Involvement of foreign economic interests in South Africa's industrial development projects

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Alternative title Notes and Documents - United Nations Centre Against ApartheidNo. 35/75 Author/Creator United Nations Centre against Apartheid; Sub-Commitee of the United Nations Special Comittee against Apartheid; United Nations Special Comittee against Apartheid Publisher Department of Political and Security Council Affairs Date 1975-11-00 Resource type Reports Language English Subject Coverage (spatial) South Africa Coverage (temporal) 1975 Source Northwestern University Libraries Description Introduction. Recent Developments in the nuclear field. (a) Uranium enrichment (b) Nuclear power station (c) Uranium mining. Sishen-Saldanha Bay project. (a) General. (b) Foreign involvement (c) (i) Iron ore exports to Japan (ii) Harbour and rail construction(iii) Semi-manufactured steel plant. Second oil-from-coal plant (SASOL II). Recent developments in mining. (a) Richards Bay coal export project (b) Recent discoveries. Developments in shipping: containerization. Format extent 34 page(s) (length/size)

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NOE, DOU MENTS*.. No. 35/75 INVOLVEMENT OF FORE N ECONOMIC INE TS IN SOUTH AFRICA'S INDUSRIAL DEVELOPMENT PROJECTS November 1975 I975 A study by the Sub-Committee (qf the Special Cowmitteeagainst Apartheid) on the ImplementatJ on of United Nations Resoiuicns and Collaboratioi -ith SzUt'rAfrica Page I. Introduction..a...aaaa. a ...a .aa*a II. Recent Developments in the nuclear field ..a ..... (a) Uranium enrichment (b) Nuclear power station (c) Uranium mining III. Sishen-Saldanha Bay project ...... a.a (a) General (b) Foreign involvement (c) (i) Iron ore exports to Japan (ii)Harbour and rail construction (iii) Semi-manufactured steel plant IV. Second oil-from-coal plant (SASOL II) . . . V. Recent developments in mining . a. . .. * a a a a a a a (a) Richards Bay coal export project (b) Recent discoveries VI. Developments in shipping: containerization ..aaaa. 50 LThis study is published by the Unit on Apartheid at the request of the Special Committee against Apartheid._ *All material in these notes and documents may be freely reprinted. Acknowledgement, together with a copy of the publication containing the reprint, would be appreciated. NOTESA

I. INTRODUCTION The extent and significance of foreign involvement in apartheid in South Africa has been extensively documented in the reports of the Special Committee against Apartheid, as well as in the publications of the liberation movements, and in studies prepared by anti-apartheid movements and other non-governmental organizations and by other concerned institutions and individuals. The evidence presented in these reports shows conclusively that the role played by foreign capital in South Africa is not purely economic, but has deep political, military and strategic implications. Foreign investment helps reinforce apartheid and impedes United Nations efforts to secure the eradication of apartheid. The major trading partners of South Africa have largely ignored United Nations resolutions requesting Member States to break off all relations with South Africa. Involvement in the apartheid economy by companies under their jurisdiction and by transnational companies has continued to increase. In recent years, many of these foreign economic interests have entered into undertakings in partnership with South African State-owned and private corporations, thus acquiring an ever larger stake in the perpetuation of the apartheid system. Figures published by the South African Reserve Bank show that foreign assets in the Republic of South Africa. grew from R4,562 million in 1968 to R7,786 million in 1972. Between 1968 and 1974, foreign capital is estimated to have financed a proportion of between 5.9 and 19 per cent of South Africa's gross domestic investment. l_ Most of this capital inflow has been direct investment in wholly or partly-owned subsidiary companies. In recent years, however, there has developed a trend toward growing foreign involvement in the public sector. Under the pressure of its growing political and economic isolation, the South African regime has embarked on a major industrialization programme aimed at achieving self-sufficiency through the development of strategic sectors of the economy by various State and para-statal corporations. Public authorities and public corporations more than doubled the value of their investments in the period under consideration, and their share of the countryts gross domestic investment was 55 per cent in 1972. ?/ They were encouraged to enter into partnerships with foreign economic interests and to approach foreign capital markets for loans. As a result, foreign direct investment declined from 67 per cent to 62 per cent of total foreign investment between 1968 and 1972, while indirect investment in the public sector increased from 13 per cent to 17 per cent of the total./ l/ See A/AC.115/L.414 for details. / South African Reserve Bank, Quarterly Bulletin, June 1975. The share of the public sector declined after the 1972 peak, and was 38 per cent in 1974. The huge development programmes recently approved and described in this paper should again raise the contribution of the public sector substantially in the next few years. The Financial Mail of Johannesburg estimated the public sectorts share at 47% in the 1970-75 period, compared with 36.5% in the immediate post--war years. (Top Companies Supplement, 6 June 1975) 31 South African Reserve Bank, Quarterly Bulletin, June 1975. 7 5-22056

According to recent figures released by the Reserve Bank, the financial year 1974/75 registered a total net inflow of capital into South Africa of R1,499 million, more than two-thirds of which was long-term capital. The public corporations received about half 4f this amount and the central government and banking sector and the private sector a quarter each./ Foreign capital, both as investment capital and loan capital, is expected to play a major role in the financing of several large-scale industrial development projects approved by the South African Government in recent years. Under the heading "Can we afford them all?", the Financial Mail of 4 July 1975 listed 28 major projects to be undertaken in the next five to ten years by South African private and public corporations, necessitating a total investment of over 14 billion rand. All of the largest projects, involving an investment of between R500 and R2,000 million, are to be carried out by the public sector. These include the expansion of the postal and telecommunications system (R2,100 million); the restructuring of the shipping services to containerization (R2,000 million); four new electric power stations, including a nuclear station (R4,350 million); the establishment of a second plant for the conversion of coal into oil (R1,021 million); coal mining expansion (Rl,000 million); a uranium enrichment plant (R910 million); and an iron-ore mining and export scheme at Sishen-Saldanha Bay (R603 million). The paper pointed out that investment envisaged under the Government's Economic Development Programme for lq,74- 79,to sustain, an annual growth rate of 6.4 per cent would amount to R50 billion, or about three times the combined assets of all South Africa's banks, building . societies and insurance companies. Many of these projects are thus dependent on South Africa's capacity to raise the necessary capital abroad. The technological know-how and sophisticated capital equipment contributed by foreign companies are an additional important consideration. The projects reviewed in this paper are illustrative of South Africa's industrialization plans and of the crucial role pfL. yed by foreign capital in enabling the implementation of the Government's plans. They have been selected for their strategic importance to the apartheid regime in achieving self-sufficiency in areas in which it is vulnerable to an int rnational boycott, and in, creating links of inter-dependence between the r4gime and its foreign collaborators. _/ Address by Dr. T.W. de Jongh, Governor of the South African Reserve Bank, at the annual General meeting of stockholders of the Bank on 26 August 1975. Financial Mail, Juhannesburg, 29 August 1975.

II. RECENT DEVELOPMENTS IN THE NUCLEAR FIELD (a) Uranium enrichment South Africa has spent years of research and millions of rands on gaining possession of advanced nuclear technology, and has obtained substantial foreign technical and other assistance for this purpose. An extensive long-term research programme was initiated in 1959, under the auspices of the Atomic Energy Board, and comprehensive research facilities were established at Pelindaba, near Pretoria. In April 1971, following the disclosure that South African scientists at Pelindaba had developed a unique process for the enrichment of uranium4, the Government established the Uranium Enrichment Corporation (UCOR) as a State corporation to undertake research and development with the stated objective of making South Africa an independent manufacturer of enriched uranium for its own energy needs as well as for export. UCOR w-.s charged with the erection of a pilot plant for the production of enriched uranium at Pelindaba. Two iportant announcements made in the first part of 1975 showed that South Africa had moved considerably closer to its goal. On 7 April 1975, the Prime Minister, Mr. B.J. Vorster, disclosed in the House of Assembly that the first pprt of the pilot plant had been brought into operation successfully. He stated: "The new South African process has therefore not only been proved in practice but it also bnables us to proceed with confidence with the erection of a large-scale plant with a view to the marketing of a large portion of our uranium supplies in enriched form for commercial purposes." 5/ The science correspondent of the London Daily Telegraph cemmented: "South Afrfca's announcement has given rise to speculation as to whether she has discovered a short cut to producing an atomic bomb. "Uranium is enriched in the isotope U 235. With high-level enrichment, it can be used for bombs. At low levels it is suitable fnr nuclear power station fuel. In practice each plant has to be designed to produce one or the other. "Mr. Vorster's statement indicates that the pilot plant has been designed to produce civil-grade material. Nevertheless the process does Topen the door' to producing weapons-grade uranium, should thlre be the intent, and it is conceivable that bomb-grade materiL has bevn produced already." 6/ 5/ House of Assembly Debates (Hansard), 7 April 1975, cols. 3601-2 6/ Daily Telegraph, London, 8 April 1975

Subsequently, on U1 June 1975, the South African Minister of Mines, Mr. P. G. J. Koornhof, announced that South African scientists had successfully commissioned a pilot plant at Pelindaba to produce uranium hexafluoride the "feed material" for the enrichment plant. This meant that South Africa was now in a position to do the entire enrichment process without having to depend on outsiders. / In announcing the completion of the first stage of the enrichment plant, Mr. Vorster claimed: "That this achievement could be reached without any assistance from foreign countries inspires enormous confidence for the future scientific and technological development of our country." 8/ Speaking at the European Nuclear Conference in Paris a few weeks later, Mr. A.J.A. Roux, Chairman of UCOR, stated that a total of 234 South African companies had been involved in constructing the plant. 9/ The plant, which involved an investment of about R100 million, has reportedly about 90 per cent "local" content.lO These statements and figures, however, are misleading in many ways. The United States corporation Allis Chalmers designed and built the research and test reactor which is at the heart of the research center at Pelindaba. A report by the American Committee on Africa in New York gave the names of eight other United States organizations which have been involved in research at Pelindaba. L/ United States nuclaar engineers were sent to South Africa to supervise the initial stages of the reactor, and scores of South African scientists have received extensive training in the United States. Among these was Ir. W. L. Grant, who was credited by Mr. Vorster as having been one of the inventors of the South African enrichment process. L2/ South African nuclear physicists are als known to have been trained in France, reportedly at the expense of the French Government. 1/ In addition, under a 20-year agreement for co-operation in the peaceful uses of atomic energy concluded with South Africa in 1957, the United States Atomic Energy Commission is supplying highgrade uranium to fuel the research reactor at Pelindaba. L/ Following a protest by 7/ House of Assembly Debates (Hansard), 11 June 1975, col. 7967 8/ House of Assembly Debates (Hansard), 7 April 1975, col. 3601 2/ Financial Times, London, 23 April 1975; Rand Daily Mail, Johannesburg, 23 April 1975. L/ The Star, Johannesburg, weekly airmail edition, 8 June 1974. 1/ Africa Today,New York, August - September 1965 L2/ Information Service of South Africa, New York, Business Report,26 March 1965; South African Scope,February 1965; Hearings before the Sub-Committee on Africa of the Committee on Fvreign Affairs, United States House of Representatives, Part 2 12 November 1971, p. 53. L/ South African Information Service, Pretoria, 9 April 1965. L/ Hearings before the Sub-Committee on Africa..., o..cit., p.41

