U.S. Sanctions Lifted, but Obstacles Remain for Business With S. Africa : Trade: States and cities have restrictions, Pretoria has new markets and bad feelings are slow to go away.

Just hours after the United States imposed sanctions on Pretoria back in 1986, businessman Reuben Sive learned to his horror that 500 tons of his South African canned goods were stranded on ships in half a dozen American ports.

U.S. Customs agents had refused entry for the shipment, and “it all just lay there,” Sive remembered.

That was midnight, Oct. 6, 1986. Congress had overridden then-President Ronald Reagan’s veto, and the curtains suddenly fell on virtually all South African imports, from wine to steel and ostrich feathers to lobster.

South African business people like Sive, trapped in the middle of transactions, had to dump their products on other world markets at a considerable loss. “We thought that they would do like other countries and allow a three-month grace period,” Sive said. “But not the Americans.”

Now the United States--once South Africa’s No. 1 trading partner--has lifted its five-year-old sanctions and ban on imports from South Africa. But the delicate economic relationship that once existed between the two countries has been altered irrevocably. Bad feelings remain on both sides of the globe. And most experts agree that the two nations won’t be picking up where they left off.

Most South African factories, singed by the unpredictability of American politics, have retooled or found other export markets. Businessmen like Sive worry that, even if he can get the South African label back onto U.S. store shelves, American consumers will boycott it.

On the American side, companies are wary of the 145 state and local governments that have sanctions against firms doing business in South Africa. And many of the 190 firms that left are unlikely to return soon; they’re still smarting from the ugly boardroom scenes that preceded their departures.

“So many companies went through a tough process when the umbilical cord was cut,” said Wayne Mitchell, executive director of the American Chamber of Commerce in Johannesburg. “And they’ll find it difficult to patch up those past differences. It’s going to be easier to attract new investment than persuade previous investors to return.”

Sive is heading for the United States soon to look up his old customers. Some of them say they’d like to renew their contracts with his Robin Trading Co., which exports fruit concentrates and canned fruits and vegetables.

Robin Trading once exported almost exclusively to the United States. But, after sanctions were imposed, the company turned to markets in Israel, Europe and, recently, Japan.

Sive, a retired member of Parliament, is a longtime member of the white liberal party that fought for years to end apartheid but also opposed sanctions as a weapon for political change in South Africa. Sive believes sanctions have caused widespread black joblessness and severely damaged the country’s economy.

President Bush’s decision to remove sanctions “is a very good thing for South Africa, and it’ll make a tremendous difference for a lot of us,” Sive said. But he doesn’t expect any miracle recovery for his U.S. business.

“It will take some time for that prejudice about goods made in South Africa to wear off in the U.S.,” Sive said. “There won’t be a rush. There’ve been big changes in the American market in the last five years. You can’t just walk in and start selling.”

South Africans once exported more than $2 billion a year to the United States, but that fell by $745 million after sanctions banned imports of textiles, agricultural products, gold, sugar and uranium. Economists say it may take years for South Africa to regain those export markets.

For example, the United States once allowed 40,000 tons of South African sugar, grown in the steamy Natal province, to be imported each year. But after sanctions were imposed, that quota was filled by the Philippines; South Africa would now have to negotiate a new quota with the U.S. government.

South Africa also once exported fruit to the United States. But since Washington banned all South African agricultural imports, Americans have found other sources of fruit abroad and at home, including California’s growing fruit production industry.

South Africa’s best prospect for renewed trade with Americans should have been the lobster industry, which accounted for a major share of pre-sanctions exports to the United States. But the industry is in serious trouble now. The lobster harvest this year was only 70% of the total allowed by the government, and even smaller catches are expected next year.

Despite those hurdles, South Africa is likely to see some increase in exports. Sive says his American customers still tell him that “you produce the best product in the world, give the best service and your prices are competitive.”

Any increase in exports to the United States, though, will benefit primarily white-owned and white-controlled businesses in South Africa. That is the main objection that the African National Congress and other anti-apartheid groups have raised to President Bush’s decision to lift sanctions. Whites control the vast majority of the country’s capital wealth, and their grip on the economy is likely to remain at least until the country’s black majority gets a say in government.

The government and white businessmen in South Africa admit that increased exports to the United States will benefit whites first. But they say it will benefit the entire economy as well, meaning more jobs and a higher standard of living for the black majority.

Tertius Delport, President Frederik W. de Klerk’s deputy minister of constitutional development, recently explained the government’s economic view this way: “If a free society cannot take care of the few who are rich, then it cannot save the many who are poor.”

The prospects for U.S. investment and exports to South Africa are only slightly better. In lifting U.S. sanctions, Bush also removed a law that effectively imposed a double tax on American firms doing business in South Africa. That law was responsible for the departure of Mobil Oil Co. in 1989.

Although the end of double taxation may stop the exodus of U.S. firms, it isn’t likely to lure companies back. Most companies still worry about South Africa’s stagnant economy, escalating violence and uncertainty about the ANC’s commitment to a free-market economy.

Many American companies, though, are at least exploring business opportunities in South Africa; the local American Chamber of Commerce has fielded many inquiries.

An Illinois golf club manufacturer, Tommy Armour Golf, advertised in a Johannesburg newspaper this week for an exclusive distributor for its products in South Africa. No one can remember seeing such an ad here in at least five years.

Despite the disinvestment of recent years, many U.S. products, from Kellogg cereal to Johnson & Johnson skin-care products, are still sold here, and the taste for things American remains strong. Coca-Cola products, produced in neighboring Swaziland, are widely available.

Kodak disinvested, but its film, manufactured in Kodak plants outside the United States, is still widely available. IBM disinvested, but its computers are still sold through ISM, or Information Services Management, which is now owned by white South Africans. Ford left the country, but its cars are still produced by a local firm.

When Hewlett-Packard left the country, HiPerformance Systems was born. As the new company said in a full-page newspaper advertisement at the time, it has “the same products, the same commitment to excellence but, above all, the same people.”

Joseph LaBonte, a financial consultant and former chief executive of Reebok International, says many major American corporations he has contacted are considering investments in South Africa, but they will need guarantees “to invest with peace of mind.” He recommends that U.S. firms link up with black business people in South Africa.

But anti-apartheid leaders worry that the removal of sanctions will also remove the incentive for American firms to promote blacks and to invest in development programs for blacks.

U.S. companies that remained in South Africa, despite the sanctions, often hired and trained blacks to important executive positions as a way of countering calls for disinvestment from shareholders and others back home. “They wanted to be seen to be doing something for black communities,” said Thami Mazwai, business editor of the Sowetan, the largest black daily newspaper in South Africa.

But Mazwai predicts that new investors will now try to make amends with the white business Establishment and will worry less about promoting blacks and pumping money into black development projects.

“They are going to try to make up for the past and will tell whites, ‘Look, chaps, we’re sorry we couldn’t do business with you before, but we’re back now,’ ” Mazwai said.