South Africans Assess Drive for Sanctions : Whites Fear Divestment Will Spur Revolution; Blacks Divided

JOHANNESBURG, South Africa — Among many white South Africans, the move in the United States toward divestment and the adoption of other sanctions against the government here is regarded as the first step toward a long-feared black revolution.

Blacks see such sanctions neither as their salvation nor as a threat to what little they have now. Political activists welcome the international pressure for change but doubt that it will bring a quick end to the system of apartheid, strict racial separation. And the average black worker simply wonders how sales of stocks and bonds in New York could ever help him.

Worried white South Africans, however, are convinced that, one day soon, the sale of $1-million worth of stock in IBM or General Motors or another company doing business in South Africa will trigger a cataclysmic upheaval that will engulf those it is meant to help as well as the system it was intended to destroy.

“Maybe it will be New York, maybe Los Angeles, maybe Oshkosh, Wis., but the dumping, day in and day out, of shares of companies that do business here will have a cumulative impact,” said a Johannesburg executive just back from the United States. “One day, those sales of shareholdings will be such that a stampede starts. . . . American companies will then have to choose--the stability of their stock at home or their business in South Africa--and we will lose.

“When you multiply this decision a thousand times over as British, German, Japanese and other foreign companies leave, our domestic business confidence will be undermined greatly, trade will drop sharply and our economic isolation will increase. Not only will we not pull out of the present recession, but it will deepen. Unemployment will soar, and more and more blacks will be put out of work. Their anger will sweep this country, and sanctions, instead of promoting reform, will have brought revolution.”

As the campaign has grown in the United States for economic sanctions against South Africa, such doomsday scenarios have become almost commonplace here. The sell-off by universities, pension funds and other institutional holders of shares in the 300 or so American companies that do business here is seen as precipitating a total pullout by those firms and perhaps by many European ones as well.

The other possible sanctions under discussion in the United States--a ban on new U.S. investments here, prohibition of American bank loans to the South African government and state-owned companies, an end to direct flights between the two countries, restrictions on sales of high-technology equipment--add to worry that often seems to verge on irrational panic among the white minority here.

“The reality facing us is frightening,” the Transvaal Chamber of Industries told its members this month, warning about the impact U.S. sanctions could have on South African business and the country as a whole. “Our future is at stake!”

A full-scale foreign pullout, it is said, could reduce Africa’s gross domestic product by 1.5% to 2%--a substantial cut for a country that needs annual economic growth of at least 5.5% simply to create jobs for those entering the labor force each year and to maintain present living standards.

Many analysts here, however, say that the more significant impact would be psychological and political rather than economic.

“South Africans like American products, and their lives would be unimaginable without them,” said Prof. Carl Noffke, director of Rand Afrikaans University’s American Studies Institute. “They get up in the morning and brush their teeth with Colgate toothpaste and wash with Palmolive soap. They have Kellogg cereals for breakfast. They ride to work in cars with Goodyear and Firestone tires. They use IBM typewriters and Xerox copiers at the office. They drink Pepsi and Coke at lunch. . . .

“If all these products disappeared suddenly, the impact would be tremendous,” Noffke continued. “It is not that there are not other cereals or toothpastes or typewriters, but some of the comforts and certainties of life would have been abruptly changed, and it would bring a feeling of isolation. . . .

“I doubt very much, however, whether it would speed the reform process. It would almost certainly retard it and could well kill it as whites retreat in self-defense. At a time when we are trying to create good will among all our people, divestment and other sanctions generate ill will. At a time when we are trying to find a solution to our problems that will bring progress for all (racial) groups and satisfy all, this kind of pressure tries to force us in certain directions. . . . Naturally, there is a backlash.”

In contrast, the general black reaction has largely been one of indifference, as if divestment, or disinvestment as it is sometimes termed, and other economic sanctions have little to do with them but are part of a political game for whites.

The predominantly black Federation of South African Trade Unions, for example, said it would “wholeheartedly” support international sanctions against South Africa, including the withdrawal of foreign companies from the country, if it had any assurance that this would bring the political, economic and social changes desired by workers.