-5 Congressman Les Aspin, a member of the Armed Services Committee of the House of Representatives, the U.S. Nuclear Regulatory Commission confirmed in April 1975 that by the end of 1974, 83.6 pounds of enriched uranium had been supplied to South Africa under the agreement, and a license had been issued for the supply of a further 42.5 pofnds.l_/ The spent fuel elements from the reactor are re-processed in the United Kingdom under an agreement with the United Kingdom Atomic Energy Authority of November 1970 4/ Despite South AfricaTs claim that its enrichment process is "unique", there appears to have been substantial co-operation with the Federal Republic of Germany in its development. In his speech at the Paris conference, Dr. Roux confirmed that South Africa's process was an aerodynamic one, of the same basic type as the "jet-nozzle" process under development at the Institute for Nuclear Processing Techniques, a Government agency, at Karlsruhe, Federal Republic of Germany. It was disclosed in 1974 that several South African scientists h. had visited the nuclear research laboratories at Karlsruhe. Research at Karlsruhe has had the financial and technical assistance of Essener Steinkohlen Elektrizit~t AG, an industrial group in the Federal Republic of Germany which is reportedly planning to invest in South AfricaTs enrichment plant._7/ It also appears that South Africa has benefited from foreign assistance in the developnent of its hexafluoride plant. Dr. Roux had disclosed in 1970 that research for the process had been carried out by South African scientists and industrialists in collaboration with "overseas interests", and that South Africa had now reached the stage where it needed no foreign assistance to erect such a plant. 1/ Moreover, although the names of South African companies involved in the construction of the pilot plant at Pelindaba have not been disclosed, these are very likely to include a number of subsidiaries of foreign companies and local companies with foreign holdings. It was reported, for instance, that the South African subsidiaries of Siemens and Krupp, the companies in the Federal Republic of Germany, had been connected with research at Pelindaba. The United States companies IBM and Foxboro Corporation are reported to have provided some of the technological equipment.l_/ Foreign involvement is likely to continue to be substantial in the development of South Africa's enrichment process on a commercial scale. On 11 June 1975, Mr. Koornhof announced that UCOR had established a company under the name cf ISASA to deal with the building of a large-scale. uranium L5/ Washington Post, 14 April 1975. 16/ The Star, Johannesburg, weekly airmail edition, 5 December 1970. 1/ Financial Times, Londo4, 23 April 1975; Rand Daily Mail, Johannesburg, 23 April 1975; Wall Street Jcurnal, 6 May 1974. L/ Rand Daily Mail, Johannesburg, 24 October 1970. 12/ Ruth First, "Foreign Investment in Apartheid",Unit on Apartheid Notes and Documents, No. 21/72, October 1972; Southern Africa, New York, June 1975.

-6- enrichment plant, and that a final decision would be reached within a few months. LO/ The Uranium Enrichment Amendment Act was passed in September 1974 to allow private investment in the venture. In April 1975, Mr. Roux disclosed that negotiations were under way for the establishment of the plant; e sen international venture. The plant would require an estimated investment of R910-million and would have a capacity of 5,000 tons a year of enriched uranium with a development potential of up to 10,000 tons. It was expected to come into operation by 1984, and to reach full production by 1986. 21/ Apart from its potential significance for ther 1rproduction of weaponsgrade uranium (a possibility which the South African regime claims its eschews at this point), the enrichment plant is of major importance to South Africa for economic as well as political and strategic reasons. First, self-sufficiency in the production of enriched uranium is expected to contribute considerably to South Africays self-sufficiency in meeting its energy needs, thus lessening the impact of an internationAl boycott of petroleum supplies, at least in the long run. Dr. J.W.L. De Villiers, Vice-President of the South African Atomic Energy Board, disclosed rec ntly that the Board was planning to step up its fuel development programme, and that the current oil situation was one of the most important considerations for an accelerated nuclear power programme. He stated that the introduction of nuclear power meant that South Africa could reserve its coal for the petrochemical industry and for the gasification of coal and production of liqiid fuel. */ From an economic point of view, South Africa stands to gain substantially from the export of enriched, rather than crude, uranium since the value added in the process is over 200 per cent. The plant is expected to bring in at least R250- million a year and possibly much more, thus contributing to bridge South Africa's chronic balance of trade deficit. Q/ It is also expected to provide a stimulating effect on South African industry, fostering the creation of mew manufacturing potential and expertise.24/ Beyond the more immediate economic and other advantages of the proposed plant, it is clear that the South African regime hopes to take advantage of its position as a major producer of uranium, and eventually of enriched uranium, to involve the major industrialized countries more closely in the apartheid economy and thereby to strengthen their vested interest in support of the status quo in South Africa. South Africa is at present the second largest producer of ?/ House of Assembly Debates (Hansard), 11 June 1975, col. 7967. LJ Financial Times, London, 23 April 1975; Rand Daily Mail, Johannesburg, 23 April 1975. 2/ The Star, Johannesburg, 6 September 1974. ?V House of Assembly Debates (Hansard), ll June 1975, col. 7966. 2-4/ Ibid., col. 7967. uranium outside the Socialist states, after the United States, with about 25 per cent of known reserves. g / In addition, since enriched uranium is at present produced only in a handful of industrialized countries, South Africa expects to become a major supplier, taking advantage of a reported gap between production and demand of at least 6,000 tons per year by 1985. ?6/ South African officials have claimed that their enrichment process is considerably cheaper than existing ones, thus placing them in a very competitive position on the world market. L/ In an interview with the Johannesburg Star, Dr. Roux gave four main reasons for South Africa's need to co-operate with foreign interests in the development of the enrichment plant. The first was the financial aspect. The high cost of the plant would make it difficult to raise the necessary capital in South Africa alone, particularly in view of the other large development projects under way. Secondly, with partners who were themselves consumers of enriched uranium, the marketing of the productwould be greatly simplified and assured. Thirdly, partner nations would ensure the existence of the very large industrial capacity needed for a plant of the proposed size. Dr. Roux gave as the fourth reason South Africa's wish to share its technology with countries which in the past had provided it with assistance in its research and development. 28/ The proposed enrichment plant has already aroused considerable interest abroad. An agreement was concluded in 1974 between UCOR and STEAG (Federal Republic of Germany)to carry out a joint feasibility study for the constuction of the plant. The study was successfully completed in early 1975, and STEAG was expected to invest substantially in the project. L/ The Mini-ter of Mines, Dr. Koornhof, was reported to have discussed South Africa's enrichment process in recent talks with the Economic Affairs Minister of the Federal Republic of Germany, and to have offered to supply enriched uranium to meet any shortage that may arise in the Federal Republic's stocks of fissile material. MO/ I; an interview with The Star in June 1974, Dr. Roux had revealed that further overseas interests were involved in the project beside STEAG, but declined to identify them. Ll/ A report in the Daily Telegraph of London mentioned France besides the Federal Republic of Germany; it was reported subsequently that a high-level French Government mission which visited South Africa in L/ Financial Mail, Johannesburg, 11 April 1975. 26/ Ibid. 27/ South African Financial Gazette, Johannesburg, 11 April 1975; Financial Times, London, 23 April 1975. L/ The Star, Johannesburg, weekly airmail edition, 18 June 1974. 2 / Rand Daily Mail, Johannesburg, 23 April 1974; South African Financial Uzette, Johannesburg, 11 April 1975; Financial Times, London, 23 April 1975. / The Star, Johannesburg, weekly airmail edition, 26 April 1975. a/ Ibid., 18 June 1975.

