U.S. CORPORATE ACTIVITIES IN SOUTH AFRICA

HEARINGS AND MARKUP BEFORE THE SUBCOMMITTEES ON INTERNATIONAL ECONOMIC POLICY AND TRADE AND ON . AFRICA OF THE COMMITTEE ON FOREIGN AFFAIRS HOUSE OF REPRESENTATIVES NINETY-SEVENTH CONGRESS

ON H.R. 3008, H.R. 3597, H.R. 6393

SEPTEMBER 24, OCTOBER 15 AND 22, 1981; MAY 18 AND JUNE 10, 1982

Printed for the use of the Committee on Foreign Affairs

U.S. GOVERNMENT PRINTING OFFICE 99-7800 WASWNGTON : 1983 COMMITfEE ON FOREIGN AFFAIRS CLEMENT J. ZABLOCKI, Wisconsin. Chairman L. H. FOUNTAIN, North Carolina WILLIAM S. BROOMFIELD, Michigan DANTE B. FASCELL, Florida EDWARD J. DERWINSKI, Illinois BENJAMIN S. ROSENTHAL, New York PAUL FINDLEY, Illinois LEE H. HAMILTON, Indiana LARRY WINN, JR., Kansas JONATHAN B. BINGHAM, New York BENJAMIN A. GILMAN, New York GUS YATRON, Pennsylvania ROBERT J. LAGOMARSINO, California STEPHEN J. SOLARZ. New York WILLIAM F. GOODLING. Pennsylvania DON BONKER, Washington JOEL PRITCHARD, Washington GERRY E. STUDDS, Massachusetts MILLICENT FENWICK, New Jersey ANDY IRELAND, Florida ROBERT K. DORNAN, California DAN MICA, Florida JIM LEACH, Iowa MICHAEL D. BARNES, Maryland ARLEN ERDAHL, Minnesota HOWARD WOLPE, Michigan TOBY ROTH, Wisconsin GEO. W. CROCKETT, JR., Michigan OLYMPIA J. SNOWE, Maine BOB SHAMANSKY, Ohio JOHN L.BOUTILLIER, New York SAM GEJDENSON, Connecticut HENRY J. HYDE, Illinois MERVYN M. DYMALLY, California DENNIS E. ECKART, Ohio TOM LANTOS, California DAVID R. BOWEN, Mississippi JOHN J. BRADY, Jr., Chief of Staff MICKEY HARMON, Staff Assistant ANNE MARKWARD, Staff Assistant

SUBCOMMITTEE ON INTERNATIONAL ECONOMIC POLICY AND TRADE JONATHAN B. BINGHAM, New York, Chairman DENNIS E. ECKART, Ohio ROBERT J. LAGOMARSINO, California DON BONKER, Washington ARLEN ERDAHL, Minnesota HOWARD WOLPE, Michigan BENJAMIN A. GILMAN, New York BOB SHAMANSKY, Ohio MILLICENT FENWICK, New Jersey R. ROGER MAJAK, Subcommittee Staff Director TABOR E. DUNMAN, Jr., Mirwrity Staff Consultant CAROL PAGE RoVNER, Subcommittee Staff Associate JOHN MAXWELL HAMILTON, Subcommittee Staff Associate

SUBCOMMITTEE ON AFRICA HOWARD WOLPE, Michigan, Chairman GEO. W. CROCKETT, JR., Michigan WILLIAM F. GOODLING, Pennsylvania STEPHEN J. SOLARZ, New York ARLEN ERDAHL, Minnesota GERRY E. STUDDS, Massachuaetts OLYMPIA J. SNOWE, Maine DENNIS E. ECKART, Ohio ROBERT K. DORNAN, California JOHNNIE CARSON, Subcommittee Staff Director GARDNER G. PEcKHAM, Minority Staff Ccnsultant STEVE WEISSMAN, Subcommittee Staff Associate PRISCILLA NEWMAN, Subcommittee Starf Associate

