South Africa: The Business of Fighting Apartheid

American companies seem to have little impact on the system, whether they stay or leave

FOR YEARS THE disinvestment movement seemed a model of futility. The more that activists pressed United States companies to leave South Africa, the more those companies were determined to stay. Last fall, however, the years of toil suddenly seemed worth it. In the course of little more than a month General Motors, IBM, and Coca-Cola all announced that they were pulling out. The corporate exodus from South Africa seemed to have begun in earnest.

For all the fanfare, however, South Africans will still be able to buy IBM PCs and cars inspected by Mr. Goodwrench. And disinvestment will not interrupt profit flows. The three corporations are not closing up shop, only selling out to local businessmen, and all plan to maintain a presence through licensing agreements, distribution contracts, and technology transfers. (An exception to the rule is Eastman Kodak, which in November announced that both the company and its product would be leaving South Africa.)

Consider the case of Coca-Cola, which announced its pullout last September. Given that Coke controls 7.S percent of South Africa’s soft-drink market, I expected the response to its decision to be sackcloth and ashes. In fact the announcement hardly aroused any interest. While in Atlanta the company was declaring its distaste for apartheid, in South Africa it was saying that Coke would continue to be available. According to local newspapers, the magic syrup would be transported in tankers across the Atlantic. All in all, it was a sweet deal for Coke, providing it with political capital at home and continued profits in South Africa.

Disinvestment can look very different up close from the way it does in the United States. Reflecting this, the debate in America over LT.S. business in South Africa has shifted ground. What happens when U.S. companies are sold to South African ones? Are blacks worse off for the change? Are American companies better employers than South African ones? Some have argued that disinvestment, as currently practiced, represents the worst of both worlds: it allows companies to benefit from apartheid without incurring any responsibility for reforming it. That, of course, assumes that American companies in South Africa have been able to make a difference. What does the record show?

DISINVESTMENT IS A sensitive issue in South Africa—advocating it is actually a crime—and it’s not hard to see why. American logos appear everywhere, and, for whites at least, they are associated with the good life. Looking up car-rental agencies in the phone book, one finds listings for Avis and Hertz; among the offerings arc GMs and Fords. When low on gas, cars can be filled with either Mobil or Caltex (owned jointly by Texaco and Chevron). As for lodging, a trusty Holiday Inn beckons everywhere, Colgate-Palmolive is South Africa’s leader in shampoos, and Kellogg‘s is a mainstay at the breakfast table.

For all the abundance of brand names, however, the roughly 240 American companies in South Africa occupy a relatively small niche in the country’s economy. The issue of unemployment is a good illustration. For years the strongest argument against disinvestment was that it would throw thousands of blacks out of work. Even advocates of disinvestment did not contest this bur argued that the benefits would far outweigh the drawbacks. Now it seems that the unemployment fallout will be quite modest. For instance, about 4,000 people have been involved in getting Coke to market. Only 460 of them, however, have been employees of Coca-Cola; the rest work in operations, such as bottling, that are already controlled by local interests. Most of the 460 will be kept on, because Coke is not shutting down its facilities, only selling them to South Africans. At most, says a spokesman for Coke in Atlanta, 100 to 200 people could be affected by the change.

Even that figure is atypically high. According to the Investor Responsibility Research Center, in Washington, D.C., fifty-five firms employing 8,700 people disinvested from January of 1985 to tnid1986; of these, only fourteen liquidated their operations, throwing a total of 594 people out of work. Very few employees of the other forty-one companies lost their jobs. In recent years economic retrenchment in South Africa has caused far more loss of jobs at American companies than has disinvestment. Months before GM and IBM decided to disinvest, GM laid off 1,200 workers and IBM 300—both in response to economic recession. American companies employ such a small portion of South Africa’s black work force—about 50,000 of more than 6 million workers—that even if all the companies suddenly shut down, the country’s black unemployment rate (30 percent last December) would rise by about one percentage point.