April 1975 had ,iscussed the possibility of receiving enriched uranium as partpayment for the supply of a nuclear power reactor for the proposed Koeberg staion. 3/ Press reports have indicated that Iran has contracted to buy enriched uranium from South Africa for two nuclear pow-r plants to be supplied by France. 13/ South Africa also hopes to sell its enriched uranium to Japan, since Japan already obtains 43 per cent of its crude uranium requirements from South Africa. In 1973, talks were held between the head of Japan's Ftomic energy programme and members of the South African Atomic Energy Board. 4/ (b) Nuclear power station Dr. R. L. Straszacker, Chairman of the South African Electricity Supply Commission (Escom), a State corporation, announced in February 1974 that South Africa's first nucl-ar power plant would be built at Koeberg, near Cape Town. mi The plant, which is now estimated will require an investment of R600 million, will house two reactors with a total generating capacity of between 1,600 and 2,000 MW. The first of these reactors is scheduled to come into service by 1982, and the second a year or two later. 36/ The plant is part of an ambitious drive initiated in the early 1960Ts to make South Africa self-sufficient in its electrial energy needs through the creation of a sub-continental power grid stretching from the Cabora Bassa dam in Mozambique to Cape Town - a distance of some 2,500 km-and including a "mix" of generating capacity, ranging from hydroelectric stations to thermal coal-fired stations and nuclear generators. Koeberg will be the first of a number of nuclear power stations to be built in the Eastern and Western Cape Province to meet South AfricaTs growing energy needs: it is expected that by the year 2000 between 15 and 25 per cent of South Africa's installed generating capacity-, will be in nucle§ar stations. 37/ The decision to build a nuclear power station, delayed several times for technical and economic reasons, was finally reached on the basis of several considerations. South Africa's rapidly rising consumption of electrical energy (more than doubled in a decade) and the new needs stemming from the intensified industrial and mining developments in the Western Cape, in particular 1/ Daily Telegraph, London, 8 April 1975; South African Financial Gazette, Johannesburg, 11 April 1975. 3/ Rand Daily Mail,Johannesburg, 21 November 1974. _3/ Ibid.,13 February 1975, 24 September 1973. _/ Ibid., 11 February 1974. 36/ South African Digest, Pretoria, 20 June 1975; Standard Bank Review, London, March 1974. 2/ South Afridan Financial Gazette, Johannesburg, 15 November 1974; The Star, Johannesburg, 12 March 1974. rn the Sishen-Saldanha project, made the rapid development of substantial additional electric power necessary. At the same time, the international fuel crisis and the embargo on oil supplies to South Africa imposed by the Arab producers in October 1973 convinced the Goverment of the necessity to speed up its selfsufficiency programme by promoting the development of nuclear energy while at the same time freeirgpart of its coal reserves for use in an additional oilfrom-coal plant. Rising prices of coal on the world market made it desirable to increase the quantities of coal available for export and, by narrowing the cost ratio between a coal-fired station and r nuclear station, made the plant an economically more attractive venture. 38 Finally, the development of uranium enrichment at Pelindaba would ensure future supplies of the necessary fuel for the nuclear station, although reliance on foreign supplies of enriched uranium wouldbe necessary in the first stages. 22/ Nevertheless, the building of a nuclear power plant will require massive involvement of foreign capital and equipment. Commenting on the decision to proceed with the plant, The Star of Johannesburg noted that Escom would be forced "to raise huge sums of money, much of it overseas, to form international construction consortia and to import nuclear technology on a large scale." LO/ Foreign interest in the project has been considerable. Sixteen companies in the United States, the United Kingdom, the Federal Republic of Germany, France, Italy, Switzerland and Japan reportedly replied to EscomTs initial letterr of intent, expressing interest in submitting tenders. L1/ In March 1974, Dr. R. L. Straszacker announced that Escom had finally sont invitations to tender to nine companies. He stated that the contract would be on a turnkey basis, with a single contractor responsible for the entire plant. IL/ Outline tenders were received from five manufacturers by October 1974; in April 1975 Escom invited final tenders from three conscortia in France, of -itzerlard: an! the Urited States of Airerica. It was reported that the final contractor would be selected in early 1976, with construction to begin shortly thereafter. L_/ 38/ The Star, JoLannesburg, .12 March 1974. / South African Financial Gazette, Johannesburg, 15 February 1974. . The Star, Johannesburg, 11 February 1974. _/ South African Financial Gazette, Johannesburg, 17 December 1971. L2/ The Star, Johannesburg, 6 March 1974. !3 Sunday Times, Johannesburg, 23 March 1975.

While the names of the companies which were invited to tender have not been disclosed, press reports have indicated the names and nationalities of some of these. They included the Kraftwerke Union AG, the joint nuclear subsidiary of Siemens and AEG Telefunken (Federal Republic of Germany), and the State-cwned comrany Electricit4 de France, which was reported to have co- ordinated a joint offer by three private French companies. 4/ A high-level French Government mission which visited South Africa in April 1975 was reportedly charged with finalizing a contract for the constructitn of the station. L/ Mitsubishi Heavy Industries (Japan) reportedly sent a mission to South Africa in September 1973 to discuss the project with Escom officials._6/ Four United States reactor producers - Westinghouse, Combustion Engineering, General Electric, and Babcock and Wilcox - were also reported to be interested_/ Two United Kingdom consortia, British Nuclear Design and Construction Ltd., and British Nuclear Power Company, as well as an unnamed Canadian company, were also mentioned in the press. Since the first part of the power plant is scheduled to come into operation by 1982, while the uranium enrichment plant willbe.commissioned in 1984, South Africa is dependent on outside supplies of enriched uranium for the initial charges of the reactor. It was reported that the United States Atomic Energy Commission (AEC) had signed a contract with Escom in early 1974 for enrichment services for up to 2,000 MW. Under the contract, South Africa would sezid processed uranium to the AEC's laboratory at Oak Ridge for enrichment into the "feed material" for the reactor, as well as the burnt fuel for reprocessing. In April 1975, however, it was disclosed that the Nuclear Regulatory Commission had halted all licenses to bring uranium into the United States in the course of an overall policy review. Also blocked were all export licenses for nuclear reactors. Escom officials, however, expressed faith that the agreement would eventually be followed through. / (c) Uranium mining Foreign involvement in South Africa's uranium production has been considerable since the beginning. The mining of uranium in South Africa was developed after the Second World War, in response to the needs of the Western Powers for their accelerated nuclear weapons production. The United States of America and the United Kingdom assisted South Africa in 4/ Rand Daily Mail, Johannesburg, 29 June 1974 and 14 February 1975. 2/ Reuter, from Cape Town, 11 April 1975; South African Financial Gazette, Johannesburg, 11 April 1975. / The Star, Johannesburg, weekly airmail edition, 13 April 1974. 4L/ Financial Mail, Johannesburg, 29 November 1974; Hearings before the Sub- Committee on Africa...., o.cit., p. 68. L/ South African Financial Gazette, Johannesburg, 25 September 1970. 2/ Financial Mail,Johannesburg, 29 October 1974 and 11 April 1975. The AEC has similar agreements with about thirty other countries.

-ii- research and development of the technology necessary to recover uranium from gold-bearing ores. They financed the programme and bought South Africa's total output of uranium for many years. With foreign assistance, South Africa's production grew from 44 tons in 1952 to a peak of 6,400 tons in 1959, earning South Africa an estimated Rl,00 million in twenty years. 50/ Because of uranium discoveries in the United States and changes in the weapons programme, the United States ceased buying South African uranium in 1966, after purchasing approximately 43,000 tons at a value of $1,000 million. 5/ South Afri ca, however, has continued to sell uranium to the United Kingdom and to a number of other countries including the Federal Republic of Germany, France, Switzerland, and Japan. 5/ As a result of over-supply on the world market, South Africa was forced to cut back her production after 1959, until it was about 3,800 tons in the early 1970's. While 27 mines were capable of supporting production, only 11 were in operation by 1973, when the international price of uranium had sunk to a low of $6 per pound. The world-wide search for new energy sources after the oil crisis of 1973, by raising the price of uranium and creating expectations of a shortage of supplies by the mid-1980's, rekindled interest in uranium mining in South Africa. South Africa is believed to have about one-fourth of the world reserves of low-cost uranium, i.e. recoverable at less than $10 per pound. 5/ Most of Soith Africa's uranium is mined as a by-product of gold, and foreign interests have substantial holdings in the gold mining companies. Foreign interests have recently invested in prospecting for, and developing, new sources of uranium. Reports on uranium exploration activities are classified under the Atomic Energy Act, so that only sketchy information is available about them. One of the most important and most controversial projects undertaken bY foreign interests is the Rrssing uranium mine near Swakopmund, in Namibia, The mine is owned by the British conglomerate Rio Tinto Zinc, in partnership with the South African Industrial Development Corporation and the Compagnie Frangaise des Ptroles. It will involve an investment of RlO0 million and will be developed into one of the biggest open-cast mines in the world. Work on the mine started in 1970 and is expected to be completed by 1976/77. The production target is about 1,000 tons a year, or almost one-fourth of South Africa's present uranium production. Uranium from Rising will be sold to the United Kingdom Atomic Energy Agency under a contract signed a few years ago in spite of strong opposition by several anti-apartheid and other groups in that country. Compagnie Franqaise des P4troles will also receive part of the uranium in return for its stake in the 50/ Africa Bureau, London, Fact Sheet No. 39, October 1974. 51/ Hearings before the Sub-Committee on Africa..., op. cit., p. 69. 5/ Southern Africa, London, 13 March and 12 June 1967; 15 August 1970; Financial Times, London, 23 July 1970. 1/ South African Financial Gazette, Johannesburg, 23 February 1973; Financial Mail, Johannesburg, 6 June 1975.

-12- project. There have also been reports that uranium frcm Rssing may be sold to the Federal Republic ef Germany, although Urangesellschaft, a company in the Federal Republic which had originally intended to invest in the project, pulled out in 1972 as a result of pressure from the Federal Government.. 54/ It was reported in August 1973, that "uranium fever" was raging around Beaufort West, in the Cape Province, following substantial discoveries made by United States mining companies. The report stated that intensive prospecting in the area had been carried out by Union Carbide and Utah Mining, and that two other American mining firms, Newmont and U.S. Steel, were seeking areas to begin prospecting. According to press reports, the presence of radio-active materials in the area had been indicated by mineral surveys carfied out by United States space satellites. Z/ On Financial Mail of 20 June 1975 reported that the United States company Exxon had joined the race for uranium in the Cape Province, and had taken options on land between Beaufort West and Oudtshoorn, expanding its prospecting team in the area. While refusing to give details on the operations, the company's director of mineral exploration stated that thought was already being devoted to ways of financing and operating an eventual project, and that partnership with one of South Africa's mining houses was being considered. Foreign interests are also involved in uranium extraction at the copper mine at Palabora. The mine owned and man'.ged by Rio Tinto Zinc (United Kingdom), in partnership with Newmont Mining Company (Lnited:. States), the South AfricF.n Industrial Development Corporation and other South African interests. About 150 tons of uranium a year is recovered at th-is mine through a special process developed by the company in conjunction with the South African Atomic Energy Board and the National Institute of Metallurgy. 5/ / Financial Times, London, 23 July; Observer, London, 3 August 1970; Financial Mail, Johannesburg, 21 May 1971; The Star, Johannesburg, weekly airmail edition, 9 February 1972, 30 June and 17 November 1973; South African Financial Gazette, Johannesburg, 11 April 1975. 5/ Die Burger, Cape Town, 25 August 1973; South African Financial Gazette, Johannesburg, 31 August 1973. L6/ The Star, Johannesburg, 8 August 1973.

