Transnational Corporations and the South African Military-Industrial Complex

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Alternative title Notes and Documents - United Nations Centre Against ApartheidNo. 24/79 Author/Creator United Nations Centre against ; Seidman, Ann W.; Makgetla, Neva Publisher United Nations, New York Date 1979-09-00 Resource type Reports Language English Subject Coverage (spatial) Coverage (temporal) 1979-00-00 Source Northwestern University Libraries Description Introduction. Transnational corporate investments in the South African military-industrial complex. The South African control network. Iron and steel. Chemicals. Transportation industry. Electrical equipment and machinery. Computers. Nuclear technology. Other military-related industries. The transnational corporate oil industry. Transnational corporate transfer of military equipment and weaponry. Direct and indirect transnational bank finance of military expenditures. Transnational banks' South African affiliates. The transnational banks' contribution. Transnational banks as wholesalers for credit to South Africa. International banking consortia. Transnational banks' role in mobilizing foreign credit. Home Government insurances and guarantee programmes. South African gold. Conclusion. Format extent 68 page(s) (length/size)

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http://www.aluka.org CENTRE AGAINST

CENTRE AGAINST APARTHEID DEPARTMENT OF POLITICAL AND SECURITY COUNCIL AFFAIRS NOTES AND DOCUMENTS* 24/79 ; I~iit September 1979 '- Y N~V ~ TRANSNATIONAL CORPORATIONS AND THE SOUTH AFRICAN MILITARY-INDUSTRIAL COMPLEX by Ann Seidman and Neva Makgetla L-Note: This issue is published at the request of the Special Committee against Apartheid. Professor Seidman is Visiting Professor at Brown University, Providence, Rhode Island. She is the author of several books and articles on the economies and development of southern Africa. Mrs. Makgetla is a graduate student in economics. The views expressed are those of the authors.J 79-234o07 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. Js

Table of Contents Pages Introduction...... 1 I. Transnational corporate investments in the South African military-industrial complex ...... The South African control network ...... 6 Iron and steel ...... 11 Chemicals ...... 16 Transportation industry ...... *.. *...... 18 Electrical equipment and machinery ...... 22 Computers ...... 25 Nuclear technology ...... 0 . .. 27 Other military-related industries ...... 30 The transnational corporate oil industry ...... 32 II. Transnational corporate transfer of military equipment and weaponry ...... III. Direct and indirect transnational bank finance of military expenditures...... *0...... 42 Transnational banks' South African affiliates ...... 44 The transnational banks' contribution ...... 48 Transnational banks as wholesalers for credit to South Africa . . . . 53 International banking consortia . . . 0 & ...... 54 Transnational banks' role in mobilizing foreign credit ...... 55 Home Government insurances and guarantee programmes ...... 61 South African gold ...... 63 IV.Conclusion...... 66

-1- Introduet ion Transnational corporations continue to play a crucial role in strengthening the South African r6gime's military capability, despite the United Nations mandatory arms embargo, in three ways. First, transnationals continie to provide technology and finance to build up the key advanced, capital-intensive machinery and equipment industries that constitute the foundations of the military~.industrial complex that enables South Africa to boast that it can produce 75 per cent of its own military requirements demestically. / Transnational firms with subsidiaries and/or affiliates in South Africa also ship in parts and materials for the basic military equipment and machinery they produce there. Secondly, transnational corporations sell to South Africa that 25 per cent of the weapons and military machinery which South African industry cannot yet produce. Thirdly, transnational corporate banks and associated financial institutions continue to help the South African regime obtain the necessary finance to buy the military equipment and weapons produced domestically and internationally. It is impossible to obtain aggregate data to expose the full extent of continued transnational corporate involvement in the South African military build-up because such activity has, over the years, been conducted in violation, first, of the voluntary United Nations arms embargo imposed in the early 1960s; and, secondly, since 4 November 1977, the United Nations mandatory arms embargo. This brief paper, therefore, only provides illustrations of the way transnational corporations have participated in these three types of activities. I. Transnational corporate investments in the South African military-industrial complex The rapid expansion of military expenditures by the South African minority regime, following the Sharpeville massacre, significantly stiiulated the multiplication of transnational corporate investments there in the 1960s and 70s. The United States military journal, Armed Forces Journal International, observed that South Africa's increasing expenditure on capital goods for the military, "has resulted in development of skill locally, and has provided economic growth to the country." 2/ Transnational corporations investing in South Africa benefitted both directly, in the form of contracts to sell parts and materials to the military, and indirectly in terms of a more generally expanded market. I/ Abdul S. Minty, statement to the United Nations Special Committee against Apartheid, A/AC. -115/L. 485. a/ Armed Forces Journal Internationa1 (Washington, D.C.), June 1973.

-2- South Africa's military expenditures multiplied rapidly after the Sharpeville massacre, over six times by the end of the 1960s. By 1977/1978 it had more than quadrupled again to total $1,645 million. J/ In 1978/1979 it rose still further to $1,929 million. / The South African Government, itself, entered directly into military production through ARMSCOR , a parastatal holding company created in 1969. About 70 per cent of the Government's defence expenditures for armaments goes to ARMSCOR's seven wholly-owned subsidiaries. _/ ARMSCOR makes hundreds of contracts' each year with private firms, including subsidiaries of transnational corporations, to produce parts and materials for incorporation in military supplies and equipment. After 1970, the began to introduce the most modern equipment available. This was especially important to enable the scarce supply of skilled white workers to man the expanding military force without drawing on blacks. The share of the defence budget allocated for "armament procurement and special equipment to replace obsolete gear" rose from about a third to half of the total in the first three years of the 1970s. 6/ About $280 million was spent on aircraft, $125 million on ammunition, and $110 million on radio, radar and other electro-technical equipment. The South African regime took steps to stimulate local manufacture of as many of the essential parts and equipment for its growing military establishment as possible. 7/ At the end of 1978, about Rl billion of ARMSCOR spending - two thirds of the total military budget on domestic armaments production in the coming fiscal year - was expected to provide further major stimulus for the socalled "private" sector. About 60 per cent of ARMSCOR's spending "goes directly into private enterprise coffers and another R300 million is contracted to ARMSCOR's subsidiaries which in turn subcontract up to 75 per cent of their work to the private sector." 8/ The United States publication, International Defense, 9 reported in the early 1970s that South Africa could manufacture a wide range of explosives, ammunition, small arms, napalm bombs, guided missiles, aircraft, radios, mine detectors and other classified electronic equipment. Strict South African Government secrecy laws make it impossiblei, without direct access to official South African Government or private company files, to assess the extent to which individual transnational firms are involved in producing for the South African military machine. Official reports show that private contractors were awarded $52 million worth of contracts for military production in 1971/72, and double that amount in 1972/73. Most / South Africa Digest (: Government Printer) 30 September 1977. _/ South Africa Digest, 3 November 1978. / Guardian, London, 5 December 1973. 6/ Institute for Strategic Studies (London) Survival, June-July 1972. L/ "Call for an end to all military co-operation with South Africa", Notes and Documents, 18/73, 1 October 1973. 8/South Africa Digest, 3 November 1978. 2/ International Defense, December 1971, Vol. 4, No. 6.

-3- of these funds were spent for engineering and electronics equipment and machinery 1/ in which transnational corporations have invested heavily. In 1973, the Defence Department reported that half of the total armaments expenditures were paid to about 200 contractors and sub-contractors in South Africa itself. These expenditures provided a considerable domestic demand for expanded manufacturing production. In addition, transnational firms sold licences to local firms for a wide range of military equipment. In 1974, South African began to build its own F-1 Mirage fighter planes under license from the French firm Dassault. It was already producing "in whole or nearly so ... advanced versions of Itpala aircraft (the Italian Aermacchi MB-326), Eland armoured cars, and many small arms including the Belgian FN rifle". AL/ According to its Defence Minister, 3/ South Africa was expected to start building its own tanks soon. Domestic military purchases undoubtedly contributed significantly to the expansion of demand required to stimulate domestic manufacturing industries. In the midst of the slump in the mid-1970s, military spending by the South African Government was the primary spur to major sectors of the domestic economy. In 1977, following the United Nations Security Council imposition of the mandatory arms embargo after the death in detention of Steve Biko, the South African Government announced that it would not hesitate to take over the plant of any transnational corporation which refused to produce strategic materials upon request. This implied that any transnational corporation's South African affiliate might, at any time, be required to produce military or military related supplies for the South African Government if so ordered. i_/ ARMSCOR's chairman made it clear that, despite the United Nation's *ilitary embargo, it would treat the licences it had obtained from transnational corporations for military production as little more than "recipes". He insisted, "we have paid for them and we have every right to continue with production". U/ 1O/ Guardian, 5 December 1973. 11/ Eveninx News, 19 February 1974. Armed Pbrces Journal International (Washington, D.C.), June 1973. Ibid. L4/ The Washington Post, 11 November 1977. I/ Financial mail, (), 13 June 1978. Table 1 Current defence industry in South Africa (a) Indigenous design Year Year in design pro- Status of programe, Country Designation, description bxgun duction other information Tank Mine-clearing vehicle "Whiplash" air-to-air miss, IR-homing 1966 1976 1973 1972 Government announced it was ready to start series pirduction of indigenous tanks but no further details published No further information since 1973 Range: 550 km Electronics Engines Napalm Chemical weapons: nerve gas, tear gas 1969 1968 1960 Local engine on Eland II AC Manufactured entirely from local material Self sufficiency achieved since large investments in arms industries Source : World Armaments and Disarmament, Sipri Yearbook, 1978 (Taylor and Francis, London, 1978, Stockholm International Peace Research Institute) South Africa

-5- (Table 1 continued) (b) Weapons currently produced under licence Licensee Licenser South France Africa Designation. description Atlas AMirage FI-CZIA Z fighter Year or Year or licence 1971 Year in production 1971-78 Status of programme. other informltioui Ordered: 48 consisling of 32 FI-AZs and 16 FI-CZs Eland armoured car (Panhard AML 60190) France/FR "Jodo-Coutipho "-class Germany frigate Israel "Reshef".class fast miss craft Italy Atlas i#1p0l1 II light strike (MI1.326K) AFIC RSA-200 falcon civil/nlitary light plane Atlas Atf.3C"Bosbok" monoplane ItalyJUSA C4,%f Kud, (A.-60/ AM-3C derivative) STOL. light obscrva- 1965 1967 Indig: - 100 %; second generation de-mloped locally Feb Announced as indigepous 1975 construction but perhaps origilally to have been built inPortugal Late (1975) Displ: 430 t speed: 30 knots; 1974 3 under construction in flaifa. 1 in S. Africa 1973 197S Production of Ihpala Nlk I ended %%ith 151 built; 50 Mlk 11 ordered 1965 1967 Production temporarily suspended 1971 1975 (1974) 1975 Most. if not all.asseniblcd by Atlias Ordcred: 37; dcliverics now thought to ha%c started World Armaments and Disarnanint, (Taylor & Francis, London, 1978, SIPRI Yearbook 1978 Stockholm International Peace Research Institute). Source:

-6- By the 1970s, transnational corporations owned about 40 per cent of South Africa's manufacturing industry. They played an especially important role in those strategic sectors which were essential to the strength and relative independence of what had, over the years, become a powerful military-industrial complex. Iron and steel, chemicals, auto, electrical equipment and appliances, machinery, and engineering industries furnish the industrial infrastructure essential for development of a relatively independent military capacity. In the years following the Sharpeville massacre, the major thrust of transnational corporate investments was to provide advanced technologies, managerial skills and finance to these strategic sectors in South Africa. The South African control network To comprehend the significance of the transnational corporations' contiibution, it is essential to realize that the South African militaryindustrial complex is dominated by a closely interwoven network of Government parastatal, a small handful of giant domestic mining finance houses dominated by the Anglo-American corporation, and transnational corporate investors. This may be illustrated by the following diagram Chart I: The South African military-industrial complex "Private Sector"* South African Government Parastatals "Privately" held corporations (State corporations) Administration ARMSCOR (military) Anglo-American Corporation Police ISCOR (iron and steel) plus six other mining Army ESCOM (electricity and nuclear) finance houses Airforce SENTRACHEM (chemicals) Transnational corporations Navy SAH&RR (harbors and railways) 40% of South African SASOL (oil-from-coal) manufacturing NATREF (State oil refinery) Transnational corporate IDC (State development corporation) banks Etc. 60% of 20 largest South *Designated as "private" by South African r6gime. African banks As the South African Yearbook declared in the early lQ70s IL/ the gold mining industry was "controlled by seven major groups or financial houses." These were: the Anglo-American Corporation, Anglo Transvaal (Anglovaal) Rand Mines, General Mining and Finance Corporation (GM and FC), Johannesburg Consolidated Investments (Johnnies), Gold Fields of South Africa (GFSA, an associate of a British company, Consolidated Gold Fields), and Union Corporation, Ltd. Of the six major mining finance houses established before 1920, three were founded by South African magnates (Rand Mines - Beit; GFSA - Rhodes; Johnnies - Barnato); two were controlled by German banks; and one, Anglo American, was "founded ... with South African and an extra injection of British and American - capital." 17/ 16/ De Ga ublishers, State of South Africa, (Johannesburg, 1973). /Ruth First, Christobel Gurney, Jonathan Steele, The South African Connection Udon: Maurice Temple Smith Ltd., 1972). -7- Most of the foreign capital available to the locallycontrolled mining finance houses was initially provided in the form of indirect investment through the London Stock Exchange or the money markets in London, New York, or continental Europe. By the mid-20th century, as the South Africans, themselves, reinvested their profits in mining, however, the relative proportion of local capital increased. 18 / The percentage of mining dividends paid abroad steadily declined. In 1918, four out of every five dollars in profit was remitted abroad. By 1965 this had dropped to about one in four. In absolute terms, however, foreign shareholdings and remitted profits increased as the k nes expanded. Not only were the mining finance houses large in terms of their tAtended investments in mining and other industries. They were so closely intertwined that to conceive of them as separate entities would be entirely misleading. As the official South African Yearbook observed, "6o-operation between the individual groups is close, and directors are often exchanged." 12/ By the 1960s, Anglo-American, by far the most powerful of the South African mining finance houses, had itself become essentially a transnational corporation. LO/ About 56 per cent of Anglo's shares were held in the United Kingdom, but Anglo had cemented close ties with the United States firm, Engelhard. Anglo's overall assets were estimated in 1974 at over $T.4 billion, equal to about a fourth of South Africa's total national product. The AngloAAmerican parent company, alone, had investments totblling $1.8 billion. The capital of the complex of mining, industrial and other kinds of companies administered within the group totalled over $5 billion. Anglo has become part of the world network of multinational corporations. This is illustrated by its relationship with Charter Consolidated, a British group which acted as Anglo's agent in the United Kingdom and with vhich Anglo launched many ventures, not only in South Africa, but also internationally. Charter ownd 10 per cent of Anglo. Charter's quoted and unquoted investments in the early 1970s totalled almost a billion dollars. A little over a tenth are in the United Kingdom. Almost half are in South Africa. The remainder are scattered throughout Asia, , the United States, continental Europe and the rest of Africa. South Africa provided 44 per cent of Charter's investment income in 1973, followed by Zambia. 12/ Da Gema Publishers, State of South Africa, M. cit. 2 See Anglo-American Corporation, Annual Report, 1971, for its assets, subsidiaries, and affiliates, unless otherwise cited.

-8- Anglo's partnership with Charter found expression partly in Anglo American Corporation of Ltd.,, which was established in 1966 to consolidate most of Anglo, De Beers and Charter interests, including "both direct and indirect investment in copper, zinc, cadmium, gold, silver, potash and uranium mining, chemical, crude oil and natural gas production and prospecting operations." AAC Canada owns 34.75 per cent of Hudson Bay Mining and Smelting, 40 per cent of Francana Development Corporation and 10 per cent of Anglo Lake Mines Ltd. Charter owns ten percent of Zinc. It also held up to ten per cent of the equity of, among others, Falconbridge Nickel Mines of Canada; Alcan Aluminium; Union Corporation of South Africa; British Petroleum; Shell Oil; "Shell" Transport and Trading, Ultramar (which are all oil companies).; Berelt Tin and Wolfram (Portugal); and the United States firms Atlantic Richfield, Exxon, Mobil Oil, Phillips Petroleum, Standard Oil (Indiana) and Bethlehem Steel. Anglo-American is also closely interlocked with the United States firm Englehard Minerals and Chemicals Corporations (EMC), which markets ore and minerals, mines kaolin and other non-metallic minerals and refines and manufactures precious metals for industry. As a result of a complex series of stock transactions taking place from 1969 to 1972, the Anglo-American group had come to own about 30 per cent of Englehard's common stock and 20 per cent of its preferred stock. 21/ Englehard family interests own about 11 per cent of the common and 7 per cent of the preferred stock of the company. G. W. H. Reilly, who came up through the ranks of the Anglo-American Corporation to become president and chairman of its board of directors, also sits on the board of Englehard Minerals and Chemicals Company. Another example of Anglo-American's extensive international links is the Minerals and Resources Corporation, Ltd., a member of the group incorporated in Bermuda. Oppenheimer is also its chairman. This firm acquired 43 per cent of Trend Exploration Ltd., an unquoted United States company, with a number of oil wells in the United States and Indonesia. Anglo developed a gold mine in Australia through another subsidiary, taking advantage of the high gold prices in the world market. Members of Anglo's board of directors provide additional ties to other groups of international corporations. Anglo's chairman, Oppenheimer, serves on the boards of Barclays Bank_'and the Canadian Imperial Bank of Commerce. G. C. Fletcher, a director of Anglo, Rand Mines and GM and FC, also sits on the boards of Rio Tinto Zinc, Societe Nazionale Sviluppo Impresse Industrial, Societe Financiere Louis le Grand, and Soci6te Minitre et Maritime. Moody's Industrials, 1974, and Erglehbrd Minerals and Chemicals Corporation, Report to the Securities and Exchange Commission, United States of America, 1971, pp.1-6. &2/ For the important role of Barclays in southern Africa see below.

