Disinvestment from South Africa - AbsoluteAstronomy.com

Disinvestment from South Africa was first advocated in the 1960s, in protest of South Africa's system of Apartheid

History of South Africa in the apartheid era

Apartheid was a system of racial segregation enforced by the National Party governments of South Africa between 1948 and 1994, under which the rights of the majority 'non-white' inhabitants of South Africa were curtailed and white supremacy and Afrikaner minority rule was maintained...

, but was not implemented on a significant scale until the mid 1980s. The disinvestment

Disinvestment

Disinvestment, sometimes referred to as divestment, refers to the use of a concerted economic boycott, with specific emphasis on liquidating stock, to pressure a government, industry, or company towards a change in policy, or in the case of governments, even regime change...

campaign, after being realized in federal legislation enacted in 1986 by the United States, is credited as pressuring the South Africa

South Africa

The Republic of South Africa is a country in southern Africa. Located at the southern tip of Africa, it is divided into nine provinces, with of coastline on the Atlantic and Indian oceans...

n Government to embark on negotiations ultimately leading to the dismantling of the apartheid system.

United Nations campaign (1962-1965)

In November 1962, the United Nations General Assembly

United Nations General Assembly

For two articles dealing with membership in the General Assembly, see:* General Assembly members* General Assembly observersThe United Nations General Assembly is one of the five principal organs of the United Nations and the only one in which all member nations have equal representation...

passed Resolution 1761

UN General Assembly Resolution 1761

United Nations General Assembly Resolution 1761 was passed on 6 November 1962 in response to the racist policies of apartheid established by the South African Government.- Condemnation of apartheid :...

, a non-binding resolution establishing the United Nations Special Committee against Apartheid and called for imposing economic and other sanctions on South Africa. All Western nations were unhappy with the call for sanctions and as a result boycotted the committee.

Following this passage of this resolution the UK-based Anti-Apartheid Movement

Anti-Apartheid Movement

Anti-Apartheid Movement , originally known as the Boycott Movement, was a British organization that was at the center of the international movement opposing South Africa's system of apartheid and supporting South Africa's Blacks....

spearheaded the arrangements for an international conference on sanctions to be held in London in April 1964. According to Lisson, "The aim of the Conference was to work out the practicability of economic sanctions and their implications on the economies of South Africa, the UK, the US and the Protectorates. Knowing that the strongest opposition to the application of sanctions came from the West (and within the West, Britain), the Committee made every effort to attract as wide and varied a number of speakers and participants as possible so that the Conference findings would be regarded as objective."

The conference was named the International Conference for Economic Sanctions Against South Africa. This conference, Lisson writes,

"established the necessity, the legality and the practicability of internationally organised sanctions against South Africa, whose policies were seen to have become a direct threat to peace and security in Africa and the world. Its findings also pointed out that in order to be effective, a programme of sanctions would need the active participation of Britain and the US, who were also the main obstacle to the implementation of such a policy."

Attempts to persuade British policymakers

The conference was not successful in persuading Britain to take up economic sanctions against South Africa though. Rather, the British government "remained firm in its view that the imposition of sanctions would be unconstitutional "because we do not accept that this situation in South Africa constitutes a threat to international peace and security and we do not in any case believe that sanctions would have the effect of persuading the South African Government to change its policies'."

The AAM tried to make sanctions an election issue in the 1964 General Election in Britain. Candidates were asked to state their position on economic sanctions and other punitive measures against the South African government. Most candidates who responded answered in the affirmative. After the Labour Party sweep to power though, commitment to the anti-apartheid cause dissipated. In short order, Labour Party leader Harold Wilson told the press that his Labour Party was "not in favour of trade sanctions partly because, even if fully effective, they would harm the people we are most concerned about - the Africans and those white South Africans who are having to maintain some standard of decency there." Even so, Lisson writes that the "AAM still hoped that the new Labour Government would be more sensitive to the demands of public opinion than the previous Government." But by the end of 1964, it was clear that the election of the Labour Party had made little difference in the governments overall unwillingness to imposing sanctions.

Steadfast rejection by the West

Lisson summarizes the dismal situation at the UN in 1964:

"At the UN, Britain consistently refused to accept that the situation in South Africa fell under Chapter VII of the [United Nations] Charter
Chapter VII of the United Nations Charter
Chapter VII of the United Nations Charter sets out the UN Security Council's powers to maintain peace. It allows the Council to "determine the existence of any threat to the peace, breach of the peace, or act of aggression" and to take military and nonmilitary action to "restore international peace...

