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COLUMN ONE : The Politics of Profit in S. Africa : Anglo American Corp. built an economic empire with diamonds, gold and progressive policies toward blacks. Now its future hinges on the dismantling of apartheid.

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TIMES STAFF WRITER

The story is told here of a top executive of a subsidiary of the giant Anglo American Corp. who stood up at a board meeting and asked, “Gentlemen, which one of you wants this company to be remembered as the IG Farben of apartheid?”

The reference to the industrial engine of Nazi Germany was a telling one. For no corporation dominates its national economy the way Anglo American does. And no company has as much at stake in moving this country out of the era of apartheid.

In South Africa, one can scarcely buy a book, a car, a beer, a bottle of wine, an egg, a pair of shoes or a sofa, take out an insurance policy or open a bank account, heat the home, read a local newspaper, rent an office or erect a skyscraper without in some way enriching this secretive conglomerate of 600 companies.

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From an unadorned, templelike building at 44 Main St. in Johannesburg, Anglo American runs South Africa’s biggest gold mines and the region’s richest diamond mines, the two pillars of South Africa’s economy. The corporation and its subsidiaries account for more than 45% of the capitalization of the Johannesburg Stock Exchange.

Its reach extends over the Western world through the Central Selling Organization of its De Beers Consolidated Mines, which in the 1950s coined the advertising slogan “A diamond is forever” and created today’s global market for diamond engagement rings. Concentrated in the United States and Japan and reaching into increasingly affluent South Asia, that market accounts for a good part of De Beers’ sales of more than $6 billion a year.

Of course, dominating the economy of a politically charged country like South Africa has its price: On European exchanges, Anglo stock has for years traded at a sharp discount in relation to its asset value, a phenomenon that former Chairman Gavin Relly calls “a sort of rating of South Africa.”

With the reforms announced this year by South Africa’s President Frederik W. de Klerk, the discount has shrunk to about 12%, down from 35% over the last decade.

“We are ‘South Africa Inc.,’ in a sense,” Michael W. Spicer, a top adviser to Anglo Chairman Julian Ogilvie Thompson, said recently, “so our fate is tied up with South Africa’s.”

Today, Anglo American, like South Africa, finds itself in the midst of change that it cannot easily control.

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Once one of the country’s most progressive mine employers--Anglo was the first company to allow unions to organize its black workers--the company has become the target of labor’s harshest criticism and its most resolute strikes.

Former Chairman Relly once provoked the government by leading a delegation of business people to a peace meeting with the then-banned African National Congress. Yet when ANC leaders talk today of nationalizing South Africa’s wealth, Anglo is their key target.

Anglo’s mandarins have long financed the anti-apartheid opposition in South Africa, but the company cannot hide its record of having profited handsomely from apartheid’s supply of cheap black labor.

“They’ve always tried to project a liberal and compassionate image,” said Marcel Golding, deputy general secretary of the 350,000-member National Union of Mineworkers (NUM), which is made up of blacks, “but one can’t say this is a corporation that’s got the welfare of its people at heart.”

Finally, Anglo has pushed for South Africa’s re-integration into the global marketplace. But its biggest foray into competitive European markets was such a flop that many people wonder if the secret of its success hasn’t been its sovereignty over economic activity in its home country.

As structured, Anglo is perfectly designed to pursue its historic aims: controlling near-monopoly markets and undertaking the kind of massive engineering projects that are indispensable to mining. But South Africa’s great mines are running out, and Anglo’s reach throughout southern Africa may be hampered by competition and political animosity.

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Nevertheless, there are few signs of a cultural transformation at 44 Main.

Spicer, the adviser, said that “clearly in the South Africa of the 1990s, things must be different,” but he said there has been no change in the “logic” of Anglo’s structure, which is oriented toward “large, difficult projects.”

One recent attempt to be “different” backfired badly. This was Anglo’s 1988 takeover bid for Consolidated Gold, one of its major competitors. The company’s first major foray into the world of international takeovers was undermined by the ability of ConsGold, itself a major investor in South Africa, to portray Anglo as a sinister and secretive arm of South African interests.

Observers disagree over whether the failure of the bid was wholly Anglo’s fault.