-9- Dr. F. A. Zoellner. also on the board of GM and FC, was an advisor to the Dresdner Bank A/G. ?/ In short, the Anglo-American group, in itself, had become a transnational corporation which, although based in South Africa, had acquired investments and ties in several continents through dozens of affiliates and subsidiaries. At the same time, it had forged direct links through its board of directors with some of the largest transnationals in the world. In the mid 1970s, the Anglo-American group merged with the Barlow Rand group, the sixth largest of the big mining finance houses. The Barlow Rand group had a turnover of almost a billion dollars in the mid-70s. It had been formed when a manufacturing conglomerate, Thomas Barlow and Sons, took over a mining finance house, Rand Mines, in 1971. Rand Mines had previously been linked with Anglo's United States affiliate, Englehard. Transnational corporations from all the Western nations expanded their investments in South Africa's strategic manufacturing industries in the 1960s and 1970s in collaboration with the South African Government parastatals and the South African transnational corporation, Anglo-American. The British manufacturing investments in South Africa date back into the early formative years when British firms played the primary role in providing technical assistance as well as finance and the necessary capital goods and equipment for building up the industrial base. Over the years, British firms tended to merge their interests with those of South African firms, holding a significant proportion in the form of minority shares. They continue today to provide technology and, as trade statistics show, to sell vital capital goods and equipment to their affiliates. As the British economy became increasingly enmeshed in the crisis of the early 1970s, furthermore, British manufacturing firms expanded their South African investments. In the mid-1970s, British manufacturing investments in South Africa and , combined &1rotalled almost a billion pounds sterling (L997.2 million) - more than double the 1971 figure (1407 million). Over half these were in basic military-related industries: chemicals (11 per cent); metal manufacture (12 per cent in 1971; not given for the later year); and electrical engineering (18 per cent). 25/ In the late 1960s and 1970s, American-based transnationals, too, expanded their South African manufacturing investments. They concentrated on the newer, more sophisticated industries, like uranium processing, computer technology and motor vehicles. United States firm tended to accompany a high proportion of their officially reported manufacturing investments by direct control than did the British. 26/ 0/ A bank of the Federal Republic of Germany which played an important role in mobilizing funds for South Africa; see below. &4/ British statistics, like those of South Africa, combine Namibian data with that of South Africa. (United Kingdom Board of Trade. Trade and Industry. 25 February 1977). ?5/ Ibid. gL/ Republic of South Africa, Second Census of Foreign Transactions, Liabilities and Assets, 31 December 1971, Supplement to South African rla"r_ larerlyih~pti, Ma~rch 1973.

- 10 - A considerable but unknown amount of additional United States capital is invested in South Africa through companies based in other countries in which United States firms hold shares. Firms of the United Kingdom, France and of the Federal Republic of Germany, in which United States transnationals participate, also play a significant role in building up South African industrial capacity. Aggregate data as to the full extent of this indirect form of United States participation in South Africa is unavailable, though examples will be cited below. Transnationals of the Federal Republic of Germany multiplied their manufacturing investments in South Africa exceptionally rapidly in the late 1960s and early 1970s. Almost two-thirds of net investment of the Federal Republic of Germany by the end of 1975 was concentrated in four branches : motor vehicles (23 per cent); chemical industry (19 per cent); machinery production (17.1 per cent); and electrical machinery (6.5 per cent). French transnationals have not invested as much in South African manufacturing as did those from the Federal Republic of Germany or the United States. Nevertheless, heightened French interest has been reflected not only in their expanded trade, but also by increased French involvement in specific industrial projects. 28_/ Ironically, some Japanese firms, prohibited by their home Government from making direct investments in South Africa, invest there through United States firms which own shares in them. Others licensed South African firms to assemble imported parts and materials to produce the Japanese product. The role of transnational corporations in providing the necessary industrial foundation for South Africa's military-industrial complex may best be illustrated by examining key strategic industries. a/ W. Schneider-Barthold, Die Beurteilung der Wirtschaftsbeziehung der BRD zur RSA,(Berlin: Deutsches Institut fUr Entvicklungspolitik, 1976), 18/ "Activities of transnational corporations and their collaboration with the r6gime in South Africa", Notes and Documents, 21/77, July 1977.

- 11 - Iron and steel The iron and steel industry is critical to domestic military production. High quality steel is essential for production of guns, tanks, rockets, airplanes and ships; and military output has provided an important market for South Africa's burgeoning iron and steel industry. South Africa's State steel corporation, ISCOR, founded in 1928, had, by the 1970s, gvown into a giant holding company, with total assets worth over R3 billion, and an annual output of over four million tons of steel. 9/ It provided South African military-industrial producers with an assured source of low-cost, Government subsidized iron and steel products. It contributed to easing the nation's balance of payments problems, not only ending the import of steel, but, by 1978, exporting over a third of its output. 30/ ISCOR's investments were financed, in large part, through borrowing increasingly from transnational financial institutions. The South African Government acted as guarantor. In the difficult year of 1975, alone, the net financial charges for ISCOR's accumulated loans totalled $87 million, 40 per cent more than its reported profits. 31/ ISCOR, in essence, has used the South African Government's borrowing capacity to subsidize its low-cost iron and steel production. Transnational steel companies continue to contribute the advanced technologies, parts and materials and capital which enable ISCOR to play its leading role in the South African industrialization programme. British steel firms were, historically, the first to provide technical assistance for South Africa's infant steel industry in the early years. A number invested directly to take advantage of the South African Government-created hot-house environment for steel industry growth. When the British Government nationalized iron and steel in the United Kingdom itself after the Second World War, the newly-created British Steel Corporation acquired a number of South African subsidiaries and minority shareholdings.in South African companies which had belonged to the fourteen major British steel companies from which it was formed. These interests brought the British Steel Corporation into direct partnership with South African private capital, especially the mining finance houses. 2/ In the summer of 1970, the British Steel Corporation agreed to a reorganization of its South African interests which effectively handed over control of these companies, in which it retained the largest single interest, to the South African State owned ISCOR. This gave ISCOR more power and greater flexibility to build up South Africa's steel industry and, through it, to influence the entire southern African regional economy. 33/ 2/ ISCOR, Annual Report and Financial Mail, (Johannesburg), 2 March 1979. / Financial Mail,(Johannesburg), 2 March 1979. L/ Star (Johannesburg), 12 November 1971 and 29 October 1973: South African Digest, 22 February 197. / First, et al, The South African Connection, 22. cit. r bid.

-12- Table 2 Reported annual sales and employment of some British Steel Corporation affiliates in South Africa 1975 - 1976 Employment Production activities British Steel Corp. (South African sales) Pty, Ltd. Stewarts and Lloyds of South Africa Ltd., Dorman Long (Van Der Bihl Corp.) Ltd. ,000 179,000 180,000 No data 12,000 20,000 Metal Service Centre and offices Blast furnaces, rolling mill steel works, plumbing and heating equipment Shipbuilding, repairing railroad equipment Source: Dun and Bradstreet, Principal International Business, 5-1976, The World Marketing Directory(New York, 90 Church Street., 19T7). Sales (M3 - 13 - In 1977, the British Steel Corporation still had what the South African Financial Mail termed "inextricable links" with South Africa. Britcor, RSC South Africa, owned 35 per cent of International Pipe and Steel Investments (IPSA), while ISCOR and Anglo-American held the remaining shares. IPSA in turn owned 52 per cent of the shares of Stewarts and Lloyds. IPSA also took over Vecor (with plants at Vanderbijlpark and Vereeniging) and merged it with Dorman Long to form Dorbyl, in which it retained 56 per cent. In 1978, although affected by South Africa's industrial slowdown, Derbyl reported that it continued to expad its interests, buying up firms producing parts and equipment for local motor industry production; expanding its heavy engineering subsidiary; and developing its ship repair capacity where "we believe both the Government and related authorities value the strategic importance of the undertaking." Lh/ The British Steel Corporation itself held a 21 per cent interest in Stewarts and Lloyds which, despite the recession in South African industry, commissioned a high-speed weld mill for steel tube production in 1978, and proposed to spend $15 million in other new investments, taking advantage of the South African rigime's investment allowances to reduce taxes, over the next four years. 36 /The British Steel Corporation also, directly or indirectly, retained holdings in Steel Wheel and AZLe, South Africa, and Pipe Couplings. In 1976, it took up a 10 per cent holding in Consolidated Metallurgical Industries, in which the American firm, Allegheny Ludlum Industries, also held shares. This firm commissioned a new ferro-chrome plant near Lydenburg. British Steel Corporation (BSC)(South Africa Sales, or Britsteel) continued to act as sales agent for the parent corporation throughout southern Africa. It made know-how available to local manufacturers, "frequently enabling them to develop products competitive in the export markets of the world." Britsteel set up six continuous casting machines for ISCOR. As the South African Financial Mail concluded, "one way or another, BSC is very much a force in our own steel and engineering manufacturing industry." 3_2' Guest Keen and Nettlefolds (GKN), United Kingdom's largest private manufacturer of steel products, and one of the world's largest engineering groups, sold about 14 per cent of its world output in southern Africa in 1976, much of it produced by South African subsidiaries. 3L/ L4/ Financial Mail ,(Johannesburg), 19 January 1979. U/ Ibid. 6/ Ibid., 21 August 1977. I/ Guest, Keen and Nettlefolds, Ltd., Annual Report. 1976 (London, 1977).

- 14 - Table 3 Holdings of Guest Keen and Nettlefolds, Ltd., or its subsidiaries, 1 January 1977 in Africa 100% holdings Guest, Keen and Nettlefolds South Africa (Pty.) Ltd. South Africa Other holdings of less than 100% Borg-Warner S.A. (Pty.) Ltd. (20% equity and 20% loan capital) South Africa Guestro Industries (Ptic) Ltd. (50% equity and 50% loan capital) South Africa Source: Guest, Keen and Nettlefolds, Ltd., Annual Report, 1976, London 1977 Other transnational corporations play a significant role, especially in selling ISCOR more advanced technologies. Demag, a firm of the Federal Republic of Germany, a subsidiary of Mannesman, AG also sold equipment to Rhodesia, despite United Nations sanctions. In the mid-1970s Demag's South African subsidiaries included: Demag Industrial Equipment, in which it owned 75 per cent of the $200,000 investment; and Plastic Technical Services, in which i-t owned 75 per cent of the $100,000 capital. Demag supplied over DM 90 million (about $437 million) worth of containerization to South Africa over one two-year period. -Other firms of the Federal Republic of Germany became members of a consortium to construct a semi-manufacturing steel plant as part of the Sishen- Saldanha Bay project in the 1970s. Kloeckner was reported to have a 7.5 per cent stake, and Hoesche was involved through its participation in Estel, a consortium of the Netherlands holding 6.5 per cent. 3 _/ DEMA (DuisbUrg, Federal Republic of Germany) Ein Bericht tber das Geschftsjahr, 1976. U/ Rsnd DailY Mail, (Johannesburg), 8 March 1975.

- 15 - The United States Steel Company, one of the two biggest in the United States, began to explore the possibility of investing directly in mining and processing iron ore in southern Africa in the 1960s in co-operation with South African interests. It had established four subsidiaries there by the early 1970s. Table 4 United States Steel's South African holdings, 1971 Feralloys Ltd. (South Africa) 31% ferromanganese and ferrochrome Prieska Copper Mines (Pty.) Ltd. (South Africa) 46% copper, zinc Zeerust Chrome Mines, Ltd. Source: United States Steel Corporation, Annual Report, 1972. United States Steel's Prieska Copper Mines established a plant for processing copper and zinc concentrates in South Africa in the early 1970s. -2./ In 1975, United States Steel purchased a 19 per cent interest in Associated Manganese Mines of South Africa, a major manganese ore producer which also owned high grade iron ore reserves. United States Steel contracted to buy over 3 million net tons of this ore (minimum 63 per cent iron) annually for 15 years beginning in 1978. 1 This contributes foreign exchange to the South African r~gime, enabling it to buy abroad military and other items it cannot produce. Although Japanese steel firms were prohibited by the Japanese Government from investing directly in South Africa, they had, by the. 1970s, become a cricial market for South African crude iron ore, which they processed in their own plants in Japan. At the same time, Japanese firms began to sell more plant and equipment to ISCOR for its expanding steel industry. Nippon Steel, Kuwasaki Heavy Industries, and Mitsubishi Heavy Industries, Hitachi and Marubani and Mitsui sold its rolling mills and blast furnaces. As part of a network of linkages that South Africa began establishing with other regional sub-centres, ISCOR, in the 1970s, formed a steel trading corporation, ISKOOR, with the largest Israeli steel processor, the Koor group. Koor retained 51 per cent, and ISCOR acquired 49 per cent. ISKOOR purchased steel on the world market for Israel, presumably buying as much as possible from ISCOR. 42/ 40/ United States Steel, Annual Report, 1975. SIbid. !/ ISCOR, Annual RePort, 1974.

- 16 - Chemicals The growth of South Africa's chemicals industry has significant military implications. By the 1970s, South Africa was able to produce its own napalm, nerve gas and tear gas. ! There seems to be evidence that South African troops used nerve gas in their attacks on refugee camps in Cassinga, Angola. V Transnational chemicals corporations collaborated with the South African parastatal, Sentrachem, to build the industrial foundations which has created this domestic production capacity. Their role is particularly important because the chemicals industry is highly capital-intensive and has economies of scale requiring a market considerably larger than that of South Africa. South Africa, therefore, remains heavily dependent on the import of transnational firms' basic chemicals inputs and technical know-how. The South African chemicals plants constructed as a result of South African Government pressures depended heavily on foreign technological information. 45/ The South African parastatal chemicals firm, Sentrachem, was formed as a result of a merger sponsored by the South African Industrial Development Corporation between several South African firms and the British company, BP Chemicals. This gave the British Government an indirect interest in the South African chemicals industry, since it had holdings in BP. Sentrachem grew rapidly in the 1970s. Its assets multiplied lmost three times from $71.4 million in 1972 to $174.9 million in 1976. 'L4/ Although Sentrachem remained a South African parastatal, it depended "to a great extent on international links to stay abreast of an industry of great technological depth and rate of change." 47_/ Many of the group's products were made under licences obtained from international firms. One observer emphasized, "indeed, several of these companies have expressed their confidence in the South African chemical industry by sharing with Sentrdehem in the manufacture of various products. Not only have they provided production and marketing know-how, they have also made direct capital investments in Sentrachem's plants."8_8/ The British chemicals transnational, Imperial Chemicals Industries (ICI), collaborated extensively with both public and private South African capital to develop South Africa's chemicals industry. South Africa had, by the 1970s, become ICI's second largest export market after the United States. 4_9 / ICI (South Africa), although a very small part of the British parent firms s world-wide interests, ranked 21st among South Africa's top 100 companies in the mid-1970s. It owns three subsidiaries and markets basic chemicals, resins, dyestuffs, and plastics that can not be manufactured economically in South Africa. W/ SIPRI Yearbook 1978 (London, Taylor & Francis, 1978; Stockholm, International Peace Research Institute) !/ Africa News (Durham, North Carolina), 18 September 1978. Financial Mail (Johannesburg), 24 May 1971. Sentrachem, Annual Report, 1976. Financial Times (Johannesburg), 20 May 197. !L imL, Annual Revort. 1976.

