The foreign companies that had invested in South Africa during the apartheid years faced a lot of pressure to stop conducting their operations in that country. However, there also arose voices from different quarters that highlighted the advantages of foreign investment to the black communities. This is a discussion showing why continued investment in South Africa was morally and economically incorrect.
Foreign Investment in Apartheid South Africa
The South African economical dependence on multinationals served as a great opportunity for the world to pressure the White supremacy government to end apartheid. The multinationals were in a position to push for reforms. Foreign investment in South Africa was the main economic engine for the country at that time. A director of Barclays Bank in South Africa acknowledged the weight of the importance of foreign investment in the country especially in the category of technical skills (Hopkins, 1985).
Sharp criticism of the U.S involvement in South Africa arose from different quarters as the world saw the social injustices that were taking place in South Africa. The Reverend Jesse Jackson commented on the way multinationals were reaping huge profits from the exploitation of the cheap African labour. Proponents of the importance of continued business in South Africa were unable to demonstrate how the multinationals had an impact on the South Africa government to stop apartheid. There was also no clear demonstration by these companies of how they would limit the effects of apartheid through multinational corporate responsibility. The multinationals instead just reinforced the strength of the apartheid government. There was a clear relationship between economic growth and the political status quo of the government. In the period 1977-1987, the country had set several economic development goals.
The government noted that a strong economy in South Africa would help the country effectively deal with the political pressures from the outside world calling for political reform.
However, there are critics who argued that the divestment by American companies would not really have the great impact that the public perceived or expected. The foreign investment was only 19% of the total investment. Furthermore, if America was to withdraw from the country competition would come in swiftly and fill in the gap created. Overall, whether the American companies would be able to force or push for reforms, the question became an issue of morality first and foremost. Whether the action forced the South African government to amend or change their ways, the bottom line is that western companies should not have worked together with a government that recorded high number of social injustices.
There also businessmen who argued that the presence of multinationals helped the Black communities at the end of the day. They highlighted that the multinationals provided capital to the country leading to growth and the creation of jobs for the African community. The black community would experience high levels of unemployment and lower standards of living if the multinationals left the country. However, this is a fallacy since despite the levels of growth that was being experienced in the country, there were high levels of disparity of the have and have not’s, inflation and inadequate social structures. Furthermore the black community was the least beneficiary of the growth benefits of the multinationals.
A study of the Caltex Company showed that it underwent an employment restructuring for the period 1962 to 1977. In 1962, the company had employed 2400 workers. The black workers were counted at 776. However, by the year 1977, the company had reduced its employees from 2400 to 1953. Interestingly the count of the black workers stood at 452. This blows away the argument of the enhancement of the economic well-being by the multinationals. During this period the company had reduced its workforce by 20%, however the black workers were reduced by 42%.
Furthermore, the apartheid system limited the opportunities of the black workers to get the advanced technical skills. The country was at a level where it was highly capital intensive. Without the appropriate skills, the educational system ensured that the black communities would find it hard to find work and when they got it, there would usually be the first lot or group to be sent home. Another point that tears into the economic development advantage of multinationals is the fact that the multinationals employed a limited number of Black workers.
Other arguments that arose against the divestment of companies were the belief that it was not correct for businesses to analyse and judge the actions of the governments of the market countries. The businesses main role and responsibility was to make profit or increase their shareholder’s wealth. The black community was also seen to be able to withstand the tough conditions of apartheid. There was also the acknowledgement of the reliance of the American economy on South African products such as gold, diamonds, uranium and chrome. A lot of Americans would lose jobs if America was to cut off links with the South African government. Scholars argued on the weight this would have on the American economy. There would be an increase in the government expenditure when it came to such items as unemployment compensation, food stamps and medical care expenditures. Furthermore, the government would have less sources of income due to the decreased tax revenue.
Despite these arguments, with time the role that the American companies could play could not be ignored any longer. Reverend Sullivan, a black civil rights leader who worked in the board of General Motors pushed for the multinationals to be more aggressive in addressing apartheid in the working environment. He came up with the Sullivan principles which advocated for the desegregation of the workers in the workplace. They also pushed for equal pay, job training and promotion among the White and Black workers (Seidman, 2003). Many companies, over 140, signed and agreed to the application of Sullivan principles in their workplaces.
After, a while however it become clear that the only way to effectively deal with apartheid morally was for the American companies to totally disengage themselves from trading in South Africa. The Sullivan principles had an effect however the progress was slow. For example, it was not easy for the Black workers to be promoted into managerial positions as the companies feared provoking the resistant White workers.
A study conducted on the American, British and South African companies showed that they were still paying the Blacks salaries that were below the minimum level. In fact the study showed that the South African companies had higher compensation packages for the Black workers than the U.S companies. The application of the Suvilian principles was found to have been conducted superficially by the multinationals. They segregated facilities according to the hourly and salaried workers. The superior facilities that had been previously used by Whites were used by the salaried workers. Segregation between the blacks and white was still at a high level since the hourly rate workers were mostly Blacks. There were very few numbers of the Black workers in the salaried bracket. Furthermore the Sullivan principles did not work to motivate the government to conduct reforms in the country. It was a way of appeasing the public and reducing political pressure so they quickly accepted the implementation of the principles.
In the country, the black community was still segregated. They still lived in prescribed areas and they had limited opportunities to education. The American companies in South Africa saw themselves as separate from the political affairs of a country .As much as the companies did not want to be used by the government as foreign policy tool; it is difficult to separate politics and economics of a country. The American government could not afford to keep silent due to its economic power and status and its well known stand on democracy and racial equality. The United States had invested heavily in the South African companies. It had over 350 firms conducting business in South Africa through subsidiaries. These were some of the best firms in the country as some were in the fortune top one hundred firms. At that time the U.S held over 50% of the foreign holdings in the South Africa stock exchange.
It is not just about business in the world. As multinationals and other companies conduct business they have to think on the humanitarian aspects in the countries they invest in. It is about multinational corporate social responsibility where companies refuse to work with corrupt and unfair systems of governance.
Hopkins, S. (1985) An Analysis Of U.S.-South African Relations In The 1980s:
has Engagement been Constructive? Journal of Comparative Business and Capital Market Law 7, 89-115
Seidman, G. (2003) Monitoring Multinationals: Lessons from the Anti-Apartheid Era.
Politics Society, 31, 381-406.