-13- _:.SIHNSALDANHJA WBAYRJ ECT (a) Leea The Sishen-Saldankha Bay iron ore project was approved by the South African Parliament in April 1973, after five years of preliminary study and research. Construction work began shortly thereafter, and operations are scheduled to start in 19.76. This is reportedly one of the most ambitious economic schemes ever undertaken by South Africa, involving an investment of over R 600 million according to the latest estimates. 57/ The South African Government is the main investor through its Iron and Steel Corporation (Iscor) and the project IsThpavtly dependent on foreign capital and foreign as istance, as well as on foreign markets for the eventual sale of the ore. The scheme is linked with proposals for a plant to manufacture s:emi-processed steelp the construction of a dry dock and other large developments which would involve a total cost of well over 2 billion rands. The main project consists of three parts. First, the expansion of the existing Sishen mine in the northern Cape (owned by Iscor), to increase annual output from around three million tons to 15 million tons by 1980, and to as much as 30-35 million tons eventually. Reserves of high-grade iron ore at Sishen are estimated at 4,500 million tons. 18/ Second, the construction of an 853 km rail link between Sishen and the proposed port at Saldanha Bay. The railway, which was initially planned to be owned and operated by Iscor for the export of its ore, was subsequently made available to private enterprise in order to encourage development of the huge mineral deposits in the northern and northwestern Cape. Railway capacity is to be expanded to 40- 50 million tons a year through the construction of additional inks. 52/ Third, the development of a modern deep water harbour at Saldanha Bay. When finished, the harbour is expected to be four times as large as the harbours at Cape Town, Durban, Port Elizabeth and East London combined. It will be specifically geared to the large bulk carriers, accommodating ships of up to 150,000 tons by August 1976, and up to 250,000 tons by March/April 1977. !LO/ The project envisions the employment of African migrant labour in the mine at Sishen, and of Western Cape Coloured workers in the harbour and the proposed steel plant at Saldanha Bay. New hostels to house the African miners are pres'mtly being built at Sishen, and an entire Coloured township is being built at Vredenburg. 6/ 5/ Financial Mail, Johannesburg, 27 June 1975 Standard Bank Review, London, November 1973; The Times, London,16 May 1974. _/ Financial Mail, Johannesburg, 14 March 1975 Rand Daily Mail,Johannesburg, 11 August 1972; South African Digest, Pretoria, 18 August 1972; Sunday Times, Johannesburg, 23 March 1975. §/ The Times, London, 16 May 1974; Financial Mail, Johannesburg, 14 March 1975.

-14- The South African Government attaches great importance to the Sishen-Saldanha Bay scheme for a number of reasons. The expansion of South Africa's iron ore exports is the primary consideration. Output of iron ore in South Africa has been closely geared in the past to the requirements of the domestic steel industry. In 1973, South Africa produced 11 million tons of iron ore (about one per cent of total world production) and exported 2.4 million tons. In the same year, South Africa's known iron ore reserves were estimated at 5,000 million tons - 7 per cent of the world total. L/ The planned expansion of the Iscor mine at Sishen, and the construction of rail links to an area east of Sishen where South African companies own vast deposits of high-grade iron ore,are expected to make South Africa a major exporter of ia'ren ore. Recent discoveries in the North-Western Cape of reportedly huge quantities of mineral ores, in particular lead, zinc, copper and silver, have addeda new dimension to the significance of the SishenSaldanha railway. The Government is planning to build an extension to the railway in order to open up this area which is expected to provide an output of over 90 million tons of ore a year and eventually outstrip the Witwatersrand in total production. §/ The scope of the Sishen-Saldanha Bay project, however, is to reach beyond that of an ore export scheme. The Government reportedly hopes that the project will become the focus of a major industrialization drive in the entire Western Cape area, which is at present relatively underdeveloped. The main industrial projects related to the scheme center on the manufacture of semi-processed sted("semis") and the construction of a dry dock. Because it is much more profitable to export iron in the form of semi-processed steel than as ore or pig iron, the construction of a "semis" plant was mooted from the very beginning of the SishenSaldanha scheme. It was hoped that South Africa could use its substantial mineral reserves to become a Irajor exporter of semiprocessed steel in the foreseeable future. As the Johannesburg Star pointed out on 21 June 1972: "The new project must be. seen as being of major importance to South Africa as an industrial country. Even though steel productivn in the major producing countries has dipped in the past year, the steel-hungry world will require more and more raw and refined steel products and )South Africa is getting ready to supply the increased need when it arises." L2/ Investment Guide, Supplement to the Financial Mail, Johannesburg, 14 February 1975 63 Sunday Times, Johannesburg, 17 August 1975, South African Financial Gazette, Johannesburg, 28 February 1975. See also Chapter V.2 of this report.

-15- The plant, which according to revised recent estimates would require an investment of between R1,000 and R1,500 million, is expected to produce up to 12 million tons of "semis" a year when in full operation. At peak production, earnings from the plant could reportedly reach Rl,O00 million a year at 1975 prices. 6L/ Like all the other aspects of the Sishen-Saldanha scheme, however, the realization of the "semis" plant is dependent on the availability of foreign capital and technology on the one hFpnd, and of an export market on the other. Because of difficulties which will be exi .ined below, Iscor has had to delay the project, although it has by no means abandoned it. The other major industrial development project was to be the construction of a dry dock to service shipping. Feasibility studies for the dry dock were carried out by the Industrial Development Corporation (IDC) with a view to servicing large bulk carriers, particularly oil tankersoof over 100,000 tons for which there are at present no facilities in South Africa and none on the oil route except in Europe and Japan. Again, due to the rapid increase in the estimated investment necessary for the project, which grew from R35 million to over RLOO million by 1974, it became necessary to involve foreign partners. Eventually, however, it was indicated that the project might be shelved in favor of a smaller venture in Cape Town itself. !/ Other industrial ;rojects are also envisioned for Saldanha Bay at a later stage. The Iscor managers have reportedly mapped out several areas for fur-ther development - around the harbour for dockbased industries; in the railhead reglon for heavy industry; and further inland for ligh industry. 6/ (b) Foreign involvement South Africa relies heavily on foreign involvement for the realization of the Sishen-Saldanha project. The project would be technically, econc ically and financially feasible only if co-operation by foreign economic interests was secured in the following areas: (i) longterm agreement for the purchase of the greater part of iron ore production from the Sishen mine and other mines in the area; (ii) equipment and technical know-how for the construction of the harbour and the railway and for mine expansion; and (iii) financial and technical participation in all aspects of the project, particularly the dry dock, the "semis" plant, and other industrial schemes. 6j/ Standard Bank Review, London, November 1973; South African Financial Gazette, JoLannesburg, 27 March 1975; Financial Mail, Johannesburg, 21 March 1975. 6 / Standard Bank Review,Londai, November 1973; Financial Mail, Johanne sburg, 29 March 1974. 66/ Financial Mail, Johannesburg, 14 March 1975.

-16- (i) Iron ore exports to Japan The economic viability of the Sishen-Saldanha scheme is apparently predicated on large-scale, long-term exports of iron ore to Japan. While several Western European countries were reported to have expressed interest in Sishel-s production, Japan's involvement was held to be essential for the scheme to approach an economic level. §/ A Japanese withdrawal could therefore severely affect the success ofthe entire scheme. Negotiations between Iscor and Japanese steel companies for long-term contracts for the purchase of iron ore had been going on since 1968, two years before the Sishen-Saldanha project was officially mooted. The Japanese steel industry was already buying about 400,000 tons of iron ore a year from the Sishen mine. Iscor, however, was hoping to sell the Japanese about 10 million tons a year over a period. -'of 15 years beginning in 1974. At the same time, Consolidated African Mines (CAM), the owner of other large deposits near Sishen, wanted to sell 74-million tons of iron ore over a period of 16 years starting in 1972._8/ In 1971, however, negotiations were suspended, primarily because of an economic recession which had forced the Japanese steel industry to curtail production operations by up to 20 per cent.6_/ Again in 1972, spokesmen for the Japanese steel industry declared that it was impossible for them to engage in any long-term planning. m/ The South African Government, however, decided to go ahead with the scheme even before having reached- long-term export agreements, in the expectation that an upturn in the economic situation in Japan would convince the steel mills to resume negotiations. 7/ In August 1973, the Japanese steel mills announced their provisional intention of accepting South African iron ore exports of between 10 and 12 million tons per year, starting with 3-5 million tons in 1976, divided fairly equally between Iscor and private industry. 7/ In December 1973, the mills reportedly signed a "letter of agreement" to Iscor in which they stated they hoped to be able to formalize the contract by the end of March 1974. _/ In January 1974, the Japanese mills were reported to have signed a RlOO-million contract with CAM for the export of up to 11 million tons of manganiferous ore from its mino§ in the Sishen area over a 10-year period starting in 1977. In February 1974, they signed another contract with CAM for R300--million for the export of up to 43 million tons iron ore over 15 years, also starting in 1977. _4 Financial Times,London, 14 February 1974; The Star,Johannesburg, weekly airmail edition, 18 June 1974. !/ Standard Bank Review,London, November 1973; The Star,Johannesburg,19 January 1972. / The Star, Johannesburg, 19 January 1972. 70/ Rand Daily Mail, Johannesburg, 4 March 1972. l/ The Star, Johannesburg, weekly airmail edition, ll March 1972. Y21 The Star, Johannesburg, 1 August 1973. L/ Rand Daily Mail,Johannesburg, 31 May 1974. 7V Rand Daily Mail,Johannesburg, 30 January and 28 February 1974.