(II) CONTENTS

Thursday, September 24, 1981: Page Rev. Leon Howard Sullivan, chairman of the board, International Council of Equal Opportunity Principles...... 3 Han. Stephen J. Solarz, a Representative in Congress from the State of New york...... 19 Hon. William H. Gray, III, a Representative in Congress from the State of California ...... 34 Thursday, October 15, 1981: Mr. Joseph F. Dennin, Deputy Assistant Secretary for Finance, Invest- ment, and Services, U.S. Department of Commerce...... 52 Mr. Princeton Lyman, Deputy Assistant Secretary of State for African Affairs...... 60 Mr. Thomas Leddy, Acting Assistant Secretary for International Affairs, Department of Treasury ..... "...... ,...... ,..... "...... ,...... 72 Thursday, October 22, 1981: Han. Carl D. Pursell, a Representative in Congress from the State of Michigan ...... •...... 121 Rev. William Howard, president, National Council of Churches"...... 133 Mr. William B. Gould, professor of law, Stanford University Law School... 137 Mr. Rendall Robinson, director, TransAfrica ...... 153 Mr. Broadus N. Butler, director, International Affairs, National Associ- ation for the Advancement of Colored People ...... 157 Tuesday, May 18, 1982: Subcommittees' markup session (no witnesses)...... 189 Thursday, June 10, 1982: Subcommittees' final markup session (no witnesses).. 203 APPENDIXES 1. Legislation: H.R. 3008, as introduced by Mr. Solarz, April 2, 1981 ...... 225 Amendment in the nature of a substitute to H.R. 3008, July 2, 1982 ...... 245 H.R. 3597, as introduced by Mr. Gray, May 14, 1981 ...... 278 H.R. 6393, as introduced by Mr. Bingham, May 18, 1982, and voted out of 274 2. A p~~~i~~8~t1.~:~:~r~ft ..S:·Ch~:;.;;h~~··~;;·b;;;:;k··i~;;;;;;··i;;~~~t;:;;~;;t·i;;·S;;;;th Africa and December 1980 ICCR brief submitted by Rev. William Howard, president of the National Council of Churches of Christ in the U.S.A ...... 276 3. Statement submitted by General Motors Corporation, October 23, 1981 ...... 283 4. Statement submitted by Ray Denison, director, department of legislation at the American Federation of Labor and Congress of Industrial Organiza- tions .. ,...... ,...... "..... "...... , ...... 298 5. Letter dated November 9, 1981, submitted by Nicholas L. Deak, chairman of the board of DEAK -PERERA ...... 309 6. Letter dated November 25, 1981, submitted by J. R. Fluor, chairman, president, and chief executive officer, and D. S. Tappan, vice chairman of the Fluor Corp ...... 311 7. Letter dated November 19, 1981, from Mr. Wolpe to Department of Treas- ury and response letter dated December 30, 1981 ...... 315 8. Responses to questions submitted to the Department of Labor by the subcommittees...... "...... , ...... "..... "..... ".... "...... ,...... ,...... ,., .... ". 318 9. Article by the Economist, September 19, 1981, "America and South Africa Trade Follows the Flag" ...... 324 10. Article by Joseph Lelyveld, published in the New York Times, August 10, 1981, "South African DIscloses Bid To 'Break' Black Union" ...... ,.. ,...... , ...... 325 11. Article by Joseph Lelyveld, published in the New York Times, November 28, 1981, 1414 Unionists, Seized by South Africans" ...... ,...... 327