. Instead, in collaboration with the US, it worked for a carefully worded appeal on the Rivonia and other political trials to try to appease Afro-Asian countries and public opinion at home and abroad; by early 1965 the issue of sanctions had lost momentum."

According to Lisson, Britain's rejection was premised on its economic interests in South Africa, which would be put at risk if any type of meaningful economic sanctions were put in place.

The Sullivan Principles (1977)

Knight writes that anti-Apartheid movement in the U.S found that Washington was unwilling to get involved in economically isolating South Africa. The movement responded by organized lobbying of individual businesses and institutional investors to end their involvement with or investments in the apartheid state as a matter of corporate social responsibility

Corporate social responsibility

Corporate social responsibility is a form of corporate self-regulation integrated into a business model...

. This campaign was coordinated by several faith-based institutional investors eventually leading to the creation of the Interfaith Center on Corporate Responsibility

Interfaith Center on Corporate Responsibility

The Interfaith Center on Corporate Responsibility is a coalition of 275 faith-based institutional investors. Founded in 1973, the organization advocates for corporate social responsibility and files shareholder resolutions and engages in dialogue with corporate management on issues such as global...

. An array of celebrities, including singer Paul Simon

Paul Simon

Paul Frederic Simon is an American singer-songwriter and guitarist.Simon is best known for his success, beginning in 1965, as part of the duo Simon & Garfunkel, with musical partner Art Garfunkel. Simon wrote most of the pair's songs, including three that reached number one on the US singles...

, also participated.

The key instrument of this campaign was the so-called Sullivan Principles

Sullivan Principles

The Sullivan principles are the names of two corporate codes of conduct, developed by the African-American preacher Rev. Leon Sullivan, promoting corporate social responsibility:...

, authored by and named after the Rev. Dr.Leon Sullivan

Leon Sullivan

Leon Howard Sullivan was a Baptist minister, a civil rights leader and social activist focusing on the creation of job training opportunities for African-Americans, a longtime General Motors Board Member, and an anti-Apartheid activist. Sullivan died on April 24, 2001, of leukemia at a Scottsdale,...

. Leon Sullivan was an African-American preacher in Philadelphia who, in 1977, was also a board member of the corporate giant General Motors

General Motors

General Motors Company , commonly known as GM, formerly incorporated as General Motors Corporation, is an American multinational automotive corporation headquartered in Detroit, Michigan and the world's second-largest automaker in 2010...

. At that time, General Motors was the largest employer of blacks in South Africa. The principles required that the corporation ensure that all employees are treated equally and in an integrated environment, both in and outside the workplace, and regardless of race, as a condition of doing business. These principles directly conflicted with the mandated racial discrimination and segregation policies of apartheid-era South Africa, thus making it impossible for businesses adopting the Sullivan Principles to continue doing business there.

While the anti-Apartheid movement lobbied individual businesses to adopt and comply with the Sullivan Principles, the movement opened an additional front with the institutional investors. Besides advocating that institutional investors withdraw any direct investments in South African-based companies, anti-Apartheid activists also lobbied for the divestment from all U.S.-based companies having South African interests who had not yet themselves adopted the Sullivan Principles. The institutional investors such as public pension funds were the most susceptible to these types of lobbying efforts.

Public companies with South Africa interests were thus confronted on two levels: First, shareholder resolutions were submitted by concerned stockholders who, admitted, posed more of a threat to the often-cherished corporate reputations than to the stock price. Second, the companies were presented with the significant financial threat whereby one or more of their major institutional investors decides to withdraw their investments.

Achieving critical mass (1984-1989)

The disinvestment campaign in the United States, which had been in existence for quite some years, gained critical mass following the Black political resistance to the 1983 South African constitution which included a "complex set of segregated parliaments." Richard Knight writes:

"In a total rejection of apartheid, black South Africans mobilized to make the townships ungovernable, black local officials resigned in droves, and the government declared a State of Emergency in 1985 and used thousands of troops to quell "unrest." Television audiences throughout the world were to watch almost nightly reports of massive resistance to apartheid, the growth of a democratic movement, and the savage police and military response."

The result of the widely televised South African response was "a dramatic expansion of international actions to isolate apartheid, actions that combined with the internal situation to force dramatic changes in South Africa's international economic relations."

