NORTHWESTERN UNIVERSITY LIBRARY EVANSTON, ILLINOIS The South African Connection RUTH FIRST JONATHAN STEELE CHRISTABEL GURNEY The South African Connection Western Investment in Apartheid TEMPLE SMITH - LONDON First published in Great Britain 1972 by Maurice Temple Smith Ltd 37 Great Russell Street, London wci © 1972 RUTH FIRST, JONATHAN STEELE &CHRISTABEL GURNEY ISBN 0 8511 7029 3 Printed in Great Britain by Billing & Sons Limited, Guildford and London 33 ;.73 F57s Contents I Business and Politics: How They Mix 9 2 The Foundations of the Partnership 23 ,3 The Black Poor Get Poorer 41 '4 The Floating Colour Bar 59 Less pay for equal work 66 Job dilution 71 The border areas 77 5 The Place of Foreign Capital 81 Mining: the magnet for them all 85 Banking and insurance: fund-raisers for apartheid 89 The motor industry: in gear with the Government 95 Textiles: the benefits of cheap labour 98 Chemicals: the giant that needs a market ioI Oil: the Achilles heel 103 Computers: the most advanced sector of them all Io6 6 The Patterns of the Past lo9 7 South Africa's Other Friends 128 The United States 128 France 135 West Germany 137 Japan 142 8 The Companies: Image and Reality 147 NINE CASE STUDIES The Rio Tinto--Zinc Corporation 162 British Leyland 167 Imperial Chemical Industries 172 British Steel Corporation 176 Dunlop Holdings 179 Guest Keen and Nettlefolds 182 General Electric Company i86 General Motors x89 Caltex '9' 9 Experiments and Failures 193 Polaroid 193 Barclays Bank: equal pay for equal work? 200 The Oppenheimer phenomenon 203 io Business Plays Politics 213 The United Kingdom-South Africa Trade Association 216 The South Africa Foundation 221 The British National Export Council 233 The Monday Club 239 i i Recruiting Immigrants for South Africa 243 1 2 Western Trade Follows the South African Flag 255 13 Conclusion 279 Chapter Notes 298 Appendices 316 Tables 330 Index 341 Acknowledgements We have learnt much from others working on the political economy of apartheid, and this will be clear from our detailed references to sources. In particular we should like to thank: Denis Herbstein whose on-the-spot interviews with industrialists in South Africa were invaluable, and who generously made available to us his unpublished notes; Sean Gervasi who helped with statistics and tables and by placing at our disposal his notes on research in progress; Harold Wolpe, Vella Pillay and Brian Bunting who read and criticized some of the draft chapters and who helped to clarify our ideas in discussion; Peter Kellner who was involved in the early stages of the book; Paul Fauvet who did some of the research on company directorships; Timothy Smith, Reed Kramer and Tammie Hultman, who made available the material they have collected on the operations of American corporations in South Africa. Note on exchange rate conversions In most cases we have converted rands into pounds sterling at the current rate of R .95 = kI. Where figures refer to capital flows (which are to some extent influenced by the prevailing rate of exchange at the time) we have converted at the rate: R2 = ki up to and including 1967 Ri.7 = ki for 1968 to 1971 Ri.95 = Ci for 1972 onwards The 1967 devaluation of the pound occurred in November. We have, however, taken the rate R2 = Ci for the whole of the year 1967. The 1971 devaluation of the rand occurred in December. Again we have taken the rate Ri .7 for the whole of the year 1971. Similarly we have used the following dollar exchange rates: US $2.80 = £i up to and including 1967 US $2.40 = Ci for 1968 to 1971 US $2.55 = i for 1972 onwards 1 Business and Politics: How They Mix From a Conservative point of view, it was Reginald Maudling who hit the nail firmly on the thumb. In May 197o he launched into an attack on the demonstrators who were trying to prevent the all-white South African cricket tour. They were, he argued, putting too much emphasis on one, relatively minor, aspect of South African life. 'South African trade and industry', the Conservative deputy leader intoned, %are just as much based on apartheid as cricket is.' What Mr Maudling was trying to do, of course, was to de-fuse the protests with the old formula of 'Why pick on... ?' (cricket, South Africa, Greece, Vietnam, or whatever the case may be). But inadvertently he had hit on an important truth; for in spite of all the action by militant radicals against apartheid, it is only recently that big business corporations have come under direct attack. Demonstrators have nearly always taken political institutions as the objects of their opposition, with foreign .embassies the favourite targets. It is surely time to question this approach as a preoccupation with the outward symbols of political power and a lopsided scale of tactical priorities. This question is probably more important in the discussion of apartheid than of any other world issue. For, controversial though the British Government's