(lIIJ 153 Mr. WOLPE. Thank you very much, Mr. Gould. We now turn to Mr. Randall Robinson, executive director of TransAfrica. It is good to have you before the committee. STATEMENT OF RANDALL ROBINSON, DIRECTOR, TRANSAFRICA Mr. RoBINSON. Thank you, Mr. Chairman. I have a strong feeling of deja vu being here today. My testimony today is essentially the same as it was in 1978 and I remember having some of my first divided discussions with this subcommittee with Mrs. Fenwick and Mr. Solarz and I expect that we will see some renewal of that today, but in any case, let me proceed. Mr. SOLARZ. Maybe we should just have somebody read from the transcript of the last hearing. Mr. ROBINSON. Mr. Chairman, I welcome the opportunity to tes­ tify here today on the two bills before this subcommittee, R.R. 3597 and R.R. 3009. While Americans who value freedom are alike in their abhorrence of white minority rule and apartheid in South Africa, black Americans perhaps are uniquely interested in the scope and quality of our Government's response to the South Afri­ can system of tyranny. This obtains not only because we are bound to Africa by linkages of race and heritage but more compellingly because we have been provided through our struggle for equality in America a frame of reference for empathetically understanding something of the pain that 20 million black South Africans have been caused to endure. There are, however, critical dissimilarities between respective quests of black Americans and black South Africans. In America, ours has been and remains in its essentials a struggle for civil rights and economic equality. Among the various black South African objectives, the sine qua non is political enfranchisement, the right of every man and woman, irrespective of race, to cast an equally weighted vote in a unitary state. All other objectives are secondary and perforce achievable, given a solution to the central problem of franchise denial, including abo­ lition of the practice of petty apartheid. Although South Africa, in response to internal and external pres­ sure, has shown a grudging inclination to make cosmetic changes by lifting some petty apartheid restrictions, it has made clear to its black majority and to the world that it has no intention of allowing blacks full political participation within the Republic. On this point, South African leadership promises in a believable fashion that there can and will be no compromise. Recently, the world has seen a demonstration of how South Africa responds to a diminution of external pressures brought about in the instant case through an unfortunate hand of friend­ ship extended by the Reagan administration to the Pretoria regime. Since January 1981, barely discernible trends toward cosmetic amelioration of South Africa's racial policies have been reversed. Prime Minister P. W. Botha has publicly announced South Africa's abandonment of a previous commitment to the slow liberalization of petty apartheid. Reflecting the Government's renewed pursuit of grand apartheid, South African Government trucks cartloads of corrugated metal daily to worthless and remote bantustans on which tin huts are being rapidly erected to house the tens of thousands of black South 154 Africans the Government plans to deport. Only recently, South Af­ rican police arrested 1,500 squatters outside Capetown. They comprise but a tiny segment of those scheduled for reloca­ tion to arid patches of land upon which the Pretoria regime plans to confer "independence." Earlier this year, for implying support for corporate disinvest­ ment while visiting the United States, the South African Govern­ ment confIScated the passport of Bishop Desmond Tutu upon his return home. Bishop Tutu, general secretary of the South African Council of Churches and a prominent moderate, is now a subject for consider­ ation of a government banning order. In its external relations, South Mrica of late has pursued a vio­ lently aggressive course similar in character to its recent domestic behavior patterns. Since January of this year, South African forces have invaded Mozambique, assembled an assassination squad to assassinate an­ tiapartheid leaders in the neighboring states, trained in the Trans­ vaal anti-Zimbabwe guerrillas, conspired with Ian Smith and Bishop Muzorewa to destabilize the Zimbabwean Government, massed occupation troops in Namibia and massively invaded Angola. South African observers, white and black, agree that the new in­ crease in Government aggressive and repressive activity is in large part a consequence of the Reagan administration's permissive policy of "neutrality" and "constructive engagement." Expecting no criticism from the United States, the Pretoria regime has acted with Draconian impunity. From all of this, one is compelled to conclude that under no cir­ cumstances, absent extreme international pressure or war, or both, will the ruling white minority accept majority rule. The lines now appear indelibly drawn. The middle ground that once existed ap­ pears to have eroded completely. Thus, the value of the two bills before the subcommittee must be measured against answers to the following questions: Does Ameri­ can corporate presence in South Africa enhance the capacity of the governing white minority to deny political power