Governor Signs South African Divestiture Bill

Times Staff Writer

Gov. George Deukmejian, declaring his opposition to South Africa’s system of apartheid, signed California’s landmark divestiture law Friday and called on Congress to override President Reagan’s veto of legislation imposing sanctions on the racially divided nation.

“We are condemning apartheid in the strongest possible terms that we can within the powers we have in this state,” Deukmejian told reporters before signing the measure. “Today, California is signaling to the government of South Africa, and indeed to the world itself, that a great and free people are not going to fall silent to racism and brutal oppression.”

The Republican governor, who has staked out a tough position on South Africa as he campaigns for reelection, said he would be “happy” to lobby members of Congress if that would help overcome Reagan’s veto of stronger federal sanctions.

California’s divestiture law, designed to put pressure on South Africa to dismantle its system of racial segregation, will require the withdrawal of up to $12 billion worth of public investments in companies that do business in the white-ruled nation.


As state pension fund managers prepared to put the plan into motion, companies affected by the law criticized Deukmejian’s stand and said divestiture was unlikely to alter their operations in South Africa.

“We’re very sad that divestment has been taken up by the state,” said Stephen North, a spokesman for Chevron Corp. “It’s a misguided policy. It will not cause Chevron to leave South Africa.”

State employee pension funds have invested about $176 million in Chevron stocks and bonds. The pension funds also have invested heavily in Dow Chemical Co., buying about $173 million worth of stocks and bonds in the firm, which operates a plant in South Africa that makes drugs to combat tuberculosis.

Understand Emotionalism


“We don’t intend to change our operations in South Africa as a result of this legislation,” Dow spokesman Jack Jones said. “We’re disappointed we’re not first-class citizens, or investments, in California as the legislation implies. But we certainly understand the emotionalism of the issue.

“We’re sad about it. We realize where he (the governor) is coming from. We know it’s a personal issue with him,” Jones said. “Hopefully, South Africa can get straightened out before they have to implement this bill.”

The four-year divestiture plan will require the sale of up to $6 billion in stocks and bonds held by the state Public Employees Retirement System and $2.9 billion held by the State Teachers Retirement Systems in companies such as Dow and Chevron, according to the most recent estimates.

Personal Liability

The law also enables the University of California to proceed with its plan to sell up to $3.1 billion in holdings linked to South Africa by indemnifying university officials from any person1634476140divestiture policy.

Under the law, companies will have until Jan. 1, 1988, to avoid divestiture by halting their operations in South Africa. After that, the state will sell at least a third of its holdings each year in companies that are still doing business in South Africa, unless apartheid is abolished. Divestiture should be complete by Jan. 1, 1991.

Assemblywoman Maxine Waters (D-Los Angeles), the author of the legislation, said it will be the largest divestiture action aimed at South Africa anywhere in the world.

Some members of Congress have argued that the federal sanctions, if Congress enacts them by overriding the President’s veto, would supersede the state measure. But Deukmejian said he believes California has the power to adopt its divestiture plan.


Sole Power

While the United States has the sole power to make foreign policy, Deukmejian said he doubts the federal government can dictate what a state’s investment policy shall be.

“It’s not totally free from debate, but based on the best legal analysis we have available to us, we don’t think they can preempt us from taking this kind of action,” Deukmejian said.

The federal legislation, which overwhelmingly passed both houses of Congress, would place a virtual ban on new investments and loans to South Africa, block exports of crude oil and petroleum products and halt imports of South African uranium, coal, textiles, steel, arms and farm products. It would also deny landing rights in the United States to South African aircraft. But it stops short of requiring full divestiture. Corporations that would be affected by California’s divestiture law argued that pulling out of South Africa would only harm the black population.

Sells Tractors

“We feel our presence there is of benefit to the black community,” said Charles Schnieder, public relations manager for Tenneco Inc., which sells tractors and backhoes in South Africa. “We have no intention at this time of changing that.”

State pension funds own about $238 million in Tenneco stocks and bonds.

The company that would be most affected by divestiture is International Business Machines, in which the pension funds have invested about $742 million.


“We’re sorry to lose shareholders, but we have said we will continue to do business there as long as it makes good business sense and we can help people to make positive change in that country,” IBM spokesman Rich Coyle said.

Deukmejian chose to sign the bill in San Francisco, where he has lost considerable ground since May to his Democratic rival, Los Angeles Mayor Tom Bradley. According to a Los Angeles Times Poll taken earlier this month, the governor has lost his lead over Bradley in the Bay Area and now trails him by 20 percentage points.

Stand for Freedom

“Today we are telling the world that we always stand against hatred and bigotry and for freedom, opportunity and dignity for all people,” Deukmejian said at the bill-signing ceremony, which was attended by the Legislature’s strongest black advocates of divestiture, Waters and Assembly Speaker Willie Brown (D-San Francisco).

“I think,” the governor said, “we all ought to ask ourselves the question as I have done: How would we feel if our rights and if our individual freedoms were denied and the rest of the world turned its back on us?”