policy towards South Africa is, its influence is small compared with the effect of trade and industry. Gettin on for two-thirds of all foreign investment in South Africa is British. and- one-third _f all South Africa's exports come to this country. British business interests spra thrug almost every aspect otie ubli's life; it is lia- ,to-img- e-hWs-o--e---ecors, liekl75hnking, for example, would keep going without British backing. The South African Connection In their reply to the suggestion that this involvement puts a special onus on British firms to help to end apartheid, businessmen generally give one of two answers: the first is that business and politics (like sport and politics) should not be mixed, and the second that apartheid may be objectionable, but that business is 'doing its bit behind the scenes' to change it; the alternative to this reform-by-participation would, after all, be to try to bring down South Africa's regime and consequently her economy. So, let us opt for reform through business rather than for revolution. ('e view that business and politics should not be mixed is extraordinarily difficult to uphold; it rests on the argument - a singularly unpersuasive one - that politics and business are autonomous areas of society, and it ignores the widespread and permanent pressure exerted upon governments by those who control industrial, commercial and financial resource Business and political interests, far from being separate and independent, interact closely with each other, influence each other and each of them relies on this interdependence in its own policy-making. Manifestly, companies use their influence where they can to further their own interests in both the short and the long term. Sometimes this influence takes the form of special pleading - for instance, the Rolls-Royce appeal to the British Government for a forty-two-million pound subsidy to help the company over short-term difficulties during the design and production of aero-engines for the American market. But the influence is often directed towards more general ends: changes in company taxation; alterations in trade policy; even - as could be seen from the dramatic rise in share prices on 19 June I97o, at the time of Britain's general election - a change of government. The argument that business and politics should not be mixed comes up against insuperable difficulties in South Africa. The history of the development of the country's economy falls into three main stages: the coercion of black Business and Politics: How they Mix labour into the compounds of the gold and diamond mines; Britain's establishment of Union in I9IO so that centralized state power would control labour in the interests of white capital; and now the stage of apartheid, when the political and economic pressures for cheap labour are intensified; all three tell of the close interdependence of vested political and business interests. The argument for the defence can shift slightly: some businessmen claim that they cannot be held responsible for supporting apartheid, because they play no part in making the laws which regulate it. 'We would be just as willing', they say, 'to work under a black government in South Africa as a white government.' This argument is not consistent unless it maintains that business should never take part in any political process. The fact that so many British companies subscribe to the Conservative party, or to other organizations of a rightward persuasion, like the Economic League, suggests that this is not a point of view which many businessmen hold with any conviction. Now, one man who believes strongly that business and politics cannot be separated is Sir Val Duncan. Sir Val is Chairman of Rio Tinto- Zinc (R T Z), the huge international, British-run mining corporation, forty-three per cent of whose profits in 1970 came from its South African subsidiary, Palabora Mining. Two years ago Sir Val headed a Government-sponsored commission to study the future of the Foreign Office. The core of the commission's recommendations was that British missions abroad should be more directly oriented to promoting British commercial interests; indeed, it was felt that in some countries, a full embassy was superfluous: a commercial office would suffice. If there was any disagreement within the British business community with these suggestions, it did not make itself evident. It is more likely that most companies do not, in practice, separate - or even -aiif- to separate - business and political considerations, unless it happens to suit them to do so. If this is the The South African Connection case, then the argument that business bears no responsibility for developments in South Africa is sheer hypocrisy, and those who put it forward are really saying that it is in their best interests to keep their mouths shut over politically sensitive issues, and to profit as best they can.