-17- It was expected that a much larger contract with Iscor, for an expected 7 million tons of iron ore a year starting in 1976, would also be signed promptly. After several delays, it was intimated that uncertainties connected with the oil situation would have to be removed before the Iscor contract could be signed. L5/ The Rand Daily Mail reported in May 1974. that "the delay is attributed in some quarters to growing pressure on Japan to scale down its trade with South Africa." 7/ In June 1974, a spokesman for the Nippon Steel Company stated that he did not know whether a contract could be signed. He said the company was negotiating with the Japanese Government over the issue. "Trade with South Africa is a very delicate matter because of relations with Black Africa," he stated. He acknowledged that if there were no political problems involved, Japanese mills would have a very big interest in the Sishen-Saldanha project. 7/ Press reports in 1974 indicated that the Japanese Government was engaged in a reappraisal of its trade policy concerning South Africa. L/ In September, the Special Committee against Apartheid sent a mission, to Japan to convey to the Government the Committee's concern over expanding economic relations between the two countries. 1/ During a visit to Africa in November, the Japanese Foreign Minister, Mr. ToshLo Kimura, declared that Japan %ms doing its utmost to sever traie links with South Africa, though this could not be done immediately. 8Q/ No official statement was made concerning long-term purchases of iron ore from the Sishen mines. According to some press reports, however, the Japanese Government intended to recommend that South African iron ore be bought on a spot basis, rather than unler long-term contracts. L_/ In July 1975, the Johannesburg Financial Mail indicated that Iscor had concluded an initial contract for the export of 7.5 million tons of iron ore a year to Japan. However, no details were disclosed: a later report stated that "the basic policy of Japanese steelmakers towards South Africar raw materials can nowadays be summed up in one word: discretion. "2/ No further information is available at present. (ii) Harbour and rail construction Foreign interests have played an important role in the development of a deep- water harbour at Saldanha Bay and the construction of a railway linking the port with the Sishen area, some 860 km. inland. They have provided the equipment and technical expertise necessary at every stage of the project. 7 The Star, Johannesburg, weekly airmail edition, 18 June 1974. Rand Daily Mail,Johannesburg, 31 May 1974. The Star, Johannesburg, weekly airmail edition, 18 June 1974. y8/ Rand Daily Mail, Johannesburg, 31 May 1974; The Star, Johannesburg, (/ The mission reported to the Special Committee at its 292r meeting on 19 September 1974 (A/AC.115/SR.292) O/ The Guardian,Lxndon, 4 November 1974; Rand Daily Mail, Johannesburg, 7 November 1974. L/ Rand Daily Mail, Johannesburg, 31 May 1974. 2V Financial Mail, Johannesburg, 3- July and 8 August 1975

- 18 - In 1972, Mr. G.J. Botha, head of the project, declared that worldwide interest in the project was steadily growing. Tenders were called in August 1972, and documents were issued to 136 firms and organizations in South Africa, the Federal Republic of Germany, Belgium, France, Italy, United Kingdom, Canada, the United States of America, Japan, and Australia. 8/ By April 1973, Iscor had placed orders totalling R 230 million. A report in South African Digest, a Government publication, stated at that time that some of the biggest contractors were from abroad. Construction of the harbour was entrusted to Salcon, a Dutch consortium. Spie-Batignolles, a French firm, was to lay the plates down the entire length of the railway and to be responsbile for. the railway marshalling yards and tunneling and earthworks along some of the line. The engineering company Mann, together with other firms in the Federal Republic of Germany, was to erect the handling and ship loading installations at the new harbour. 84/ Another report in South African Digest disclosed that 40 Diesel electric locomotives, built in South Africa by the subsidiary of the General Electric Company (U.K.) in collaboration with South African interests, would be used for the construction of the railway. The locomotives would eventually be used to haul the ore trains. The same publication also stated that the rails had been obtained from the Federal Republic of Germany, the welding of the rails was done with British equipment; and an American company was providing the signalling system. The progress of the trains on the line would be guided from a computerized control room at the ore terminal. The open pit mine at Sishen had also been planned by a computer. This points to further involvement of foreign interests, since South Africa does not manufacture computers. L5/ (iii) Semi-manufactured steel plant Because of the size of the proposed semis plant and the sophisticated technology involved, foreign participation in the scheme was essential from the beginning. In June 1972, Iscor reached an agreement in principle with Vereinigte Oesterreichische Eisen und Stahlwerke (VOEST)-Alpine, the largest steel producer in Austria and a major producer of manufactured steel plants. According to press reports, VOEST's agreement to participate in the scheme was of particular importance to South Africa. From a technological point of view, VOEST's expertise in the oxygen blast steelmaking system, which is most suitable to big-capacity production, meant that Iscor would have access to the most advanced know-how in the field. Secondly, the agreement with VOEST would facilitate South African entry into the European steel market, given Austria's membership in both the European Free Trade Association (EFTA) and the European Coal and Steel Community (ECSC). 8/ 8,/ South African Digest, Pretoria, 18 August 1972 V j gibid., 20 April 1973 VL Ibid.,:.18 October 1974 and 50 May 1975. 8 The Star Johannesburg, weekly airmail edition, 17 November 1973; South African Financial Gazette, Johannesburg, 2T March 1975

- 19 - According to the preliminary agreement, Iscor would retain a controlling share (51) of the project, while VOEST was entitled to take up 49% of the equity, with the option of transferring up to 23% to other partners. 87/ In November 1973, it was announced that VOEST would avail itself of this option, mainly because of difficulties in raising the capital needed. The rest of VOESTts share would reportedly be spread among other members of the ECSC. 8/ According to press reports, the consortium was joined by Kloeckner (Federal Republic of Germany) with 7.5 per cent; Estel - itself a consortium of Hoogovens (Netherlands) and Hoesch (Federal Republic of Germany) with 6.3 per cent; and Finsider (an Italian state corporation) with 5 per cent. 89/ Press reports on a recent high-level French Government mission to South Africa indicated that the mission had discussed the possibility of French participation in the project. 99/ The South African Government, for its part, has refused to divulge the names of companies involved in the project besides VOEST, on the grounds that certain of them wished to remain anonymous. 91/ Other interests approached by Iscor in the past for participation in the plant included August Thyssen (Federal Republic of Germany); British Steel (United Kingdom); Armco Steel Corporation (United States of America); and unnamed Italian interests. 92/ Several large Japanese steel companies were also reported to have expressed keen interest in investing in the plant. In June 1973, however, it was reported that, acting on instructions from their Government, the Japanese steel industry decided to abandon tentative plans to invest in the plant.A spokesman for Nippon Steel said at the time that the steel industry would not enter into any contract which would not be compatible with national policy. Recently, the Japanese Foreign Ministry formally denied that Japanese interests had joined the Iscor-VOEST consortium. 9/ Feasibility studies for the project, initiated in 1972, were completed in the spring of 1975. At that time, however, the project began to encounter serious difficulties both of a political and an economic order. On the one hand, the project met with opposition in Austria and the Netherlands. The officers of the Special Committee against Apartheid discussed the matter with the Austrian Foreign Minister during a visit to Vienna in May 1974. In March 1975, the Austrian Chancellor Dr. Bruno Kreisky expressed opposition to the participation in the project by VOEST (a nationalized enterprise) on the grounds that increased economic cooperation with South Africa could harm Austria's relations with independent African countries. Strong opposition to the project was also voiced by Mr. Erich Bielka-Karltreu, Foreign Minister of Austria. After several delays, however, the board of dirctors of the Oesterreichische Industrie AG - the body overseeing Austria's nationalized industries - approved VOEST's participation in the scheme. 94/ 8/ Financial Mail, Johannesburg, 12 October 1973 S The Star, Johannesburg, weekly airmail edition, 17 November and 1 December 1973 Rand Daily Mail, Johannesburg, 8 March 1975 9/ Reuter, from Cape Town, 11 April 1975; TheStar, Johannesburg, weekly airmail edition, 12 April 1975 2_/ Minister of Economic Affairs, reply to a question, House of Assembly Debates (Hansard), 7 March 1975, col. 417 9 South African Financial Gazette, Johannesburg, 18 August 1972; Financial Mail Johannesburg, 12 October 1973 __ The Times, London, 20 June 1973; Rand Daily Mail. Johannesburg, 4 July 1973; Financial Mail, Johannesburg, 11 January 1974 and 8 August 1975 94 Rand Daily Mail, Johannesburg, 17 and 22 March 1975; The Star, Johannesburg, we- n, 22 March and 26 April 1975

- 20 In the Netherlands, Government members, trade unions, and anti-apartheid and other groups joined a campaign in opposition to participation in the project by googovens (the partly Government-owned Dutch component of the Estel combine). 93/ On the other hand, the project has been delayed because of considerable economic difficulties. In February 1975, the South African Minister of Economic Affairs, Mr. Chris Heunis, disclosed that revised estimates for the project amounted to over R 1,000 million (almost double the initial estimate). He added: "The present scarcity of funds makes it exceedingly difficult for the parties to the consortium to provide at this stage their respective shares of the -funds required." He expressed optimism that the consortium would proceed with the project "when the liquidity position eases sufficietly. 9/ A joint statement issued by Iscor and VOEST in March 1975 to announce the completion of feasibility studies confirmed that the main stumbling block for the realization of the project was the mobilization of capital. 97/ According to the Financial Matl, the other partners in the project also had difficulties in raising their shares. 98/ The situation highlights once again South Africa's dependence on international capital for its industrial development projects. According to available information, Iscor borrowed at least $ 400 million in a two-year period ending in July 1975, $213 million of which went to financing the Sishenx-Saldanha project. Lending banks were in the United States of America, the United Kingdom, the Federal Republic of Germany, the Netherlands, France, Belgium and Austria, / Recently, however, South African observers pointed with concern to the increasing difficulty of obtaining long-term loans. They indicated that political reasons having to do with the changed situation in southern Africa and growing pressure by international public opinion might affect the banks' willingness to lend to South Africa. In addition, theworld economic recession, in particular the recession in the steel industry, was msing it increasingly hard to raise longterm finance capital for the proposed steel plant. It was pointed out that Iscor's ambitious development programme and its financial difficulties might make it ever less desirable as a borrower on tight international money markets. The Star, Johannesburg, 21 November 1974; The Star, Johannesburg, weekly airmail edition, 30 November 1974 96] House of Assembly Debates (Hansard), reply to a question, 7 February 1975, Col. 4950. 97] Reuter, from London, 23 March 1975 08, Financial Mail, Johannesburg, 21 March 1975 :/ See A/AC.115/L.414 for a list of recent loans to the South African Government and public and private corporations 100/Financial Mail, Johannesburg, 14 March and 6 June 1975