- 17 - ICI owns 42.l/2per cent of African Explosives and Chemicals Industry (AECI). ICI's chairman is AECI's deputy chairman. The South African affiliate of Anglo-American, DeBeers, owns another 42.]/2 per cent, hile the South African public holds 15 per cent. 50/ AECI collaborates directly with the South African parastatal, Sentrachem, to develop key chemicals projects. 5-/ It provided the technical expertise for Sentrachem's $350 million project to produce fuel from maize and sugar cane which became a high priority item after the Iranian revolution. AECI, the fifth largest South African company,52/ has become a lynchpin of the South African economy. It operates two of the largest commerci'al explosives factories in the world, and is the "sole supplier" of explosfres to the South African Chamber of Mines. 53 / It constructed munitions plaxits for the South African Government. Reflecting its importance to the South African military-industrial complex, AECI continues to prosper despite the impact of the international economic crisis on the South African econonV in the mid-70s. Group sales increased over a third in 1977 and a third more in 1978, while group profits rose 54 per cent in the latter year. 54/ Almost a fifth of all of the Federal Republic of Germany's firms expanding investments in South Africa were poured into the chemicals industry. The biggest chemicals firm of the Federal Republic of Germany, Hoechst, established two South African subsidiaries. One of these it owned outright, the other, Safripol, it shared (51-49 per cent) with South Africa's parastatal, Sentrachem. The firm, Bodische Analyn and Soda-Fabrik (BASF) of the Federal Republic of Germany owned R3.5 million worth of assets in South Africa in 1975. One of its subsidiaries engaged in a joint venture with the British-South African firm, AECI, to produce formaldehyde and kaurit urea, as well as potash and paraffins. Its South African sales totalled R30 million in the mid 70s. 55/ L/ AECI, Annual Report. 1974. L/ As Denys Marvin, President of AECI explained: "The only way in which one can possibly justify putting in some of these highcost plants ... is by doing it jointly with the competitor .... We are doing it with Sentrachen in our PVC Coalplex project. We couldn't justify it from the national viewpoint, and we couldn't Justify it from the shareholder's viewpoint if the two of us were to press on in the same direction, putting in over-capacity at a time when this country has no resources to spare." / Financial M

- 18 - The FBA Pharmaceuticals, Johannesburg, a subsidiary of the firm Bayer AG of the Federal Republic of Germany, is reported to have the capacity to manufacture the nerve poisons, Tabun , Sarin and Soman, in lieu of insecticides. 1/ A number of United States firms had invested in the South African chemicals business by the mid 1970s. Dow Chemicals, in Dow Today, proclaimed its aim of remaining in South Africa where "we have a sales office and a small warehouse employing a total of 39 people." 57_/ What Dow did not explain is what kind of chemicals they are importing, but it has been suggested that they, too might be providing nerve gas. 8/ Transportation Industry A crucial element in the South African minority r6gime's military planning is the expanded capacity to transport military equipment and personnel rapidly at low cost over widespread geographical areas. Large bodies of the limited numbers of white troops need to be able to shift rapidly from one potential trouble spot to another. Transnational corporate investment, pressured by the South African r6gime's policies, has helped build up the most modern transport industry on the continent. The motor car industry supplies the defence forces with transport and other equipment as well as engines and components for tanks and military vehicles. It also supplies the police force with vehicles, and where local vehicles are not made, they are imported. For example, British Leyland Land Rover Kits are imported from the United Kingdom, assembled in South Africa, and supplied to the South African Police Force. 59/ By the 197Os, some 12 transnational corporate auto producers had entered the South African market. The economic crisis of the mid 1970s, combined with the high prices of oil, deeply affected their operations, saddling them with combined losses of over $40 million. In this environment, Anglo- American Corporation's auto subsidiary, fling, initiated an aggressive campaign which, in less than two years, had cornered a fourth of the national market. Its first step was to purchase South Africa, leaving the parent United States company of that name with a 25 per cent holding, and consolidating production of Chrysler, Dodge, and lItsubishi cars and trucks (Chrysler had been producing the Japanese firm's cars and trucks 5/ Alliance Bonn-Pretoria, Berlin/Dresden, 1967, p. 46. a/ Reprint in South Africa Digest, 26 January 1979. 5/ According to former South African soldiers, reported by Don Morton, Coordinator, SAMRAF (South African Military Refugee Aid Fund, 138 Berkeley Place, Brooklyn, New York, 11217) in interview, 7 June 1979. 1/ Abdul S. Minty, report to the United Nations Special Committee against Apeid, .AC-15/L.85, 22 December 1977.

- 19 - in its South African plant, enabling it to evade the Japanese Government's prohibition against direct investments there; Chrysler owns 10 per cent of the Japanese parent firm)§/ together with its own Mack trucks and cars. The resulting firm Sigma Motor Corporation (SMC) proceeded within a few months to take over the French firm, -Citroen, for $34 million, moving their models into Sigma's production line, too. In 1978, Sigma Motor Corporation merged its commercial vehicle operations with those of the British firm, Leyland Motor Car, to form Sigma Leyland Motor Vehicle Co. in which Anglo retained a 51 per cent interest, and the British firm Leyland, 49 per cent. British Leyland, like the United States Chrykler company apparently concluded that it would continue "reaping profits from its partnership with Sigma," while countering "pressure from the anti- apartheid lobby in the United Kingdom" if it did not control the South African company. 61, Thus Sigma Motor Co. brought together these major auto firms under direct South African control, while the transnational corporations continue to provide capital and technology through their minority holdings. Their home based factories continue, too, to produce those parts and materials which the South African company cannot yet produce, constituting about a third of the final product. Other transnational corporations continue to operate their own South African subsidiaries directly. The United States transnational firm, General Mtors, (GM) the biggest non-oil company in the world, remains an important direct investor in the South African transport industry.62/ It retains its outright ownership of an assembly plant and a manufacturing factory in , and an engine manufacturing plant just outside that city. It produces several GM models, and a range of locally manufactured components such as radiators, engines, batteries, spark plugs, springs and sheet metal parts. GM's engineers designed the "" for production in South Africa, and GM sells it through its world-wide marketing outlets. GM's South African operations alone constitute those of a large firm, although they produced only four per cent of GM's world wide output. GM produces locomotives for use by the South African Government's parastatal, the South African Harbours and Railways Corporation. General Motors, after it acquired 34 per cent of Isuzu, Japan's third ranking truck manufacturer, began to produce small sized Isuzu trucks at its Port Elizabeth plant in South Africa. GM has been designated by the South African regime as a national key point industry because of its strategic importance for the continued operation of the South African military. In a secret memorandum delivered by hand to the Detroit GM office, 63/ GM's South African affiliate spelled out the implications of this status : "industries or services designated as National Key Points 60/ Y. Kitizawa, from Tokyo to Johannesburg (New York: ICCR, 1975), p. 20. 61/ Business Week, 21 August 1978. 62/ Corporate Information Center, National Council of Churches, Church Invest ents, Corporations and South Africa (New York, 1973), PP. 95ff. §J/ General Motors South Africa (Pty.) Ltd., Inter-Office Memo, published by Interfaith Center on Corporate Responsibility, National Council of Churches, May 1978.

- 20 - v.. will be accorded protection in emergencies through the medium of the Citizen Force Commando system .... (white personnel) are encouraged by authorities to Join a local commando unit." The memo explains the dual role of top GM personnel under military control "The 'G.M. Commando' would assume guarding responsibility for the G.M. plants and would fall under the control of the local military authority for the duration of the emergency. It is envisaged ..... that plant personnel could be engaged in a composite function, i.e. part normal work and part guard duty in such situations." This double-edged role is required for top GM personnel because of the relative scarcity of skilled whites; "compulsory military service is applicable only to white male citizens. The concept of utilizing plant personnel in a dual function is related to the fact that key skills, technical and managerial expertise are concentrated in the same population group from which defence requirements ... must be drawn." Ford, the second largest auto company, in the United States, established its first plant in South Africa in 1923 as a subsidiary of its Canadian subsidiary. 64/ By the 1970s, it owned administrative offices, assembly plants for cars, vans, tractors and trucks, an engine plant, and a parts and services depot. South African affiliates of Volkswagen (VW), Daimler-Benz and Deutz, the leading transnational auto firms of the Federal Republic of Germany, had, by the late 1960s, captured an important segment of the South African market. The Government of the Federal Republic of Germany and the member State, Niedersachsen, each owned 20 per cent of the capital of Volkswagen 61/ which controlled about 15 per cent of the South African car market. In 197 VW increased its South African investment about 60 per cent, 66./ and announced that it planned to"invest another R5 million in its South AFrican works in the late 1970s." 67/ The parent firm, Daimler-Benz of the Federal Republic of Germany, was held 28.5 per cent by the Deutsche Bank, 25.2 per cent by Mercedes- AutomobilHolding (an affiliate of the Commerzbank, Deutsche Bank, and Bayerische Landesbank) and 14 per cent by the Kuwaiti Government. L/ In turn, Daimler- Benz owned 26.7 per cent of the United Car and Diesel Distributors of South Africa, which itself owned 100 per cent of the Car Distributors Assembly of South Africa. 64/ Corporate Information Center, Church Investments, Corporations and South Africa, _M. cit. §J/ For extent of involvement by Federal Republic of Genany in industrial firms, see Centre Europ6en de l'entreprise publique, Les entreprises publiques dans la CEE (Paris: Funod, 1967), 286ff. For specific firms, see Financial Mail (Johannesburg), 22 April 1977. 661 Volkswagenwerk AG, Report for Year of 1976 (Wolfsberg, Federal Republic of Germany) 6/ South Africa Digest, 17 October 1976. Commerzbank (Kin,Federal Republic of Germany)Wer Gehtrt zu Wem, 1976.

- 21 - The transnational firm, Klockner Daimler and Man of the Federal Republic of Germany, have delivered over a hundred heavy duty tractor engines to Pretoria for transportation of military tanks. 69/ Daimler Benz UNIMOG military vehicles are basic equipment of the South African armed forces. 7_Q/ The firm, Deutz, of the Federal Republic of Germany, produced the first wholly South African-made tractor with its own locally manufactured diesel engine in the early 1970s. 71/ The South African army had also begun to use armoured locomotives supplied by Klockner-Humboldt-Deutz and Man. 7_. Although the Japanese Government officially prohibited investments by Japanese firms in South Africa, Japanese auto companies licensed local assembly plants to produce their vehicles inside South Africa in order to capture a larger share of the market there. Toyota first established a motor assembly plant in in 1962, with an initial loan of R1.5 million from Wesco Investment Company and Johnnies, one of South Africa's major mining finance houses. Toyota South Africa remained essentially a franchise holder for the wholly-South African-owned concern so that technically there was no direct investment by the Japanese parent company. An Afrikaaner family, the Wessels, owned two-thirds of the shares. The Japanese firm provided the expertise, technology in the form of patents and blue prints, management skills, personnel training and advice, and new methods for improving plant production. 73/ In 1974, the company constructed a new R1.8 million plant to assemble trucks for which it imported the parts. Toyota South Africa sold more trucks than cars. Since trucks did not fall under the South African Government's requirement that two thirds by weight of cars must be produced domestically, most of the truck parts were still imported, providing the Toyota Company of Japan with an expanding South African market. Toyota South Africa began to produce models that served as combined cars and trucks, a further device for evading South Africa's local content restrictions. Nissan Motors, Japan's second largest auto maker, better known as Datsun, first began to ship parts for assembly in South Africa in 1966 at a plant in Rosslyn, a border industrial area near Pretoria. Nissan licensed a new engine manufacturing plant in 1973. The financing of the plant, about R2.7 million, was channeled through Nissan's United States subsidiary. Basic equipment included machinery supplied by Herbert-Ingersoll of the United Kingdom, Nagel of the Federal Republic of Germany, Press Metal Co. of South Africa, and Ferrand of Scotland. Nissan openly expressed dissatisfaction with the Japanese Government's "non-investment" policy. 7k/ 69/ Wehrdienst, No. 461/1974 L/ ZDF TV News, "Heute", 28 March 1976. 71/ South Africa Digest, 27 September 1974. 7/ Stern (Bonn), 2 March 1977. YJ/ Y. Kitizawa, From Tokyo to Johannesburg, 2_2. cit., p. 23. 7/ Star. (Johannesburg), 7 April 1974.

- 22 - Electrical equipment and machinery Transnational corporations built up South Africa's electrical equipment and appliance industry, providing the technologically-sophisticated, capital intensive machinery necessary to strengthen the rule of the South African minority. South Africa abounds in sources of potential electric energy, both hydro and nuclear, although it must import almost all of its petroleum. Systematic electrification of the economy has permitted the utilization of the most advanced automated, computerized techniques needed to overcome a chronic shortage of skilled labour without upgrading blacks. United States transnationals have long played a leading role in South Africa's electrical equipment and machinery industry. (GE), the largest electrical firm in the United States first began operations in South Africa in 1898 through South Africa GE (SAGE). SAGE became the biggest electrical company in the country, manufacturing a wide range of household appliances, industrial controls and capacitors, and importing additional items for both the consumer and industrial markets. SAGE manufactures railway locomotives for the South African Government. In 1978, the United States parent company sold its consumer electrical equipment and appliance industry to a South African firm, Defy, in which it retained a 23.5 per cent holdingT5_/ This reduced GE's direct employment of blacks, but the transnational continued to provide technology, parts and materials to Defy, and to share in the profits. It continued its direct operation of more basic electrical equipment and machinery production. International Telephone and Telegraph (ITT), ninth among the largest firms in the United States, had also made extensive investments in South Africa. One subsidiary, Standard Telephone and Cables (STC) became another of South Africa's largest electrical manufacturing concerns, producing a wide range of technologically complex electrical equipment. It supplied communications equipment for the police and Simonstown Naval Base, and recruited engineers to operate the naval base equipment. In 1976, it reported that 70 per cent of its sales were made to the South African Government. In 1978, ITT, too, sold a majority of its shares in Standard Telephone and Cables to a South African partner _U/. Like GE, it continued to supply technical expertise, parts and materials, and share in the South African firm's profits through its minority shareholding. A second ITT subsidiary, ITT Supersonic, Africa, was initially established as a marketing agent for ITT's Rhodesian subsidiary, Supersonic Radio Manufacturing Company. It then began manufacturing radio equipment in the Pietersburg "border areas" in South Africa, profiting from the exceptionally low wages paid there. In June 1977, ITT sold this subsidiary to a local South African electronics firm, but retained a 36 per cent interest and continued to provide overseas linkages. 78/ DJ Africa New,;, 13 November 1978. T/ IT' in South Africa, May 1976. Y11 Africa News, 13 November 1978. 7/ Ibid.

- 23 The United States firm, Sperry Rand, established a subsidiary which, in the mid- 1970s, sold about R7 million worth of aerospace, communications and farm equipment annually in South Africa. U/ Much of this equipment was capable of military, as well as civilian use. The parent company's output was used extensively by the United States Air Force. §/ How many of the same items are sold in South Africa is unknown. British firms are also engaged in the electrical equipment and supply field. The British General Electricity Company's (GEC) South African subsidiaries produce transformers, consumer and light industrial goods, including absorption refrigerators, and telecommunications equipment. §l/ Plessey South Africa Holdings, which owns two subsidiaries, is itself a subsidiary of the British firm of the same name. One of its subsidiaries, in which it holds 74 per cent, produced semi-conductors and related devices in the 1970s. 2/ Reflecting the historic interdependence of British and South African interests, Plessey South Africa also owned 74 per cent of the Tellurometer, a firm operating primarily in United Kingdom. 8/ Companies of the Federal Republic of Germany invested heavily in South Africa's electrical and communications industry in the 1960s and 1970s. Siemens8 4/ South Africa is 52 per cent owned by the company of the Federal Republic of Germany of that name, and 2h per cent by the South African parastatal, the Industrial Development Corporation. The remainder is held by two South African companies, the Federale group, and South African Mutual Insurance. The parent company also was closely tied to the Deutsche Bank. By the mid 1970s, Siemens South Africa owned seven plants producing electrical components, data and telephone systems, and power and medical equipment. It produced a third of all South African post office telecommunications and railway signalling equipment. It built the transmission system linking the Cabora Bassa Dam to the South African electrical grid. It had become the parent firm's fifth largest subsidiary in terms of sales and its largest area of investment after Brazil, Austiria and the Federal Republic of Germany itself. Siemens, Monchengladbach, supplied an instrument for gauging rocket flights to the station at St. Lucia, Natal. 85/ Dun & Bradstreet, Principal International Business. 1975-76: The World Marketing Directory(New York, 1977), P. 1184. 8o/ Sperry Rand, Annual Report, 1975. 81/ Dun & Bradstreet, op. cit., p. 1175. L2/ Ibid. 8/ Plessey (United Kingdom), Annual Report, 1975. 8/ Siemens, Annual Report, 1974/75. Q / Wolf Geisler, The Military Cooperation between the Federal Republic of Germany and South Africa in the Nuclear and Conventional Field,translation of article published in book, "Sudafrika:Rassimus- Imperialismus-Befreiungskampf"Palhl-Rugenstein-Verlag, K*'n, Federal Republic of Germany, April 1978).

- 24 - The United States transnational electricity firm, General Electric, owns 15 per cent of another §redominantly firm of the Federal Republic of Germany which expanded its South African business in the 1970s: AEG- Telefunken which became a major manufacturer of electrical equipment and appliances there. It helped set up South Africa's television network,86,!_/ and was also heavily involved in providing components for Project Avocaat, an advanced military communications system that was part of the military build-up on the Cape route. - / The Stienmuller engineering group of the Federal Republic of Germany received a contract from the South African Parastatal, ESCOM, to supply about RI00 million worth of boilers for the Kriel and Endrina thermal power stations. As part of the deal, the company agreed to produce industrial equipment locally and seek export markets. W French-based electrical firms expanded their operations in South Africa in the context of groving French trade and military involvement. A French consortium, Telespace, won a contract to build South Africa's first satellite earth station to provide telephone, telegraph and telex channels all over the world, as well as one TV channel via the Atlantic. 89/ Philips of the Netherlands, expanded its operations in South Africa in the late 19709, investing about RIO million in new plant and equipment. By 1977, it had four major subsidiaries there, two of them in close relationship with South African capital. As in the auto industry, Japanese firms licensed South African firms to assembly and sell Japanese electrical equipment and appliances. Hitachi Electric, the largest electrical machinery manufacturer in Japan, began supplying South Africa with transistor radios, high-fidelity and other equipment in the early 1960s. In 1970, it opened an assembly factory in Pinetown, Durban, run by United Electronics Corporation. Tokyo Shibaura Electric Co., Japan's second largest electric machinery maker, began the assembly and sale of "Toshiba" brand electric appliances in 1970 in a joint venture with Gallo African Co. of South Africa. 2/ Matsushita Electric Co., the world's largest manufacturer of electric and gas a pliances, established an assembly plant in 1972 as a Junior partner in a Joint venture with Barlows Manufacturing of South Africa. Matsushita provided technical assistance to Barlows for colour TV production. 1/ 8K/ South African Financial Gazette,15 November 1974; AEG-Telefunken, Annual Report. 1 T6. Sechaba, November - December 1975. -Sunday Times, (South Africa),13 June 1971. Ibild. E_/ Nixon Keizai Shimbun (Japan), 26 June 1970. 2/ Star,(Johannesburg), 24 March 1978.

