ECONOMIC ACTION AGAINST APARTHEID: An Overview of the Divestment Campaign and Financial Implications for Institutional Investors

Contents: 1. South Africa-Running Scared by Brook Baldwin • 2. The Financial Implications of Divestment from South Africa on Major Institutional Common Stock Portfolios by Theodore Brown • Appendix A. South Africa Free Portfolio • Appendix B. South Africa Portfolio • 3. Appendix C. Summary of College and University Divestment Actions • 4. Press Reports • 5. References • The pamphlet says this study was made possible by a grant from The New World Foundation. The pamphlet says publication of this study was made possible by a grant from the Africa Office of the National Council of Churches. The pamphlet says U.S dollars play a critical role in propping up the apartheid system; by 1984 U.S. corporations had direct investments worth $2.3 billion in South Africa, and U.S. banks had outstanding loans to South Africa worth more than $4.5 billion. The pamphlet says because U.S. involvement provides capital and technology needed by the white majority to maintain its absolute domination over the black majority, millions of Americans are moving to divest their funds from the corporations and banks that continue to collaborate with apartheid. The pamphlet says by the end of 1984, state and municipal actions across the U.S. had mandated the withdrawal of over $1.3 billion in public funds from such companies; five states, Connecticut, Massachusetts, Michigan, Maryland, and Nebraska, and over twenty cities, including Boston, New York, Newark, Philadelphia, Washington, D.C. and Wilmington, have enacted divestment legislation; similar legislation is now pending in more than 28 other states, and Congress is debating legislation to restrict U.S. economic and military links with South Africa. The pamphlet says on March 3, 1985, the Ministry of Foreign Affairs of the South African government announced the creation of a special post "to coordinate action against overseas campaigns for divestment from South Africa." The pamphlet says this action followed only days after the resignation of the director of the American Chamber of Commerce in South Africa so that he could launch the American Association for Trade and Investment, a group dedicated to providing "an aggressive response" to the divestment campaign; both of these actions within South Africa followed by less than a year the formation in the United States of two corporate committees devoted to lobbying against pending state and city divestment legislation; one, an unnamed committee of about 25 major U.S. companies, including Ford, General Motors, Mobil and others, has been organized to oppose divestment proposals at the state level; the other, the Corporate Committee for Change in South Africa, was recently formed by about a dozen U.S. corporations to lobby against divestment proposals before cities and other local governments. The pamphlet says U.S. financial involvement in South Africa currently stands at about $14 billion, including bank loans, shareholding and $2.3 billion in direct investment by some 300 U.S based multi-national corporations with on-ground subsidiaries; while the South African foreign ministry claims that this investment is "not of determinant political importance in a country which draws the lion's share of its investment capital from domestic and other foreign sources" (New York Times, Oct 28, 1984), the government's own actions and admissions are among the evidence which contradicts this claim. The report says as early as 1982, Dr. Van der Merwe, head of the Reserve Bank's balance of payments section, admitted that increasing political pressure on foreign companies to limit their investments in South Africa had contributed to a shift in investment patterns away from direct investments toward loans. The pamphlet says Steve Bisenius, President of the American Association for Trade and Investment, has warned of the vulnerability of dependence on short-term loans, especially in the face of pending U.S. federal legislation prohibiting private bank loans to South Africa; he pointed out in an interview with the Financial Mail (Feb. 1, 1985) that if the 1985 bill sponsored by Senators Kennedy, Weiker, Proxmire and Sarbanes was passed, it would mean that the period of existing loans could not be extended, so that South Africa would face paying debts so staggering that it would result in default, ruin South Africa's international credit rating and "drop the rand through the basement". The pamphlet says in 1982, the Washington law firm of Smathers, Symington and Herlong, on a $300,000 annual retainer to the South African government as a registered agent, sent a lobbyist to Boston to fight Massachusetts' land-mark total divestment bill. The pamphlet says two months before he was even appointed to the new anti-divestment post, Dr. Mark Burgher, in his capacity as assistant director of Foreign Affairs, toured the country, warning groups of businessmen in Durban, Cape Town and Johannesburg that divestment lobbying could produce significant results. The pamphlet says the anti-apartheid movement in the U.S. has a long history (the American Committee on Africa was founded, for instance, in 1953); the 1960 Sharpeville massacre, in which South African police gunned down sixty-nine people protesting pass laws, triggered student, church and community action; Students for a Democratic Society, to give one example, organized a protest on Wall Street against Chase Manhattan Bank because of its loans to South Africa; then, in the wake of the 1976 Soweto uprising, anti-apartheid activism resulted in significant successful divestment actions. As student groups in the U.S. formed in solidarity with the student protestors of South Africa, college campuses became the locus of the divestment campaign. The pamphlet discusses the Rand Daily Mail, the Financial Mail, gross domestic fixed Investment, John Chettle, the South Africa Foundation, the Wall Street Journal, Krugerrands, Fantu Cheru, the Terrorism Act, the Internal Security Act, Members of Parliament, the National Party, eviction, Indians, "Coloureds", the UDF (United Democratic Front), treason trials, P.W. Botha, the Federated Chamber of Industries, Associated Chamber of Commerce, the Sullivan Principles Employment Code, Rev. Leon Sullivan, U.S. companies, Anthony Lewis, IBM, General Motors (GM), Key Point Industries, department of prisons, defense force military research, Control Data, the military, the nuclear industry, the Reagan administration, constructive engagement, Secretary of State Schultz, the South African Forum, Professor Carl Noffke, the Institute for American Studies, Rand Afrikaans University, the Mass Divest Campaign, the University of Massachusetts (UMASS), student groups, Oregon State Schools, the University of Wisconsin, Michigan State University (MSU), Western Michigan University, the South African Solidarity Organization (SASO), Yale University, the University of Iowa, state and city divestment campaigns, Connecticut, Firestone, Governor Michael Dukakis, Mayor Raymond Flynn, divestment legislation, Nebraska, Senator Ernie Chambers, selective purchasing, religious organizations, shareholder resolutions, trade unions, risk, and financial performance. The pamphlet reprints newspaper articles including "Govt prepares for US disinvestment"; "Special Govt post to deal with anti-SA campaign in U.S." by Norman West and Brian Pottinger; "Facing up to a two-way disinvestment backlash" by Herman Giliomee; "Political reform is the answer to divestment" by Chris Freimond; and "Union reviews Sullivan Code".