NOVEMBER 1983 - VOLUME 4 - NUMBER 11
Dollar$ for Apartheid
by James Cason and Michael Fleshman
The full extent of the American financial stake in South Africa was revealed last July with the release of a secret State Department study which put total U.S. investments in that white minority-ruled country at a staggering $14.6 billion-far in excess of the Commerce Department's official figure for direct investment of $2.6 billion or even the $6-$8 billion figure most commonly used by anti-apartheid and divestment activists.
The study, U.S. Investment in South Africa: The Hidden Pieces, was conducted by economic analysts at the U.S. consulate in Johannesburg and cabled to Washington. The three-page cable found its way to TransAfrica, the Washington-based black lobby for Africa and the Caribbean and was made available to Multinational Monitor.
Although the cable shows no dramatic new increases in the level of U.S. involvement in the South African economy, it does reveal additional types of investment that had previously gone uncounted. The revelations raise new fears about the lengths the U.S. government is prepared to go to protect U.S. investment in South Africa and seem certain to spur the growing divestment movement in the U.S.
Lying With Statistics
The study suggests that a withdrawal of American investors from South Africa would he much more damaging to the apartheid economy than the business community and the State Department had been previously willing to admit.
Most assessments of U.S. financial holdings in South Africa have reported the misleading 52.6 billion Commerce Department figure for direct imestment - which is defined as a single U.S. investor owning the equivalent of at least 10 percent of the voting shares in a South African company. But not included in the Commerce figure are investments through subsidiaries of U.S. firms based in a third country, such as that of the Ford Motor Company, which holds 88 percent of Ford Canada, which in turn owns 100 percent of Ford South Africa. Ford's $213 million investment shows up as a U.S. investment in Canada-not South Africa.
Also not included in the Commerce Department statistics are U.S. bank loans and portfolio investments by Americans in the Johannesburg Stock Exchange. "These fatter transactions," the cable's author note,. "still represent U.S. investment." It is the inclusion of these investment - $3.6 billion in short-term loans from U.S. banks and over $8 billion in U.S.-owned South African stocks together with Commerce's direct investment figure that make up the $14.6 billion total.
Significantly, the study found that the nine largest U.S. banks-Banker's Trust, Chase Manhattan, Chemical, Citibank, Manufacturers Hanover, J.P. Morgan, Continental Illinois, First Chicago, and Bank of America-accounted for 65 percent of all outstanding loans to South Africa. U.S. investors account for 57 percent of the total foreign shareholdings in South Africa's gold, diamond, and other precious metals and mineral mining houses, valued at $8.1 billion. "Most U.S. [portfolio] investment is directly in gold mining companies," the cable reports. "U.S. investors also own 25.3 percent of the platinum mines and 11.0 percent of DeBeers [the diamond mining and marketing cartel]." The cable quotes no figures for U.S. stock holdings in other sectors of the South African economy.
Stocks and Bombs
It is the highly visible presence of U.S. corporate subsidiaries in South Africa that has drawn the greatest fire from human rights and anti-apartheid activists.
Since 1970, U.S. investment in South Africa has more than tripled to a point where U.S. companies now account for more than 20 percent of all foreign direct investment in South Africa. Most recently, spurred by strong expansion of the South African economy, American companies expanded their investment by almost 17 percent in 1980 and by 12 percent in 1981. By comparison, American foreign direct investment worldwide increased 14 percent in 1980 and 5 percent in 1981.
American manufacturing companies own almost ten percent of the fixed capital stock in the manufacturing sector and U.S. firms reportedly control 75 percent of all computer sales. What's more, U.S. petroleum companies control almost 40 percent of South Africa's petroleum sales.
Yet the gross figures for foreign direct investment do not tell the whole story. Although over 350 corporations have direct investments and more than 6,000 U.S.-based transnationals are involved in some type of arrangement with the apartheid Republic, about ten corporations-among them, Caltex, Mobil, Ford, General Motors, Goodyear, General Electric and U.S. Steel-control over 70 percent of the total value of U.S. direct investment in South Africa. At the top of any list of American companies in South Africa are the two oil giants Caltex Petroleum Company, jointly owned by Texaco and Standard Oil of California, and Mobil Oil. Both play a key role in South Africa's energy sector.
South Africa has yet to discover any commercially exploitable petroleum reserves, and, in view of a four-year-old embargo on oil deliveries by OPEC and most non-OPEC oil producers, the government has embarked on an ambitious plan to construct synthetic fuel plants. Petroleum supplies remain a weak link in the economy, and the state goes to great lengths to ensure its supplies-including outlawing publication of information about oil supplies even by the companies themselves.
While acknowledging that apartheid is "both repugnant and indefensible"" Mobil asserts its corporate responsibility to provide oil to the South African government. "Total denial of supplies to the police and military forces of a host country," the company told shareholders in response to demands that Mobil cease all sales to those institutions, `is hardly consistent with an image of responsible citizenship in that country. The great bulk of the work of both the police and military forces in every country, including South Africa, is for the benefit of all of its inhabitants."
Both Mobil and Caltex maintain that their activities in South Africa benefit black South Africans. Mobil reported to shareholders in 1981 that its subsidiaries in South Africa have "been in the forefront of community activities designed to improve the education, living conditions, and status of non-white South Africans."
In general, American corporations continue to argue that, while they do support the government they also provide jobs and security for large amounts of black workers who would otherwise be far worse off. But critics question this contention, noting that the 127,000 black workers that American companies employ represent less than 2 percent of the officially recognized black work force.