- 25 - Japanese firms, like their United States and European counterparts, sell electrical equipment to the South African parastatal, ESCOM. Hitachi Co. and Tokyo Shibaura Electric, for example, provided two sets of hydro-electric power generator equipment for South Africa's R1O00 million Development project. 92,' The Swiss firm, Brown Boveri and Company, in co-operation with its subsidiaries from France and the Federal Republic of Germany, sold six 350,000 kwh turbo alternator sets each to three ESCOM generating stations at Arnot, riel and Grootvlei. It supplied a huge rectifier for the Alusef which provided more than a fourth of the energy consumed in Natal. By 1976, Brown Boveri had acquired two subsidiaries in South Africa which produce equipment for power distribution and transport. Co2muters "Computers flashing out reference numbers, photocopies relayed by telephone, perhaps even instant transmission of fingerprints all to keep track of members of the population. Sounds like George Orwell's 1984, doesn't it? Well, it's South Africa's way of modernizing and streamlining its pass and influx control system". 2/ The computer industry has come to play a vital role in the South African minority's system of surveillance and control over the daily lives of the black population, as well as strengthening its military capacity. Since 1967, an ICL computer (British-make) has been handling more than 10 million registration numbers and places of domicile of blacks in South Africa. Computers are used extensively by Bantu Boards for administrative jobs - in rates and rents, for example. 9!L/ Computerized "aid centres" were used to return some 38,500 persons back to the bahtustans, in 1976 alone, for violations of "control" standards. "Citizens" of the nominally "independent" Transkei and Bophuthatswana were fingerprinted and given travel documents" which served the function of previously used pass books. All Africans over 16 years of age were fingerprinted, to ensure easy identification and control. And the entire control mechanism was streamlined with the essential introduction of computers, part of the furiously growing South African market for transnational corporate computer supplies and services. Computers were welcomed by the ruling minority as a means of resolving the crisis brought about by the shortage of (white) skilled labour without upgrading blacks. By the 1970s, as the managing director of Burroughs in South Africa told researchers: 9J_/ 2/ South African Financial Gazette,21 May 1971; Nigon Tokyo Shimbun (Japan) 23 August 1973. / Financial Mail. (Johannesburg), 24 March 1978. 2/ J. Starkey, in Ibid. o/ iM in South Africa (New York: National Council of Churches, 1972) P.3.

- 26 - "The economy would grind to a halt without access to the computer technology of the West. No bank could function; the Government couldn't collect its money and couldn't account for it; business couldn't operate; payrolls could not be paid. Retail and wholesale marketing and related services would be disrupted." By 1974, the total mumber of computers was estimated at more than 1,000 with a value of $365 million. 96/ As the South African economy plunged into recession in the mid-1970s, computers still continued to "sell like hot cakes" with market growth estimated at between 20 and 30 per cent a year. 9T/ By 1976, the number of computers had increased to 1,500 representing more than $500 million. Only the United States and the United Kingdom were said to spend more than South Africa on computers as a percentage of GNP. 9/ Transnational corporations invested heavily in this expanding market. A joint United States-South African venture between Anglo-American Corporation and the United States Computer Sciences Corporation offered South African firms access to a world-wide time sharing network to provide maximum computer usage at lower costs than they would have incurred had each had to install their own machines. Known as Infoset, the project integrated two South African centers into a network of four centres in the United States. one in Canada, and two in Australia. 92/ By the early seventies, the United States transnational, International Business Machines (IBM), the sixth largest firm in the United States, controlled about half of the South African computer market. The International Computers Equipment Finance Corp. (ICLEF), in which the British firm, ICL, had substantial holdings, held another third. The inclusion of John Starkey, managing director of the ICL's South African subsidiary, on the Queen's New Year's Honours list citing his "services to the British commercial interests in South Africa" seemed to suggest "an official British stamp of approval on doirgbusiness" with South Africa. lQO/ South Africa was the best ICL sales area outside of Europe. ICL, itself, represents a complex mix of British Government and private capital. In 1977, ICL sales in South Africa jumped .68 per cent, putting it into the lead as South Africa's number one computer supplier. i01/ V/ Maaeme, South Africa, November 1974, p. 33. 2/ South African Financial Gazette, 29 March 1975. Mana ent, . cit., November 1974. 2/ First, et al, The South African Connection, cit., p. 107. 10(/ Financial Mail, (Johannesburg), 12 January 1979. M1/ Sunday Times, (Johannesburg), 25 February 1977.

- 27 - The South African subsidiary of the United States transnational, International Business Machines (IBM), although dropping into second place in 1977 behind ICL, nevertheless had developed an extensive business in South Africa. It employed 2,600 workers 102f mainly whites, to service its equipment. Despite United States Government efforts to cut back on sales of services or equipment to the South African military in line with the United Nations embargo of 1977, IBM's South African subsidiary announced it would continue to supply spare parts and service to military or police computers as long as the parts lasted.lO__/Also, since the IBM computers used by the South African Department of Defence were commercial models similar to those used by other Government agencies and corporate customers, it appeared difficult to United States Government officials to monitor the spare parts they might receive. The South African Government had established a co-operative network among Government agencies to handle work for any Government office. 104/ In response to anti-apartheid criticism of the role of transnational computer firms in South Africa, IBM's chairman declared in April 1977: l_1/ "We would not bid any business where we believe that our products are going to be used to abridge human rights. However, we do not see how IBM or any other computer manufacturer can guarantee that they will not be. The facts of the matter are that we do not and cannot control the actions of our customers, and it would be grossly misleading to espouse a policy that we cannot enforce." Nuclear technology Several Governments expressed concern in 1977 over an installation in the in Namibia observed by satellite reconnaisance, which resembled a testing facility for nuclear explosives. The South African r6gime denied that it planned to produce nuclear bombs, but it refused to sign the non-nuclear proliferation treaty. Its spokesman also denied that they had promised the United States Government not to produce nuclear weapons. 106/, Nuclear weapons analysts became convinced, that, if the minority regime did not already have the capacity to produce nuclear bombs it soon would have it. in/ Transnational corporations provided the essential technological foundation which has enabled the South African regime to transform its extensive uranium deposits into nuclear power and potentially into nuclear weaponry. Experts underscore the fact that there is no such thing as solely "peaceful" nuclear technology. 108 .' Transnational corporations from several countries collaborated as well as competed to directly hand over to South Africa's minority regime the nuclear technology, including the complex equipment required, to produce nuclear weapons. LO.2 Dun& Bradtreet, .2p. cit. 1177. M r t/ Computer Weekly, (United Kingdom), 31 March 1978. Financial Mail, (Johannesburg), 25 February 197. SL IBM annual meeting, April 1977. New York Times, 25 October 1977. 107/ See Ronald W. Walters, "United States Policy and Nuclear Proliferation in South Africa," in Western Massachusetts Association of Concerned African Scholars, U.S. Military Involvement in Southern Africa,(Boston:South End Press, 19T8), pp. 192-196. 1 Raimo Vayrynen, "South Africa: A Coming Nuclear Weapon Power?"in InsI Research cn Peace and Violence, Vol. 7, No. 1, 1977, P. 34.

- 28 - Siemans began selling computers in South Africa in 1971. It installed one at the ISCOR steel mill at Vanderbijlpark and provided another to operate the traffic control system in Capetown. log/ It purchased a local firm, Sati, which produced a locally designed computer, Isis. After suspending sales of its international models for several years, its parent firm rendered "the local fray" to sell its large frame machines. In 1978, it advertised that its computer installations were backed by 6,700 employees and nationwide facilities for manufacturing and service. 20_/ Kienzle, another firm of the Federal Republic of Germany, installed a computer for ISCOR's Newcastle Plant. The mini-computer manufacturer of the Federal Republic of Germany, Nixdorf, set up a South African subsidiary in 1973 and reportedly captured a large slice of the market. Increased military expenditure in the mid-1970s, as well as the growth of consumer electronics in addition, gave a boost to South African production of components by transnational corporate affiliates. 1 Siemens, entered into a partnership with a South African firm, Sames, to produce semi- conductors behind a tariff wall. ICL, the British firm, entered into talks with the Government on the possibility of producing one of its smaller computers in South Africa. Anglo-American's subsidiary, Computer Sciences, had already begun to produce prototypes of its SAM intelligent terminal. Ankar Data, a local firm with Swiss backing, had been manufacturing intelligent terminals for two years. South Africa has long been known to nave uranium, as a by-product of its gold output. It developed the essential uranium enrichment capacity over the years in close collaboration with transnational corporations backed by their Governments. This augmented South African foreign exchange earnings for the sale of its uranium; ensured enriched uranium for its nuclear power plants to provide an alternative source of electric power, further reducing its necessity to import oil; gave it the possibility of producing nuclear weapons; and provided it with an important lever for political bargaining to gain support internationally for its oppressive regime. J The United States Government and private firms first became involved in the South African nuclear business back in 1952 when the first South African uranium plant was opened under a tri-partite agreement between the British, the United States and South African Governments. At that time, United States and the United Kingdom were the sole purchasers of South African uranium. South Africa bought her first nuclear reactor, Safari 1 from the United States in the edrly 1960s. It was installed with the aid of the United States corporation, Allis Chalmers. South African nuclear scientists were invited to the United States Atomic Energy Commission laboratory at Oak Ridge for training. The United States firm, Foxboro Co., sold two large computers to the South African Pelindaba research center in 1973, computers which probably could not have been obtained elsewhere. 113/ 9 Financial Mail, (Johannesburg), 14 March 1975; Sunday Times (South Africa), 6 April 1975. 11Y Financial Mail, (Johannesburg), 10 February 1978. / Financial Mail, (Johannesburg), 16 March 1979. W Walters "United States Policy and Nuclear Proliferation..." . . _Q/ Ibid.

-29- In 1974, the Oak Ridge-based United States Nuclear Corporation exported 45 kilograms of enriched uranium to a research reactor in South Africa, after the Nuclear Regulatory Commission 3_14/obtained South African agreement that it would not use it for nuclear weapons. The United States again provided enriched uranium to South Africa in 1975 and 1976. In initially pledged to sell more to the French-American nuclear power plants to be completed in South Africa by 1984. In all, the United States had sold or was ccxmitted to sell 300 pounds of weapons- grade uranium, from which 15 atomic bombs could be produced, to South Africa. 114/ In 1978, the United States decided to end all sales of enriched uranium to South Africa and returned the advance payments the South African regime had made for future sales. The United States delegation to the United Nations explicitly insisted, however, that nuclear co-operation be left out of the 1977 mandatory United Nations embargo on the sale of military equipment to South Africa. I6/ The Federal Republic of Germany's firm, Urangesellschaft, Gmbh, aned the British Rio Tinto Zinc and South African capital to invest DM 70 million in the Rgssing Uranium mine in Namibia. It withdrqw due to pressure from the Government of the Federal Republic of Germany which owned shares of its parent company, VEBA AG, because, as the Minister of Economic Cooperation declared, "Government support for the uranium project would be bound to damage the reputation of the Federal Republic of Germany in black Africa." 117/ Nevertheless, in the 1970's, the Federal Republic of Germany was obtairing about 40 per cent of its nat-ral uranium from South Africa. In 1973, firms of the Federal Republic of Germany, including STEAG (Steinkohlen-Elektrizit.tsAG, a branch of Ruhrkohle) and Gesellschaft fir Kernforschang started t6 explore the possibility of collaboration in developing the South Africa's uranium enrichment process. 118/ In August, 1973, STEAG reached an agreementwith the South African State-controlled Uranium Enrichment Corporation (UCOR) which was re-written (following widespread anti-apartheid criticism in the Federal Republic of Germany itself) in 1974 to provide a feasibility study of the South African enrichment process. STEAG is indirectly linked to the Government of the Federal Republic of Germany which owns Salzgitter (100'per cent) and is involved in other firms which own shares in STEAG. A majority of the Federal Republic of Germany firms, which were active in nuclear-related business had, between them, 17 subsidiaries in South Africa. 1FThe-United States Agency which grants licences for exportation of nuclear material. .i~/Vayrynen, "South Africa: A Coming Nuclear Weapon Power," a.cit., p.34. AY western Massachusetts Association of Concerned African Scholars, United States Military Involvement in Southern Africa, 22. cit. p. 4. UV Star,(Johannesburg), 23 January 1971. 181 For chronological outline of Federal Republic of Germany firms' involvement in South Africa's nuclear build-up; see Geisler, The Military Cooperation betyeen the Federal Reublic of Germany and South Africa in the Nuclear and fdnventional Field, o_. cit.,

- 30 - The enrichment process developed in South Africa is similar to the het-nozzle process developed at the Karlsruhe Atomic Energy Research Institute in the Federal Republic of Germany. Some 1200 South African researchers and engineers had benefited from the two-way flow of personnel between Karlsruhe and Pelindaba, the South African research station. The 1973 agreement between UCOR and STEAG gave the former a licence for the enrichment process, presumably also providing STEAG assistance to resolve technical bottlenecks for commercial use of the process. The Pelindaba plant was completed in 1976. Three transnational corporate consortia competed to sell two power reactors to South Africa for its new nuclear power plants .4_/ The first consisted cf General Electric (United States), Rijn-Schelde Verolme, Vereinigde Bedrijven Brodero, Ingenieursbureau Compino (Netherlands), and Brown Bovery International (Switzerland). The second was Kraftverunion, a joint venture of Siemens and AEG-Telefunken (in which the United States firm, GE, held shares). The third was Framatome involving Spie-Batignolle and Alstheoms and the French Creusot-Loire group in which the United States firm, Westinghouse, held 15 per cent of the shares. South Africa awarded the deal to Framatome, reportedly because of French military assistance to South Africa. Westinghouse provided much of the technical input. Other military-related industries The development of an engineering industry is vital for an integrated, increasingly self-reliant military industrial production. It facilitates the adaptation and increased local production of industrial items in the context of the particular constraints and resources of the domestic economy. In 1979, E.C. Ellis, executive chairman of the United Kingdom South African affiliate, Dorman Long Vanderbilj Corp. declared, "South Africa. has a heavy engineering industry capable of replacing the importation of virtually any type of mechanical machinery and plant should the need arise."1__O/ United Kingdom based engineering firms, while not as large as some of those in the more capital-intensive industries discussed above, continued to provide technical expertise to South Africa. Their activities are summarized in Table 5. 112/ South Africa Digest, 30 July 1976 and 24 June 1976. i__/ Ibid., 26 January 1979.

- 31 - Table 5 Some of the principal United Kingdom based engineering firms operative in South Africa in i96 Name of United Kingdom Company Acrow Engineers Hadon Carrier Powell Duffryn Name of South African Company Acrow Engineers Air Conditioning and Engineering Co. Hamworthy Engineering Africa Sales Employment 8000 3000 Nature of Activities Lumber £ allied woodwork; Ventilation contractors ND Manufactures Heating Equipment Vickers ND Engineering contractors Source: Dun & Bradstreet, Principal International Business, 1975-1976, The World Marketing Director (New York: 99 Church Street, 1977). Vickers

- 32 A number of United Kingdom firms continued to manufacture and sell machinery other than electrical equipment and appliances in South Africa. A few transnationals from other countries entered this field, too. Table 6 Holdings of other transnational companies in South Africa's machinery and equipment, except electrical, manufacturing industry Name of parent South African Sales Employment Nature of Activities subsidiary (R 000) Klein Schanzlia KSB Pumps ND 120 Manufactures pumps, compressors, and Becker Ag valves (Federal Republic of Germany) Massey-Ferguson Massey-Ferguson 38,000 1,500 Manufactures agricultural (Canada) equipment The transnational corporate oil industry Like every other modern industrial economy, South Africa needs oil to fuel its transport system, industrial sector, chemicals production, agricultural machinery, and fishing and shipping fleets. Above all, it must have oil for its capital-intensive military equipment and machinery. As Paratus, the journal of the South African Armed Forces, has pointed out, the concept of "mobile warfare.. .has made petrol a critical item in the time of operations. 12_Ander South African law, oil appears to be considered a "munition of war" as the United States transnational oil firm, Mobil, was informed by its South African solicitors.i_/ "As oil is absolutely vital to enable the army to move, the navy to sail and the air force to fly, it is likely that a South African court would hold that it falls within... the definition of munitions of war." Under South African legislation, it is an offence for an oil company operating in the country to refuse to supply the armed forces.=/ It has been shown that all five oil "majors" in South Africa - Shell, BP, Mobil, Caltex and Total - regularly sell oil products to the military. agi/ 2JMajor J.A.H.J. Smith, "Verspreiding van Petrol tydens Operasies" Paaratus, August 1973, p. 23, translated in Martin Bailey and Bernard Rivers, "Oil Sanctions against South Africa" Notes and Documents, No. 12/78, June 1978, p. 19. 22 Extract (Section 3.3.3) from legal opinion prepared by Hfayman Godfrey & Sanderson (Johannesburg) for Mobil, dated 1, July 1976 (submitted by Mobil as part of its evidence to the United States Senate, 17 September 1976); cited in Bailey and Rivers, "Oil Sanctions against South Africa", 2 cit., p. 19. 1W Legislation on -"Conditional selling" is embodied in the National Supplies Procurement Act, No. 89 of 1970, cited in Bailey and Rivers, .2. cit., p. 20. ~ Testimony, 1 December 1977, cited in Bailey and Rivers, o_.cit., p. 20.

