IBM Pulling Out of South Africa : Cites ‘Deteriorating Political and Economic Situation’

IBM said today it will sell its South African subsidiary because of the “deteriorating political and economic situation” in the racially divided country.

The announcement came a day after General Motors Corp., the second-largest U.S.-based employer in South Africa after Mobil Corp., said it will sell its South African operations to local interests. (Story on Page 14.)

IBM said it will sell the subsidiary for an undetermined price to a new company established “for the benefit of the employees of IBM South Africa.”

IBM South Africa markets and services information equipment and employs fewer than 1,500 workers, 23% of whom are non-whites, IBM spokesman Richard Coyle said. It is not involved in manufacturing or product development, he said.

Coyle said the subsidiary accounted for about 0.5% of IBM’s $50 billion in worldwide revenue during 1985.

The sale is to be completed by March 1, IBM said. The new company will be headed by Jack Clarke, general manager of IBM South Africa.

“Unfortunately, the deteriorating political and economic situation in South Africa, and between South Africa and its trading partners, makes our action necessary,” Chairman John F. Akers said in a statement.

“By taking this step now, before our freedom of action is further limited, we can best carry out our responsibilities to our employees and our customers in South Africa.”

The Investor Responsibility Research Center, a Washington-based group studying U.S. investment in South Africa, says 22 American companies have left South Africa this year, and six say they will, including Coca-Cola Co., Procter & Gamble Co. and Marriott Corp.

That compares with 39 companies that left in 1985 and seven in 1984. The number of companies in South Africa totals 244, with investment totaling $1.3 billion, down from $2.6 billion in 1981, the center says.

IBM has operated the South African subsidiary for 34 years, Akers said.

Although IBM regularly reviewed the climate in South Africa, the sale proposal had been under consideration only for a couple of weeks, according to Coyle.

IBM wanted to sell the subsidiary while it still was in good business condition and had “a good base on which to build,” he said. After the sale, the subsidiary will be free to represent products from other manufacturers, giving it a broader business base, he said.