-21- IV. THE SECOND OIL-FROM-COAL PLANT (SASOL 11) Mri O.P.F. Horwood, South African Minister of Economic Affairs, announced in December 1974 that the South African Cabinet had decided that a new oil-from- coal plant should be established with a minimum of delay. The decision was prompted by the rising prices of oil and the threat of an international embargo on oil supplies to South Africa. The press hailed the decision as "a giant step towards strategi" invulnerability for the nation." lol To be built by the State-owned South African Coal, Oil and Gas Corporation (SASOL), the new plant would be three times as large as the first oil-from-coal plant (SASOL I) and produce ten times as much, or about 1.5 million tons per year of gas oil and motor gas. Together with the first plant, it would be able to satisfy about 25 per cent of South Africats estimated demand for gas in 1981, the year in which the new plant was expected to begin operations. 2 The Minister disclosed that initial investment would amount to Rl,021 million, excluding capital escalation, working capital, township development and housing. i/ Press reports indicated that the total capital required would be in the neighborhood of R3,400 million, making SASOL II the bigg'est single industrial undertaking ever to be embarked upon by South Africa. L04 The oil-from-coal process was developed by South Africa in the early 1950's as part of the continuing effort by the regime to achieve self- sufficiency in its strategic needs, particularly in ehergy supplies. The production of oil from coal was a natural option given Sobth Africa's huge coal reserves (estimated at 75 billion tons in 1973), which could be mined - because of South Africa's low wages for Black miners - at a cost onethird to one- fourth lower than that of United States or Eurclean coal. 105/ SASOL was first established in 1950 to investigate and develop a technology for the manufacture of synthetic petroleum and other petrochemicals from coal. The first plant began operations in 1955,and has since developed into one of South Africats industrial giants, comprising 30 interlinked plants manufacturing a great variety of products. jql/ Gas production from SASOL I, which accounts for about 80 per cent of its turnover, satisfies about 8 per cent of South AfricaTs current demand. 1071 SASOL uses the Fischer/Tropsch process, which originated in the Federal Republic of Germany, with various adaptations and improvements developed over the past twenty years. The purified gas obtained from coal is fed into two types of reactors, the Arge (developed by Lurgi, Federal Republic of Germany) to produce heavy hydrocarbons and the Synthol (developed by Kellogg, United States of America) to produce light hydrocarbons. Between them, the two processes yield all the products normally refined from crude oil, as well as some usually produced in petrochemical plants. a9j The present SASOL plant is reportedly the 191/ Rand Daily MaeI, Johannesburg,6 December 1974; South African Financial Gazette Johannesburg, 13 December 1974. 0 thAfrican Financial G aetteJohannesburg, 13 December 1974; Financial Mail, Johannesburg, 18 July 1975. = House of Assebly Debates (Hansard), 17 June 1975, col. 1193. iQj/ Rand Daily MWl, Johannesburg, 6 December 1974. ~ South African Financial Gazette, Johannesburg, 19 and 26 October 1973. 126/ ]and Daily Mail, Johannesburg, 30 January 1974.

-22 IV. THE SECOND OIL-FROM-COAL PLANT (SASOL II) Mr. O.P.F. Horwood, South African Minister of Economic Affairs, announced in December 1974 that the South African Cabinet had decided that a new oil-from- coal plant should be established with a minimum of delay. The decision was prompted by the rising prices of oil and the threat of an international embargo on oil supplies to South Africa. The prcss hailed the decision as "a giant step towards strategic invulnerability for the nation." iQl/ To be built by the State-owned South African Coal, Oil and Gas Corporation (SASOL), the new plant would be three times as large as the first oil- from-coal plant (SASOL I) and produce ten times as much, or about 1.5 million tons per year of gas oil and motor gas. Together with the first plant, it wuuld be able to satisfy about 25 per cent of South Africa's estinated demand for gas in 1981, the year in which the new plant was expected to begin operations. j1g/ The Minister disclosed that initial investment would amount to Rl,021 million, excluding capital 6scalation, working capital, township development and housing. 123! Press reports indicated tka t the total capital required wruld be in the' neighborhood of R3,400 million, making SASOL II the biggest single industrial undertaking ever to be embarked upon by South Africa. 124/ The oil-from-coal process was developed by South Afzi ca in the early 1950's as part of the continuing effort by the r4gime to achieve self-sufficiency in its strategic needs, particularly in energy supplies. The production of oil from coal was a m tural option given South Africa's huge coal reserves (estimated at 75 billion tons in 1973), which could be mined - because of South Africa's low wages for Black miners - at a cost onethird to one-fourth lower than that of United States or European coal. 105/ SASOL was first established in 1950 to investigate and develop a technology for the manufacture of synthetic petroleum and other petrochemicals from coal. The first plant began operations in 1955, and has since developed into one of South Africa's industrial giants, comprising 30 interlinked plants manufacturing a great variety of products. 106/ Gas production from SASOL I, which accounts for about 80 per cent of its turnover, satisfies about 8 per cent of South Africa's current demand. 1/ SASOL uses the Fischer/Tropsch process, which originated in the Federal Republic of Germany, with various adaptations and improvements developed over the past twenty years. The purified gas obtained from coal is fed into two types of reactors, the Arge (developed by Lurgi, Federal Republic of Germany) to produce heavy hydrocarbons and the Synthol (developed by Kellegg, United States of America) to produce light Hydrocarbons. Between them, the two processes yield all the products normally refined from crude oil, as well as some usually produced in petrochemical plants. 108/ The present SASOL plant is reportedly the lOO/Rand Daily Mail,Johannesburg,6 December 1974;South African Financial Gazette, Johannesburg, 13 December 1974. 102/South African Financial Gazette,Johannesburg, 13 December 1974;Financial Mail Johannesburg, 18 July 1975. 1O_/House of Assembly Debates (Hr.&.srd), 17 June 1975, col. 1195. 104/Rand Daily Mail, Johannesburg, 6 December 1974. 105/South African Financial Gazette,Johannesburg, 19 and 26 October 1973. lO6/Rand Daily Mail,Johannesburg, 30 January 1974.

-23- first and the only commercially viable project of its kind in the world. 19/ SASOL II will basically use the same method, but restricted to the Kellogg synthesis in order to obtain a higher quantity of fuel. i Because of its strategic significance, the first oil-from-coal plant was established with little regard to profitability. Over R300million (at 1950's prices) were invested by the Government in the undertaking, and throughout most of its life SASOL I barely broke even. Proposals for a huge investment in a second SASOL, which because of rapidly rising costs and inflation would require many times the amount spent for the first plant, were therefore greeted with skepticism. As late as 1973, the Chairman of SASOL, Dr. Etienne Rousseau, stated in his review for the year that there was no justification for SASOL II as long as petrol could be produced fiom crude at a lower cost. II Expansion plans to increase SASOL I's coal gasification capacity by 40 per cent and a stepped-up research programme into new processes were mooted instead. L2/ The four-fold increase in oil prices which followed the October 1973 war in the Middle East, changed the situation dramatically, by making SASOLrs process a competitive source of fuel. The South African Financial Gazette commented: "Once considered an expensive white elephant, SASOL looks increasingly attractive with each price rise of Middle East oil. Its early start has given iSouth Africa a world technological lead and justified what once might have looked like excessive strategy-consciousness on the part of the Government." 1/ Rising petroleum prices and growing shortages in supplies of conventional sources of energy have created a world-wide trend toward increased mining and use of coal as an alternative fuel, as well as investment in coal beneficiation, especially in countries which are already large producers of coal. According to estimates, world reserves of recoverable coal are equivalent to 2.5 trillion tons of oil, whereas oil reserves, both proven and estimated, including those recoverable with -tchnical difficulty and high cost from tar sands and shale deposits, amount to only about 380 billion tons. 111. South Africa, with its highly sophisticated oil-from-coal technology and its twentyyear- old experience and ongoing research programmes, now finds itself in a position of supplying assistance and know-how to other countries wishing to establish their own oil-from coal plants. According to press 1 South African Financial Gazette, Johannesburg, 16 November 1973 and 13 December 1974. Oil accounts for about 20 per cent of South Africa's current energy consumption. 108! The Petroleum Economist,July 1974; Rand Daily Mail,Johannesburg,7 December 1974; South African Financial Gazette,Johannesburg, 13 December 1974. 122/ The Star,Johannesburg, 2 November 1973. To the Point International, 25 January 1974. Ibid. 11 The Star, Johannesburg, 23 October 1973 113 South African Financial Gazette,Johannesburg, 26 October 1973. 114 Ibid., 19 October 1973.

-24- reports, such assistance is being provided to the United States of America, the Federal Republic of Germany, Japan, and other undisclosed Western naticns. Interest had also been expressed by econcmic circles in certain Latin American countries with substantial coal deposits. 115/ The South African Government is interested in the broader effects of the links created by technical arrangements. One of SASOL's managers stated: "South Africa will benefit not only in immediate monetary terms, but in goodwill, in being involved in fuel research developments taking place elsewhere." 116/ The growing international interest in South Africa's oil-fromcoal technology is reflected in foreign participation and investment in the proposed new SASOL plant. It was revealed in March 1975 that the contract for the construction of the plant had been awarded to the Fluor Corporation of Los Angeles (United States). The company would handle the total development package from the planning through the construction and operational phases. This was the largest single contract to be concluded for the SASOL project, worth about R700-million, and was reportedly the largest ever received by the Fluor Corporation. The company, which has already built the Caltex refinery in Cape Town and the Natref refinery at Sasolburg, as well as a styrene plant and a synthetic rubber plant at Sasolburg, "knows and likes South Africa," according to its managers. iii/ Press reports have also indicated that license agreements for the plants were concluded with Lurgi Mineralbltechnik GmbH of Frankfurt (Federal Republic of Germany), which would supply the process design and the basic engineering and procure the proprietary equipment for the plant. 1 A high-level French Government mission which visited South Africa in April 1975 reportedly expressed the desire of French industry to participate in the project. 1 In addition, SASOL's managing director, Mr. David de Villiers, has predicted that more SASOLs would be built in the future with joint ownership by South Africa and international oil interests. 120/ Foreign investors are also showing considerable interst in "downstream" operations connected with the two SASOL plants. It was disclosed in September 1974, that Safripol, a joint operation of Hoechst (Federal Republic of Germany) and Sentrachem, a joint British-South African company, would undertake a R2OC-million expansion of its plant at Sasolburg to produce from coal a range of industrial chemicals previously manufactured from crude oil. 121/ British Petroleum is reported to be planning to establish a coal-based acetylere plant near SASOL II; the new plant was also expected to attract investment in fertilizer, chemical and plastics operations. 1?2/ 115/ The Star,Johannesburg, 2 November 1973; South African Financial Gazette, Johannesburg, 20 July 1973; Review of the River Plate,12 December 1973. 116/ The Star, Johannesburg, 2 November 1973. 117/ New York Times, 11 March 1975; South African Digest,Pretoria, 21 March 1975; Sunday Times, Johannesburg, 23 March 1975. L The Star, Johannesburg, weekly airmail edition, 12 April 1975. 119/ Reuter, from Cape Town, 11 April 1975. 120/ South African Financial Gazette, Johannesburg, 19 October 1973. _ll The Star, Johannesburg, 14 September 1974. I2/ Ibid., weekly airmail edition, 7 December 1974.

