Fluor also landed a joint contract with the French-
based Framatone corporation to maintain South Africa's first nuclear-powered
electric plant at Koeberg. Framatone, owned by the French government's
Creusot-Loire group and the French Atomic Energy Commission, delivered
the Koeberg nuclear reactors, which were built under a license held by
Westinghouse Electric Corp. of the United States. Alsthom and Spie Batignolles,
both from France, also helped build the Koeberg facility, while Credit
Lyonnais of France led the group of banks which financed the project. Fuel
rods for the Koeberg facility are manufactured by Eurofuels, a subsidiary
of France's Framatone and Pechiney- Ugine-Kuhlman firms and Westinghouse.
There is a good probability that many of those fuel rods contain Namibian
and South African uranium mined by Rossing Uranium, Ltd. Rossing--an international
conglomerate 46.5 percent owned by Britain's Rio Tinto Zinc (RTZ) Corp.
and lesser ownership spread among French, West German and South African
companies--operates the largest open-pit uranium mine in the world. The
U.N. Council for Namibia has reported that Rossing Uranium has been the
"largest profit generator for its parent multinational (RTZ)" since 1982,
earning the British company some $40 million in both 1986 and 1987. The
U.N. council was quick to point out that Pretoria's racist and laissez
faire policies made such profitability possible. "It is relatively inexpensive
to produce uranium in Namibia because of racial discrimination in wages,
low taxation rates and the relative freedom from societal, political, environment
and other legal restraints on foreign corporations operating in the Territory,"
the council said.
The Rossing operations also place the company's unprotected
workers and local residents--who are predominantly black--at risk because
of tremendous health hazards, according to U.N. experts. "The lack of safeguards
and standards to protect black workers and local inhabitants against radioactive
contamination from Rossing has made mining, processing and transportation
of uranium particularly harmful to these people," a U.N. report found.
"Thus, the plunder of Namibia's uranium by Rossing is likely to present
a serious health and environmental hazard for generations of Namibians."
South Africa's two other nuclear facilities--the Pelindaba plant, which
produces radioisotopes for research, and the Valindaba uranium-enrichment
pilot plant--also were built with equipment and expertise from foreign
multinationals. Companies such as West Germany's Siemens AG, Messerschmidt-
Boelkow-Bloem, and Leybold-Heraus, Switzerland's Sulzer Brothers and France's
Hispano-Suiza helped develop the Valindaba plant, which produces enough
enriched uranium to build two or three nuclear bombs each year. Foreign
firms such as these have played a crucial role in providing Pretoria with
the technology it needs to develop its highly secret nuclear program. Western
governments, such as France, the United States and Britain, must also bear
responsibility for South Africa's step into the nuclear age because they
have permitted transnationals to transfer nuclear know-how to Pretoria.
Pretoria's refusal to sign the Treaty of Non-Proliferation of Nuclear Weapons,
its potential to build nuclear weapons and its November 1986 purchase of
two converted Israeli Boeing 707 in- flight refuelling tankers have caused
alarm among South Africa's neighbors. Using the 707s, South African warplanes
could conceivably deliver a nuclear or conventional air strike as far as
1,200 miles from South African territory, making every city south of the
Sahara a potential target of South Africa's air force.
Divestment: Money Talks
Since the U.S. Comprehensive Anti-Apartheid Act took effect in October
1986, over the veto of President Reagan, the campaign for divestment has
led at least 19 U.S. state governments, 70 U.S. cities and some 120 universities
to approve measures mandating withdrawal of more than $18.5 billion in
investments in companies doing business in or with South Africa.
In 1985, France announced a ban on new investments in South Africa by French companies
and said state-run public utilities would not renew contracts for South
African coal purchases. Also in 1985, the governments of Denmark, Finland
Iceland, Norway and Sweden adopted a sanctions program in unison, and other
sanctions individually, which virtually ended their commercial relations
with South Africa.
In 1986, seven Commonwealth state leaders agreed to
ban new investment and reinvestment of profits earned in South Africa,
all government procurement and contracts with Pretoria and all financial
loans to the regime. Since the U.S. Congress approved sanctions in late
1986, 162 U.S. firms have reduced or severed their ties to South Africa,
including General Electric, General Motors, IBM and Coca-Cola.
Many of these companies, however, maintain a presence in South Africa through licensing
or distribution agreements. IBM, for example, sold its South Africa operations,
but continues to sell products in South Africa. General Motors sold its
South Africa facilities to local managers, who will continue to build and
sell GM vehicles in South Africa, and GM itself will continue to send spare
parts to South Africa for assembly. While sanctions have not stopped the
flow of dollars or the transfer of technology to South Africa's racist
government, the actions of some of South Africa's largest trading partners
have raised the financial and public relations costs of doing business
there. Companies with interests in South Africa, however, seem willing
to bear a high price in the pursuit of profit.
David Bates is a Washington, D.C. journalist.
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