For black workers, disinvestment generally means trading an American boss for a South African one. To many Americans, that sounds like a drasticstep backward, a move from factories where blacks and whites whistle while they work to Dickensian hellholes of exploitation and bias. This impression has been created largely by the Sullivan principles, which since 1977 hate held U.S. companies in South Africa to rigorous employment standards. The principles are the creation of the Reverend Leon Sullivan, a black Baptist minister in Philadelphia and a longtime member of GM’s board of directors. Sullivan devised the code in the mid-1970s, at a time when U.S. companies operating in South Africa were beginning to feel the heat of protest. The idea was that if the companies were not going to leave they should at least become model employers. The principles call for, among other things, desegregation of the workplace, equal pay for equal work, promotion of non-whites, and generous social spending. Although the code is entirely voluntary and lacks enforcement mechanisms, continued pressure from angry shareholders has made compliance seem like good business sense. About two thirds of the U.S. companies in South Africa have signed on.

All signatories are rated according to their performance. The rating process is quite complex. Sullivan evaluation forms are thirty pages long, and the information they require is so tangled that a special breed of Sullivan specialists has arisen to compile it. The forms are sent to Arthur D. Little & Co., the consulting firm, in Cambridge, Massachusetts, where a staff of six, using an arcane formula, tabulates the companies’ annual grades. The process is expensive, with signatories paying up to $8,400 for the privilege of being judged. To most, the money seems well spent. In 1985 a full three quarters of all signatories received passing grades—“making good progress" and “making progress”—which can do much to placate concerned shareholders. Arthur D. Little’s annual reports brim with tributes to the companies’ progress. “Signatories today are satisfying requirements which they would not have tolerated when the program was initiated,” the firm reported in 1985. “This is made possible by a dynamic, voluntary effort.”

ASSESSMKNTS OF THAT claim vary, depending on who the judge is. I discovered this on a visit to Colgate-Palmolive’s facilities in a heavy-industry belt cast of Johannesburg. I was received by Deryk Magid, the company’s director of human resources in South Africa. “U.S. business has been at the cutting edge of change in South Africa,” he told me. Fifteen years’ worth of “affirmative action,” Magid said, has produced changes of “earth-shattering“ proportions. He mentioned Colgate’s high minimum wage, its desegregated facilities, its abundant philanthropy. (Colgate receives the top Sullivan rating.) When I asked how many non-white managers worked at Colgate, Magid became somewhat less animated. The answer was two out of fifty, or four percent: Colgate’s overall work force is 60 percent non-white (black, Asian, and “colored,” or mixed race). “It’s not an area where we’re as far along as we’d like,” Magid admitted.

I asked for permission to wander through Colgate‘s facilities and interview workers. That would not be feasible, Magid said, offering instead to select some workers himself. I was dubious. My suspicions increased when I was ushered into the company‘s boardroom. However, the six workers, black unionists all, turned out to be outspoken. My first question, concerning how long the company had been unionized, elicited angry descriptions of the tough, drawn-out campaign that had been waged in 1981 for recognition; Colgate ultimately yielded, but only after a national boycott had been organized. Colgate‘s current practices also occasioned grumbling. One worker, a lab technician, complained that whites had a much easier time of it at the plant. “By the fact of being white, a man can walk in off the street and become a foreman,“ he said. “But every black man, whether educated or not, has to be trained first. In my mind, that’s discrimination.“ When I mentioned the low figure that I had been quoted for black managers, the workers said that even that was inflated. “We don’t have any black managers here,” a packer said.

The discrepancy is probably explained by a recent tendency among American companies to create high-level positions for blacks — positions that many workers dismiss as window dressing. But even counting those positions, blacks hold only two percent of all managerial positions at Sullivan companies (they constitute 73 percent of the South African population). Whites account for 95 percent, and Asians and coloreds, who constitute 12 percent of the population, make up the rest. The companies claim that they can’t find enough qualified blacks to fill high-level positions. Blacks vehemently dispute this. Mohale Mahanyele, the director of a black placement firm, told me that over the past few years he has written to virtually every American company in South Africa, offering to provide blacks for skilled and managerial jobs. “I’ve got black graduates by the thousands—many of them unemployed, underemployed, misemployed,” he said. “I’m begging these companies to take them. The response overwhelmingly is, ‘No, we have them, we can provide them from our own resources.’ Then, when they get to the States, they say, ‘We don’t have qualified blacks.’” He said that the Sullivan principles have been a dismal failure.