- 33 With all its other mineral riches, however, the one South Africa lacks is oil. To compensate, the South African Government has made every effort to reduce its dependence on oil by intensive development of other energy sources, including hydroelectric and nuclear power. Partly as a result of transnational corporate contributions of the most advanced technologies in these fields, it successfully reduced its dependence on oil to only about a fourth p of its total energy needs, probably the lowest level achieved by any industrial economy in the world. But its demand for that irreducible minimum remained. Transnational corporations have assisted South Africa's minority r~gime in every aspect of its efforts to meet its irreducible minimum need for oil. To guard against the possible effect of an oil embargo, the South African Government has taken measures to build up stockpiles of oil. How large these are remains unknown. The South Africa Digest, in 1979, cited reports that they totalled about 18 months supplies. I/ The transnational oil companies have been required by the South African regime to "...hold large stocks at their own expense. This requirement was, indeed, made a condition of the franchise given to oil companies to build or expand refineries."1?/ In 1967, an American firm, Penis and Scission, received the first contract to complete undergroundstorage facilities.0§/ Transnational corporations provided the essential technology that enabled the South African regime to build SASOL to produce oil from its vast coal reserves. In 1955, it completed SASOL I, which uses the Fischer-Tropsche method, developed in Germany between the two world wars, to produce about one per cent of South Africa's current oil requirements. / A much larger plant, SASOL II, was undertaken in the 1970's, to be completed by 1981. It was to be the largest industrial complex in the nation, with cost estimates of R2,458 million in 1977. It was to be financed from three sources: R1,666 million from the Government's Strategic Oil Fund, R492 million in the form of export credits provided by transnational firms, and R300 million from Parliamentary appropriations.-lo/ Its total output was to contribute 12 per cent of South Africa's oil needs, bringing both SASOL projects contribution to 13 per cent of the nation's requirements. Transnational corporations played a critical role in the construction of SASOL II. The United States firm, Fluor, undertook the basic construction contract. Another United States firm, Raytheon, subcontracted for about $350 million of the construction operations through its subsidiary, Badger. 31/ The Lurgi Company of Frankfurt, Federal Republic of Germany, engineered and supplied the gasification and other major equipment. Deutsche Babcock, Federal Republic of Germany, also participated in the construction. The United States firm, Honeywell, provided much of the required electrical equipment. 1 South Africa Digest, 2 March 1979. g South Africa Digest, 10 November 1979. 12T Peter Odell, Oil and World Power: Background to the Oil Crisis (Harmondsworth: Penguin, fourth edition, 1975), cited in Bailey and Rivers, o_.cit., p. 56. 1__Southern Africa (London21 April 1967, cited in Bailey and Rivers, p.cit.,p.56. g For discussion, see Bailey and Rivers, o_.cit.,pp.51 ff. J Chairman's statement, 1977 annual general meeting of SASOL, reprinted in Financial Mail, 4 November 1977; cited in Bailey and Rivers, 9R-=t,p. 52. 11/ Informationsdiens ttl'od e . a (Bonn), December 1."7,

Table 7 : Principal subsidiaries of the five Subsidiary Home of Parent United States United States BP BP Oil South Africa Shell and BP South African Petroleum Refineries Shell and BP South African Manufacturing Company of South Africa Trek Beleggings Ducknams Oil Africa Chemico Price's South Africa Sealracheun BP Development Company of South Africa % Shares Owned 100% 23.8% Activity Best estimate of total investment Refining and marketing Lubrican refinery (1978) R291 million Caltex (Standard oil of California and Texaco) Caltex Oil (South Africa) South African Oil Refinery Mobil Mobil Refining Company Southern Africa Mobil Oil Southern Africa South Africa Oil Refinery Condor Oil Vialit Roadmlx Holdings 100% 100% 32.9% 100% 100% 2672 Marketing Lubricant refining Manufacture material Marketing .00% Refining Z5% 17.5% 100% 15Z 20% 20% 100% (1976) R290 million of road surfacing (1976) R140 million with a further R375 planned by 1981 .Lubricant refining oil company Lubricant marketing Candles Chemicals Oil Exploration Refining United Kingdom maior oil companies in South Africa, 1978

Table 7 (continued) United Kingdom 100% Oil Marketing Refining Shell Shell Oil South Africa Shell and BP South African Petroleum Refineries Shell and BP South African Manufacturing Co. Shell EksplorasieSuid-Afrika 100% (1975) R250 million, with a further R500 million planned by 1985 Source: M. Bailey and B. Rivers, "Oil Sanctions Against South Africa", Notes and Documents 12/78, June 1978. Lubricant refining Oil Exploration

- 36 In 1978, as the Iranian rewv1ution appea to ihreaten South Africa's major source of imported oil and skyrocketing gola prices increased the minority regime's foreign exchange earnings, plans were made to expand SASOL II still further, expending R3.3 billion on the highly secret project. By 1978 more than 230 contracts had been placed with South African consultants and contractors, accounting for 60 per cent of the cost. These included subsidiaries of transnational firms, like the British Steel Corporationrs affiliate, Dorbyl. But overseas transnationals continued to play the major role in providing critical technical guidance and key imported inputs. Fluor was again selected as "contractor for phase three and four extensions for SASOL II".I_/ Fluor's South African business accounted for 13 per cent of its 1978 world wide turnover. M/ Fluor framed a consortium contract with Babcock and Wilcox, Dillinger Engineering and Contracting, General Erection and Roberts Construction for supply of labour and construction services. Siemens was involved in the construction of the mine.1)4/ But the most vital role of transnational corporations in supplying South Africa's strategically essential oil needs continued to be that of the major oil firms in importing and refining crude oil produced in their wells elsewhere in the world. Eight major oil companies are engaged in refining and/or distributing oil products in South Africa. Six are completely foreign-owned. One is largely foreign owned, and the eighth is the South African parastatal, SASOL. By the 1970s, four subsidiaries of transnational oil firms, Mobil, Shell, British Petroleum, and Caltex, supplied 75 per cent of the total regional demand for petroleum products. Each had about an 18-22 per cent share of the market. CPF, a subsidiary of the French national petroleum firm, Total, had a 10 per cent share. SASOL, Trek ( a locally-controlled company), Esso and Sonap (backed by Portugese interests) accounted for between 2 and 4 per cent each. Most of the refineries were built by consortia of these firms. They claimed the crude was mostly imported from Iran. 2/ Whether the big oil companies shipped in crude oil they extracted from otheroil-producing countries was impossible for outsiders to determine. With the fall of the Shah of Iran, and the new Government's declaration that it would end sales to South Africa (as well as cancellation of its plans to construct new nuclear power facilities), it was expected that South Africa would suffer shortages of crude - unless the oil companies shipped in supplies from elsewhere. Ia/ Financial Mail, (Johannesburg), 2 March 1979. 1 Financial Mail, (Johannesburg), 16 March 1979. L Financial Mail, (Johannesburg), 2 March 1979. J United States Senate Subcommittee on African Affairs of the Committee on Fbreign Relations, Hearings, September 1976 (Washington, D.C.:Government Printing Office, 1977) p. 285.

- 37 - Bernard Rivers, a British economist stated the following at a meeting of the Special Committee against Apartheid: "...It was difficult to compile statistics on South Africa's oil supplies because the oil-exporting countries frequently depended on the multinational oil companies for information concerning the destination of their oil. Crude oil was sometimes carried to South Africa by ships belonging to multinational companies with subsidiaries in South Africa, having been purchased in Middle Eastern countries which *ere members of OPEC, and whidh had recently attempted to enforce an oil embargo against South Africa. One or more of the parent oil companies were clearly undermining the policy of various Middle Eastern OPEC members by failing to inform them that their oil was being exported to South Africa."(A/AC 115/SR.361, paragraph 31,). 136,' The British Petroleum Company (BP), in which the British Government holds shares, played a major role in building up South Africa's oil refinery industry, as well as its petro-chemicals industry. It owned 20 per cent of the shares of the South African parastatal, Sentrachem. By the mid 1970's, BP, together with Shell, controlled about 25 per cent of the South African oil products market. Over the years, Shell-BP also constructed a lubricating plant and a tanker terminal at Reunion, a few miles south of Durban. The Shell/BP refinery SAPREF; had the biggest output of any single commercial South African refinery, next to the huge State controlled NATREF. Shell/BP owned or supplied about 1700 service stations throughout southern Africa. Shell also became involved in coal mining in South Africa. Shell and BP each own 18 per cent of Trek Beleggings Beperk, "Trek", which they had established together with the South African parastatal, the Industrial Development Corporation (which retained 9.5 per cent) and the Afrikaans mining finance house, General Mining. Trek owned or supplied another 193 service stations in South Africa.lI/ Trek began construction of a R2 billion oil refinery in the Saldanha-Vredenburg area under conditions of considerable secrecy in 1978. 1-38 Next to manufacturing, oil had become the most important sector of United States investment in South Africa by 1973.* Three United States firms, Caltex, Mobil, and Esso, together, controlled almost half of the South African market for petroleum products by the 1970's. Two of the remaining three refineries owned by commercial interests belonged to United States firms. 1/ United Nations document A/AC.115/SR.361. U Corporate Information Centre, Church Investments, Corporations, and South Africa, 2E. cit. 8 South Africa Digest, 10 November 1978.

The introduction of the most advanced technologies by United States firms actually contributed to reducing African employment. Texaco published data purporting to prove that it had upgraded African workers from 1962 to 1977. Scrutiny of the data shows, however, that, while the company increased output during the 15 year period, it cut back on total employment by several hundreds of workers. Furthermore, it reduced the proportion of blacks from 62 per cent of the labour force in 1962 to 41 per cent in 1977.1/ Mobil Oil refines about 8.8 per cent of its worldwide refined products in Africa, but its South African refineryproduced about 87 per cent of this total-lO0 thousand barrels a day.2l_/ In late 1978 a Mobil subsidiary, Condor Oil, opened an oil recycling plant which now provides about 6 per cent of South Africa's lubricating oil needs. Mobil staff designed and engineered the plant for which 90 per cent of the materials were provided by South African industry.4/ Presumably, Mobil imported the rest from its transnational corporate connexions abroad. In 1976, Mobil incorporated its operations in Namibia, which it had previously operated from its South African office, as a separate company. Its Namibia assets were about $6 million, including inland depots, about 10 service stations, and a coastal terminal at Walvis Bay. 1W Standard Oil of California, which owns Caltex oil refinery in South Africa with Texaco had by the 1970s become the biggest company in the world. In 1975, Standard Oil of California acquired 20 per cent of the common stock of AMAX, Inc., which, in-close collaboration with South African mining finance houses, had extensive interests in southern Africa. In 1975, Caltex began to expand its output with the goal of almost doubling it from 58,000 barrels daily to 100,000 barrels daily by 1978. Caltex also owned 23.8 per cent of Mobil's lubricating oil refinery in Durban. Compagnie Frangaise des Petroles, partly owned by the French Government, originally had complete control of Total South Africa. In 1969, however, it sold a block of shares in Total to a local Afrikaaner house, Volkskas. Total retained a 30 per cent interest in the State-owned oil refinery, NATREF. I Texaco Star. (Texas, Inc. ), 4 November 1977. 14/ Mobil Oil, Annual Report. 1976. W South Africa Digest, 19 January 1979. W United States Senate, Subccnittee on African Affairs, op.cit. - 38 - - 39 - How South Africa obtained its oil after Iran declared its determination to end shipments is not clear. Bits and pieces of evidence have emerged. Shell apparently has a contract with Bahrain to ship oil to its South African refinery. The president of the Deak Perera Group, said to be the leading retail dealer in gold and foreign currencies the ough 58 offices and banks worldwide, reported South Africa was exchanging unknown amounts of gold bullion for Saudi Arabian and Kuwaiti oil. i/ A ship of the United States oil firm, Standard Oil of Ohio, was sighted on its way to the South African terminal. And South Africa appeared able to buy crude at 60 per cent more than OPEC prices by purchasing it on spot contract at Rotterdam. ! South Africa's Globe Engineering Works at Cape Town reported that it services the United States tanker, Atlantic, the French Tanker, Jade, and the British tanker, Lima,1!_ / suggesting close on-going links between transnational oil firms and South Africa. These pieces of evidence tend to confirm reports by the South African Financial Mail that for "the oil majors, with supply commitments to their South African refining and marketing subsidiaries, the loss of Iran has forced drastic rescheduling of their supply chains. 146! It added, "The base load of South Africa's crude oil requirements is probably being carried by sources to which the oil majors have access with a reasonable prospect of medium to longterm on a contractual basis. In addition to these limited sources, the oil companies and SASOL will probably negotiate term contracts with international brokers and take their chances on the spot market." 11.7 The Financial Mail suggested that the oil majors were not acting without the support of their Governments. It reported that, when the summit conference of the Heads of Government of France, the Federal Republic of Germany, the United Kingdom and the United States met in Guadeloupe in January, they huddled on Rhodesia, Iran, oil and South Africa, and proposed that "the United Kingdom and the United States would guarantee South Africa's annual oil imports of 15 million tons for an indefinite period. In return, Pretoria would resume full diplomatic pressure on Salisbury to bring about a peaceful solution there." 2.8 /Standard Oil of California, Annual Report. 1976. 1 New York Times, 25 June 1979. SFinancial Mail, (Johannesburg), 9 February 1979. 6 South Africa Digest, 18 May 1979. SFinancial Mail, (Johannesburg), 9 February 1979. 148 Ibid.

- 40 - The Financial Mail argues that "it is unlikely that the...Congress would allow the White House to ship domestic United States oil abroad," 2/ but United States Energy Secretary, James Schlesinger declared, "there was substantial evidence that petroleum products that normally would be going to the United States have been diverted to Europe by oil companies looking for higher profits." 11I Privately, United States officials reportedly said that that 200,000 barrels a day were involved. Schlesinger himself had urged United States companies to enter the Rotterdam spot market. How much of this might be going to South Africa remained unknown. The international oil companies seemed to be using their position as suppliers of a "scarce and strategic commodity" to muscle into South Africa's coal industry, according to the South African Financial Mail.jl_/ BP, Shell, and Total had obtained an allocation of almost half of South Africa's lucrative coal exports, apparently on the assumption that "the more business the oil majors can do in South Africa...the less inclined they will be to close South Africa's oil tap." II; Transnational corporate transfer of military equipment and weaDor Since the imposition of the voluntary United Nations embargo in 1963, and even more since the imposition of the mandatory United Nations embargo in 1977, transnational corporations have not openly engaged in the transfer of military weapons and equipment to the South African Government. Nevertheless, South Africa has been able to obtain their products in a variety of ways despite the embargoes. According to Stockholm International Peace Research Institute (SIPRI) valuations, South Africa imported, between 1970 and 1977, $780 million (in constant 1975 dollars) worth of major weapons -- armoured vehicles, ships, missiles and aircraft -- about 50 per cent from France, 20 per cent from Italy, 18 per cent from Jordan, and 14 per cent from Israel. i Discovery of the channels by which these weapons, parts and materials for military purposes are sold by transnational corporations, involves extensive detective work which is difficult for ordinary citizens to undertake. Only bits and pieces of the evidence have been discovered, a few of which are indicated here for illustrative purposes. W Financial ail,(Johannesburg), 12 January 1979. 150/ Ibid. 1/ Ronald Koven, Washington Post, May 1979. IL2 Financial Mail, (Johannesburg), 12 January 1979. a SIPRI Yearbook, I 78, opgcit.

- 41 - One channel remains open because Governments have not prohibited so-called "grey" area transfers. Within months after the United Nations passed the mandatory arms embargo in 1977, the United States Government had permitted the Cessna Corporation of the United States to sell Cessna aircraft to South African buyers, allegedly for private use. Yet there is wide spread evidence that Cessna aircraft can easily be converted to military use. MV The definition of "arms and military equipment" by countries like the United Kingdom, the United States and the Federal Republic of Germany has tended to be so narrow that South Africa has in this way managed to secure a wide range of equipment from these countries for its armed forces. 11 Furthermore, the "grey area" is defined i unilaterally and is often narrowed or broadened as deemed fit, sometimes because of a change in Government, but generally toward "grey area" sales rather than prohibitions,_156/ This problem is even more significant in the provision of spare parts for weapons and military equipment already supplied to South Africa. The spares may be sold to so-called civilian companies in South Africa which may in turn sell them to the South African military or police. This ensures that South Africa obtains all the spares and components it needs, as well as engines for locally assembled aircraft. Where materials are not excluded from coverage by "grey area" definitions, transnational corporations have devised other techniques to ship their output to South Africa. The Space Research 'Corporation, with a 8,000 acre factory site straddling the United States-Canadian border, apparently transshipped 155 mm. long-range artillery shells to South Africa through testing bases in Antigua and Spain. I Another United States firm, Olin Corporation, was convicted in 1978 of selling 3200 firearms produced by its Winchester division to South Africa via transshipment points in Austria, Greece and the Canary Islands. / This was the first time a United States corporation was indicted for violating the embargo on South Africa. (In 1976, an employee of Colt Industries, was sentenced to a year in prison for selling handguns to South Africa via several third world countries.) Six type-S-l13 speed-boats were being mounted for South Africa under Israeli supervision in mid 1978, four in Haifa (Israel) and two in Durban (South Africa), using construction plans and imported parts made in the Federal Republic of Germany where they are produced by Mssrs. Lurssen, Bremen /Robert Sylvester, op.eit. l~/ Minty, Report to the Special Committee against Apartheid. op.cit., p. 2. &6 Ibid. I/ Rutland Herald (Vermont, United States of America) 12, 15, 22, 26 December 1978. J/ New York Times, 31 March 1978. 1/ Klare and Prokosch, "Evading the embargo...." o.cit., p. 166.