“It’s difficult to have to face political objections to what is purely a commercial exercise,” said William Bowler, one of the leading Anglo-watchers in Johannesburg’s investment community. “In the current political environment, the minute they start anything that’s too high-profile, they’ll have trouble.”

The disastrous fight for ConsGold destroyed Anglo’s worldwide image as an invincible manipulator of men, money and markets. And it raised questions about the giant combine’s ability to survive in the more competitive international environment.

Meanwhile, the change in South Africa has brought about a dilution of Anglo American’s liberal image.

Its progressive outlook stemmed largely from Harry Oppenheimer, 81, the son of the founder, whose family influence is exercised through Anglo’s unique corporate structure.

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The Oppenheimer interests control Anglo through a network of minority stakes strengthened by interlocking ownerships and supported by personal loyalty. A good portion of the pay of Anglo’s chairman and other top officers comes from a private fund administered by the Oppenheimer family.

To illustrate how relatively small stakes give the family great power, consider the case of De Beers, one of the anchors of the empire. Anglo owns 7% of De Beers, which in turn owns 38% of Anglo; another 26% of De Beers is owned by Anglo American Investment Trust, which is in turn 52% owned by Anglo. E. Oppenheimer & Son, the family firm, owns only 8% of Anglo outright, but such a web of holdings ensures that the family reigns supreme.

Harry Oppenheimer’s father, Ernest, was once the mayor of Kimberley, site of the greatest diamond strike of all time, who in 1917 put together a mining and financial combine to exploit the vast gold reef lying under Johannesburg. Much of the financing came from American financier J. P. Morgan--hence the corporation’s international-sounding name.

While Anglo American rode the crest of South Africa’s gold boom, the founder also helped establish the De Beers diamond cartel, the only commodity cartel anywhere that has seen enduring success. By the time Harry inherited the company in 1957, Anglo was the world’s largest gold producer and controlled 80% of all diamond sales. It produced half of South Africa’s coal and 15% of the world’s copper, according to Bill Jamieson, the author of a recent book about the company.

In the relatively small world of South African business, this made for immense power. The Economist, the British financial weekly magazine, recently described the family as “the Rockefellers, Morgans and Gettys of South Africa all rolled into one.”

As Britons, the Oppenheimers held very little sway over South African politics. The family’s position among South African leaders is imperfectly understood if seen only in terms of black and white; in South Africa, there is also English vs. Afrikaner.

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To the Dutch-descended Afrikaners, who won and have held political power in this country since 1948, the Oppenheimer empire has been the ultimate symbol of the economic power of English-speakers.

“Historically, (Anglo) has been seen by a lot of the emotional side of Afrikaner nationalism as a bogey man inimical to Afrikaner interests,” former Chairman Relly said in an interview with Johannesburg’s weekly Financial Mail in May.

Harry Oppenheimer has been a financial mainstay of liberal-minded South Africans. Anglo was the first company to openly flout apartheid laws. Two years ago, its property-management unit began selling apartments directly to blacks in the Johannesburg suburb of Hillbrow in violation of the Group Areas Act, which classified Hillbrow as a white residential district.

Perhaps Anglo’s most spectacular challenge to the government was in 1985, at a meeting in Zambia between Relly, then Anglo chairman, and leaders of the banned ANC.

For a top South African businessman to defy the government in such a manner was unprecedented. Then-President Pieter W. Botha denounced the people who planned to attend the meeting as disloyal, and all but a few businessmen with Anglo connections dropped out of the delegation.

Relly went anyway, and told the ANC that he supported the release of black activist Nelson Mandela from prison, government negotiations with black leaders and integrated education.

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But always, Anglo’s apparent liberalism had a commercial aspect. Hillbrow had already become a de facto black community. Anglo, as a major property owner, stood to lose more money by selling its apartments at fire-sale prices to whites who in turn illegally rented them to blacks, than by acknowledging reality and getting a better price from middle-class blacks.

Similarly, Relly’s visit to the ANC was partly an attempt to wean the group from its leftist economic policies, which included breaking up concentrations of economic power like Anglo itself and nationalizing natural resources like gold and diamonds.

