TRANSNATIONAL CORPORATIONS IN SOUTH AFRICA

...Namibia and Zimbabwe, for instance, now stand at the end of the long process of decolonization—and South Africa plays a pivotal role in their ongoing struggle for independence...

...Applying such sanctions defies the basic rule of nonintervention in the internal political affairs of a sovereign country proclaiming allegiance to Western values and liberal economics, and violates the established practice of countries with free-market economies only to interfere with firms investing and operating abroad when they ask for protection or intend to establish economic links with "enemy" countries...

...Apartheid indeed is the very basis of South Africa's social structure, of its political organization and economy—of labor laws, of the land-owning and property system, and all their consequences...

...For now there are factors and forces at work in South Africa that have to be taken into account...

...Foreign capital and trade indeed give substantial support to South Africa's government...

...Implementation of such sanctions could create a conflict for subsidiaries of TNCs if home offices refuse to sell certain materials to South Africa's government—and refusal to comply with South African law might in future precipitate nationalization...

...The rapid transfer of wealth from the market economies to oil-producing countries have provoked an intensive drive for export earnings to offset high oil bills...

...There is a possibility that actions taken by African states may alter the stakes for those who deal with South Africa...

...Historically, one of South Africa's major attractions has been a docile labor force, which surely can no longer be taken for granted...

...however, real gross domestic product rose somewhat in 1978...

...The South African authorities' statement that, despite inflation, unemployment was at a low 0.5 percent was credited, even though this figure blatantly ignores black unemployment...

...The decline of the South African economy—in the face of the worldwide recession and domestic problems—has caused some leveling off in the flow of direct foreign investment...

...If the major industrial powers claim that they cannot tolerate the economic consequences of severing relations with South Africa, it is difficult to see how these countries with their much more fragile economies can make that sacrifice...

...TNCs provide the regime with military equipment, chemicals, communications systems...

...What kind of working conditions do black employees of TN C's experience...

...4) to obtain, for parts or the whole process of production, labor at lower cost than is available at home...

...There are subsitutes for most minerals in most uses—given time and money—when they are considered individually, but not when taken as a group...

...others that include the "homelands" put it at 25 percent...

...In fact, that country's economic order and regime have received tacit approval and tangible support from IMF loans totaling $464 million in 1976-77, more 476 than all the rest of Africa combined received from IMF during that period, and exceeded only by its loans to the United Kingdom and Mexico...

...These estimates are on the conservative side...

...III OUR Focus now is on the role of individual transnational corporations as employers of blacks...

...No wonder then that most of the major TNCs are now operating in South Africa...

...And no attention was paid to the high increase of government spending for military expenditures that rose, in the period 1973-76, by 120 percent...

...Thus, indeed, the much publicized increase in wages for blacks in the'70s is a response to strikes and labor unrest rather than to trickledown effects of economic expansion...

...Annual comparisons of black unemployment figures with those for whites and "colored" reinforce evidence of the impermanence of black gains...

...The rhetoric of human rights indeed has framed much discussion about motivations and intentions—but, so far, the issue has been manipulated to coincide with economic and security interests...

...As elsewhere, TNCs are expected to respect local laws and customs, and in South Africa the laws specify racial discrimination...

...South Africa is a case in point...

...Its system was set up gradually, and it was strengthened and refined in the 1960s, a time of economic expansion...

...Thus, having chosen to operate in South Africa—where social engineering is so all-encompassing—TNCs must become part of the structure of apartheid...

...A somewhat analogous situation was experienced by the countries bordering on Rhodesia, which have borne the brunt of economic sanctions against that country's regime...

...The many calls for economic sanctions against a country whose government encourages foreign investment are rare in international relations...

...The developments of the last decade, of course, have made matters more complex...

...Thus the undisputable mineral wealth of South Africa constitutes a powerful argument for its continued integration into the capitalist world economy...

...477...

...As a result, voluntary codes of conduct, spelling out obligations for the socially responsible employer, have proliferated...

...These two all-pervading factors—the high level of South Africa's integration into the capitalist world economy and the thoroughness of racial discrimination in the system of apartheid—have to be kept in mind when discussing any possibility of change...

...The formation of OPEC and the recession of the mid-70s have made everyone aware of the acute resource dependence of the industrialized countries...

