The sanctions debate

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Fight Racism! Fight Imperialism! no.94 April/May 1990

In four recent publications an array of anti-apartheid researchers present their findings and recommendations for sanctions policy*. They throw light on the shifting relationship between the imperialist powers and apartheid. ANDY HIGGINBOTTOM examines them.

SOUTH AFRICA'S TRADE

The first consequence of imperialism in Africa is an incredible accumulation of wealth and power in the hands of white South Africans. In 1985 South Africa’s Gross Domestic Product was US$67.7bn. The total for all the other 17 African countries south of the equator was US$43.7bn, less than two thirds (Banking on Apartheid p73). Concentration of capital underlies South Africa’s role as an auxiliary power for imperialism with its own economic base.

South Africa’s trade patterns point to a striking characteristic of its economy, reliance on the primary sectors for export revenue. 45% of exports are gold; a further 34% of exports are other minerals and 10% are agricultural produce; only 3% are manufactured goods. But South Africa is no ordinary ‘third world’ country. The conditions of super-exploitation imposed on millions of black Africans to provide cheap labour for the mines and white agri-business provided both the infrastructure and capital for a steadily expanding manufacturing sector, which relies on imports of foreign technology and goods. Apart from coal, gas and petroleum (15%), South Africa’s imports are concentrated on vehicles (20%), electrical and electronics (14%), chemicals (12%), machinery (12%) and other manufactured goods (8%).

APARTHEID AND THE WORLD ECONOMY

The first trade sanctions were applied by India in 1946. India opposed the evil of white domination two years before the Nationalist Party came to power to intensify black oppression under the banner of apartheid. By 1959 the ANC and PAC called for comprehensive sanctions as a weapon against the racist regime. International capitalism took little notice until 1977, when in response to the regime’s repression of the Soweto revolt, the United Nations declared a mandatory arms embargo.

The world recession 1979/80 played into Pretoria’s hands. Because of its role as the international money commodity, gold exchanged for ever greater currency equivalents. During 1980 it topped US$800 an ounce. South Africa deployed these windfall profits in massive operations to circumvent arms sanctions and the oil embargo. Before long additional loans were required to finance the state’s nuclear energy, coal-to-oil conversion and armaments programmes.

Increasingly, the weight of international investment in South Africa shifted from direct investment in companies’ own subsidiaries to indirect investment: loans. Between 1980 and 1985 direct investment doubled from R12.3bn to R27.9bn; indirect investment quadrupled from R13.7bn to R55.5bn over the same period. Recovery in the world capitalist economy had an adverse effect on gold earnings which had fallen to US$317 an ounce in 1985. South Africa’s foreign debt had reached US$24bn, a 293% increase in terms of the sharply diminishing rand.

THE DEBT CRISIS AND SANCTIONS

Expansion of the apartheid economy, and the corresponding ability of the white ruling class to operate independently of the major imperialist powers, is conditioned by objective economic constraints; the white supremacist state needs technological imports, loans and gold revenues to survive.

But the critical factors are political. Black people’s resistance to sham reforms, culminating in the insurrections of 1984/85, elicited solidarity action. In the USA a popular black-led movement for divestment pushed banks and corporations with apartheid links onto the defensive. Chase Manhattan was the first to refuse to roll over payments due from its South African debtors. The much-trailed ‘crossing the Rubicon’ speech on 15 August signalled to the world’s bankers only that PW Botha was set against reform. Politics had triggered the debt crisis. Shares collapsed, the rand crashed and US banks seized South African assets in security. Pretoria closed all foreign exchanges, declared a moratorium on the repayments of US$10bn short-term debt and reintroduced the two-tier exchange rates for the financial and commercial rand.

The sanctions movement was still to peak. In October 1986 the US Senate finally overcame Reagan’s veto and enacted the Comprehensive Anti-Apartheid Act. Within two years, US-South African trade was cut by 39%, the shortfall being more than compensated by the USA’s rivals West Germany and Japan (see Table 1). Table 1 shows a moderate reduction in the UK’s imports from South Africa in 1987, which had shot up again by 1988. The UK’s non-gold trade totals US$2.6bn. A fuller picture must include South Africa’s gold exports (see Table 2). Gold provides a vital component in sustaining an overall trade surplus, US$7bn in 1987, of which some US$3bn was routed through the London market.

