S. Africa Irked as U.S. Sees Troubled Business Climate

An official U.S. report concluding that South Africa is “closer to becoming just another African country” and not a good place for American companies to do business set off a major diplomatic row Thursday between Pretoria and Washington.

Foreign Minister Roelof F. (Pik) Botha summoned the American charge d’affaires, Richard C. Barkley, and told him angrily that South Africa takes “the strongest exception to the insulting and hostile language” of the U.S. Commerce Department report on political and economic developments here.

“South Africa is part of Africa,” Botha said, “and therefore takes exception to the arrogant and insensitive comment that South Africa is ‘closer to becoming just another African state.’ ”

The report had been prepared for internal U.S. government use, but it was made available to reporters after parts of it were quoted in Thursday’s editions of the Business Day newspaper and in a dispatch of the Reuters news agency.

Botha’s anger clearly stemmed not only from the publication of the report but also from the congressional imposition of economic sanctions on South Africa earlier this month and the abrupt withdrawal of three major American companies from the country this week.

Citing political as well as economic reasons, General Motors, IBM and Warner Communications all announced their intention to sell their South African subsidiaries. Several more companies, including Honeywell, are expected to pull out within a few weeks.

Their withdrawal, which will leave about 240 American companies here, is taken as a judgment that South Africa’s crisis will not be resolved easily or soon and that it is not worthwhile staying.

Although the economic consequences of the departure of the American corporations are not catastrophic--most will continue to sell their products here indirectly--the psychological impact is great as one company after another leaves and denounces apartheid. So far this year, 22 have left, and seven have said they will.

What particularly galled Pretoria about the U.S. government report was its implicit recommendation to American businessmen to pull out because South Africa is already a poor place to invest or trade in a large way and seems likely to get worse.

Sees Bleak Outlook

Written by the U.S. Commerce Department’s trade representative in Johannesburg, the 50-page report concluded in scathing terms that the white-led minority government in Pretoria is increasingly unable to manage the country’s affairs and that the economic as well as the political outlook is bleak.

Although South Africa takes pride in its modern, industrialized economy, the U.S. report described the country as “a chronic debtor, import-starved, ridden with ethnic diversities, a repressive regime unable to manage its own domestic constituency in any positive way, whose only leverage is its ability to manipulate foreign governments and attract international attention. . . .”

“This is not an ambiance that can attract U.S. trade and investment,” the report said, adding that the imposition of international sanctions will mean a “siege economy,” including lower industrial standards, fewer imports and greater government controls, making South Africa even less attractive to American companies.

Even before the political controversy about trading with South Africa and the imposition of international sanctions, the report said, South Africa had become a difficult place for American companies to do business because of excessive government control of the economy and extensive regulation of commerce.

‘Half-Truths’ Charged

“A monstrous bureaucracy superintends a maze of commercial regulations,” the report said. American companies face serious trade barriers in the form of “government control of infrastructure, tariffs, price controls, commodity and agricultural marketing and protecting of industry,” it said, adding that import tariffs can run to 100% of a product’s value.

Kent Durr, the deputy minister of finance, described the report as “dangerously naive, laced with half-truths and falsehoods.”

If South Africa has a “siege economy,” Durr said, the U.S. government itself is largely responsible because it has “blackmailed” American companies to pull out of the country, has imposed economic sanctions on it and is helping to exclude South Africa from international trade.

Harry Schwarz, the economics spokesman for the white opposition Progressive Federal Party, agreed with Durr.

“This is couched in exaggerated language, and it is not a correct assessment of the economic and political situation,” Schwarz said, expressing concern that American businessmen might take the Commerce Department report seriously and as a result pull out of the country.

State-run Radio South Africa, in a commentary reflecting government thinking, said the withdrawal of American companies from South Africa is regrettable but could have some beneficial effects, both political and economic.

Pretoria will be less vulnerable to “foreign-imposed dictates on South African business, . . . leaving South Africans to get on with the job,” the commentary said. Less U.S. economic involvement will inevitably mean “reduced political interference,” the commentary added, almost welcoming the pullout for its political implications.