-25 V. RECENT DEVELOPMENTS IN MINING The exploitation of South AfricaTs enormous mineral wealth has historically played a central role in the establishment and perpetuation of the apartheid system in South Africa. It has created strong vested interests in the status quo among many of South AfricaTs main trading partners, who are dependent on it for several strategic raw materials. The economic contribution made by mining to South AfricaTs economy and to the transformation of the country into an industrial power has been, and continues to be, immense. The South African Minister of Mines stated recently that income from mining had.increased from R251 million in .1947 to over R4,000 million in 1974, and that it was expected to reach R7,000 million by the year 2000. The contribution of mining to foreign exchange earnings was about 60 per cent, and its contribution to the national economy was 15.4 per cent in 1974. 125/ Foreign capital has played a major role in developing and financing South Africa's mining industry, and the Government has encouraged foreign mining concerns to invest and operate in the country in order to benefit from their expertise, capital, and export outlets. 1 In 1975, the South African Government relaxed its conditions for foreign investment in mining in Namibia in order to accelerate the exploitation of the mineral wealth of the territory. 125/ As a result, activities by foreign mining ccnpanies have greatly intensified in recent years and several major discoveries have been made in variqus areas of South Africa and Namibia, leading to prospects of vastly increased earnings from exports of minerals to the countries of the West and Japah. (a) The Richards Bay coal export project The development of Richards Bay, a small fishing village in a "white area" in the KwaZulu "bantustan", into a deep-sea harbour twice the size of Durban and the largest harbour on the east coast of Africa, was first mooted in 1965. Extensive studies of the area were carried out starting in 1967. Intended to relieve congestion on the main line from Johannesburg to Durban, the harbour was to be connected to the Transvaal coalfields and industrial areas by a new railway and would itself become a major industrial site. L L House of Assembly Debates (Hansard),ll October 1974, col. 5200, and 10 June 1975, col. 7956. More than half the amount indicated was due to increases in the price of gold, but significant gains were also reported in the copper, coal, diamond and platinum sectors of the industry. (South African Financial Gazette, Johannesburg, 7 March 1975). i2p/ South Africen Financial Gazette, Johannesburg, 7 March 1975. i/ Ibid, 9 November 1973. 126/ The Star, Johannesburg, 6 September 1973; Sunday Times, Johannesburg, 23 March 1975.

-26- While coal exports were to be the main raison d'etre of the new harbour, it would also be equipped to handle other cargo coming from the Transvaal industries and frcm Rhodesia. 127/ As in the Sishen-Saldanha scheme, expectation of massive exports to Japan played a major role in the decision to build the harbour at Richards Bay. The project was approved in 1971 after the signing of a R250-million contract for the export of 27 million tons of coal to Japan over an 11-year period starting in 1976. The contract concluded at a price about four times higher than the domestic price gave a powerful impulse to the revitalization of the coal industry, which had been stagnating for many years because of regulation of production, price controls and lack of investment. 1 Rapidly rising world demand for coal in the wake of the Arab oil embargo and skyrocketing oil prices led to the signing of several new contracts for the export of up to 10 million tons of coal a year to France, the Federal Republic of Germany, Italy and the United States of America, i.e. a tenfold increase in South Africa's coal exports over the level in 1973. Expecting a "profit bonanza" from a world price of around R25 a ton, the coal industry continued to press for increased exports, obtaining from the Government export quotas of about 800 million tons over a 20-year period. It was estimated that exports of this magnitude would eventually contribute about R350 million a year to South Africa's balance of payments. ? These exports would be channeled through Richards Bay after the harbour is built in 1976. The rapidly rising demand for coal both inside South Africa and internationally has given a great impulse to prospecting for coal and research into methods of extracting coal more efficiently. 1J0/ According to press reports, international oil companies have bought options in the marginal coal areas where South African coal hois es did not have claims. Companies from the United States of America, Western Europe and Japan are reported to have sought to enter into partnership arrangements with South African companies for the exploitation of richer deposits. 1 127/ The Times, London, 16 May 1974; The Star, Johannesburg, 6 September 1973. 1?8/ Financial Times, London, 3 July 1975. 129/ Ibid. 130/ It is estimated that South Africa's domestic consumption of coal will double to 130 million tons per annum by 1985, and that coal production would have to double in the next ten y,-rs in order to meet internal ('-nr~rC and export commitments. According to the report of a Government Commission on mining, coal reserves are estimated at 92 millien tons, of which 24 billion can be exploited under present economic conditions. (Financial Mail, Johannesburg, 27 March 1975; House of Assembly Debates (Hansard), 10 June 1975, col.7962). j~/ Rand Daily Mail, Johannesbueg, 22 November 1973.

-27- One of the most important agreements for the exploitation of coal deposits and export frcm Richards Bay was concluded between South African, Italian, and other European interests in June 1974. Hailed in the press as "the biggest single foreign investment project undertaken so far in South Africa", the scheme envisaged the investment of up to R1,O00 million in the development of recently discovered coalfields in the northwestern and eastern Transvaal; the building of three 800 km-long pipelines to carry the coal to Richards Bay for export to Italy, the establishment of a coal-fired power station and aluminum refinery at Richards Bay (with the production to be exported to Italy); and heavy engineering works to provide plant and services essential for the pipeline. 12! Participants in the scheme were Ente Fartecipaziofi e Finanziamento Industria Manifatturiera (Efim), an Italian Government- controlled group, with a 40 per cent stake; Europin vest and Vilma S.A., two Luxembourgbased international groups, with a 20 per cent stake each; and Nicrina Holdinge, a South African company, also with 20 per cent. The investors were operating through South Cape Corporation, a company set up for the purpose of carrying out the project, headed by Mr. Ben Schoeman, former South African Minister of Transport.13_/ The company was expected to raise at le ast two-thirds of the necessary capital abroad through its foreign connections. The actual operation of the coal mines would be carried out by General Mining and Iscor, which held the concessions on the coalfields. 1 Recent reports indicate that the scheme might be jeopardized by the international economic recession and the difficulty for the partners to raise the necessary capital on the international markets. It was intimated that the Italian Government might block Efimts participation for economic reasons. However, the recent grant by the South African Government of an export permit to South Cape, for 150 million tons of coal over a 20-year period, suggests that the project will proceed as planned. 15/ Another major contract for the export of coal through Richards Bay was signed in December 1973 by the Gulf Power Company, subsidiary of the Southern Company of the United States. The contract, at a price of $47 million for 2.5 million tons of coal over a three-year period, was concluded through the intermediary of Mannesmann Pipe and Steel Corporation, a West Germanycompany. It was believed that further large contracts wculd be concluded by other United States utilities companies in spite of widespread opposition by coal miners, anti-apartheid, church, and other organizations, and members of the United States Congress. 136/ 132/Rand Daily Mail, Johannesburg, 4 June 1974; The Star, Johannesburg, weekly airmail ,ditioA, 8 June 1974. 133/Financial Mail,Johannesburg, 6 September 1974. Vilma S.A. replaced another Italian investor, FEAT, which relinquished its share for undisclosed reasons. 13 Ibid; Rand Daily Mail, Johannesburg, 4 June 1974. l_5/Financial Mail, Johannesburg, 6 September 1974; The Star, Johannesburg, weekly airmail edition, 7 September 1974; Financial Times, London, 3 July 1975. l/Statement by Mr. Dudley Thompson, United Church Board for World Ministries, before the Special Committee against Apartheid, 16 April 1975; Financial Mail, Johannesburg, 9 May 1975.

-28- Besides supplying capital for the development of coalfields and purchasing large amounts of coal from South Africa, foreign economic interests have been active in other aspects of the Richards Bay project. The dredging of the harbour has been carried out by a consortium of companies from the Netherlands, the Federal Republic of Germany and Belgium. la/ Alusaf, a joint undertaking of the Swiss company Alusuisse and the South African Industrial Development Corporation,invest-d R80 million in establishing South Africa's first aluminium smelter in 1971. According to recent estimates, the plant could be expanded to produce 300,000 tons annually, making South Africa practically selfsufficient in aluminium production. Alusaf is reportedly planning to invest R20 million in the production of carbon annodes at Richards Bay, further freeing the production of aluminium from dependence on outside sources. 138/ Trek Beleggings, an oil company owned by Shell and British Petro"eum in partnership with South African interests, is reported to be studying the possibility of building a R200-million oil refinery at Richards Bay. 139/ Another major project being mooted is the establishment of a mine to extract titanium and zirconium from beach sands north of Richards Bay and the building of a titanium smelter complex. Main partners in the project, which involve an investment of R200 million, are the Quebec Iron and Titanium Corporation (Canada), with a 50 per cent share, the South African Government through its Industrial Development Corporation, and Union Corporation, a South African company, with 25 per cent each. The Canadian company is reported to be a pioneer in the field, so that its participation in the project is deemed to be particularly important. 140/ Foreign banks have at various times supplied loan capital to the South African Railways and Harbours for the realization of the Richards Bay scheme, According to available information, recent loans to the SAR and H for Richards Bay included R25 million from a syndicate of European banks (names undisclosed) in late 1973, and DM 140 million from a syndicate of European banks headed by the Berliner Handelsgesellschaft-Frankfurter Bank (Federal Republic of Germany) and DGK-International (Luxembourg) in June 1974. 141/ (b) Recent discoveries Intensive prospecting and drilling operations by United States mining companies led to the discovery of massive deposits of copper, zinc, lead, silver and antimony in the north-western Cape Province in 1973 and 1974. The discoveries were later hailed as "the most thrilling prospect in South African mining" by the Li/ Financial Mail, Johannesburg, 17 January 1975. I Financial Mail, Johannesburg, 17 January 1975; Centre Europe-Tiers Monde, Geneva, La Suisse et l'Afrique du Sud (1973) I Financial Mail, Johannesburg, 17 January 1975. lQ/ Ibid., The Star, Johannesburg, 15 October 1974. 141/See A/AC.115/L.414 for details.