University campuses

The anti-Apartheid disinvestment campaign on campuses began on the West coast in 1977 at Stanford University. It had some early successes in 1978 at Michigan State University, which voted total divestiture http://africanactivist.msu.edu/organization.php?name=Southern+Africa+Liberation+Committee , at Columbia University.; and the University of Wisconsin–Madison. Following the Michigan State University divestiture in 1978, in 1982, the State of Michigan legislature and governor voted for divestiture by all of the more than 30 State of Michigan colleges and universities, an action later struck down by the Michigan Supreme Court http://www.nytimes.com/1988/02/04/us/michigan-law-on-south-africa-investments-upset.html.

The initial Columbia divestment, focused largely on bonds and financial institutions directly involved with the South African regime. It followed a year long campaign first initiated by students who had worked together to block the appointment of former Secretary of State Henry Kissinger to an endowed chair at the University in 1977. Broadly backed by a diverse array of student groups and many notable faculty members the Committee Against Investment in South Africa held numerous teach-ins and demonstrations through the year focused on the trustees ties to the corporations doing business with South Africa. Trustee meetings were picketed and interrupted by demonstrations culminating in May 1978 in the takeover of the Graduate School of Business.

These initial successes set a pattern which was later repeated and many more campuses across the country. Activism surged in 1984 on the wave of public interest created by the wide television coverage of the then recent resistance efforts of the black South Africans.

Students organized to demand that their universities "divest", meaning that the universities were to cease investing in companies that traded or had operations in South Africa. At many universities, many students and faculty protested in order to force action on the issue. For example, in April, 1986, 61 students were arrested after building a shantytown in front of the chancellor's office at UC Berkeley.

As a result of these organized "divestment campaigns", the boards of trustees of several prominent universities voted to divest completely from South Africa

South Africa

The Republic of South Africa is a country in southern Africa. Located at the southern tip of Africa, it is divided into nine provinces, with of coastline on the Atlantic and Indian oceans...

and companies with major South African interests.

The first of these was Hampshire College in 1977.

Harvard University

Harvard University

Harvard University is a private Ivy League university located in Cambridge, Massachusetts, United States, established in 1636 by the Massachusetts legislature. Harvard is the oldest institution of higher learning in the United States and the first corporation chartered in the country...

only undertook a partial "divestment" from South Africa and only after significant resistance. Adam Soften and Aln Wirzbicki give this description:

"Throughout the ‘80s, Harvard professors for the most part avoided involvement with South Africa in protest of apartheid, and then president Derek C. Bok was a vocal supporter of work by the U.S. to prompt reform in South Africa. But the University was slow to pull its own investments out of companies doing business in South Africa, insisting that through its proxy votes, it could more effectively fight apartheid than by purging stocks from its portfolio. But after a decade of protests, Harvard did adopt a policy of selective divestment, and by the end of the ‘80s was almost completely out of South Africa."

University of California

The University of California is a public university system in the U.S. state of California. Under the California Master Plan for Higher Education, the University of California is a part of the state's three-tier public higher education system, which also includes the California State University...

, in contrast to the limited action undertaken by Harvard, authorized the withdrawal of three billion dollars worth of investments from the apartheid state. Nelson Mandela

Nelson Mandela

Nelson Rolihlahla Mandela served as President of South Africa from 1994 to 1999, and was the first South African president to be elected in a fully representative democratic election. Before his presidency, Mandela was an anti-apartheid activist, and the leader of Umkhonto we Sizwe, the armed wing...

has stated his belief that the University of California's massive divestment was particularly significant in abolishing white-minority rule in South Africa.

Overall, according to Knight's analysis, the numbers year over year for educational institutions fully or partially divesting from South Africa were:

	1984	1987	1988
Number of institutions divesting	53	128	155

States and cities

In addition to campuses, anti-apartheid activists found concerned and sympathetic legislators in cities and states. Several states and localities did pass legislation ordering the sale of such securities, most notably the city of San Francisco. The result was that "by the end of 1989 26 states, 22 counties and over 90 cities had taken some form of binding economic action against companies doing business in South Africa." Many public pension funds connected to these local governments were legislated to disinvestment from South African companies. These local governments also exerted pressure via enacting selective purchasing policies, "whereby cities give preference in bidding on contracts for goods and services to those companies who do not do business in South Africa."

Federal involvement

The activity at the state and city level set the stage for action at the federal level.

