I
wrote this article was drafted in September 1986 – one year after the South
African government declared a debt standstill. After the debt standstill was
imposed Citibank adopted a policy of making no new cross border loans to South
Africa. Citibank sold its South African
banking subsidiary to First National Bank, a South African company, in July
1987. Citibank maintained correspondent
banking ties with First National Bank.
In about 1990 Citibank had approximately $666 million in outstanding
bank loans to South Africa, all of which had been converted to long term exit
loans.
Citicorp
served as a depository institution for American Depository Receipts (ADRs) of
South African companies. ADRs provided a
mechanism for investing in South African companies on U.S. stock exchanges.
Citibank
had other business ties to apartheid South Africa. Citicorp’s U.S. subsidiary Diners Club sold
its 19% interest in Diners Club SA (Pty.) Ltd to Standard Bank in 1987. After acquiring Citicorp’s interest Standard
Bank owned 54% of Diners Club SA. US
Diners Club continued to license its former subsidiary.
In
1995, after the end of apartheid, Citibank reentered South Africa with
corporate and commercial banking. It 1998 Citibank added Asset Based Finance
and in 2001 Schroder Salmon Smith Barney started
operating in South Africa. Citibank has office in Johannesburg, , Durban, Cape Town and Port Elizabeth.
In
October 1998 Citicorp and the Travelers Group merged to form Citigroup.
Please
note The Africa Fund is no longer located at the address on this publication
but is now part of Africa Action in Washington, DC. I made minor changes in the chart to make it
more readable and take make it advantage of web formatting features.
Richard
Knight
November
2002
CITIBANK AND SOUTH AFRICA
Citicorp,
through its Citibank subsidiaries, is the largest U.S. lender to South Africa,
with $800 million in outstanding loans to that country. This figure represents a quarter of the total
$3.2 billion in current U.S. loans to South Africa. Citicorp's South Africa
related lending policy was that of providing loans to both the public and
private sector. Until 1985, Citicorp's official South Africa lending policy
continued to allow loans to both private and public sector borrowers. But as a result of intensified pressure from
anti-apartheid forces in the U.S., as well as new Federal restrictions on bank
lending to South Africa, Citicorp was forced to end all loans to the public
sector in 1985.
Citicorp
is also the only U.S. bank with a subsidiary in South Africa, Citibank, N.A., Ltd. This distinction
enables Citicorp to function as a normal commercial bank with assets and
deposits held by local branches. It is
through this subsidiary that Citicorp has continued to expand its operations
and finance the apartheid system. As a
result of these operations, in 1984, Citibank, N.A., Ltd. more than doubled its
assets, and in 1985, its assets increased approximately 73% (see table).
The Role of Foreign Banks in South Africa
Foreign
banks have played an integral role in bolstering the South African economy,
especially during times of political crisis following events such as the
Sharpeville massacre of 1960 and the Soweto uprising of 1976. More recently, the political turmoil
surrounding the declaration of the first State of Emergency in July 1985,
induced most banks, including most U.S. institutions, to cut off South Africa's
lines of credit and request immediate repayment of outstanding short-term
loans. This financial panic caused the
white minority government to impose a moratorium on its short-term debt of $14
billion in September 1985, and to enter into negotiations with its creditors on
the rescheduling of payments on that debt.
At
that time, Black South African leaders such as Bishop Desmond Tutu and Rev.
Allan Boesak implored the foreign lenders not to roll
over the loans unless the Botha government resigned and was replaced by a
government representative of all South Africans. The international banks, however, ignored
these pleas and agreed to conditions which require South Africa to pay only 5% of its short-term debt by April
1986, and to renegotiate conditions for the repayment of the remainder of the
debt in February 1987.
Citibank and South Africa
Citibank
was one of the last U.S. banks to provide the Botha government with a loan in
1980. When the debt moratorium was
imposed in September 1985, Citibank had approximately $800 million tied up in
outstanding loans to South Africa, a figure which was more than one-third of
the $2.35 billion total exposure of the nine largest U.S. lenders. The moratorium forced Citibank to temporarily
suspend all dollar loans to that country, but the bank's subsidiary in South
Africa still does business in Rand (the South African unit of currency) through
its commercial branches. Citibank
continues this lending, as well as relending those
monies “blocked” by the moratorium to its existing clients within the country.
At
a time when most U.S. banks have been reducing their involvement in South
Africa and the total value of U.S. lending has dropped by one-third, Citibank
is becoming more deeply entrenched in the apartheid system. Since 1983, Citibank N.A., Ltd. has grown
dramatically. It is now ranked among the
top six South African banks in growth of assets and deposits. In 1984, it ranked first in asset and deposit
growth, with an astounding 154% growth in assets and 229% growth in deposits (see table). Citibank's performance also strongly suggests
that after the debt crisis is over, it will resume providing direct loans to
the private sector and to South African banks. This loan activity will in turn make funds
available for loans to the government and its parastatal
agencies.
Citibank's
advertisements in the South African Financial Mail underline the bank's
view of its central role in the exploitative apartheid system, describing
Citicorp as, "...an essential business resource of South Africa's major
corporations." And Gordon Phelps,
the bank's Senior Vice President responsible for Northern Europe and South
Africa has reassured South Africa's business community that Citicorp would
never completely withdraw from South Africa.
CITIBANK'S INVOLVEMENT IN SOUTH AFRICA |
|||||||
|
Total |
|
Rank |
||||
|
(in Rand million) |
|
(among South African banks) |
||||
|
1983 |
1984 |
1985 |
|
1983 |
1984 |
1985 |
Total Assets |
115.3 |
291.1 |
503.1 |
|
29 |
23 |
19 |
Growth of Assets |
59.9% |
152.4% |
72.8% |
|
4 |
1 |
6 |
Total Deposits |
63.2 |
207.9 |
367.7 |
|
33 |
26 |
18 |
Growth of Deposits |
93.3% |
229% |
76.9% |
|
3 |
1 |
4 |
source: Financial Mail Top Companies (1986) |
Citicorp Under Fire
In
recent years, Citibank has been the target of protest both in South Africa and
the U.S. In April, 1985, forty members
of the United Democratic Front, a leading opposition coalition in South Africa,
demonstrated inside the bank’s Johannesburg offices displaying signs which read,
“Citibank you finance apartheid!” In the
U.S., Citibank's offices have routinely been sites for anti-apartheid protests,
including a major rally at Citicorp headquarters in New York in October, 1985.
The
U.S. religious community has also joined the protests against Citibank's links
with apartheid. According to the
Interfaith Center for Corporate Responsibility, more than twenty churches have
closed their accounts and/or completely divested Citibank stock worth over $100
million. In addition, municipal
governments, trade unions, student groups and community organizations around
the country have been boycotting Citibank because of its involvement in South
Africa.
CITIBANK WILL CONTINUE TO BE A TARGET OF
PROTESTS, BOTH IN THE U.S.
AND SOUTH AFRICA, UNTIL IT SEVERS ALL TIES
WITH APARTHEID.
Copyright
(c) The Africa Fund, September 1986.
The Africa
Fund (associated with The
American Committee on Africa) 198 Broadway, New York, NY 10038 (212) 962-1210.