...Alas, as patterns of wage levels and black unemployment in the '70s demonstrated, gains made by black workers in the boom years were neither far-reaching nor permanent...

...Recognition of the supportive nature of foreign investment leads to recommendations of economic pressure...

...Although many will agree that South Africa's present economic difficulties may be overcome if the price of gold remains at its current high levels, the regime's political problems cannot be resolved by higher gold prices alone...

...to both sides, the policy implications, i.e., the utility and feasibility of applying economic leverage, are of central concern...

...The three countries named above are the world's major suppliers of many important steel additives or alloying materials...

...And apartheid makes a principle of defying human rights...

...That country, so rich in raw materials and cheap labor, also provides market conditions comparable to those in industrialized economies—and, until recently, political stability...

...Unquestionably, TNCs have created jobs, although recent investments have been highly capital-intensive, providing few openings for unskilled workers...

...Its banking and financial sector are an integral part of the capitalist world economy, and in the field of technology highly developed, capital-intensive methods of production have been shared by home offices without restriction, contrary to the pattern of technology transfers to developing countries...

...So is the all-embracing impact of apartheid...

...2) The voluntary Code of Conduct for companies operating in South Africa, adopted by the Foreign Ministers of the European Communities in 1977, with the proviso of other measures, such as bans on new investments and export credit...

...Given the reservation of skilled positions for whites, data on average wages for blacks and whites do not even refer to comparable jobs: the difference in earning speaks more of job discrimination than of wage discrimination...

...IV A LOOK at the expanding role of the World Bank Group, most notably the IMF (International Monetary Fund), in global economic decisionmaking can only confirm the pessimism about the potential for isolating South Africa...

...But the record of United Kingdom firms, for instance, since such a code was enacted in 1974, shows that the utility of voluntary codes is open to skepticism...

...Both sides have often been articulated...

...This new concern and criticism have been instrumental in bringing about a number of developments that seemed unthinkable a decade ago: (1) The mandatory arms embargo voted unanimously by the United Nations Security Council in 1977...

...New high levels of domestic unemployment are prominent in the policy considerations of South Africa's major trade and investment partners, and any action that limits exports must contend with union opposition...

...South Africa is also a significant producer of uranium, and of the main base metals...

...IMF has become a key mechanism for assessing a country's economic stability and credit ranking...

...It is now in the context of NorthSouth economic relations on the international agenda that the social effects of foreign investment are being discussed—and, specifically, regarding South Africa—that long-standing doubts are being raised about the positive effects of TNC presence on apartheid...

...Such interference by a host government in the private sector has been a classic cause for home-country intervention...

...The success of OPEC within the context of Third World demands for a larger share of the world's wealth has precipitated deep concern about natural resources—i.e, secure supplies, reasonable prices, and adequate reserves...

...The issue of human rights is not among the IMFs concerns...

...In the early 1970s, official investigations into matters of wages and working conditions found TNCs generally undistinguishable from local firms...

...Recently, those arguing for "constructive involvement" have shifted their focus from employment practices to an emphasis on the utility of TNCs and all economic links with South Africa as tools of potential pressure—maintaining that one needs connections in order to exert pressure...

...Although some social engineering, implemented largely through labor and land policies, has enabled some blacks to participate in the economy as workers, they still are kept fast in their restricted conditions—being denied decent living conditions, social freedom, economic opportunity, and political power...

...We have seen that those alternatives are either an exercise in futility or in wishful thinking...

...The procedures of the IMF allowed it to define problems—its recent balance-of-payment difficulties, dwindling reserves, and lagging exports— entirely to external causes, giving no consideration to the domestic structural problems imposed by policies of racial separation and restrictions...

...These analyses, made in secret by such international institutions, now serve as benchmarks for commercial banks, TNCs, and governments...

...Among these anti-apartheid voices, a clear distinction has to be made between those who speak — (I) for economic (and military) disengagement or withdrawal (i.e., leaving the country...

...The decline in the ratio only demonstrates the enormity of the gap...

...For instance, new guidelines announced by the West German government to limit the amount of export guarantees for South Africa allow exception for orders that have employment implications in the Federal Republic...