But the 150,000-member federation said it has “no mandate” from its members, many of whom are employed by foreign companies, to press for divestment or other sanctions “at this stage.”

“Workers have a vested interest in those factories,” federation general secretary Joe Foster said, “and we in fact believe we are part owners of them. In any case, I don’t think workers would want to inherit a bankrupt country.”

A few blacks, like Chief Gatsha Buthelezi, the Zulu leader, have even spoken out strongly against divestment, arguing that progress must come through faster economic development and that will require more foreign investment, not less.

A survey a year ago by Prof. Lawrence Schlemmer, president of the South African Institute of Race Relations and director of the University of Natal’s Center for Applied Social Sciences, found that 75% of black workers surveyed in the country’s main industrial centers said they disagreed with campaigns for divestment and other economic sanctions.

Of those opposed, 54% said such sanctions would reduce employment opportunities, and 41% said they would harm blacks. Even among self-described labor hard-liners, only 29% favored sanctions as a strategy, Schlemmer found.

Among the workers who endorsed divestment and other sanctions, 30% asserted that they are needed to “frighten the government,” and 28% felt they would help achieve political rights for blacks. But 39% wanted sanctions to help win higher wages and better working conditions.

Since that survey was completed, black political attitudes may have hardened, but after nine months of unrest, black activists remain wary of calling for international sanctions.

One reason has been the fear that such demands may be illegal, a violation of South Africa’s severe security laws. Another has been the conviction, as a leading member of the black consciousness movement’s Azanian People’s Organization put it last week, that “our liberation must be won in South Africa, not in the United States. We don’t mind help, of course, but we don’t have great expectations.”

Still, as Bishop Desmond Tutu, the Nobel Peace laureate, has discovered, the threat of international sanctions is taken very seriously by the government and whites generally, giving him additional leverage as he campaigns for an end to apartheid.

Tutu does not call for divestment or other sanctions, only for political and economic pressure on South Africa. But he says that he will take a stronger stand if the government has not begun dismantling apartheid within two years.

“Tutu sees the threat of sanctions as more potent than the sanctions probably would be themselves in putting pressure on the government,” one of the bishop’s associates explained. “Waving that stick of disinvestment seems to have more impact on whites here than all the unrest, all the deaths, all the strife, simply because they might at last be affected by apartheid and its consequences.”

But economists studying divestment doubt that major U.S. firms, whose $2.3 billion in direct holdings constitute 22% of foreign investments here, would be forced out of South Africa by a sell-off of their stock by government pension funds, university endowments and other institutions.

“General Motors, Mobil Oil, IBM and the like are too broadly held for share prices to be depressed for long by just disinvestment,” an American banker here said. “Moreover, their write-offs on pulling out could be considerable and affect their earnings and thus their share prices. Another factor to be remembered is that South African or even other foreign firms would probably buy their plants, very cheaply, to be sure, and so business would continue without much change. In purely economic terms, disinvestment itself is likely to have a marginal impact.”

A number of leading American companies--General Motors, IBM, Hewlett-Packard and Mobil Oil among them--have declared their determination to remain in South Africa, though this might expose them to greater criticism in the United States.

“We felt a duty to our employees, to our business partners and to the community at large to say we intend to stay and to work for reform,” said an executive of one of the companies, who asked not to be quoted by name because of “the extreme sensitivity of this issue back home now.”

“We could have kept quiet, hoping that people in the States would forget about us, but we pride ourselves on being good corporate citizens and felt this required us to say that we feel we can contribute more to peaceful change by remaining here,” the executive said.

Nine U.S. companies have closed their operations here in the past six months. Most, such as Blue Bell Inc., which had 600 garment workers here, and Pan American World Airways, which ended its flights to Johannesburg, blamed poor economic conditions for their withdrawal. But one firm, Perkin-Elmer Corp., a scientific instrument company from Norwalk, Conn., did little to disguise the divestment character of the sale of its 12-man office to its senior South African employees.

Frank Lubke, president of the 300-member American Chamber of Commerce here and general manager of Abbott Laboratories Ltd., said he expects more U.S. affiliates to close or be sold to South African interests because of the continuing recession, if not divestment pressures. “We are all here primarily for business reasons,” he said.

