Citicorp Joins Parade of Firms Leaving S. Africa : Bowing to Pressure in U.S., Bank Will Sell Its Subsidiary by July 1
Citicorp, the largest American commercial banking company, announced Tuesday that it is joining the corporate exodus from South Africa and selling its subsidiary here, apparently as a result of U.S. anti-apartheid sanctions.
John S. Reed, Citicorp’s chairman, said in New York that “current constraints” have made it “increasingly difficult to meet the needs of South African clients in the manner they have the right to expect.” By “constraints,” he meant both New York City and federal laws that penalize American companies operating in South Africa and prohibit new U.S. investment here.
The local Citibank subsidiary will be sold July 1, Reed said, to the First National Bank of Southern Africa. First National was Barclays National Bank before its British parent pulled out of South Africa last year.
Reed said Citicorp believes that it has had “a positive effect upon the environment” in South Africa and regrets that it now feels it must pull out.
Citicorp’s withdrawal is more a political and psychological blow than an economic blow to South Africa.
Even as other major American companies withdrew from South Africa over the past two years, sometimes expressing their opposition to apartheid but more often saying they saw no early resolution of the country’s problems, Citicorp repeatedly declared its determination to stay on and work for political, economic and social reform.
Situation Changed
But a month ago, as anti-apartheid sanctions in the United States threatened profitable Citicorp operations there, and a hard swing to the right in white parliamentary elections appeared to reduce reform prospects here, the New York bank asked First National whether it was interested in buying its South African subsidiary. Negotiations followed quickly in London and Johannesburg.
Under the federal sanctions enacted last October, Citicorp was prohibited from lending to South African public agencies, dealing in South African government securities or extending new dollar credits to private borrowers, according to a Citicorp spokesman. More than 30 cities have laws restricting purchases of goods and services from companies that do business in South Africa. New York City’s ordinance requires companies that wish to sell to the city to sign a statement saying that they do not sell to the South African military or police. If companies refuse to sign, their low bids may be rejected.
“In addition,” a corporate spokesman added, “the uncertainties with regard to our situation had an impact on the members of our staff and their ability to realize their own full potentials as bankers.”
Reed said First National, as South Africa’s largest bank, “has the capability and position to capitalize on the opportunities of the business being sold and to realize the full potential of Citicorp’s multiracial South African staff.”
Chris Ball, First National’s managing director, told a press conference here that although its name will be changed, the Citibank subsidiary will be kept intact as a special corporate banking unit within his bank. He said its 175 South African employees will all be retained under its present management group.
Although the nominal sale price of 130 million rand is almost $65 million, Citicorp apparently will realize only $38 million because the money can be withdrawn from South Africa only at the financial exchange rate used for foreign investments.
The Citicorp action came only two weeks after the Rev. Leon Sullivan, the Philadelphia minister who wrote a code of fair employment practices under which most American companies operate here, called for a complete break in economic relations with South Africa, including a total U.S. corporate withdrawal. But both Citibank and First National officials said there was no direct connection between Sullivan’s demand and Citicorp’s decision.
Joins Corporate Exodus
More than 100 U.S. companies have pulled out of South Africa in the past two years, according to the Investor Responsibility Research Center, a Washington-based group that monitors American economic involvement in South Africa. They include such giants as International Business Machines, General Motors, Exxon, Coca-Cola, Kodak and Firestone Tire & Rubber. Ford Motor is discussing a deal under which it would give to the workers most of its minority share in a South African auto company.
Citicorp’s withdrawal will leave South Africa without an American banking presence. Chase Manhattan Bank and North Carolina’s NCNB bank closed their small representative offices about a year ago.
Ball said the Citibank unit’s projected earnings for the year ending Dec. 31 are roughly $4.5 million after taxes, but freed from U.S. sanctions, it should earn at least $7.5 million and possibly even twice that next year. Citicorp, which operates subsidiaries in 40 countries, had a consolidated profit of $1.05 billion in 1986.