While some of the changes brought by the corporations-such as integrating existing facilities-are welcomed by the black workers, they can hardly be said to get at the root of the apartheid system. In 1982, average monthly wages for urban blacks in South Africa were only $271, compared with a figure for whites that stood at $1,044. And while the strength of black trade unions in South Africa has increased dramatically in the past few years, the harsh reality of apartheid as a system that encompasses the entire lives of black South Africans, on and off the workplace, cannot be erased.
The difficulties that black workers face in South Africa was illustrated in August when workers struck a Firestone - owned plant west of Johannesburg, demanding a pay raise and the elimination of incentive bonus wages in favor of straight hourly pay. As of early September, the workers, who are affiliated with the largest independent black trade union in the country were on strike.
But even when unions successfully organize at plants, the police often step in. Thozamile Gqweta, president of the South African Allied Workers Union, was detained seven times between November 1981 and May 1982 and he has testified repeatedly about the torture he endured in prison.
The most stinging criticism of the America corporate presence is provided by the reality of apartheid. The Compensation Commissioner for Occupational Diseases on the mines recently reported that the standard payment a white mine worker receives for any "first degree compensatory disease other than TB" is $16,458. Black mine workers get $1,372. For TB compensation alone, whites receive $6,858, while blacks get $823.
Companies, the military, and the state
Corporate investment and the apartheid political system in South Africa are linked-but not in the direction of change. South African authorities are well aware of their dependence on industry-South Africa's "first line of defense" against attacks by those opposed to apartheid in the words of Defense Minister General Malan.
For example, the South African government has required companies designated as important to national security to hire armed guards and formulate plans to deal with situations of "civil unrest" by September this year. These companies, designated as "National Key Points," are defined as installations where any loss or damage could endanger South Africa's security or interests, and are generally acknowledged to include a number of American multinationals.
According to press reports, "several hundred" sites have been classified as key points, including airports, power stations, oil refineries, auto plants and chemical installations. For those companies that might hesitate to comply, the act provides fines of up to $18,400 and possible prison terms of five years for corporate executives.
American corporate collaboration with the South African government goes back to a time long before the key points laws came into effect. In the early 1960s, the American Allis Chalmers Corporation built South Africa's first experimental nuclear research reactor. An IBM computer helps the government keep track of the black population, and GM and Ford trucks keep the police and military on the road.
More recently, in late September, the Reagan administration granted permission to seven U.S. firms to bid on a ten-year maintenance contract for South Africa's Koeberg nuclear power plant outside of Cape Town.
The South African government is clearly aware of the role U.S. multinationals can play in determining policy. This was revealed in a secret 1978 State Department cable on South African government attitudes towards multinational corporations obtained by the American Friends Service Committee. The State Department reported that "[the South African government's] stake in the multinationals is very large, not only for obvious economic reasons but because they exercise a restraining effect on policymakers abroad."
The corporate and South African lobbying effort seems to be paying off. In early October the Johannesburg Sunday Express reported the Reagan administration had quietly approved a special trade promotion office in Johannesburg, the first official U.S. government-sponsored trade office for many years. The trade office, which was approved last April, is operated by the Commercial Foreign Service of the U.S. Department of Commerce and will be staffed by two Commerce officers and five local staff. "We hope to increase trade by one billion dollars annually," said Stanley M. McGeehan, the senior Commerce officer.
While American officials tried to minimize the importance of the new office, the Sunday Express quickly saw the significance, proclaiming in its headline over the article announcing the new office: "U.S. DEFIES THE SANCTIONS LOBBY."
The Reagan administration and American companies argue that their presence in South Africa helps preserve American jobs by promoting trade and accelerates further change in South Africa. Yet the bottom line for corporate involvement in South Africa, as for corporate involvement worldwide, is profits. The rate of return on investment for U.S.-based corporations with direct investments in South Africa was 29 percent in 1980 and 19 percent in 1981, while average rates of return for United States direct investment worldwide were 18 percent and 14 percent for the same two years. American corporate managers, and their friends in government, can hardly be expected to work with much speed to dismantle a system that produces such large profit margins.
Recognizing the link between corporate profit margins and apartheid, black South Africans have for many years called for the complete isolation of the white minority government and for a total corporate pullout from South Africa.
The response to this call from within South Africa has been a growing international movement to isolate South Africa. In the last few years, a nationwide movement in support of a corporate pull-out from South Africa has been growing. Activists on college campuses, in churches and labor unions, and in state and municipal governments have called on these institutions to sell their stocks in corporations that continue to operate in the apartheid republic-with notable success. In the past six years, according to figures compiled by the New York-based Africa Fund, colleges have been forced to sell at least $140 million in stocks in companies involved in South Africa. The Fund also reports that actions by state and municipal governments in 1982 will likely result in the sale of some $300 million in other stocks.
It is in these campaigns that activists plan to employ the secret State Department cables. "The secret cable reveals the full magnitude of the total U.S. relationship with South Africa," says TransAfrica Executive Director Randall Robinson. "It also reveals how very badly we've been deceived by this administration and by past administrations about the depth of our involvement with that country."
James Cason and Michael Fleshman are the former editors of Southern Africa magazine, which stopped publication in April of this year. Both are now freelance writers living in New York City.
For further information on the divestment movement in the United States contact:
American Committee on Africa/