Comprehensive Anti-Apartheid Act

This began when the Senate and Congress presented Ronald Reagan with the Comprehensive Anti-Apartheid Act of 1986. Ronald Reagan responded by using his veto, but surprisingly and in testament to the strength of the anti-Apartheid movement, the Republican controlled senate overrode his veto. Knight gives this description the act:

"The Act banned new U.S. investment in South Africa, sales to the police and military, and new bank loans, except for the purpose of trade. Specific measures against trade included the prohibition of the import of agricultural goods, textiles, shellfish, steel, iron, uranium and the products of state-owned corporations."

The results of the act were mixed in economic terms according to Knight: Between 1985 and 1987, U.S. imports from South Africa declined 35%, although the trend reverses in 1988 when imports increased by 15%. Between 1985 and 1998, U.S. exports to South Africa increased by 40%.

Knight attributes some of the increase in imports in 1988 to lax enforcement of the 1986 Act citing a 1989 study by the General Accounting Office. Knight writes that a "major weakness of the Act is that it does little to prohibit exports to South Africa, even in such areas as computers and other capital goods."

Budget Reconciliation Act

A second federal measure introduced by Representative Charles Rangel in 1987 as an amendment to the Budget Reconciliation Act halted the ability of U.S. corporations from attaining tax reimbursements for taxes paid in South Africa. The result was that U.S. corporations operating in South Africa were subject to double taxation. According to Knight:

"The sums of money involved are large. According to the Internal Revenue Service, taxes involved in 1982 were $211,593,000 on taxable income of $440,780,000. The U.S. Chamber of Commerce in South Africa has estimated that the measure increases the tax bill for U.S. companies from 57.5% to 72% of profits in South Africa."

Further legislative efforts

An additionally and much harsher sanctions bill was passed by the House of Representatives (Congress) in August 1988. This bill mandated "the withdrawal of all U.S. companies from South Africa, the sale by U.S. residents of all investments in South African companies and an end to most trade, except for the import of certain strategic minerals." In the end, the bill didn't become law as wasn't able to pass the Senate. (In the United States legislative system a bill must be passed by both the Senate and the House of Representatives before it can be signed into law by the President.) Even so, the fact that such a harsh bill made any progress at all though the legislature "alerted both the South African government and U.S. business that significant further sanctions were likely to be forthcoming" if the political situation in South Africa remained unchanged.

Economic effects

While post-colonial African countries had already imposed sanctions on South Africa in solidarity with the Defiance Campaign

Defiance Campaign

The Defiance Campaign against Unjust Laws was presented by the African National Congress at a conference held in Bloemfontein, South Africa in December 1951....

, these measures had little effect because of the relatively small economies of those involved. The disinvestment campaign only impacted South Africa after the major Western nations, including the United States, got involved beginning in mid-1984. From 1984 onwards, according to Knight, because of the disinvestment campaign and the repayment of foreign loans, South Africa experienced considerable capital flight

Capital flight

Capital flight, in economics, occurs when assets and/or money rapidly flow out of a country, due to an economic event and that disturbs investors and causes them to lower their valuation of the assets in that country, or otherwise to lose confidence in its economic...

. The net capital movement out of South Africa was:

"R9.2 billion in 1985"
"R6.1 billion in 1986"
"R3.1 billion in 1987"
"R5.5 billion in 1988."

The capital flight triggered a dramatic decline in the international exchange rate of the South African currency, the rand. The currency decline made imports more expensive which in turn caused inflation in South Africa to rise at a very steep 12-15% per year.

The South African government did attempt to restrict the damaging outflow of capital. Knight writes that "in September 1985 it imposed a system of exchange control and a debt repayments standstill. Under exchange control, South African residents are generally prohibited from removing capital from the country and foreign investors can only remove investments via the financial rand

Financial rand

The South African financial rand system was abolished with effect from 13 March 1995. The financial rand system was instituted on 1 September 1985 in an attempt to control the large outflows of capital from South Africa at that time. These outflows were largely the result of economic sanctions in...

, which is traded at a 20% to 40% discount compared to the commercial rand. This means companies that disinvest get significantly fewer dollars for the capital they withdraw."

Anti-Apartheid opposition

While disinvestment, boycotts and sanctions aimed at the removal of the apartheid system, there was also considerable opposition from within the anti-apartheid movement within South Africa coming from both black and white leaders. Mangosuthu Buthelezi

Mangosuthu Buthelezi

Inkosi Mangosuthu Buthelezi is a South African Zulu politician who founded the Inkatha Freedom Party in 1975 and continues to lead the party today.His praise name is Shenge.-Early life:...