As Relly said upon returning from the meeting, “My interest in the thing was entirely in order to develop a judgment about the importance of this crummy Marxism, which they purported to advocate.”

The company’s positive image has often been undermined by its hard-nosed business behavior. Anglo has still not entirely shaken off the blame for the demise of South Africa’s leading progressive and investigative newspaper, the Rand Daily Mail, in which it held a large interest and which it allowed to fold in 1985 for economic reasons.

Perhaps the main battleground today between Anglo’s history and its future, as well as its image and reality, is the mine. South Africa’s largely black migrant mining work force has long been at the bottom of the employment pyramid. These are among the lowest-paid of South African workers, and their jobs are among the most grueling on Earth.

The typical black worker lives 300 miles from his family in what critics say resembles a military barracks or a prison camp. In many mines, the toilet facilities and changing rooms are racially segregated.

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Anglo American called for legalizing black trade unions in 1974, five years before the government agreed, and it was the first company to allow the NUM access to its workers. For years, Anglo had the best wage rates in the industry for black mine workers. Recently, it started a program of issuing shares of stock to employees with at least two years’ service, including blacks. The program is designed to give its employees more of a stake in seeing Anglo survive in its present form.

But in 1987, the union waged a three-week strike, and Anglo mines, the richest and most heavily unionized, were the prime target. In the course of the strike, the company fired 40,000 black workers.

“Before 1987,” said Hilton Ashton, a leading industry analyst in Johannesburg, “they were in the forefront in encouraging the development of unions, and that’s why they were in the forefront of strike action: They were the easiest target.”

In an echo of the ANC’s position on President De Klerk’s political reforms, NUM officials maintain that Anglo had no right to expect special praise for acceding to union rights that are routinely accepted all over the world.

They say Anglo’s performance has been only incrementally better than the industry at large. At Anglo, unionized miners must get permission to hold work-site union meetings, and their agendas and speakers must be approved by management in advance, just as at other mines. The NUM says these rules restrict labor freedom.

“There’s a uniform orientation in the mine industry,” the NUM’s Golding said. “But Anglo’s PR (public relations) is better able to project a good image.”

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The company, he said, is not appreciably more advanced than the rest of the industry in promoting blacks into supervisory jobs in the mines, although he acknowledged that Anglo may have a larger proportion of blacks enrolled in its training programs for supervisors.

For its part, Anglo says that in promotion and pay policies its hands are tied by South Africa’s political realities and by the harvest of apartheid’s historical shortchanging of black education, which has kept the number of blacks qualified for top jobs throughout the company at rock-bottom levels.

“To end up with an employable person coming out of this system, you have to invest a tremendous amount of money,” said Spicer, the Anglo American official. In 1988, he said, “500 blacks came out of the system with science and mathematics qualifications that enabled them to study technical disciplines at (the) university.” Anglo has established some progressive training programs, as well as improving housing for higher-level black employees, although the vast majority of its black workers, as in all mines, live in migrants’ hostels.

As for political constraints against rectifying old racial inequalities, Spicer said, “you must beat the affirmative action drum very loudly, (but) if you say that all opportunities henceforth will be for blacks, that’s the best recruiting drive you can have for the Conservative Party,” the white, rightist opposition to De Klerk.

Spicer and other executives deliberately avoid portraying the company as a charitable institution. Anglo’s vaunted liberalism is “not all altruism, but also self-interest,” Spicer said, and added, “We did not think South Africa could have a modern economy based on the feudal system that we had.”

At the same time, Anglo American has taken steps to disassociate itself from South Africa, in part to improve its standing abroad, but also to protect some of its profit centers from the risk of nationalization by a majority-black government.

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Anglo recently moved the headquarters of De Beers, which produces its greatest profits, to Switzerland. The company restructured De Beers stock so that 80% of the old company’s earnings now flow through a new company, De Beers Centenary, which is based overseas and thus immune from nationalization. The corporate rationale was that 80% of De Beers earnings are actually generated overseas, through London-based sales of diamonds.

For all that, Anglo executives insist that the company’s future remains focused on South Africa and its neighboring region. There are few who doubt it.

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