I found general agreement that at the time of their introduction the principles played an important role. Spurred on by the principles, American companies took the lead in desegregating bathrooms and eating facilities. And, Colgate notwithstanding, U.S. firms were among the first in South Africa to recognize black trade unions. They thus played a role in the government’s decision in 1979 to recognize the right of black workers to organize. In recent years, though, progress has slowed. Any doubts I had on this score were resolved during a visit to the headquarters of General Motors, in Port Elizabeth. (I made the trip about a month before the company announced its intention to leave.) Perhaps more than any other corporation, GM, influenced by Rev. Sullivan, has sought to enact the principles. I was therefore surprised by the frank assessment I received from George Stegmann, GM’s director of personnel and public affairs in South Africa. The principles, he said, “may have been effective in 1977 and 1978,“ when they had something of a “catalytic effect” on local companies. “But looking at the situation today, we frankly have to question whether the principles have outlived their intended purpose.” Most companies, he explained, were less eager to see results than to chalk up good ratings, which they could do simply by spending large sums of money. Moreover, Stegmann said, the companies had failed to consult blacks.

The lack of input from blacks helps explain how companies can get such stellar ratings from Arthur D. Little and such poor ones from their own workers. The data for the ratings come exclusively from the companies themselves, and most have awarded themselves As. Those best positioned to evaluate corporate performance—black trade unions— charge that they are rarely consulted. This is not for lack of trying. At General Motors, for instance, two black union representatives told me, “At a certain stage we took the Sullivan principles very seriously.” When the Arthur D. Little representative came to South Africa, a union representative telephoned him in Johannesburg and asked him to visit Port Elizabeth. He never came. “He wasn’t even interested,” the two unionists told me. Today, they said, most workers regard the principles as a “farce.“ (Reid Weedon, the head of Arthur D. Little’s monitoring unit, says that he has no recollection of any such incident. He says that he has traveled to Port Elizabeth four times to meet with black unionists. “One of the major purposes of going to South Africa every year,” he says, “is to understand how blacks regard these issues, and to see how we can shape our questioning in response to their views.” Nonetheless, I found widespread dissatisfaction among workers over their role in the monitoring process.)

In general, black workers give American companies a modest edge over South African ones, saying that the pressure exerted on U.S. companies has made them somewhat more responsive to workers’ demands. The difference is so slim, however, that no one sees it as an argument against disinvestment. Most union leaders have endorsed disinvestment as a form of protest against the government, and many rank-and-file members support this stand. But their support is tempered by fears of unemployment. This ambivalence is reflected in the many polls that have been conducted on the issue. The results vary so widely as to be almost useless. The numbers substantiate only two firm conclusions: workers don‘t want to lose their jobs, and they want foreign corporations in South Africa to confront apartheid head on.

AMERICAN COMPANIES have themselves gradually accepted the need for stronger action. Feeling both pressured and frustrated, the Sullivan signatories two years ago approved a strongly worded amendment to the principles, called the Fourth Amplification. It asks of the companies that they work for “the ending of all apartheid laws“ by undertaking projects in the area of “social justice.”

The Fourth Amplification is probably the most radical commitment ever required of U.S. companies abroad. Before it was adopted, U.S. corporations in South Africa regarded themselves as guests who considered it impolite to say so if they were uncomfortable with their accommodations. When it came to getting involved, companies invariably preferred safe, do-good works. Recognizing this, the Sullivan principles rated companies on how much they spent to “improve the quality of life“ for blacks, coloreds, and Asians.

Since 1977 Sullivan signatories have spent more than $170 million—most of it on employee housing, apprenticeship programs, day-care centers, and loans to black businessmen. Most popular of all have been education projects. American companies have funded everything from libraries and literacy courses to vocational training and teacher upgrading. Under a program called Adopt-a-School, companies in the United States have pledged assistance to more than 300 schools across the country. They have also handed out an impressive number of scholarships—almost 1,200 in 1986 alone.

By far the most ambitious venture was PACE (Planned Advancement of Community Education) Commercial College, a showcase secondary school, in Soweto. Opened in 1981, PACE was conceived and funded by U.S. corporations as an elite school intended to prepare blacks for universities or the business world. The $7 million facility featured well-qualified instructors and the latest in equipment, including IBM computers. By locating the school in Soweto, American businessmen were making a visible commitment to bettering the lives of black youths. The school had an enrollment of 600, and by the time the first class graduated, in 1985, only about ten percent of the students had dropped out.

By then, however, Soweto‘s schools were in chaos, and PACE was no exception. In fact, its privileged status made it a special target for young militants. White teachers had their car tires slashed, and the campus was raided by security forces. Many PACE students were forced to flee the township temporarily; partly as a result, they did poorly on their college-entrance exams. Disappointed American donors began bailing out, and last November PACE suspended operations. A denouement of sorts came in September, when, after being addressed by a U.S. business representative, students took an American flag and burned it.