- 42 - for use by the Federal Navy. IQ/ Anti-radar equipment of the MesserschmidtBolkow-Blohm company has been delivered to South Africa since the end of 1977, and two South African technicians were trained in handling the equipment by the company at their shooting test ground at Ottobrunn. The deliveries were named "project Sandwich." 161 III. Directand indirect transnational bank finance of military expenditures Introductiont Transnational banks have played and continue to play an important role in providing finance for the build up of the South African military-industrial complex. It is, however, even more difficult to obtain precise data on this aspect of transnational corporate activities than in the case of industrial firms. The typical confidentiality of relations between banks and their clients had become compounded, by the late '60s, by their desire to avoid the growing criticism of anti-apartheid groups. 6 Furthermore, money is a fungible commodity; transfers between parent transnational banks and affiliates, as well as between their corporate clients and South African parastatal and Government agencies, are difficult to monitor. Yet available evidence suggests that transnational banks remain among the most important transnational institutions for the South African r~gime, for they help to provide essential finance and foreign exchange for the purchase of military material and the machinery and equipment needed to produce it. In the mid 1970s, the role of trandnational banks was vital in helping South Africa overcome its balance of payments crisis caused by rising oil /o cf. stern# Hamburg, 28 July 1977; Fock, Schnellboote, Vol. 2,Herferd, 1975, p.225; Federal Parliament, 8th Period of legislation, 61st session, Bonn, 12 August 1977. Reply of Secretary of State GrUner to an inquiry by Mrs. L.von Bothmer, mP; and Appendix Export List of the External Trade Regulations for the Implementation of the External Trade Act No.0009-B3, Comment No.1, Federal Parliament,Printed Matter 8/68, 11.1,1977, subject area 7400. ikVGeisler, op.cit. 12/ A number of organizations, ranging from the United Church of Christ Commission for Racial Justice to the United Electrical, Radio and Machine Workers of America and the International Union of United Automobile and Aerospace Workers, joined in support of the campaign to end United States bank loans to South Africa (Committee to Oppose Bank Loans to South Africa, 305 East 46th Street, New York, N.Y.,22 November 1977); the World Council of Churches has taken a similar stand. Anti- apartheid activities are being focused on banks in the United Kingdom through the Anti-Aprtheid Movement, and by 1973, Barclays had lost an estimated £10 million in accounts due to boycotts. In the Federal Republic of Germany and the Netherlands, the Anti-Apartheid Movement has also mounted a campaign against bank loans.

- 143 - prices and increased military and military-related imports. 1970's, the balance of payments crisis was ended because of non-military-related imports, fostered by the South African measures and industrial stagnation, and the rising price of international market. Chart II M millions Balance n curren account [ 100 =o ~: ._j 0 -1000 -2000 r-- I -3000 Seasnay used annual tate By the late the decline of Government gold on the 1974 1975 1975 1977 1978 Sourcet South African Reserve Bank, Quarterly Bulletin, Dec., 1978 Nevertheless, the military-industrial complex had to continue to buy critical military-related inputs on the world market, and for this it needed the assistance of transnational banks to ensure that it had adequate foreign exchange. The cost of imported oil, initially estimated to be about $i,8 billion in for 1979, was expected to rise about a third to something like $2.3 billion as a result of rising oil prices and the necessity of major oil transnationals resorting to the spot market after the Iranian revolution. In addition, South Africa's minority r6gime was compelled to spend almost $200 million annually to import the military equipment and machinery its domestic industry could not produce. Beyond that, it had to spend hundreds of millions more to import the machinery and equipment to produce military weapons domestically, as well as parts and materials to produce the wide range of items which could not be produced by domestic factories. (See discussion of domestic industry above). 16/ Financial Mail, (Johannesburg), 15 February 1979.

- 44 - The danger persisted that, if South Africa's industry recovered from its slump, and imports rose, and/or gold prices fell, South Africa might once again confront a balance of payments crisis. This danger was accentuated by an outflow of capital which consisted of remittance of profits and interest and principal repaid on the debt accumulated during the mid 1970's. About $1200 million was shipped out in the form of interest and dividends alone in 1977.L4_/ The danger was symbolized by the R210 million shrinkage of the Reserve Bank's foreign exchange from R575 million at the end of November 1978, to R365 million at the end of December of that year._/ The South African Government, throughout the 70's, however, borrowed far more domestically than internationally to pay for its growing military establishment. Here again, it relied heavily on the role of the transnational banks which owned a major share of the domestic banking assets. Transnational banks' South African affiliates To understand the way transnational banks help to finance the South African military-industrial complex, it is essential to comprehend the dominant role they play in the South African banking structure. A small handful of transnational banks hold about two-thirds of the assets of the biggest 20 banks in South Africa, a far higher percentage than foreign firms hold in any other sector of the economy. Not only do they help mobilize domestic and foreign credit for the South African minority r6gime's military programme;their own reports indicate that they funnel capital into despite the United Nations sanctions against that illegal t6gime. As South Africa refused to enforce the United Nations sanctions against Southern Rhodesia, it was difficult to trace capital passing between South African and Southern Rhodesian subsidiaries of transnational banks. Although the parent banks claim to have had no control over their Southern Rhodesian subsidiaries, the subsidiaries themselves advertised thei international links. 167/ Two British banks, Barclays and Standard, remain by far the largest transnational banks operating in South Africa. The eight domestic affiliates of these two banks still control over half the assets of the 20 largest South African banks. Subsidiaries of three other transnational financial institutions, Hilsam, United Kingdom, Citibank, United States, and Fiench Bank, also ranked among the top 20 South African banks in the early '70s. Their assets constituted less than five per cent of the total. Far more significant were the contacts their presence provided for their transnational clients, as well as domestic South African firms. 11 South African Reserve Bank, Quarterly Bulletin, December 1978. 1/ Financial mi. (Johannesburg), 12 January 1979. 1 See, e.g., Barclays Bank, Report and Accounts. 1976: Standard & Chartered. Annual Report, 1976, which shows the banks of the same names in Southern Rhodesia as associated companies; see also Barclays International, DCO Story, (London, 1975, pp. 250 ff). 1/ E.G., Standard Bank advertisement in Thorn's Commercial Publications, Industry and Commerce of Rhodesia, 1974: "With 14,000 offices throughout the world, the Standard Bank is well placed to assist you with international business matters"; and Barclays advertisements in Property& Finance (Salisbury, 1971) "As a Rhodesian manufacturer... pays me to study Barclays Bank market reports because.., a bank that operates in over 40 countries must have their finger on the pulse of international trade.... they have direct contacts too." Grindlays advertisements in Development %Mazine (Salisbury, February 1977) refers to the bank's "over 00 offices in 41 countriLes around the world,*

- 45 -' Barclays Bank is the leading bank of South Africa. Its bank network of almost 1000 branches spreads throughout that country into Namibia. Barclays, both internationally and in South Africa, is closely interlinked with the leading South African-based transnational corporation, Anglo-American. , head of Anglo-American, sits on the Board of Barclays International, along with Sidney Spiro, chairman of Charter Consolidated, Anglo'6 British-based "overseas arm."168/ AngloAmerican is one of the biggest customers of Barclays, South Africa, and its biggest South African shareholder. In 1976, Barclays'purchased Wesbank, the seventh largest South African bank, in which Anglo-American held 70 per cent of the shares. This transaction increased Anglo-American's ownership in Barclays, South Africa, from 15 to 32 per cent. In addition, ditectors of three other mining finance houses, Barlow Rand, Anglovaal and Union Corpvration, sit on the board of Barclays, South Africa. Barclays South Africa is the transnational parent company's largest single holding. Barclays Bank's Rhodesian associate had assets in the early seventies reported at over Rh$141 million, with 37 branches and 50 fixed and mobile agencies. Despite the United Nations boycott, Barclays Rhodesia stressed "as part of its services its strong international links." 16/ From its Salisbury head offices, it operated a business and trade promotion division and realized gold bullion sales. Barclays South Africa has become closely linked in a variety of ways to other South African banks.l2/ It owned a minority of shares in Union Acceptance Ltd. (UAL), the 11th biggest South African bank in terms of assets. UAL was established in 1955 by Anglo-American Corporation in conjunction with the London-based merchant bank, Lazard Brothers. In the 1970's, UAL merged with the South African banks, Nedbank and Syfrets, under the overall control of the Nedbank group, to create a conglomerate, Nedsual, with total assets of R2 billion, greater than all the other merchant banks put together. Nedsual holds about two thirds of the Rhodesian Banking Corporation (Rhobank) which, in the mid-TOs held assets of about Rh$75 million. The Rhodesian group included a commercial bank, a finance house, a merchant bank and insurance brokers, and a travel agency. It also has an international division. Nefricho, the group's merchant bank, helps firms doing business in Rhodesia to obtain both import and export finance and foreign exchange, presumably largely through Nedsual offices in South Africa. 1/ Financial Mail, (Johannesburg), 50 January 1976. I& Thorn's Commercial Publications, Industry & Commerce in Rhodesia,1974, (Salisbury: Mardon Printers, 1974). 170/ Financial. Mail, (Johannesburg),"Barclays Bank Supplement," 30 January 1976. 171/ Thom's Commercial Publications, Industry and Commerce of Rhodesia, 1974, 01D. cit.

- 4~6 - The second largest bank in South Africa is a subsidiary of the United Kingdom parent firm, Standard and Chartered Bank. Standard Bank of South Africa has over 800 branches, with a full branch at Windhoek, Namibia. In addition to its banking operations in South Africa, Standard is one of South Africa's major agents for the sale of gold. In the mid1970's, 20.per cent of Standard's world wide profits ogiginated in South Africa. Like Barclays, Standard's activities extend into Rhodesia and, despite the United Nations sanctions, Standard's Rhodesian affiliate continued to operate there after Unilateral Declaration of Independence (UDI). Its Rhodesian commercial bank affiliate's assets more than doubled during the UDI period, reaching over Rh$200 million by 1973. It has 44 full branches and a network of agencies throughout the country. It provides export and other types of insurance through Rhodesian insurance brokers. Its Stuadard Finance offers long-term finance, hirepurchase and leasing facilities. M/ Hilsam, a member of the British Hill Samuel group, had become the third largest transnational bank in South Africa in terms of assets by the 1970's. It had been established in 1960 by the British parent firm to conduct merchant banking business in South Africa. Merchant banking remained its most important activity.170 Hill Samuel also established several subsidiaries in Rhodesia. 171. The UDC, South Africa's 16th largest bank, has become strictly speaking a South African bank, in that a majority of its shares were held Ia South Africa. It remains, nevertheless, affiliated to the British company, United Dominions Trust.1l_/ It also had an affiliated institution, UDC Ltd., in Rhodesia. The United Dominions Trust had smaller affiliates in several other former British colonies in Africa. _./ Standard & Chartered Banking Group, Annual Report. 1975. 1W Thorn's Commercial Publications, Industry and commerce of Rhodesia. 1974, o. cit. 1 Hilsam (South Africa), Annual Financial Statement, 1968. 1 Who's Who in British Finance, 1972 (London: Gower Press).

Reflecting the growing penetration of South African markets by United States transnationals, the United States based Citibank had emerged as the fourth largest foreign banli in South Africa by the '70s in terms of assets. Citibank set up its first South African branch in 1958. By 1976 it had established eight banks in the major industrial centers throughout the country. Citibank created an additional channel into the South African banking field when, in 1963, it purchased 16 /3 of the total shares of the British firm, M. Samuels. 176/ 7his gave it access to the Hill Samuel group's affiliates in South Africa (including Hilsam)and Rhodesia. Citibank's overseas holding corporation, Citicorp, also bought 49 per cent of the British bank, Grindlays, and Grindlays' chairman sat on Citicorp's board of directors. l_/The British bank, Lloyds, one of the four largest in the United Kingdom, owns 41 per cent of Grindlays. ith/ Grindlays' Rhodesian subsidiary was originally established when it took over the Ottoman Bank in Rhodesia in 1969, three years after Unilateral Declaration of Independence (UDI). Two years later, Grindlays opened its own finance house in Rhodesia, Grindlays International Finances. By the mid-70's, its assets were reported at Rh$35 million a7_/ Grindlays also established a third Rhodesian affiliate, Von Seidel Grindlays Trust Co. 180 Chase Manhattan Bank, a second big Rockefeller bank, established a branch in South Africa in 1959. By 1965, when it had three branches there, it purchased a 15 per cent stake in the British Standard Bank, giving it access to the latter's extensive southern African branch networka8l/ Chase executives joined Standard's board of directors, and a Chase officer served with Standard's central management group in London. Chase merged its South African branches with those of Standard, South Africa, which then handled its South African business. IL2/ 16/ National City Bank of New York, Annual Report, 1963. Xf Ibid. L/ The Banker (London), August 1977. 2W Thorn's Commercial Publications, Industry and Commerce of Rhodesia,1974. LQ/ Advertisement in Development Magazine (Salisbury), February 1977. IL1/ Chase Manhattan Bank, Annual Reports, 1959, 1965. 1 V2 Chase Manhattan Bank, Annual Report, 1965. - 47 -

- 48 - In 1975, the United States Federal Trade Commission required Chase to divest itself of its Standard holdings.16. / Chase then exchanged its shares of ownership in Standard for a 7 per cent share in Midland Bank, one of United Kingdom's largest commercial banks. Midlands itself participated in South Africa as a member of the European Banking consortium, EBIC Chase sold its Midland shares and re-established its own representative office in South Africa in 1975. 8 Thereafter, Chase conducted its business there on an essentially wholesale basis. The,. gpk of America, the largest bank in the world, established close ties with KIlnwort Benson, Lonsdale (London) and its subsidiary,Kleinwort Benson, Ltd.., which was also based in London. Kleinwort Benson helped the South Afric" Government establish the Accepting Bank for Industry, a merchant bank, and acquired shares in that bank. 15 Kleinwort Benson Lonsdale also purchased, a 33 per cent interest in J.L.Clark and Company, an industrial holding company in South Africa. 186/ The Bank of America's London subsidiary, Bank of America Ltd., shared three directors with Kleinwort Benson Lonsdale and/or Kleinvort Benson. I8 One of them became chairman of the New York and London subsidiaries of Kleinwort Benson which dealt with gold bullion. Another became a director of the consortium bank, Midland and International Banks, Ltd.,18_8§ whose members included the Midland Bank (45 per cent), the Toronto Dominion Bank (26 per cent) and Standard Chartered Bank (19 per cent.) 192/ French banking interests were directly represented among the transnational banks' affiliates in South Africa by the French Bank. French Bank ranked only fifth among the transnational banks' affiliates there in terms of assets. It had seven offices in South Africa's main towns by 1976, as well as one in Windhoek in Namibia. French Bank is owned by 'he Banque de L'Indochine, Paris, together with several South African partners: Union Corpration, Federated Stores, and the Old Mutual and the Messina Development Co , an Anglo-American Group member. 190 The transnationil banks' contribution The transnational banks' southern African affiliates helped to mobilize funds to build up the South African military-industrial complex in several ways. Their commercial affiliates, for example, advanced almost Al billion in various forms of credit to different sectors of the South African political economy in one year, 1975, alone. About three fourths of these were general loans to the public and private sectors. The rest were hireNew York Times, February 1975. SInterview with Tim Smith, Interfaith Center on Corporate Responsibility, based on interview with Chase Manhattan Bank officials in New York. See also Financial Mail, (Johannesburg), 29 April 1977, for statements as to plans to expand South African business, despith press releases issued in the United States that Chase would not make loans which would support §partheid.The Chase Manhattan representatave in South Africa, Steve Pryke, is executive secretary of the newly established American Chamber of Commerce in South Africa (Financial Mail,Johannesburg ,30 September 1977.) 1/ Karl Lanz, ed., Banks of the World (Fritze Knapp Verlag, 1963). 19 The Banker Research Unit, Who Owns What in World Banking.1974-5. Who's Who in British Finance, 1972 (Gower Press). Ibd. World Banking. 176-77 (Investors Chronicle). Q Financial Mail, (Johannesburg), 15 April 1977. - 419 - purchase loans, leases and acceptances. &/ An unknown percentage of these loans were made directly to the South African Government. Some of them were military loans, since the Government required commercial banks to buy bonds to finance its military buildup. Barclays South Africa, after announcing its purchase of R10 million in South African Government defence bonds, was widely criticized by United Kingdom anti- apartheid groups. British Government officials called in the officers of the parent company for questioning. Frank Dolling, chief executive of the South Africa group, asserted that "Barclays was deeply concerned at the insensitive nature of the investment in defence bonds and at the nature of the publicity given to it by their South African subsidiary." He gave his undertaking that "the bank will do whatever possible to ensure such action will not happen again." &2 The Rand Daily Mail, however, reported, "the pledge by Barclays International to keep tighter control over its South African subsidiary's Defence Force links was described as virtually meaningless by a top South African' financier", the Registrar of Financial Institution. 1 Other transnational banks did not publicize their purchases of South African defence bonds, but presumably they too bought them in accotdance with the requirement of South African law. The South African arms parastatal, ABMSCOR, floated loans directly on South Africa's capital mrket in 1978 for R40 million, and planned to borrow R30 million more. Beyond loans made for directly military purposes, the commercial banks and their various affiliates contributed far more extensive credit facilities to the South African Government for general purposes. Table 9 shaws the sources from which the Government borrowed funds on a long term and a shortterm basis. The banking sector clearly provided the major share of the short-term credit. It also provided a significant share of the long-term credit when the fact that the banks themselves entered into pension and insurance plans is taken into consideration. Given that money is fumgible, credit made available to the Government for non-military purposes inevitably releases tax revenues to finance more direct military expenditures. In other words, in the context of the South African military-industrial complex, all South African Government debt must be perceived as having millitary Implications. The amounts provided by the transnational corporate bank affiliates cannot be explicitly separated out. When one recalls, however, that they control about two thirds of the assets of the 20 largest banks in the country, one can only conclude that they must play a significant role in providing these large amounts of credit. 1 Calculated from "The Biggest Banks," Financial Mail (Johannesburg), 23 April 1976. i/ South Africa News, (London), 30 January 1976. i/ Rand Daily ail, 14 January 1977. 124/ South Africa Digest, 3 November 1978.