-29- Minister of Mines, who said he expected the area to eventually outstrip the Witwatersrand in total production, if not in annual financial return. The Minister expected at least ten new mines to be established in the area, for an early output of over 90 million tons a year involving foreign exchange earnings of more than R1,000 million. 142/ Phelps Dodge (United States) was reported to have made three major finds in the Aggenys areaV after over a year of continuous drilling and development work which involved an investment of over RlO million. The ore bodies, which contained lead, zinc, copper and silver, were reported to be suited for both open- cast and underground mining. A final decision on large-scale mining operations would reportedly be made only after a feasibility report was finalized by the Bechtel Corporation (United States) at the end of this year. If approved, the project would involve the establishment of an open-cast mine and a smelter at Aggenys for a total investment of about R100 million, the largest undertaking by Phelps Dodge outside of the United States. The project would probably be carried out in partnership with South African interests. 2 O'Kiep Copper and Newmont Mining, both of the United States, in partnership with the Union Corporation of South Africa were reported to have discovered a major zinc deposit, perhaps the largest in Africa, near Gamsberg. If a decision to exploit the deposit is made, this will reportedly involve an investment of about RlO0 million for the production of 100,000 tons of electrolytic zinc a year.1444/ A report in the Financial Mail of 11 October 1974 stated that the finds made by the American companies had attracted no fewer than 26 major exploration companies to the area. The article mentioned Rio Tinto, Shell, (United Kingdom), U.S. Steel (United States) and Falconbridge (Canada) among the foreign interests active in the area. Since the new deposits are located in a virtually deserted area, the South African Government is engeged in a massive infrastructure development programme to make exploitation feasible. This includes the building of a road, a pipeline to carry water from the Orarge River, the laying of a power line, and rail connection to the Sishen-Saldanha line. Although no final decisions have yet been reached by foreign companies concerning the exploitation of the deposits, it is believed that their richness would attract substantial foreign investment when the area became easily accessible. 142/ Sunday Times, Johannesburg, 15 August 1975, South African Financial Gazette, Johannesburg, 28 February 1975. 145/ The Star, Johannesburg, 21 March 1975, Sunday Times, Johannesburg, 15 August 1975. Sunday Times, Johannesburg, 15 August 1975, etr, Johannesburg, 2. March 1974. 4 Sunday Times, Johannesburg, 15 August 1975.

-30- VI. DEVELOPMENTS IN SHIPPING: CONTAINERIZATION The South African Government decided in 1970 that the conversion of South Africa's seaborne trade to containers had become a necessity if South Africa were to retain its substantial share of trade with the industrialized countries of the West. A Government Commission, after two years of research in Europe, the United States of America and Australia, had concluded that "containerization should be introduced into the South Africgntrade at the earliest possible time." 146/ South Africa had no alternative but to follow the lead of its major trading partners, despite the huge investment and considerable technical difficulties involved. Firstly, there was the fact that a growing proportion of traffic handled in European, American and Japanese ports was already containerised. As the Financial Mail had warned: "If South Africa does not convert fully to containerisation within the next decade, modern vessels from the more advanced countries will not be able to use our ports - and our conventional cargo vessels will not be able to use theirs..." i Moreover, the South African Government was increasingly concerned that serious and growing congestion at South Africa's main ports, and skyrocketing costs of fuel and handling charges fr;r conventicn al cargo were jeopardizing South Africa's exports and increasing the cost of its imports. Container ships, because of their huge size (one ship would replace about five conventional ones) their standardized cargo units and sophisticated navigation equipment would substantially cut fuel and stevedoring costs, time spent in the harbour and manpower requirements. 148/ Accordingly, South Africa embarked on a containerization programme which is expected to involve a total investment of between R1,500 and R2,000 million by 1979 by both the South African Government and foreign shipping interests. 148/ An agreement for the containerization of South Africa's seaborne trade with Europe by 1978/79 was signed in March 1974 by the South African Government and eight major international shipping lines operating on the -South AfricaEurope run. These were: Overseas Containers (OCL) and Ellerman and Harrison (EHCL) 146 Financial Mail, Johannesburg, Container Survey, 27 June 1975; Minister of Transport, House of Assembly Debates (Hansard), 5 March 1975, col. 1857. 147 Financial Mail, Johannesburg, Survey on Shipping, 19 September 1969. 14/Ibid., Container Survey, 27 June 1975. 149 Ibid., South African Digest, Pretoria, 4 Arril 1975.

-51- of the United Kingdom; Messageries Maritimes (MM) and Compagnie Maritime des Chargeurs Rgunis (CMCR) of France; Compagnie Maritime Beige (CMB) of Belgium; Nedlloyd of the Netherlands; D- utsche Afrika Linien (DAL) of the Federal Republic of Germany; and Lloyd Triestino of Italy. The eight lines agreed to run the container service to Europe and the Mediterranean together with the South African Marine Corporation (Safmarine), a corporation jointly owned by the South African Government and British shipping interests. 50/ The container trade would be shared among the lines on the basis of their share in the conventional trade with Europe, with the largest percentage (40 per cent) going to Safmarine, 17 per cent to 0CL, and 11 per cent to EHCL.151/ Eventually, theo.programme would be expanded to trade with the United States of America, Japan and the Far East. 152 Containerization will require a substantial restructuring of South AfricaTs shipping industry. The fleet will consist of fourteen new container ships, costing about R680 million to replace 92 conventional ships presently in use. Thirteen of these ships have already been ordered from various European shipyards. Ten of them, with a capacity of 2,450 TEUs each, will servethe United 150/ The South African Government has a 40 per cent holding in Safmarine through the Industrial Development Corporation. British and Commonwealth, the United Kingdom shipping line, owns 36 per cent. 2 Financial Mail, Johannesburg, "Container Survey", 27 June 1975. Proportions for the other lines remain to be agreed. Sibid., 6 December 1974.

Kingdom and northwest Europe. Four, of 1,340 TEUs each, will serve the Mediterranean trade. 5/ In addition, to ease the container transition, Safmarine is converting eight of its conventional ships at the yards of Mitsubishi Heavy Industries and Mitsui Shipbuilding and Engineering Company (Japan). The ships will be "jumbo-ised", i.e. lengthened through the addition of a mid-section and remodeled to carry containers. The cost was estimated at about Rl.5 million for each ship. 154 The new fleet will reportedly have to be equipped with approximately 30,000 containers, involving a total investment estimated at between R60 and R150 million. According to press reports, Safmarine has ordered the first 2,000 containers for R3.5 million from French, British and Japanese suppliers. The reports indicated that Safmarine hoped to obtain at least half of its requirements 5 Financial Mail, Johannesburg, Container Survey, 27 June 1975. The orders were as follows: Line Ships Ordered Safmarine OCL (U.K.) EHCL (U.K.) Nedlloyd(Netherlands) MM and CMCR (France) CMB (Belgium) and DAL (Fed. Rep.of Germany) DAL (Fed.Rep.of Germany) (to be confirmed) Lloyd Triestino (Italy) 2x2,450 TEU ix2,450 TEU ix2,450 TEU lxl,340 TEU ix2,450 TEU 1x2,450 TEU lx2,450 TEU lx2,450 TEU lx2,450 TEU lx2,450 TEU 2xl,340 TEU Shipyard Chantiers de France Dunkerque (France) Chantiers Navals de la Ciotat (France) Chantiers de l'Atlantique (France) Italcantieri (Italy) Weser(Fed. Rep. of Germany) Weser (Fed.Rep. of Germany) Rijn-ScheldeVerolme (Netherlands) Chantiers Navals de la Ciotat (France) Estimated Delivery date September 1977 and March 1978 July 1978 September 1978 July 1977 September 1977 November 1977 December 1977 December 1978 Boelwerf (Belgium) Not Known Howaldtswerke (Fed.Rep. of Germany) Italcantieri (Italy) February 1978 Januy-1977 and December 1977 154 South African Digest,Pretoria, 14 December 1973; Rand Daily Mail,Johannesburg, 7 November 1973 and 14 August 1974; The Star,Johannesburg, 29 August 1974; Financial Mail, Johannesburg, "Container Survey," 27 June 1975. Estimated Cost R120m R6om R6om R20m R6Om R60m R6Om R6om R6om R6om R4Om R4om from local manufacturers, although the first lot of containers had to be ordered from Rbroad. 155/ The Financial Mail reported that initial enthusiasm on the part of South African industry in the production of containers had died down after the industry realized the difficulties involved in the construction of containers. The paper went on to state that "certain large South African companies have tied up with overseas container manufacturers" to submit tenders. The names of two Japanese companies, Toyota and Datsun, were mentioned in this context. 5 Press reports have indicated that the South African Railways and Harbours (SAR and H) will have to invest about R400 million on harbour, terminal and depot extensions to accomodate an estimated traffic of about 481,000 containers a year by 1978. Similar work would have to be carried out at South African terminals overseas. Work and capital equipment necessary would include berths, cranes, stacking areas, terminal premises, straddle carriers, sideloaders, fork-lifts, trailers, mechanical horses, unit trains, rail lines and extensions to the computer system. 17j/ Foreign involvement in these various aspects is likely to be substantial. Dutch contractors are engaged at present in dredging and reclamation operations at Cape Town and Saldanha Bay. I§/ Italian and West German companies are supplying the straddle carriers Ased for moving containers. L2/ Givcn the huge investment required for the containerization programme, South Africa has sought to borrow part of the necessary capital on the international money markets. In November 1974, a consortium of five French banks led by Banque de l'Indochine signed an agreement with Safmarine to make available a credit line of R170 million to finance about 70 per cent of the estimated final contract price for the four container ships to ve supplied by French shipyards. I It was reported that SAR and H would seek to borrow about R400 million abroad in the near future, a substantial part of which would probably be used to finance expansion related to the containerization programme. 1 South African Digest, Pretoria, 6 December 1975. . Financial Mail, Johannesburg, "Container Survey", 27 June 1975. L Ibid. 8 Sunday Times, Johannesburg, 7 April 1974. 122/ Financial Mail,Johannesburg, 6 December 1974. 6/ South African Digest,Pretoria, 15 November 1974 j Financial Mail, Johannesburg, 27 December 1974.