...TNC participation in government projects developing basic industry reduces the regime's vulnerability to potential economic sanctions...

...These figures, however, are misleading...

...Periods of economic decline have had more severe consequences for blacks than for either of the other groups...

...TNCs have expanded abroad in search of four basic advantages: (1) to gain access to and control over raw materials...

...In the United Kingdom, which is most vulnerable in this respect, fears are voiced that to isolate South Africa economically would cause grave dislocations in the U.K economy, and in turn would affect other Western countries...

...Today South Africa indeed is very much tied into the production and investment system of the Western economies...

...The argument for "constructive participation" 474 proposes a reformist role for foreign investors— maintaining that economic growth, aided by foreign capital, has benefited blacks and will gradually lead to a dismantling of apartheid—a racial equivalent of the trickle-down theory...

...Unemployment for all racial categories has increased...

...2) to establish new markets...

...Although there is some disparity in the impact of increased oil prices on the various Western economies, the sense of vulnerability is common to all...

...Continuing the analogy, one could compare the present wave of anti-apartheid protests to the decolonization campaigns of the late'S0s—or, on the other hand, to the popularity of development assistance in the '60s...

...3) to maintain and expand these markets...

...3) The "Sullivan" principles for fair employment practices, adopted by mid-1979 by 110 corporations investing in South Africa...

...Thus, perceptions of the precarious nature of "interdependence" in the international economic scheme relegate human rights to a secondary concern...

...It is indeed significant that, as mentioned earlier, the legal structure of apartheid was elaborated and made fast in the'60s, a period of economic growth...

...V ALTHOUGH the international economic policymakers are not likely to promote considerations of human rights as the decisive concern, some recent developments may alter existing calculations of the costs and benefits in "doing business" with the present regime...

...Both these trends make unilateral action against South Africa unlikely...

...It has in fact grown in the important sectors at an increasingly rapid rate...

...2) for "constructive involvement" (staying on, either claiming to be improving the situation, or actively pushing for change, or both...

...This in turn has allowed for reduced employment of unskilled labor—an important factor, considering the racial composition of the South African labor market, in which skilled jobs are strictly reserved for whites...

...Still, most likely, both the corporations and their home governments will continue to favor this approach...

...We must wait and see what will be the potential cumulative effect of slackening foreign investment, economic crisis, unemployment, and social unrest, and the growing international condemnation of apartheid, which has reached a dimension no colonial power has ever had to face...

...Firms operating in South Africa, however sincere their efforts for "constructive involvement," must participate in implementing apartheid...

...At the same time, the search for new export markets has led to increased trade competition between Western market economies, and the economic crisis has given rise to protectionism...

...Beyond that, there now is deep concern about the safety of the economic, social, and political climate in the raw-material exporting countries...

...Only when the entire situation—and not only an individual investment—is viewed as "morally indefensible and economically unsound" can we expect a dismantling of the apartheid system...

...Indeed, now the proponents of this argument reject trade sanctions, for they would eliminate these tools of persuasion—ignoring the cumulative affects upon the South African government were it to face economic isolation...

...How serious are these calls for economic sanctions—and are there any effective alternatives that might serve to support South Africa's black population...

...In addition, a number of these states themselves are dependent upon trade with South Africa, and the South African government has carefully cultivated these dependencies...

...The United States is in a uniquely independent position with regard to many of these materials...

...Loans to state-owned corporations enhance the regime's resources...

...Thus it is questionable that many African countries will be prepared to force such choices upon their foreign economic partners...

...Instead, let us highlight the issue in the context of the current economic situation...

...And might they determine the policies and activities of TNCstransnational corporations...

...and one—antimony—with China which is also a major supplier of tungsten...

...It is rare to find a country that provides all four, as South Africa does...

...Taken together, these and other statements and actions, and the numerous anti-apartheid campaigns, imply that there are now various wellconcerted efforts underway to pressure the South African government into change...

...For instance, in the wake of the UN arms embargo, provisions of the National Supplies Procurement Act were reactivated, enabling the government to requisition production and provision of any specified good declared necessary to national defense...

...Some widely quoted statistics proclaim a reduction in the ratio of average white earnings to those of blacks...

...In several minerals—cromium, gold, manganese, platinum metals, vanadium and certain types of asbestos—South Africa shares a key role with the U.S.S.R...