 

TABLE 1: SOUTH AFRICA’S MAIN TRADING PARTNERS

(Monetary Gold Excluded)

Country

(83-85 ranking)

Total trade

Imports from SA

Exports to SA

Trade balance 1987 US$m

*

1987/1988 (6 months) Increase (%)

**

1987 US$m

1987

US$m

Increase 1983-85 average (%)

1987

US$m

Increase 1983-85 average (%)

Japan (2)

West Germany (3)

USA (1)

UK (4)

Italy (5)

France (6)

Taiwan (10)

4,148

3,798

2,715

2,654

2,249

1,051

874

2,280

1,242

1,420

1,089

1,791

583

451

34

30

-39

-10

10

-8

115

1,868

2,546

1,565

1,295

458

468

423

22

28

-31

2

3

1

102

-412

1,304

-125

476

-1,333

-115

-28

13

50

23

38

n/a

39

110

 

* Exports to SA – Imports from SA

** Increase of first 6 months 1988 over first 6 months 1987

 

 

Source: Sanction Report pp214, 235, 252

 

TABLE 2: EFFECT OF SANCTIONS ON TRADE TRENDS

 

Imports from SA

Exports to SA

Total change

 

 

(%)

 

 

 

 

1983-85 average US$m

1987

 

US$m

Rise/fall

 

(%)

1983-85 average

US$m

1987

 

US$m

Rise/fall

 

(%)

All Trade (except monetary gold)

 

 

 

 

 

 

 

 

Sanctions 9*

Rest

3,481

7,278

2,230

9,938

-36

37

2,931

10,445

2,047

10,293

-30

-1

-33

14

Monetary Gold

6,374

7,130

12

 

 

 

12

Totals

17,133

19,298

13

13,375

12,340

-8

4

 

* USA, France, Canada, Australia, New Zealand and Nordic countries

 

Source: Sanctions Report p213

 

DISINVESTMENT

60% of all US corporations with direct investments in South Africa decided to withdraw (see Table 3). For many the loss of business at home was too great.

Capital movements into and out of South Africa are exchanged for foreign currencies at the financial rand rate. This provides a disincentive for withdrawal of capital funds. The ratio of financial rand to the commercial rand is an index of disinvestment sentiment. Companies would have to take up to 40% losses to get their capital out.

US corporate disinvestment therefore often took a sneaky form, (Duncan Innes’ article in Sanctions Against Apartheid pp226-239), reducing public profile but in practice keeping up the profitable links through management buy-out arrangements. Coca-Cola shifted its syrup plant to Swaziland, licensing the bottling to South African satellites. IBM, General Motors and many companies adopted such licensing agreements. Those companies which were sold off to domestic conglomerates accelerated the centralisation of South African capital. Anglo-American picked up Barclays Bank subsidiary, the majority interest in Fords and the South African subsidiary of Citicorp bank, putting it in control of 60% of all shares quoted on the Johannesburg stock exchange.

UK disinvestment up to the end of 1987 was much lower. 73% of British companies remained, leaving Britain the world’s biggest direct investor in apartheid with 40% of all foreign-owned subsidiaries.

Nevertheless, the international pressures for disinvestment hurt the racist minority. New investment, burgeoning in the early 1980s, had been brought to an abrupt halt.

 

TABLE 3: DISINVESTMENT FROM SOUTH AFRICA AND NAMIBIA

(Numbers of Corporations to end 1987)

Country

Disinvested or Disinvesting No.

Remaining

 

 

 

No.

No. as % of Country’s Original Total

No. as % of International Total remaining

Australia

17

8

32

1.2

Canada

24

12

33

1.8

France

7

15

68

2.3

West Germany

10

128

93

19.2

Netherlands, Norway, Sweden, Denmark

15

27

64

4.1

Switzerland

2

32

94

4.8

United Kingdom

99

266

73

39.9

United States

271

178

40

26.7

Totals

445

666

60*

100.0

 

* Of the 1,111 foreign corporations known to have had equity investments in South Africa, 60% remain.                                                                                                                                                                               

Source: Financial Links p74

 

ECONOMIC ROOTS OF DE KLERK'S POLICY

Since 1985 surpluses in South Africa’s balance of trade have been insufficient to compensate for capital flight. In 1988 despite a trade balance of R11.9bn, offset by net invisibles of -R9.0bn making a current account balance of R2.9bn, Pretoria lost R3.6bn in foreign reserves. Capital totalling R6.7bn had left the country. The regime estimates that it will need to generate current account surpluses of R5bn a year to meet loan repayments. The apartheid regime is under a financial squeeze. Unlike his predecessor, FW de Klerk has come to terms with this reality. Reliance on international finance dictates his ‘reform' strategy. Moreover, he needs to fund new social programmes to have any chance of fulfilling the promises of reform.