- 50 - Table 8. Total South African Government debt, 1971-1978 (R millions and per eeat) R millions 5,598 6,505 7,147 7,476 9,208 10, 781 12,615 14,626 % of total debt 93% 92.8% 95.2% 93.6Z 91.2% 89.0% 90.3% 92.1% R millions 416 502 361 509 886 1325 1356 1258 % of total debt 7% 7.2% 4.8% 6.4% 8.8% 11.0% 9.7% 7.9% R millions=100% 6014 7007 7507 7986 10094 12106 13971 15883 Source: South African Reserve Bank, Quarterly Bulletin, December 19T8. Note: A far larger share of transnational corporate bank loans were made to the so-called "private" sector, including parastatals]. 1971 1972 1973 1974 1975 1976 1977 1978

- 51 - The South African Government enjouraged the growth of merchant banking, a business in which transnational banks became deeply involved, as part of its effort to attract foreign capital after Sharpeville. Merchant banks typically become more directly involved in the ownership and management of corporate enterprise than commercial banks. The tzansnational banks' South African merchant banking affiliates contributed not only to the provision of long-term loans for the private and public sectors, but also to financing equity capital of transnational affiliates and domestic firms in South Africa. Transnational financial institutions also helped mobilize the smaller savings of individuals through insurance and pension programmes.By 1976, when the South African Government passed a bill paving the way for domestic ownership of the majority of shares of all insurance companies in South Africa, life insurance companies there had accumulated assets worth more than t4 billion. & About 14 per cent of this, almost R500 million, was held by South African affiliates of transnational life insurance companies. _/ Barclays Bibsal became the third largest insurance broker in the country, offering over 100 Linds of insurance through its extensive commercial bank network._98/ Standard Bank's South African subsidiary had also entered the insurance brokerage business. Transnational financial institutions broadened the scope of their activities in the '60s and '70s to facilitate the growth of the South African military industriKl complex. Their affiliates began to purchase heavy industrial equipment, putting up the necessary foreign exchange, and then leasing it to the private South African and parastatal sectors. Leasing rates were not controlled under the South African Finance Charges Act, so banks charged rates two to three points above the commerical banks' prime lending rates. The transnationals' larger size and international connex ions gave them an advantage over domestic banks in this lucrative field. _1/ Their purchases assisted their transnational clients to market their heavy equipment and machinery, in the apartheid nation, facilitating South African firms' efforts to acquire the most advanced technologies. The South African rigime sought to encourage transnational corporate expansion by providing a discount on rands provided by banks for investment, termed "financial rands." By March 1979, the estimatesOo/of the amount of authorized financial rands ranged from R75 million to R=00 million. The specific transnational corporations receiving these discounted rands is unknown, but "market rumour" identified Volkswagen, Pilkington, BMIW, IBM, AECI, Siemens. The transnational banks play a key role in this business, for the transnational firm uses foreign currency to buy financial rands from an overseas bank which, in turn, provides the rand amount to the firm's South African affiliate through its South African branch. 1W For discussion of merchant banks in South Africa, see World Council of Churches, Business as usual: international banking in South Africa,oM. cit. and Financial Mail, (Johannesburg), 23 April 1976, 30 January 1976, 29 October 1977. 1/inancial Mail, (Johannesburg), "Ranking the life assurers," 23 April 1976. 1 Ibid. 1 Ibid., 30 January1976. 1 Ibi--d., 23 April 1976. 20/Ybd_., 16 March 1979.

Table 9 OWNERSHIP DISTRIBUTION OF DOMESTIC MARKETABLE STOCK OEBT OF CENTRAL GOVERNMENT R 11,-DBOFCNRLGVRMT ...... R - ,io,, I t ik . .. 1... . , . i.. P1dl ; i79f 0 3 I 071196 q16 19 75- 033 9 4 3 169 71,6)150 ,1116 174 4 711 3 I 7.5 9 17030416 27. 67 i 177700 99 5-"I- -76I s79 390 9 3 13 257116155 199 5 408 0 11 6 31 1975 773 379 626 326 106 Z215 1563 60 37 10 45 7 73 19916 799 171 91 477 119 7I4 111171 50 7? 31 19 2497 1977 3I3797 1700 506 ins 301 3456 67 737 24 32 71 30s4 1976Jn 9 04 340 105 245 53 36 0,5 1 79 773 306 106 237 1730 57 46 7 39 -3I 1994 MooIMos I: Is726364 36736I ;350574677 16 7 9 Apr, 177 37e i60 375 1146 I703 57 46| 1 6 1994 MeIMey 10 372 600 342 177 763 1720 57 46 I 17 -3 1954 J. 10: 372 "17 39 136I 170 60 40 6111 -2 7010 Jul 8 7201 J.5 7 05Jig5 10 246 71.457 36 :?I s5 6 70 Aug 7753 8 27601s57 36 5 07 20 so 248 III O09 3N 30 7; 700157 36 '5 70 0 701 Okifoci 190 31 260 353 101 7072 10771 57 30 60 75 1 7761 17 371 6 475 70 701 7020 69 40 7 747 D'Slos, 190 3771 917 4171177894 2178 77 50 2 V77 1 2 7 1971J 206 311 919 441 171 206 2130 71 55 23 7 16 . 59J feb 20 311 07 454 57 219 211?66 71 22 28 30 I 2536 MlMA 206 317 t00 466 I1 l30 2767 59 61 22 34 -0 3536 Ap,1 766 31 1079 471 143 Z27 2736 597 01 3 30 0 7693 MonlMv 366 310 1060 494 131 247 2246 57 75 27 78 -4 2693 Jiln 29 31 1050 514 133 753 2269 57 79 7 35 30 2 777 Jill 791 314 1143 544 117 254 7312 54 113 25 33 30 7"71 Au9 79; 319 141 540 106 300 7314 56 739 33 31 6 3 9l1 Seoi 79 33 114 584 96 275 2396 67 113 21 37 5 2921 Okilc' 311 330 117 539 708 279 7373 67 774 71 31 9 3941 l4e i 31 31931247 50 05 2273444 67 126 2 26 2 366 Os10es 323 791 1740 516 705 307 7456 67 137 24 33 31 3054 7970Joe 323 797 :766 504 0 25 2413 65 113 24 31 25 3054 feb 373 31 17 537 106 393 2569 66 11v 24 31 7 3125 M,,.. I 349 311 1314 57011 207 2549 64 131 74 32 4 3153 APOi 347 30? 1137 579 105 29 7552 63 712 23 32 74 3153 Me7Me" 430 52 1401 e74 115 1117 613 65 132 2t 65 35 3369 Jim 495 29 1466 566 016 297 2671 73 776 79 91 36 3579 Jul 40 703 7464 578 08 307 2515 74 7123 77 55 09 3 4,13 Aug 400 77 75" 537 777 307 25 67 74 27 07aI" Ssip 46 3 519 59 773 27 606 60 720 2 6 3003 03, 11,7 i ons /Oec Source: South African Reseve Bank, Quarterly ulletin, December. 1978 Raoislio, o79~5ey eDna 75117.0 Osbo Osesne teesesinisi ObOes 7~o7 Ceessis I 6050 bask, ai~ 7004 60 2 639 06 ; 017 63 3741 70 3385 145 3 547 165 3897 137 3494 143 3437 153 3500 753 3," 1'533534 753 3415I 165 3473. 1(574737 165 3531 165 3 513 165 35471 165 3553 165 350 165 3561 159 3623 159 3653 141 3690 14 3750 1443769 753 3 769 156 3803 155 3657 140 3697 137 3 972 7 76 3999 125 4041 104 4096 117 4 196 I5 4 370 134 4449 611 4 i 464 ...... ;hi 6111I 1911 37.0 57, it77 4530 ill7 73 4635 S145 7374 433 759 175 5816 A312 19766923 9916 1971 559 7377 7376 lae 550 7547 i01 5605 7539 M1, 70 5075 663 Apil 7605 7649 Me,/Moy 571 777 ,hi7 56 7 773 li0 , /i,) 76f53 f"m 558n7 /3/77 ' 5055 0056 lii Iii 5053 0759 7, 5816 0317 Ih' 5847 8363 1973 lo,5007 8473 1i.h 5089 8475 6i0. 6 60 67161 :,,7 6 154 047 Mio oM 6 200 0976 .hii 6476 9347 6587 9509 Anl 6066 9567 5'w 6 706 9649 o /Ori 6055 9778 Nr1 6973 1976 ,7( 6963 07017 1976 Jon 111 I9 24? feb 7767 31034 M,l 'M , 7386 10533 Ail 7601 1050 W.nVu, 7079 17350 Je 7 9 71 404 Jil 6043 77406 Ai N.40 ,,Q 14.5 s 1ss ll IOil tilt1 I e w11 h 0 hIe dnOno P- 0isin I'leed, 11n-ec 7 ecl'tdisooeawlbeo~,aooco if Isi.s and l i,,ii, ,,.~tn~iohii111f1* nn IA,I,, 174 3 !., fcfoi~in~eie I. S5

A further recommendation that the Reserve Bank turn over to the private banking sector the foreign currency proceeds from krugerrand and diamond sales, as well as public corporation and municipal borrowings (totalling about R3 billion a year), seemed to be delayed. 20/Apparently the Reserve Bank feared the potential for enhanced power of Barclays and Standard, with which the Chamber of Mines (krugerrand sales) and DeBeers (diamond sales) do the bulk of their business. Seftral of the smaller South African banks had apparently asked Pretoria not to let go of the krugerrand and diamond receipts because they "fear they may be at the mercy of Barclays and Standard whenever they need to buy dollars." 202/ Transnational banks as wholesalers for credit to South Africa When in the late 1960's, other transnational banks expanded their South African connexions, they operated primarily on a wholesale basis, carrying on their South African business through existing British and South African banks, rather than establishing their own local branch networks. The "Grossbanken" of the Federal Republic of Germany, the Deutsche Bank, Dresdner Bank and Commerz Bank -- became increasingly involved in South Africa as transnational corporations based in the Federal Republic of Germany expanded their investments there. More than any other transnational banks,"Grossbanken" of the Federal Rdpublic of Germany, were directly involved with transnationals based in their homeland which invested in South Africa. The Commerzbank and the Deutsche Bank, together with the Bayerische Landesbank Girozentrale, for example, owned substantial shares in Daimler Benz, both directly and through holding companies. The Dresdner Bank owned over 25 per cent of Metalgesellschaft, which had become especially active in Namibia, and also had acquired a sizeable share of Degussa. The Berliner Handels und Frankfurter Bank held over 10 per cent of Deutsche Babcock. ?_/ The Deutschebank, the largest holder of industrial shares among the banks, of the Federal Republic of Germany, was founded by Georg von Siemens in 1870, and still had close contacts with that company. A Siemens representative still sat on the bank's board.204/ For the most part, the banks of the Federal Republic of Germany operated on a wholesale basis through affiliates or representative offices. The Dresdner Bank set up its own representative office in Johannesburg which it later shared with the European Banking Consortium (EBIC). The Commerzbank shared its office with Banco di Roma and Credit Lyonnaise205/ Commerzbank also set up an agency, Koller and Bauhaus Trust Co. in Namibia. 201/ Financial Mail, (Johannesburg), 2 February 1979. 202/ Ibid. M/ Commerzbank, Wer gehort zu Wem, (10In, 1976) g24/ European Review, p. 242 ff. 20-5/ See annual reports of these banks, 1976. - 53 -

- 54 - Three Swiss banks, the Swiss Bank, the Union Bank, and the Swiss Credit Bank, became increasingly important in arranging finance for the South African economy through the Zurich Gold Pool. Credit Suisse set up its own representative office in Johannesburg. Credit Suisse is the largest single shareholder in White Weld, a British merchant bank that became active in underwriting loans to South Africa in the seventies. ? The Japanese Government prohibited direct loans as well as investments in South Africa. gQj/ It halted efforts by Japanese banks and business houses to lend Japanese funds to South Africa through the Japanese International Bank, a London-based subsidiary. Japanese firms were permitted, however, to borrow from their domestic banks to finance exports to South Africa. 208/ The Bank of Tokyo established a representative office in Johannesburg to service the growing Japanese commercial interests there. Loans by Japanese banks to assembly plants in South Africa in return for South African goods were considered "trade" and therefore not contrary to the Government's policy of "non-investment". 20/ Several Japanese banks acquired minority shares in consortium merchant banks which had already become deeply involved in South Africa. This type of consortium bank was established by Sumitomo and Cr6dit Suisse-White Weld; Mitsui Bank and Hambros; and the Japanese Industrial Bank and Deutsche Bank. These consortia aimed at "advancing securities underwriting business overseas." 10/ It is possible that these banks contributed to consortia loans mobilized by the European lead banks for South Africa. International banking consortia International banking consortia emerged as an important feature of international banking relations with South Africa in the late 1960s and 1970s. These consortia established representative offices in Johannesburg to enable their member banks to service their transnational corporate clients' South African investments. Among those represented in South Africa by the 1970s were the Associated Bank of Europe (ABECOR) and European Banks International Consortium (EBIC), as well as two Commerzbank-Cr~dit Lyonnaise-Banco di Roma group, and the Berliner Handels-und Frankfurter Bank. Each in turn had affiliated subgroups. The largest European group, ABECOR, was formed in 1974. It took over the South African office of the Dresdner Bank of the Federal Republic of Germany. U1 ABECOR member banks included: Algemene Bank Nederland, Netherlands; Banca Nazionale del Lavoro, Italy; Banque Bruxelles Lamber, g The New York Times, 18 November 1977. ?Q11 Yoko Kitizawa, From Tokyo to Johannesburg, (New York: Interfaith Center for Corporate Responsibility, 1975). gO8/ Financial Mail, (Johannesburg), 12 November 1976. / Ibd. g Oriental Economist, November 1976, P.7. g/ Barclays Bank, Ltd., Report and Accounts, 1976.

- 55- Belgium; Banque Nationale de Paris, France; Barclays Bank, United Kingdom; Bayerische Hypothek~n-und Wechsel-Bank, Federal Republic of Germany; Dresdner Bank, Federal Republic of Germany. Associated members were Banque Internationale, Luxembourg and Osterreischische Landerbank, Austria. Banque de la Soci~t6 Financi~re Europ~enne, Paris, was a special associate. The second big consortium, EBIC, had established its representative office in Johannesburg several years earlier in 1969 to provide a South African connexion for its member banks: Amsterdam Rotterdam Bank, Netherlands; Bankverein, Austria; Deutsche Bank, Federal Republic of Germany; Midland Bank, United Kingdom; Soci6t4 Gnrale, France; and Soci 4t Gn4rale de Banque, Belgium. ?/ The managing director of the Dresdner Bank explained that an international consortium of this kind "acts as an information center, to pull in other business for the group, and to liaise with local correspondent banks and customers." In South Africa, he added, "European banking consortia and banks represented here... (aim) primarily at raising foreign capital and a variety of medium-term bank facilities for Government, local authorities, public utilities and large corporations." g Transnational banks' role in mobilizing foreign credit Whether or not they had direct holdings in South Africa itself, the major transnational banks mobilized the foreign capital required to finance South Africa's pressing financial needs in the political economic crisis that shook the nation in the mid 19706. South Africa was forced to borrow heavily overseas to cover the rising costs of its continued oil imports, expanded military purchases, and the economic development programmes designed to make its minority Government more self-sufficient. By the end of 1977, South Africa's overall foreign debt was almost R13 billion ($14.8 billion). In all, thirty six banking groups participated in the business of mobilizing known Euro-currency credits for South Africa from 1972 to 1976. g These included most of the major financial institutions in the international capital market. Banks from six countries - United Kingdom, the Federal Republic of Germany, France, the United States, Switzerland and Luxembourg - were the most active bond sale managers or lenders. The banks frequently organized consortia for particular loans. ? Deutsche Bank, Annual Report. 1976. g Financial Mail (Johannesburg), 24 November 1972. 2L4/ The information regarding publicly issued bonds and credits has been collected and published in "United States Corporate Interests in South Africa" Subcommittee on African Affairs, Committee on Foreign Relationa, United States Senate. (Washingron D.C.: Government Printing Office, 1977).