, Chief Minister of KwaZulu and leading black figure slammed sanctions, stating that "They can only harm all the people of Southern Africa. They can only lead to more hardships, particularly for the blacks". Well known anti-apartheid opposition MPs Helen Suzman

Helen Suzman

Helen Suzman, DBE was a South African anti-apartheid activist and politician.-Biography:Helen Suzman, a life-long citizen of South Africa, was born as Helen Gavronsky in 1917 to Jewish immigrants....

and Harry Schwarz

Harry Schwarz

Harry Heinz Schwarz was a South African lawyer, statesman and long-time political opposition leader against apartheid, who eventually served as the South African ambassador to the United States during the country’s transition to representative democracy.Schwarz rose from the childhood poverty he...

also strongly opposed moves to disinvest from South Africa. Both politicians of the Progressive Federal Party, they argued that disinvestment would cause further economic hardships for black people, which would ultimately worsen the political climate for negotiations. Suzman described them as "self defeating, wrecking the economy and do not assist anybody irrespective of race". Schwarz also argued that "Morality is cheap when someone else is paying".

Outside criticism

Many criticised disinvestment because of its economic impact on ordinary black South Africans. John Major

John Major

Sir John Major, is a British Conservative politician, who served as Prime Minister of the United Kingdom and Leader of the Conservative Party from 1990–1997...

said disinvestment would "feed white consciences outside South Africa, not black bellies within it".

Many conservatives

Conservatism

Conservatism is a political and social philosophy that promotes the maintenance of traditional institutions and supports, at the most, minimal and gradual change in society. Some conservatives seek to preserve things as they are, emphasizing stability and continuity, while others oppose modernism...

opposed the disinvestment campaign, accusing its advocates of hypocrisy for not also proposing that the same sanctions be leveled on either the Soviet Union

Soviet Union

The Soviet Union , officially the Union of Soviet Socialist Republics , was a constitutionally socialist state that existed in Eurasia between 1922 and 1991....

or the People's Republic of China

People's Republic of China

China , officially the People's Republic of China , is the most populous country in the world, with over 1.3 billion citizens. Located in East Asia, the country covers approximately 9.6 million square kilometres...

.

Libertarian movement leader and polemicist Murray Rothbard

Murray Rothbard

Murray Newton Rothbard was an American author and economist of the Austrian School who helped define capitalist libertarianism and popularized a form of free-market anarchism he termed "anarcho-capitalism." Rothbard wrote over twenty books and is considered a centrally important figure in the...

also opposed this policy, asserting that the most-direct adverse impact of the boycott would actually be felt by the black workers in that country, and the best way to remedy the problem of apartheid was by promoting trade and the growth of free market capitalism in South Africa.

Ronald Reagan

Ronald Reagan

Ronald Wilson Reagan was the 40th President of the United States , the 33rd Governor of California and, prior to that, a radio, film and television actor....

, who was the President of the United States

President of the United States

The President of the United States of America is the head of state and head of government of the United States. The president leads the executive branch of the federal government and is the commander-in-chief of the United States Armed Forces....

during the time the disinvestment movement was at its peak, also opposed it, instead favoring a policy of "constructive engagement

Constructive engagement

Constructive engagement was the name given to the policy of the Reagan Administration towards the apartheid regime in South Africa in the early 1980s...

" with the Pretoria

Pretoria

Pretoria is a city located in the northern part of Gauteng Province, South Africa. It is one of the country's three capital cities, serving as the executive and de facto national capital; the others are Cape Town, the legislative capital, and Bloemfontein, the judicial capital.Pretoria is...

government.

External links

African Activist Archive http://www.africanactivist.msu.edu 2,000 documents, posters, t-shirts, buttons, photos, video, and memories of activism in the U.S.to support the struggles of African peoples against apartheid, colonialism, and social injustice, 1950s-1990s. Also includes a directory of African activist organizations across the U.S.
Documenting the U.S. Solidarity Movement: With reflections on the sanctions and divestment campaigns
U.S. Economic Involvement with Apartheid South Africa
An Analysis of U.S. Disinvestment from South Africa: Unity, Rights, and Justice
Black South African Opinion on Disinvestment
The Crusade Against South Africa
Inkatha Freedom Party - Inkatha and the disinvestment campaign

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