...We shall not dwell on particular options or examine the case for each in terms of the interests of various home governments...

...After World War 473 II, foreign investment expanded in South Africa, especially during the boom years of the'60s and up the present, in roughly the same pattern as in the developed countries...

...As South Africa is an important buyer of industrial goods, it is unlikely that its major trading partners will forgo this market...

...The deterioration of the international economic system that was established after World War II has been widely discussed, and developments in the world economy in the late 1960s and the'70s have been variously interpreted as a major crisis in world capitalism or as temporary imbalances in a basically sound system...

...But political decolonization now has almost run its course...

...There also is the increasing control the government exercises over the private sector in order to lessen its vulnerability to international economic pressures...

...Legally, blacks are citizens of the "homelands" and only reside in "white" areas to facilitate employment...

...In IMF terms, this is true: it is a market economy rich in raw materials and open to export and foreign capital...

...By now, however, it seems clear that these claims for the effectiveness of such "positive" internal pressure are unfounded...

...On the other hand, one must recognize that, in the '70s, inflation, high oil and food prices, and depression affecting many rawmaterial prices have been devastating for the Third World...

...Yet, a strong perception of interdependence makes it unlikely that the U.S...

...Among developments relevant to our issue are the transfer of wealth to oil-producing countries, the resurgence of protectionism, the threat of structural unemployment in the developed market economies, political unrest and new demands in the Third World, and the increased role of multilateral institutions in economic decision-making...

...The magnitude of INC presence, and of South Africa's economic integration into the West's economic system are widely underestimated...

...e.g., Richards May Minerals' new $215 million investment in mining and smelting provides only 1,000 jobs, two-thirds of them for blacks...

...In large measure the gains blacks have made were brought about by the shortage of skilled labor, which has induced some white business and trade-union leaders to press for relaxation of the color bar...

...Thus, the IMF assessed South Africa's economy as basically sound...

...Real gross domestic product, which increased by 7.1 percent in 1974, 2.1 percent in 1975, 1.4 percent in 1976, has continued to decline in 1977...

...South Africa's internal social arrangements do not enter into the IMF's considerations...

...It is in this new context that we must discuss South Africa...

...And what, regarding this issue, should, and can, be the role of transnational corporations operating in South Africa...

...There is no official record of black unemployment in South Africa...

...would abandon its concern for the needs of its partners...

...unconditional withdrawal...

...Recent economic indicators show that, since mid-1974, the rate of growth has continued to slow down...

...II THE HISTORY of international concern for the domestic conditions in South Africa may read to an optimist like the history of decolonization—or, less optimistically, like the history of development aid...

...This harrowing problem of "stability"—or potential instability— has been perceived differently by various investors, but none can afford to ignore it...

...The crux of the question concerning transnational corporations in South Africa and their stand on human rights is the debate on "constructive involvement" vs...

...The lines of debate are clearly drawn between those who argue that foreign investment reinforces apartheid—and those who see it as a moderating, positive force...

...Its appeal is based on the premise that its analyses and procedures are technical and apolitical—and that such objective criteria put investment decisions above the political interests of individual governments...

...it still leaves social responsibility up to the individual entrepreneur—a well-established norm in the capitalist system...

...However, unofficial calculations of black unemployment during the 1970s show that, in white areas, black unemployment increased from 6.1 percent in 1970 to 10.6 percent in 1976...

...The Nigerian government, for instance, has declared that foreign investors must make a choice between operating in South Africa or Nigeria...

...Out of the total of TNC investment in South Africa, 50 percent comes from the United Kingdom, 20 percent from the United States, 7 percent from the German Federal Republic, 5 percent from France, and smaller percentages from other developed countries...

...The relations of foreign interests in South Africa to that country's system of social organizationapartheid— have been under critical scrutiny in the capitals of South Africa's major economic partners...

...Finally, TNCs operate in the mining sector, which 475 provides the export earnings so crucial to a government that now is burdened by mounting foreign debt...

...A recent survey by the Royal Institute of International Affairs of EC dependence on South Africa for non-fuel mineral states: From the foreign policy viewpoint, the most important commodities are those in which South Africa is a major world supplier...