- 56 - Total South African foreign liabilities, 1973-1977 1973 Central Government Long-term Short-term Public Corporations and Local authorities Long-term Short-term Private Sector Long-term Ordinary and other shares (nominal value) Share Premiums, reserves, undistributed profits Branch and partnership balances Debentures loan stock and similar securities Rm % 1263 12.2777 486 1015 9.7 945 70 8140 6907 1078 4524 206 112 1974 Rm % 1654 12.9 1077 577 1532 12.0 1431 10178.1 9589 7784 1112 5111 247 123 1975 Rm % 2945 17.9 1684 1261 2442 14.8 2299 14375.1 11076 8776 1175 5478 298 149 Mortgage and long-term loans 873 1078 1555 Other 114 113 121 Short-term 1241 1805 2300 TOTAL 10476 100% 12775 100% 16463 Source: South African Reserve Bank, quarterly Bulletin, December 1978. 1976 Ru 4087 2008 2079 3233 3056 177 67.3 12510 10001 1287 1977 %RM% 20.6 4610 21.6 2698 1917 16.3 3054 1/' 2714 340 63.1 13668 10957 1312 6398 273 139 1764 140 2509 100% 19830 100z' 6898 194 135 2290 128 2711 Z1332 64.1 IU Table 10. 100%

- 57 Table 11 . Foreign financial institutions with major commitments to South Africa Institutions Number of Commitments in which they participate Federal Republic of German7y United Kingdom France Italy Belgium Netherlands Luxembourg Switzerland United States Westdeutsche Landerbank Girozentrale 10 Commerzbank A.G. 13 Dresdner Bank A.G. 9 (Deutsche Bank) 11 Berlmar Hendels und Frankfurter Bank(BHF) 6 White Weld Securities 10 Hill Samuel 9 Strauss Turnbull and Co 7 Delta Trade Co. Ltd., 5 Barclay Bank International Ltd., 5 Habros Bank Ltd., 4 Credit Commerciale de France** 15 Cr6dit Lyonnais 9 (Soci~t6 G6n6rale)* 5 Paribas 4 Banco Commerciale Italiana 4 Banco di Roma 4 Kredeitbank N.V. 8 Bondtrade 7 Algemene Bank Nederland N.V. 7 Kreideitbank Luxembourgaise SA 12 Union Bank of Switzerland 10 Citibank 10 Manufacturers Hanover 8 Kidder Peabody 8 Chase Manhattan 3 *Information Tables do not identify this as Soci6tg G6n6ral (Belgium) or (France) o Cr6dit Commerciale is owned 4 per cent each by: Continental Illinois Corp: Canadian Imperial Bank of Comerce: Schweizerische Bankverein; Schweizerische RlckerversicherungsGe8ellschaft; Banco Espanol de Cr6dito (Janes) Country

Some known credits to South African private corporations, 1974-1975 Interest libo Maturity lender: Tnited States Bank of Subsidiary -4. 4. 4 I 4. I 1974 1974 1974 1975 1975 1975 1975 1975 1976 1976 1976 1976 1.75 2 1.5 South Africa Breweries General Mining and Finance South Africa Marine Corp. Triomf Fertiliser Jtberg Consolidated Investments AE and CI Anglo-Alpha Cement Associated Blds. South Africa Breweries Maedem Anglo-American Rand Mines Manufacturers Hanover Ltd. Manufacturers Hanover Ltd. Citicorp International Bank Ltd Manufacturers Hanover Ltd., Citicorp International Bank Ltd Morgan Guaranty Trust Co. Bank borrowing loans Other - Nationality Morgan Grenfell and Co. Ltd. Wardley Ltd. Anthony Gibbs Holding Co.,Ltd. Barclays Bank International Banque Worms Morgan Grenfell and Col,Ltd., Baring Brothers London Multinational Bank (Chemical Bank and Northern Trust of Chicago particpated) Baring Brothers Year Borrower Amount 1.75 1.87 1.5 60$ 10$ 4.5% 30$ 7$ 100$ 15$ Table 12:

- 59 - While there was usually a lead bank from one country, banks from several countries often took part in major loans. The distinction between loans to the private and public sectors was not always clear in South Africa. The South African Government parastatal, the Industrial Development Corporation (IDC), for example, obtained transnational bank assistance to float foreign loans for private businesses. On the other hand, information about loans to private borrowers by transnational banks was seldom publicized. The South African Reserve Bank put the total foreign credit extended to the private sector at R5.8 billion in 1975 216/more than that to the public sector that year. But no details were revealed to what bank or borrowing firms were involved. In 1977, the Bank of America, which admitted outstanding credit to South Africa worth $188 million, explained that over half represented short-term loans to commercial banks, while over a quarter of the rest consituted loans to public and private corporations for "trade-related purposes or financing of industrial development projects". The largest receipient of the remainder was the South African Government which borrowed short-term funds to ease pressure on the balance of payments. g If this breakdown was typical of that for all lenders, the total loans reported for the private sector for the South African Reserve Bank - which did not include loans made to commercial banks - was probably significantly understated. In the late 1970s, several factors combined to change the pattern of bank loans to South Africa. First, the Soweto uprising and heightened repression against blacks, as they intensified their struggle for liberation, led international bankers to raise serious questions as to the political stability of the minority regime. Secondly, overseas anti-apartheid critics forcused on a growing campaign against continued bank loans, pointing out that they provided an essential prop for the whole apartheid system. Thirdly, South Africa's balance of payments, negatively effected in the mid 1970s by the rising price of oil and armaments, and the falling price of her crude exports as recession gripped the capitalistic world, began to improve as the international monetary crisis pushed up the price of gold. 215/ Financial Mail (Johannesburg), 27 August 1976. 216/ South African Reserve Bank, Quarterly Bulletin, December 1976, pp. 364-5. ?1/ Letter from Mark C. Hennessey, Research Officer-International, Bank of America, San Francisco Headquarters (Social Policy h5761) to Tim Smith, Interfaith Center on Corporate Responsibility, New York 8 August 1977).

- 60 - Reflecting growing concern over South Africa's political stability, its credit ratings in international capital markets declined. This was reflected in the shortened term of loans and higher interest rates. The anti-apartheid campaign against banks in the major lending countries also had an impact. Some United States banks, which had been among the leading banks mobilizing funds for South Africa, including the two Rockefeller banks, Chase Manhattan and Citicorp, asserted they would no longer lend funds directly to the South African Government. Q18 Both declared, however, that they would continue to lend funds to the private sector, arguing that continued economic expansion would ultimately help to end apartheid. The Bank of America insisted it would continue to lend money to both the private and Government sectors. 92/ The chairman of the European American Banking Corporation assured the World Council of Churches in late 1977 that it would only facilitate loans to finance trade transactions to South Africa. This appeared to reflect both the political situation, and' the fact that the corporation had already become heavily committed to South Africa. ?2/ Given the close interlinkage between parastatal and private sectors (indeed, in South African Government statistics, the parastatals are included in the private sector'), it was not clear whether or to what extent a bank policy of limiting loans to the private sector would significantly reduce funds for critical South African development projects. Loans directed to financing international trade, furthermore, inevitably contributed to strengthening the South African r6gime; money is fungible. Funnelled into one part of the system, it could easily be transferred to others. Foreign loans to any part of the apartheid economy helped to finance and strengthen the entire military-industrial complex. The domestically-based transnational affiliates, especially those of Standard and Barclays, provided an important conduit for transnational bank funds that was less visible than publicized Eurodollar credits. In 1977 alone, they advanced more than a billion dollars (R920) g22/ to finance the purchase of machinery and equipment which they then leased to parastatal and private corporations. South African affiliates of transnational banks found it increasingly lucrative to use their foreign ties to finance both imports and exports by obtaining international credit. They profited from the daily differences in the floating exchange rates of major currencies. g/ 218! Financial Mail (Johannesburg), 17 March 1978. g Sylvan H. Kline of the Bank of America Investment Management Corporation, at Board of Global Ministries, United Methodist Church, "Consultation on Banking and Investment Policies", 18-19 May 1978. g2/_ Financial Mail (Johannesburg), 7 October 1977. 21/ Financial Mail (Johannesburg),31 March 1978. k Financial Mail, (Johannesburg), 31 May 1978.

-61 - When, in 1978, the South African Government kept interest rates high to combat inflation, borrowers used international bank contacts to obtain funds through lines of credit overseas at lower rates. Eurodollar credit was 1 to 2 per cent cheaper than local rates for six month to a year loans. The larger banks and firms had access to acceptance credit in New York at still lower rates. g The South African Minister of Finance used tax powers to encourage this use of foreign credit for domestic productive activities. 2L4/ It was estimated that South African importers borrowed a total of some R2 billion for these purposes in 1978. The South African Financial Mail characterized these funds as so important that a small decline might "knock the foreign exchange reserves clear out of the window." 225/ The boom in gold prices in 1978, did somewhat reduce South Africa's need to borrow long-term funds. At the same time, the resulting improvement in the balance of payments convinced some European and United States bankers that its credit worthiness was improving. That the South African r~gime still eagerly seeks foreign credit and recognizes its essential role in sustaining its military-industrial complex is illustrated by the acclaim with which the South African press welcomed the news that banks of Switzerland and the Federal Republic of Germany had loaned $280 million, allegedly for the black townships. As the South African Broadcasting Company declared, these funds "will bolster our foreign exchange reserves and help to support the recovery momentum at a juncture when it has shown signs of flagging." ? One reason South Africa needs further foreign loans is to repay the past loans with high interest charged by transnational banks. a_8/ Home Government insurances and guarantee programmes Home Government guarantees of export credit, designed to foster expanded export sales, became an important factor reducing transnational bank risks on short-term credits to South Africa in the 1970s. Much of this credit was guaranteed, insured, or in some cases even discounted by home- country Governments through a variety of export promotion programmes. The importance of export credit is underscored by the South African Government's use of it to finance SASOL (oil-from-coal) expansion, since direct foreign loans did not appear forthcoming for the proJect.22/ _/ Financial Mail, (Johannesburg), 3 February 1978. 2_j/ Financial Mail. (Johannesburg), 31 March 1978. 2_ / Financial Mail, (Johannesburg), 3 February 1978. ~ Financial Mail, (Johannesburg), 23 June 1978. ?27/ South Africa Digest, 24 January 1978. &L8/ South Africa Digest, 3 November 1978. 2/ South Africa Digest,2 March 1979.

- 62 - The Export Import Bank (Eximbank) of the United States, despite a ban on direct Eximbank loans to South Africa in 1964, insured or guaranteed about three fourths of a billion dollars ($691 million) worth of trade with South Africa fron 1972 to 1976. Additional export credits were insured in 1977 and 1978. Another United States Government agent, the Commodity Credit Corporation, financed $46.2 million worth of United States agricultural exports to South Africa in the same period. 910 In late 1970, anti-apartheid critics persuaded Congress to pass an amendment prohibiting the continuation of Export Import guarantees and insurance - but the South African lobby successfully convinced the Congress to add a rider that if the United States concerns involved had adopted the Sullivan Principles the prohibition would be lifted. Since the United States Chamber of Commerce had already thwarted Congressional efforts to create a commission to monitor the implementation of the Sullivan Principles in South Africa this prohibition was essentially rendered meaningless. The Federal Republic of Germany's export insurance system, administered by two private insurance companies, Hermes Creditversicherungs-AG and Deutsche Revisions und Treuhand-AG g_ /, increased their guarantees of loans to South Africa by 36 per cent from 1970 to 1975. gl/ In 1976, Hermes guarantees of export loans to South Africa almost tripled, reaching DM2.3 billion by the end of the year. They rose another DM475 million in the first quarter of 1977. 2D/ World-wide, the value of these guarantees grew only 42 per cent. The share of "developed" countries in which South Africa was included, actually declined by 7 per cent. ? These guarantees primarily facilitated the finance of export of capital equipment by major companies of the Federal Republic of Germany operating in South Africa for use of South African Government-owned utilities. They included one worth $210 million (DM515 million) to Deutsche Babcock to provide steam generating equipment for SASOL II. Since an interministerial committee representing the Departments of Economics, Finance, foreign Affairs and Economic Co-operation, had to agree to guarantees of loans exceeding DM million, it was evident that these loans had been approved by the Government of the Federal Republic of Germany. ?2/ United States Congress,House of Representatives, Committee on International Relations, Resource Development in South Africa, Hearings, 94th Congress, 2nd Session (Washington, D.C.: United States Government Printing Office, 1976) p. 383, table 11, p. 1384, table 12. Q11 Business International Corp.,Financing Foreign Operations, 1976. 2 Infomationstelle SUdliches Afrika, E.V., Press Release, 26 June 1977. / Ibid. ?/ Bundesminister ftr Wirtschaft LP, "Ausfuhrgarantien und Ausfuhrburgschaften der BRD," 1976 BMWI Dokumentation (Bonn, 1977); other BMWI, unpublished documents; and Informationstelle SUdliches Afrika, Bonn, Jaly-August 1977.

- 63 - In late 1977, the Federal Republic of Germany, under heavy antiapartheid criticism, appeared likely to require that firms with plants in South Africa must acquiesce to the European Economic Community (EEC) labor code for black workers to qualify for further export guarantees, and to pledge that goods would not be transshipped to Rhodesia.?2/ However, the limit on loans to be guaranteed was R18 million per transaction. The president of the South African branch of the Federal Republic of Germany's Chamber of Trade and Industry declared, "R18 million (is) a lot of money. Besides, I understand Bonn will be prepared to allow exceptions."26/ Transnational banks located in South Africa's other overseas major trading partners have access to a variety of Government supported export programmes.g/ Information about the amounts of credit insured, guaranteed or financed by these agencies is not as complete as that for the United States Eximbank or the Hermes programme. The loans made for exports under the United Kingdom programme (Export Credit Guarantees Department, ECGD) are covered by an unconditional guarantee covering all risks. Bank loans may be subsidized. France encourages exports by providinglow-cost medium and longterm export credits with a special (4.5 per cent) discount rate for exports to countries outside the European Common Market. All major French banks provide credits of varying duration for French exporters. A specialized bank, Banque Franqaise du Commerce Exferieur (BECE) facilitates exports through acceptances, discounts and guarantees. About 30 per cent of all French exports are supported by provision of these credits, but no breakdown by country is available. The Japanese Government permits its banking community to finance the growing trade of Japanese firms with South Africa. The ministry of International Trade and Industry (MITI) funds a variety of export insurance programmes. In 1976, MITI spent Y13,610 billion on these programmes, but again the data on specific countries involved was not available. South African aold Transnational banks had always played an important role in the sale of South African gold, which constitutes a major source of foreign exchange earnings for the minority r~gime. By the 1970s, about 80 per cent of South Africa's gold was sold on the ZWrich Gold Pool established by three Swiss Banks, the Swiss Bank, the Union Bank and the Swiss Credit Bank. The Swiss banks purchased on their own account all the gold the South African Reserve Bank offered them. They added some of the gold to their own stocks for their investment requirements, and sold the rest. SFinancial Mail, (Johannesburg), 2 December 1977. g36 Financial Mail, (Johannesburg), 11 November 1977. g See Business International Corporation, Financing Foreign Operations, (New York, 1976) reports on the kinds of instruments available in each country for Government support of exports, but does not provide data on the actual amounts of credit provided, guaranteed or insured. The Pnnlowini information relating to export credit is from this source.

- 64 - The South African Government could thus unload large quantities of gold without fear of depressing the world price. It could also insist on payment in the currency of its choice. In this way, the Swiss banks had come to provide a major: source of finance assistance to South Africa. M8/ Of the five brokers who handled buying and selling of the rest of South Africa's gold in London, four were owned by transnational banks: tandard and Chartered Group purchased the oldest, Mocatta and Goldsmith in 1973. Samuel Montagu was wholly taken over by Midlands Bank. Rothschild and ox, Sons became linked to the National Westminister through the Westminister International and Johnson Matthey and Co., and carried on its bullion trade through its Johnson Matthey subsidiary. In the crisis of the mid-7Os, the transnational banks enabled South Africa to borrow funds using gold as a security through "gold swaps." The first of these in 1976, reportedly arranged by the ZUrich Gold Pool members, WJ was for about $500 million at about a 5 per cent interest rate for three months. The second involved about $390 million. 2401 Since the amounts involved consituted a large percentage of the Swiss banks' total assets, it appeared probable that the syndicate had tapped the wider transnational market. Transnational banks also provided the channels through which South Africa sold its krugerrands, one ounce gold pieces, abroad. This enabled South Africa to sell gold outside of traditional markets, thus avoiding depressing the world gold price. In 1975, Intergold, the marketing arm of South Africa's Chamber of Mines, reported the sale of about 21 per cent of the nationa's total gold production in this form, most of it to .ritish buyers, before the British Government banned gold investments. In 1976, Intergold hired the United States advertising firm, Doyle Dan Bornback, to increase sales in the United States, hopefully to reach a third of South Africa's annual output. A number of United States transnational banks still handle the actual sales through their local branches. 241/ The 1978 krugerrand sales brought almost $1.2 billion in foreign exchange to South Africa. 8J World Council of Churches, op. cit. W/ Financial Mai, (Johannesburg), 26 March 1976. 240/ Financial Mail, (Johannesburg), 8 March 1977. g Financial Mail, (Johannesburg), 22 October 1978. 2 South Africa Digest, 19 January 1979.

- 65 - The United States had become the largest market in 1977, followed by the Federal Republic of Germany. American citizens doubled their purchases of South African gold in 1978, with krugerrands the most popular form of purchase. 24/ /Africa News, (Durham, North Carolina),9 February 1979.

-66 IV. Conclusion Transnational corporations play a key role in providing the hardwaze and finance for South Africa's military-industrial complex. Their investments in advanced machinery and equipment in South Africa itself creates the industrial infrastructure to enable the South African regime to produce about 75 per cent of its own military needs. In addition, their investments facilitate the import of the parts and materials required to make that production possible. Their international linkages provide the channels through which South Africa continues to import the military machinery and equipment which its own industry cannot produce. Transnational corporate banks provide the essential financial contacts to enable the South African r~gime to finance its growing domestic and international military purchases.