It would be hard to come up with a more instructive parable. PACE was American corporate generosity at its best, a concerted effort to provide blacks with educational opportunities usually denied them. Ultimately, though, PACE could not escape the crushing deprivation that surrounded it. In the field of education, apartheid pursues a philosophy of separate and unequal, and no amount of private giving could hope to compensate. However well-intentioned, a project like PACE was clearly unequipped to deal with the country’s fundamental problem—white domination.

As this realization sank in, some executives of U.S. companies, in both America and South Africa, began pressing for a tougher, more activist stance. They encountered a lot of resistance. Other executives feared that a tooaggressive strategy would breed resentment among South African whites, thus complicating the real job at hand—making money. The debate became heated, and a power struggle over the issue developed at the American Chamber of Commerce (Amcham), the trade organization for U.S. companies in South Africa.

The balance was eventually tipped by the gathering fury in South Africa‘s townships and the growing protest on American campuses. Rev. Sullivan himself, disillusioned with the principles that bore his name, lobbied hard for stronger involvement. And so, in late 1984, the Fourth Amplification was finally endorsed. Now, in order to get a top rating, signatories would have to challenge the system head on, even if that entailed breaking the law.

In the past two years U.S. companies have helped black employees find housing in white-only areas—a violation of the Group Areas Act, which calls for residential segregation. Others have barred their scholarships from being used at private all-white technical schools, in an attempt to pressure those institutions into accepting blacks. In March of 1985 Amcham called on the South African government to initiate negotiations with black groups; it was the first business organization to call publicly for such a move. The chamber followed with a slick advertising campaign urging, among other things, the unbanning of all political organizations—a clear reference to the African National Congress.

To South African blacks, such activities seemed long overdue. Whites, though, were less impressed. On two occasions South African businessmen asked Amcham representatives not to accompany them on visits to government officials. The government itself was even more standoffish. Its attitude was demonstrated after U.S. banks suspended new loans to South Africa in mid-1985. A delegation of bankers came to discuss how the suspension might be reversed; the meetings, however, did not go well. “We were all very surprised at the hawkishness of their position,” one banker who was at the meeting recalls. Rather than discuss possible reforms, he says, “they told us that the ANC is a KGB organization and that they weren‘t going to deal with it.” He has concluded that “lobbying the South African government is tantamount to hitting your head against the wall.”

Probably the single most daring effort at change was mounted by General Motors. Port Elizabeth, the automaking capital of South Africa, is a tough city on the Indian Ocean. It has few scenic pleasures save its beachfront. Unlike many other cities, where the beaches have been desegregated. Port Elizabeth continued to reserve certain areas for whites. Last February the GM managing director, Robert White, an American, resolved to do something about the situation. In a letter to local newspapers White criticized the reserved-beach policy and offered legal assistance to any non-white employee arrested for violating it. In the end no one took White up on his offer. But it did attract a great deal of publicity, and the Port Elizabeth City Council, feeling embarrassed, eventually voted to change the law. GM, it seemed, had put a small but visible dent in the armor of apartheid. The company said with satisfaction in its monthly newsletter, “Initiatives such as Mr. White’s are perhaps demonstrative of what responsible U.S. corporations can achieve by remaining in South Africa and using their best efforts to create a more equitable social structure.”

Unfortunately, the story doesn‘t end there. The city council’s decision stirred up the Herstigte National Party, a farright group that could not tolerate the idea of blacks and whites bathing together. Marshaling its forces, the HNP forced a referendum on the city council’s decision. With the ruling National Party recommending that voters abstain, the right carried the issue by a meager 1,000 votes. The city council again considered the issue—and again voted to open the beaches. The matter was then turned over to the provincial government, which was to implement the new policy. There it remains. Meanwhile, Port Elizabeth’s beaches are still segregated.

GM paid for White’s outspokenness. As George Stegmann, the public-affairs director, explained to me, “The majority of people who purchase motor vehicles in this country still happen to be white. When they see GM proposing that beaches be opened, they form the opinion that GM is ‘anti-South African.”' In short, sales dropped, and some GM dealers complained. The experience sent a strong signal. If GM couldn’t affect apartheid on a patch of beach, how could it and other companies hope to bring about broader political change? GM has answered that question with its feet. And Rev. Sullivan has called on all U.S. companies to leave South Africa if apartheid is not dismantled by the end of May.