However, the political and social impact of American business in South Africa is much greater than its 22% share in total direct foreign investment suggests, particularly with the adherence to the Sullivan Principles of fair employment practices by about 150 of the largest firms employing most of the 90,000 blacks who work for U.S. companies.

‘Done Remarkable Things

“American companies have really done remarkable things in this country with their efforts to integrate the workplace and to adhere to principles of equal opportunity,” said Horace Van Rensburg, a member of Parliament from the liberal white opposition Progressive Federal Party. “In this, they have been pathfinders and pace-setters for South African companies. . . . It would really be a serious setback for further progress if they pulled out.”

Blacks, including the employees of American companies regarded as industry models, are more restrained in their praise. And many regard the whole Sullivan code, named for the Rev. Leon Sullivan, a Philadelphia black minister on the board of General Motors Corp., as a sham intended to shield the firms from demands that they withdraw from South Africa.

Black critics make three points: Integration and equal opportunity at work are almost pointless when racial segregation and inferior status resume as soon as they leave the office; blacks are generally not promoted to positions over white workers but only over other blacks and, whatever the commitment of a company’s American headquarters to the Sullivan Principles, the attitudes of the white South African middle management here have changed very slowly.

Blacks would also like to see the Sullivan program establish complaint offices in major industrial centers where workers at U.S. companies could complain about what they see as infractions of the code.

Can Apply Leverage

“Until black people see the Sullivan code as being good for them, until we have that acceptance, our impact is going to be limited,” said Lionel R. E. Gruewan, a Citibank official who acts as coordinator for Sullivan code companies.

“We have to do much more, and be seen doing it. American companies are increasingly going beyond simply playing the Sullivan game, that is beyond mere compliance, and are trying to make an impact on the community and to promote real change. . . .

“The disinvestment campaign, quite unexpectedly, gives them an excellent opportunity to do more by taking the pressure they are coming under in the states now and leveraging up. In other words, they can now go to the South African government and argue that these are the reforms that are needed to ensure they will be able to stay here.”

Of an estimated $14 billion in total U.S. investments here, only a fifth is in American subsidiaries or associated firms; most of the rest has come in the increased bank loans to South African companies and more shares purchased on the Johannesburg Stock Exchange, and how much of this money would stay is uncertain.

Some South Africans, politicians as well as businessmen, now argue that an American withdrawal or even a total foreign withdrawal of direct investments would prove a “disguised blessing.”

A withdrawal would let local firms increase their market share, force the economy as a whole to invest more and spend less and pull the country out of its current recession, now in its third year and likely to last at least two more years.

“The experience of two wars has shown that South Africa progresses the fastest when it has to act under pressure of shortages,” Anton Rupert, a prominent Afrikaner entrepreneur and an outspoken critic of apartheid, told other businessmen here this month. “Whatever supplies are not forthcoming will be made locally. Our industries thrived during the non-availability of imports. Any disinvestment would lead to greater self-dependence, and more jobs, rather than fewer jobs, could well be created.”

Among those voicing confidence in South Africa’s ability to emerge even stronger if the divestment scenario were played out have been President Pieter W. Botha and members of his Cabinet. Botha has urged businessmen in recent months to “plan for the worst . . . and we will survive to see the best,” according to a Cape Town executive who recently met with Botha.

“The president’s attitude is, Boer maak ‘n plan, “ the businessman said, quoting an Afrikaans proverb that a farmer should always make a plan for everything. “He does not want to see foreign firms leave, but he feels, first, that South Africa must not submit to pressure from abroad, even if disinvestment is the cost, and that, secondly, after some tough times, we would prosper even more than before. There is a bit of short-term truth in what he says, but no long-run logic to it.”

Like many other South African businessmen, his own concern is that a broad foreign withdrawal from the South African market will cut local companies off from new technology and products, from advanced management skills and from some foreign markets.

Stephen Gelb, a labor economist at the University of the Witwatersrand in Johannesburg, who studied the probable impact of divestment and the withdrawal of foreign firms, concluded that results would be “far more complex than the simplistic and apocalyptic visions put forward by many on both sides of the issue.”

