Senate OKs $11.4-Billion Divestment Plan for State

In protest of South Africa’s system of apartheid, the Senate voted Monday to sell up to $11.4 billion worth of public investments in companies doing business in that racially divided nation.

Approving what would be the largest divestiture plan in the United States aimed at South Africa, the Senate voted 27 to 11 in favor of legislation that would lead to the sale of University of California and state pension fund holdings in firms operating in South Africa.

“How dare we allow our investment dollars that we have in trust funds to be invested in such a racist country as South Africa?” said Sen. Diane Watson (D-Los Angeles) in urging adoption of the divestiture plan. “How dare we allow the money that we contribute into our retirement system to be used to support a system that would be clearly illegal here in California?”

Approval of the measure by the Senate signals that an end is in sight to the battle over divestiture which began at least 13 years ago when UC students called on the university to exercise social responsibility in investing its funds.

Gov. George Deukmejian, who in the past had opposed full-scale divestiture in favor of case-by-case action, shifted his stand in June and gave his backing to a four-year plan to divest the state of all investments linked to South Africa.

The Senate action was the first legislative test for the proposal, which was amended two weeks ago into a bill by Assemblywoman Maxine Waters (D-Los Angeles). The legislation is expected to win easily the approval of the Assembly as early as today.

Ultimately, the measure could require the sale of $6 billion in stocks and bonds held by the Public Employees Retirement Fund and $2.3 billion in investments made by the state Teachers Retirement Fund.

The bill would also enable the University of California to proceed with its plan to sell $3.1 billion in stocks and bonds linked to South Africa by indemnifying UC regents and managers of state pension funds from any personal liability in carrying out the divestiture policy.

Under the four-year plan, state pension and investment funds would be prohibited during the first year from making any new investments in companies doing business in South Africa. No divestiture would take place during the first year, giving business a grace period in which they could cease operations in South Africa.

During the next three years, the fund managers would be required to sell off investments in companies still operating in South Africa, disposing of at least one-third of the stocks and bonds each year until they are all sold.

By Jan. 1, 1991, divestiture would be complete.

Opposed by Republicans

In the Senate, the measure was opposed by Republican legislators who argued that divestiture would harm black South Africans who are employed by U.S. companies and would endanger the source of scarce metals such as chromium that are vital to the United States’ defense.

“We single out South Africa, which is one of the great allies we have,” complained Sen. John Doolittle (R-Citrus Heights), noting that no similar divestiture plan has been adopted for firms doing business in the Soviet Union.

But Watson, who is black, argued that such sanctions against South Africa were needed because blacks, who make up 73% of that nation’s population, are denied civil rights because of their race.

“This (divestiture) is a move of moral indignation as to what has been going in a country where the majority of the people look like me and a minority of the people keep them in bondage,” she told her colleagues.

If the divestiture plan is enacted into law, California will join 12 other states and about 30 cities, including Los Angeles, that have sold or halted investments in firms operating in South Africa.

Largest in Nation

With $11.4 billion invested in these companies, California’s divestiture plan would easily be the largest in the nation, according to Waters’ office.

In addition to the public employee and teacher retirement systems, the legislation would prevent future investment by the state Pooled Money Investment Fund in firms doing business in South Africa.

The fund, which is used to hold state money for an average of 15 months at a time, can contain as much as $20 billion, with potentially billions of that invested in companies that do business in South Africa. State Treasurer Jesse M. Unruh’s office said it has not determined how much of the fund is invested in these companies.

The rapid progress of the divestiture bill was due primarily to Deukmejian’s turnaround on the issue. Last year, he vetoed a far milder measure that would merely have halted new investment by the pension systems in firms doing business in South Africa.

The Republican governor, who is facing reelection this year, has said he shifted his stand on divestiture because of escalating violence and the failure of the white-minority Pretoria regime to dismantle the apartheid system of racial segregation.

Despite Deukmejian’s support for the bill, it won the backing of only two Republicans in the Senate, moderate Ken Maddy of Fresno and conservative John Seymour of Anaheim, the GOP caucus chairman. Twenty-five Democrats voted for the measure.

The divestiture proposal contained in the Waters’ bill is similar to one adopted by the UC regents last month at Deukmejian’s urging. However, that plan cannot take effect unless the Legislature approves the provision absolving the regents and managers of the fund from personal liability if the university should lose money as a result of divestiture.