THE GOOD INTENTIONS behind the Fourth Amplification, then, have come to naught. But opposition from white consumers is not the sole reason. Few executives sought to emulate White’s effort; in fact, many disdained it. An example is Peter Morum, a retired managing director of Firestone. Firestone’s plant is situated about a mile down the road from GM’s, and Morum, a South African, was frank with me about his neighbor: “I’m committed to the company, the community, the country—which is not the case with the Bob Whites of the world. If Bob White stands up and says something and the roof falls in, he can bugger off.“ He added, “My perception of this whole American thing is that John Dukes of company XYZ has to get his name in the papers on some issue. He can then mail it overseas and say, ‘I’m doing my job.’ These people have no commitment to the country. They’re not South Africans, they’re Americans.”

Peter Morums are much more prevalent than Bob Whites at U.S. companies; the overwhelming majority of the executives are white South Africans. And while some South African businessmen have aggressively urged the government to change, many dismiss fundamental reform as quickly as other whites do. Consider, for instance, Ken Mason, a South African who is the executive director of the American Chamber of Commerce. I interviewed Mason at Amcham’s Johannesburg office, which, oddly enough, is in the clubhouse of an exclusive golf club. When the subject of the white-minority government came up, Mason turned combative. “Those in the United States who try to instill a sense of moral outrage about South Africa have no cognizance of how far the government has really moved,“ he told me. “There’s been a lot of progress here.” Rather than criticize South Africa, he said, America should attend to some of “the skeletons it has in its own cupboard”—for example, the poor state of the Indian reservations. As for South Africa’s ongoing state of emergency, he said, “You do need stability before you can bring about change. And some stability has been achieved.”

More than 20,000 people have been detained under the state of emergency. Hundreds have been killed and tortured. The government has closed schools and gagged the press with ever more restrictive measures. Nonetheless, many white South African businessmen regard the state of emergency as critical to restoring business confidence. Those who work at U.S. companies are no exception. “Business attitudes in South Africa are dominated by the mood of the moment,” a top (European) executive at a major U.S. enterprise told me. “If the sun shines and not too many people are getting killed, things seem fine to most South African businessmen.” The attitude of South Africans who run foreign companies, he added, “tends to be the same.”

Recently Black Sash, a civil-rights activist group made up mostly of white women, polled twenty-five companies on their policies for paying employees detained under the state of emergency. The group found that only four of the companies followed a policy of paying detainees’ wages in full—and they were all South African. Most of the American companies paid half or three quarters. “On the whole,” Zoe Riordan, who conducted the research, said to me, “foreign-owmed companies didn’t show up at all well in the survey.”

When U.S. companies sell their assets to South Africans, then, one shouldn’t expect too much change; in most respects the companies already are South African.

IF u.s. COMPANIES seem unlikely to accomplish much by remaining in South Africa, they seem unlikely to accomplish any more by leaving. In the short term, at least, disinvestment will probably drive white South Africans further into the laager (the Boer equivalent of a bunker). This was foreshadowed last fall when Congress voted to impose sanetions. Within weeks the South African government had cracked down on the United Democratic Front, the country’s major opposition group; accelerated its policy of forced removal of blacks; and started an aggressive campaign against neighboring Mozambique.

The limits on American influence were summed up for me in a conversation I had aboard a flight from Johannesburg to Cape d own. My seatmate was an elderly British man who had spent most of his life in Africa and the past three years in South Africa, where he worked for a British communications company. The discussion turned to sanctions. Like virtually every other white businessman I met in South Africa, he passionately opposed them. Sanctions would only deepen Boer stubbornness, harden white attitudes, make progress all but impossible. Well, I asked when he had finished, was he implying that a decision not to impose sanctions would hasten reform? No, he confessed, and gave a loud, embarrassed laugh.

In the end disinvestment really has value only on the symbolic level. In South Africa, though, symbols count for a lot. Both blacks and whites attach great importance to how Americans view their country. Virtually all South Africans perceive President Reagan to be a good friend of the Botha Government. During my stay I heard whites repeatedly praise the President and blacks repeatedly condemn him. It was difficult to persuade members of either group that on South Africa the President does not speak for the American people. When companies like GM, IBM, and CocaCola begin pulling out, however, that message could not be more clear.

— Michael Massing