There have been three rounds of negotiations between Pretoria and those international banks with loans caught within the standstill net. Pretoria's stance has been to push back repayment dates, with added incentives to convert short term liabilities into long term. The bankers attached a condition of relaxation of the Pass Laws in the first round, but have not pursued any other social conditions.

The Sanctions Report pinpoints the connection between the banks and their imperialist governments:

‘International banks are concerned to maximise their profits and protect their loans, but their judgment will be based on a political assessment. If no significant further sanctions seem likely, they will conclude that South Africa is to be protected from sanctions. They will feel that the international com-munity has given its stamp of approval to repressive reform and that economic pressure has been lifted . . . Thus it will seem reason-able to return to business as usual with the apartheid state.'

Accordingly the report focuses on a window of opportunity, the need for immediate escalation of sanctions, to maximise pressure and utilise Pretoria's vulnerability in meeting the bulk of loan repayments that were due in 1990-91. But Pretoria staged a pre-emptive strike. On the eve of the Kuala Lumpur Commonwealth summit in September, the results of the third round were announced; most of the repayments were delayed. The bankers had given apartheid its life-line. No wonder Thatcher crowed as she told the Commonwealth that the 1 in 48 governments assembled, hers, was right to oppose sanctions.

SANCTIONS: MEANS TO WHAT END? 

Sanctions are a means to what end - reform of apartheid or its destruction? The Sanctions Report concludes that partial sanctions have been a partial success. The main argument is directed to convincing the Commonwealth governments that they should adopt measures of increasing severity. In the first phase, ‘the best candidates for initial sanctions are South African bulk exports of commodities of which there is an ample supply on the world market'. In the second phase nearly all imports and exports would be stopped and, ‘there would have to be effective penalties on countries that refused to participate'. This is wishful thinking. South Africa's main trading partners are mutually hostile brothers. Such a programme posits the need for political movements in each of the imperialist powers challenging their own imperialism from within, as happened for a period in the USA. None of the studies pursue this issue.

A chapter on Britain and the Commonwealth in Sanctions Against Apartheid seeks to explain 'the lull in sanctions pressure since the peak of 1985-6', but fails to answer the critical question. How is that Thatcher got away with her anti-sanctions policy? An analysis that examines why the Anti-Apartheid Movement and Labour Party failed to even dent Thatcher's stand is required (see South Africa: Britain Out of Apartheid - Apartheid Out of Britain, an FRFI pamphlet).

Banking on Apartheid ends by discussing a common theme - the impracticality of imposing a sanction on gold. Yet the authors acknowledge that 'South Africa is crucially dependent on gold'. If potentially so damaging, why do gold sanctions get relegated? To move against gold would cripple apartheid; it would also rapidly undermine the stability of world finance and wreak havoc in international payments. It would threaten imperialism.

Tacit limits have been placed on sanctions. Apartheid and International Finance argues that,

‘The financial sanction is almost ideal, because although in some cases backed by governments, it is by and large a sanction that market forces work to encourage'.

The point is completely one-sided: financial sanctions have only been applied under the pressure of popular action and were relaxed as soon as the banks were able to do so. Market forces can transmit pressures for reform - they cannot end apartheid.

The sanctions debate as posed in this limited way simply misses the reality of what is at stake in the struggle for black liberation. The central conflict between the interests of the black majority and white domination cannot be resolved by reforming apartheid. Apartheid must be destroyed. And since apartheid is the form that capitalism had to take in South Africa, the elimination of apartheid requires and will carry in its wake the destruction of the capitalist system.


* Apartheid and International Finance: A Programme For Change by Keith Ovenden and Tony Cole. Published by Penguin £4.99 ISBN 0 14 012835 2

Banking on Apartheid - The Financial Links Report by an Inter-Governmental Group of Officials. Published by The Commonwealth Secretariat in association with James Currey. £4.95 ISBN 0 85255 341 2

Sanctions Against Apartheid edited by Mark Orkin. Published by CIIR £7.99 ISBN 1 85287 058 3

South Africa: The Sanctions Report by an Independent Group of Experts. Prepared for The Commonwealth Committee of Foreign Ministers on Southern Africa. Published by Penguin. £4.99 ISBN 0 14 052396 0

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