to the black ma­ jority? Are any inroads narrowly made against petty apartheid in the American corporate workplaces, more than offset by advan­ tages to the South African Government drawn from American cor­ porate infusions of capital and technology? The available evidence suggests that both questions be answered affirmatively. In a January 1978 report to the Senate Foreign Relations Com­ mittee, Senator Dick Clark, chairman of the Subcommittee on Afri­ can Affairs, wrote that "the net effect of American investment has been to strengthen the economic and military self-sufficiency of South Mrica's apartheid regime." Hence, while we applaud the sincerity of purpose of the sponsors and cosponsors of H.R. 3008, TransAfrica urged that the subcom­ mittee report out favorably H.R. 3597 isasmuch as this measure sponsored by Congressman William Gray would cause the cessation of U.S. corporate capital inflow. It serves little constructive purpose to integrate the eating rooms of some 100,000 black and white South Africans employed by 155 American companies in South Africa, if, at the same time, we pro­ ceed apace in allowing American companies to join with their counterpart multinationals in underpinning the backbone of white minority ru16. While H.R. 3597 does not require a needed disinvestment of American capital, its provisions would at least begin to move us in the right direction. Alternatively, we recommend that the subcommittee combine with H.R. 3597 those sections of H.R. 3008 that are meaningful and enforceable, that is, a ban on loans by U.S. banks to the South Af­ rican Government or its parastatal entities, public disclosure of U.S. bank loans to any South Mrican corporation and a ban on the importation of the South Mrican Krugerrand into the United States. Before discussing the current investment role of the United States in South Africa, I would like to argue the nearly complete inadequacy of an American legislative response that would suggest fair employment standards as an answer to apartheid. The voluntary Sullivan principles and any mandatory fair em­ ployment standards the Congress would entertain must be dis­ cussed within the context of South Mrican law. On June 30, 1978, the Protection of Business bill was passed by the South Mrican Parliament unopposed. Under this law, it is a crime for a firm op­ erating in South Mrica to give information about its activities without the permission of the Minister of Economic Affairs. Even foreign court judgments must be ignored. Given the restrictions of this act, even if the persons covered by H.R. 3008 were inclined to submit to the Secretary of State the in­ dicated annual progress reports, they would be-forbidden from doing so without leave of the South African Government. In short, foreign companies in South Mrica are hostage to the South African Government. The companies understand this and not unhappily. Moreover, any ameliorative efforts to be made would be frustrated not only by the Protection of Business bill but also by a spate of additional restrictions with which the subcom­ mittee is no doubt familiar: The Factories Act; the Industrial Con­ ciliation Act; the Shop and Offices Act; the Apprenticeship Act. Those have been discussed by Mr. Gould. I understand to some degree they have been amended, but the reality in South Africa is much the same as it has always been. In view of the preparations South Africa has made to contain the outflow of corporate information, it appears to us that not only will the fair employment standards called for in H.R. 3008 be rendered meaningless in terms of their impact on apartheid, but unimple­ men table as well. Returning once again to the central thesis, the real issue to be confronted here is not whether the investing companies can chip away more than negligibly at discrimination in their own work­ places, but whether they serve by their considerable presence to assist in underpinning the government's continuing capacity to re­ press its black majority. A few examples will help to illustrate this point. The Fluor Corp. of California, General Motors, Ford Motor Co., and Control Data are all signers of the Sullivan principles and presumably would 156 comply with any mandatory fair employment standards insofar as compliance is allowed by the South African Government. In early 1979, Fluor announced it had received a $2 billion con­ tract from South Africa to expand an oil-from-coal plant it has been building in that country. The expansion was needed because oil-dependent South Africa had had its supplies cut off by all of the major oil-producing coun­ tries. Notwithstanding Fluor's subscription to fair employment stand­ ards, the company has helped South Africa to lessen its dependence on imported oil, thus reducing Pretoria's vulnerability to world pressure. Similarly, Ford and General Motors continue to supply trucks and other vehicles to the South African military and police while Control Data supplies computers to a regime with no capacity for local production. While the United States accounts for only about 17 percent of foreign investment in South Africa, the American companies are concentrated in the most strategically essential sectors of the coun­ try's infrastructure: the automotive industry; the petrochemical in­ dustry; electronics; and C 'luter technology. About 75 percent of the .otal American investment is accounted for by just 12 corporations that not only dominate their particUlar industry in South Africa, but are also some of the largest compa­ nies in the United States. Their value to the South African regime is beyond question. The statement made 10 years ago by the man­ ager-director of Burroughs South Africa, C. Cotton, remains rele­ vant today: We are entirely dependent on the United States. The economy would grind to a halt without access of the computer technology of the West. No bank could function, the government couldn't collect its money and couldn't account for it, business couldn't operate, payrolls could not be paid. Retail and wholesale marketing and re­ lated services would he disrupted .. U.S. firms control over 70 percent of the South African computer market, 25 percent of the automotive market, and 44 percent of the petroleum producers market. Against a background of unshakeable proof that these firms render an essential service to the regime, American companies have long defended their presence by augur­ ing that a growing South African economy, with increased need for skilled labor, will ultimately bring about apartheid's demise. Elizabeth Schmidt, author of "The Sullivan Principles: Decoding Corporate Camouflage," writes convincingly that American corpo­ rations operating in strict compliance with fair employment princi­ ples, could not begin to confront the South African system: To sustain an annual growth rate of 6.4 percent, it is augured 6,000 blacks could be promoted into previously "white" positions each year. However, the black labor pool is growing by at least 100,000 per year. Such a promotion rate would mean that fewer than one out of 1,000 African workers would move into a white vacancy each year, assuming that all of the vacancies would be filled by black workers. Meanwhile, the trend toward capital-industry is actually eliminating black jobs on the other end of the spectrum. Even if all American corporations were to sign the Sullivan principles, they would have little positive impact on the black population as a whole. Largely capital-intensive, American corporations in South Africa pro­ vide disproportionately rew job opportunities. 157 In summary, American corporations, while providing immense support to South Africa, have sought cover from criticism behind fair employment principles. They look good and do nothing. For these reasons outlined above, we find section 1 of H.R. 3008 to be unenforceable and not significantly meaningful. American, South African, and more generally, world interests can only be served through a search for American legislative responses that might cause the South African regime to alter its course. Unfortunately the Congress does not appear to be prepared to take the steps indicated by circumstances in South Mrica, that is, total American corporate disinvestment coupled with support for comprehensive sanctions imposed under chapter 7 of the U.N. Charter. While the prescriptions of H.R. 3597 fall far short of an adequate American response to apartheid, they do at the very least take the United States in a defensible direction. Majority rule is inevitable. It behooves the United States to posi­ tion itself clearly now on the right side of the growing challenge to apartheid. This cannot be done as long as American businesses, fair employment standards notwithstanding, continue to help meet the rulership needs of the white minority. In our view, only H.R. 3597 could begin to make an impact on the economic and strategic fortunes of South Africa-an impact that would reveal to the world that the United States is sincere in its commitment to human rights, a commitment which would put human dignity and self-determination before the greed of multina­ tional corporations. Mr. WOLPE. Thank you very much, Mr. Robinson. We turn last to Dr. Butler, the director of international affairs for the NAACP. STATEMENT OF BROADUS N. BUTLER, DIRECTOR, INTERNATION­ AL AFFAIRS, NATIONAL ASSOCIATION FOR THE ADVANCE­ MENT OF COLORED PEOPLE Mr. BUTLER. Mr. Chairman, ladies and gentlemen, I feel like Mr. Robinson did when he said we are back again. I remember in 1978 when we were here. I would like to just note that there is need for the approaches which are represented in the two bills before us because in Con­ gressman Gray's testimony to this committee there is an interest­ ing item on the second page of his testimony which shows that while the U.S. investments have grown by 11 percent between 1977 and 1978, they grew by only 1 percent in the year that this was being entertained, but when the administration changed, or when there was a signal that the administration was going to change, it is very interesting that the investments in South Mrica increased dramatically to 18 percent between 1979 and 1980. Now, if that is the case, I would never suggest that you not follow a bill that ought to be forwarded on the prospect that it may not be politically expedient. The NAACP has been at this for many years, as you know; and these floors are needed because there is little evidence of voluntary progress, even by American corpora­ tions in South Africa.

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