“There might well be considerable benefit for South African capital through opportunities for expansion of assets and of market shares,” Gelb said. “A more general positive side effect could be enforced development of local technical expertise. As for job loss, not all of the different possibilities would actually lead to a substantial loss of jobs, though some rise in unemployment seems a likely outcome.”

Another economist, A. B. Lumby, of the University of Natal in Durban, concluded that, if a foreign divestment campaign were “50% successful,” with half of the foreign firms leaving, output would be reduced by as much as 2% a year and 100,000 blacks would be put out of work. But South Africa could still “absorb these rather mild shocks with little difficulty,” he said, because of the boom that would probably follow as the country undertook an industrialization program to compensate.

Trade Boycott Effect

A trade boycott would have a far more serious impact, Lumby said. If it were 20% effective, it would cost South Africa $1 billion in foreign-exchange earnings and eliminate 150,000 white jobs and 500,000 black jobs. If it were 50% effective, with the West refusing to buy gold, chrome, platinum, manganese and other minerals and metals from South Africa, it would cost $2.5 billion in foreign exchange and eliminate 300,000 white jobs and and 1 million black jobs.

But South African officials believe that a trade boycott is the least likely sanction that might be imposed.

“We are too good a customer and too good a supplier for everyone to agree to a boycott,” a Foreign Ministry official remarked. “And even our neighbors in Africa would not participate. A trade embargo might be the most effective measure to isolate us economically, but it is the least probable.”

A more serious economic concern, according to analysts here, is that the divestment campaign and perhaps action by the U.S. Congress will reduce new American and other foreign investment. At present, South Africa draws about 30% of its new investment from abroad, and this cannot be replaced easily by domestic financing without a major restructuring of the economy and a sharp reduction in living standards.

Johan Cloete, chief economist of Barclays Bank here, notes that for a decade South Africa has failed to attract the amounts of overseas capital investment that its wealth of natural resources should command.

“Political factors obviously play a part in discouraging foreign investment,” Cloete says. During the same period, South Africans, according to Cloete’s calculations, have sent huge amounts of their own capital abroad, perhaps $3 billion at present exchange rates.

South Africa, as a result, has increasingly depended on foreign loans, particularly to the South African government and state corporations, to finance its economic development. These loans are particularly vulnerable to anti-apartheid sanctions, which would made it hard for South Africa even to refinance its present $16 billion in overseas debts and supplier credits.

Harry Schwarz, the economic spokesman for the opposition Progressive Federal Party, said on his return from a recent trip to the United States that he found many American companies that would like to expand their investments here but are “seriously considering not doing so” because of what he called the “hassle factor.”

The depressed South African economy and the continued unrest are also considerations, Schwarz said, but “the major factor is whether it is really worth the bother, bearing in mind the atmosphere and possible problems.”

White South Africans are not overreacting to the threat of divestment and other economic sanctions, Schwarz believes, but, if anything, failing to take them seriously enough.

“Anything that hinders our country’s economic growth is harmful,” he said. “Any act that causes more persons to be unemployed adds to instability. Any action that hinders the economic upliftment of the underprivileged will make violent as opposed to peaceful change more likely.”

U.S. MEDIA IN SOUTH AFRICA

The Associated Press: 4 news employees (not including 1 at AP-Dow Jones, which is a separate joint venture of AP and Dow Jones)

Christian Science Publishing Society (The Christian Science Monitor): none employed currently, but may have 1 news employee by year-end

CBS Inc.: 41 employees (includes news employee and those in record and music-publishing operations)

New York Times Co.: 2 news employees

RCA Corp. (NBC): 3 news employees

Time Inc. (Time): 9 employees (includes news employees and those connected with advertising sales or book operations)

Times Mirror Co. (Los Angeles Times): 2 news employees

United Press International: 2 news employees

United States Information Agency (Voice of America): 1 news employee plus 2 part-time free-lance reporters

Washington Post Co. (Washington Post and Newsweek): 2 part-time free-lance reporters

Washington Times: 1 news employee

Source: Investor Responsibility Research Center and media organizations