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IBM to End Its Presence in S. Africa

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Times Staff Writer

International Business Machines Corp. said Tuesday that it will end its 34-year presence in South Africa and sell its subsidiary to its local manager there by next March. The announcement came just one day after General Motors Corp. said it is pulling out of the racially torn country, and the one-two punch left business and political leaders there stunned.

Anti-apartheid activists extended restrained praise to IBM for the withdrawal and said the back-to-back announcements will speed the exodus of other American firms still doing business in South Africa and increase pressure on the white-ruled government there to further reform the system of discrimination.

As world leaders in their industries, GM and IBM were formidable obstacles to those who sought to have U.S. corporations divest themselves of operations in South Africa. Because of their prominence, they were in the vanguard of those espousing the policy of working from within the system to encourage reform.

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Expects ‘Flood’ to Leave

“It’s a terribly important combination of withdrawals. . . . I fully expect the trickle of about 60 companies who have left in the past couple of years to become a flood,” said Timothy Smith, executive director of the Interfaith Center on Corporate Responsibility, a coalition of church groups active in seeking divestiture of business interests in South Africa.

IBM officials said the decision was based on business considerations, even though it continues to make a profit there.

Whereas GM attributed its decision to pull out in large part to the failure of its policies to help shake the South African government’s tenacious adherence to apartheid, IBM Chairman John F. Akers studiously avoided specific mention of the racial policies and the pressure that has been placed on American companies to pull out.

In a carefully worded statement, Akers said: “We consistently have said that IBM would remain in South Africa as long as we could maintain an economically sound business and contribute to peaceful change. Unfortunately, the deteriorating political and economic situation in South Africa, and between South Africa and its trading partners, makes our action necessary.”

Like General Motors, IBM long had resisted calls by anti-apartheid lobbyists and some stockholder activists for its withdrawal from South Africa, saying that it preferred to remain in the country and work for positive social change from within as long as business conditions permitted.

However, IBM has said its operations there have been under frequent review, and last April, Akers expressed the company’s disappointment with the lack of progress in dismantling apartheid. The decision to withdraw, a spokeswoman said, came at the end of a review that began about two weeks ago.

Fewer Than 1,500 Employees

IBM’s subsidiary in South Africa employs fewer than 1,500 people, of whom 23% are nonwhite. IBM in South Africa is not a manufacturing operation but rather handles sales, service and support to IBM customers; it owns no buildings in South Africa, and a company spokeswoman said assets are minimal.

The subsidiary will be sold to a new company headed by Jack Clarke, current general manager of the subsidiary. While it will not use IBM in its name, it will sell and service IBM machines. IBM said the new company will be “established for the benefit of the employees of IBM South Africa” and will be free to sell and service other companies’ products as well. IBM will be a major creditor of the new company.

Opponents of apartheid considered the decision by General Motors to sell its auto assembly operations there a major victory. GM, the world’s largest industrial company, was one of South Africa’s largest foreign-based employers, with about twice as many on its payrolls there as IBM.

But GM’s operations there had been losing money, and the company had only a small share of the weakening South African market for autos.

Dominates Computer Market

On the other hand, IBM dominates the South African computer market, just as it dominates computer selling worldwide. Because of its leadership role in sales, the South African business community had expected it to maintain a presence in the country.

IBM said that its sales in South Africa and its market share had been declining in recent years, however, in part because of increasingly restrictive conditions facing U.S. computer makers there.

The U.S. Commerce Department now forbids the sale of computers by U.S.-based companies to the military, police, prison system or other agencies that enforce the system of racial discrimination.

“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,” Akers’ statement said.

Financial Impact Minor

The decision is expected to have little financial impact on IBM; the operations there accounted for less than 1% of the company’s 1985 sales of $50 billion.

Officials at South Africa’s Embassy in Washington declined comment on both the GM and IBM announcements. In South Africa, however, top business leaders privately expressed shock and deep regret at the IBM action. The back-to-back withdrawals are expected to be raised at a Nov. 7 meeting that South African President Pieter W. Botha has called with 200 of the country’s top business executives. It is expected that the business leaders, fearing a cascade of departures, will press for faster reform.

Anti-apartheid groups, which have pressed for 15 years for IBM’s divestiture of its South African investments, said they were concerned that IBM products would still be sold there.

“It’s a significant step forward, but it’s not as clean a break as it should be,” said Randall Robinson, executive director of TransAfrica, an anti-apartheid group.

Said Smith of the Interfaith Center: “While we commend their announcement, we continue to be concerned that they are selling their computers there . . . to be used by the proponents of white supremacy.”

22 Firms Have Left

So far this year, 22 U.S. companies have actually left the country, according to the Investor Responsibility Research Center in Washington, a group that monitors shareholder issues. Another seven--including GM, IBM and Coca-Cola--have said this year that they plan to leave South Africa but have not left yet. The center said 244 U.S. companies remain in South Africa.

The announcements mean that more pressure and stockholder activity will be brought to bear on other U.S. companies.

Burroughs Corp., now the No. 2 computer maker in the world, moves up to top spot on some lists of corporate targets, said John Lind of the Interfaith Center. Burroughs and Sperry, which it acquired earlier this year, together have nearly 800 employees in sales and marketing offices headquartered in Johannesburg.

Burroughs, along with Royal Dutch/Shell, is believed to be weakening in its resolve to remain in the country.

But Burroughs, along with computer makers Control Data Corp. and Hewlett-Packard Co., which each have sales operations in South Africa, said Tuesday that their policies had not been changed.

A Hewlett-Packard spokesman called the GM and IBM decisions “regrettable. We will miss their leadership” in the movement to effect change from within, he said.

Times staff writer Michael Parks contributed to this story from Johannesburg.


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