Bradley Seeks to Cut L.A.’s S. Africa Ties : Plan Would Involve $1 Billion, Put City in Divestment Forefront

Los Angeles Mayor Tom Bradley on Tuesday called for a sweeping policy of economic sanctions against South Africa which, if enacted, could remove as much as $1 billion in city-controlled assets from banks and businesses with ties to South Africa and place the city in the forefront of the nationwide divestment movement.

If the sanctions are approved by the City Council and the city’s three pension fund boards, they would represent one of the two largest divestment actions taken by U.S. cities in protest against South African racial oppression.

Among the 10 states and cities that have enacted divestment laws of varying severity, New York City has declared the most to divest--a $9-billion pension fund with close to $1 billion invested in companies doing business in South Africa.

$4 Billion in Pension Funds

Bradley’s plan calls for divestment of the city’s nearly $4 billion in pension funds, of which about 20% is invested in firms with connections to South Africa. Divestment of the pension funds would start with firms that sell military equipment to the South African government.

The mayor’s plan also requires the removal of all city deposits from banks and institutions that lend money to South Africa. City Treasurer Robert M. Odell said Tuesday that the city typically has about $1.5 billion in total daily deposits, but Odell could not say what percentage of that money is deposited in institutions with South African ties.

5 Years for Divestment

The policy endorsed by Bradley, which allows five years for divestment of the pension funds, will play out more slowly than the divestments of some cities, such as Philadelphia and Washington, where immediate unloading of all stocks and bonds of firms with South African ties was required.

Flanked at a press conference by Robert Farrell and Zev Yaroslavsky, the two City Council members who have worked hardest to develop a divestment policy, Bradley said his proposal was the correct response to “the most vicious and morally reprehensible form of institutional racism.” Farrell was arrested earlier this year in Washington for taking part in an anti-apartheid demonstration outside the South African Embassy.

At the same time, Bradley said, his plan will give city officials enough time to replace divested holdings with investments of equal or greater value. Bradley said he rejected arguments made by many financial analysts that divestment, which rules out investments in many major U.S. corporations, forces cities and states to put their money in second-rate securities.

“Timely and careful divestiture over a lengthy phase-in period can be successfully accomplished without threatening the fiscal integrity of public pension systems,” Bradley said.

Under the mayor’s plan, the city also would refrain from making new investments in corporations doing business in South Africa; avoid purchasing any goods or services from the South African government; impose a local fee on the sale of South African gold coins, known as Krugerrands, and use the fees to help pay for creating a nonprofit corporation that would actively oppose apartheid.

Favors Code Participants

Bradley’s plan for divestment of the city’s pension funds is kindest to those companies in South Africa that have a record of strict compliance with a voluntary code, known as the Sullivan Principles, which asks businesses to practice fair employment, improve living conditions for non-white employees and work for an end to apartheid.

According to the Rev. Leon Sullivan, the Philadelphia Baptist minister who drew up the code, about half of the U.S. firms in South Africa are abiding by them with varying degrees of diligence.

Although Bradley said the principles “have not spurred significant reform,” his divestment plan would allow the pension funds to retain holdings for at least four years in companies that are rated by Sullivan as model followers of the principles.

Bradley said he is confident that the boards of the city’s three pension funds would approve his plan. The mayor appoints some of the members of those boards. Other members are elected by city employees.

If the boards balk, Yaroslavsky said, the City Council will propose a ballot initiative that would authorize divestment of the pension funds.

Lawyer David Bow Woo, who chairs the commission overseeing the city’s Police and Fire Pension System, the largest of the three funds, said Tuesday that his board is waiting for an opinion from the city attorney’s office on the legality of divestment.

Effect on Fund Noted

Woo said that divestment would have an effect on the fund.

“I think that any divestment . . . would have an impact on our total investment plan. If you take a certain body of stocks out, you add to the risk. The question is whether you can compensate with a higher return.”

An official of the City Employees Retirement System said that board has taken no position on divestment.

Vincent Foley, chairman of the Water and Power Employees Retirement System, said his board has not discussed divestment. “In my opinion the jury is still out on whether the flight of American dollars hurts South African blacks more than it helps them,” he said.

Addressing the same issue, Bradley said, “Maybe there will be some (South African blacks) who will suffer as a result of this action.” But, he added, many more have suffered as a result of racial policies in South Africa.

Although Yaroslavsky said he believes that the City Council will support divestment, he said that at least one council member is concerned that the proposed fee on the sale of Krugerrands might be illegal.

Yaroslavsky said the council’s Finance Committee, which he chairs, will begin Thursday to consider the mayor’s plan.