U.S. Banks and South Africa on richardknight.com

The following article appeared in International Banking Campaign Against South Africa Newsletter No. 2, Winter 1986/7 published by End Loans to Southern Africa (ELTSA), London. This was a newsletter produced for the campaign against international banks' support for apartheid. It was a joint project of the Programme to Combat Racism of the World Council of Churches, based in Geneva and ELTSA.

For more information on U.S. bank loans to South Africa see Testimony of Richard Knight on the proposed Rule for Ant-Apartheid Classification of Banks and South African Activities of Particular Banks (December 1991), Citibank and South Africa (September 1986), Sanctions, Disinvestment and U.S. Corporations (1990) and U.S. Banking on South African Apartheid (November 1976).. See also U.S. Banks Cut Loans Sharply to South Africa by Nicholas D. Kristof, New York Times (August 3, 1985).

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U.S. Banks and South Africa

The new U.S. sanctions legislation is a major victory for the American anti-apartheid lobby. RICHARD KNIGHT of the American Committee on Africa puts the Act into context of the banking campaign.

Campaigns in the United States against bank loans to South Africa go back to the mid-1960s when the American Committee on Africa launched the Committee of Conscience Against Apartheid following the Sharpeville massacre in South Africa. In 1977, following the Soweto uprising, ACOA was again instrumental in forming the Campaign to Oppose Bank Loans to South Africa. Currently, ACOA is at the center of the divestment campaign, which has succeeded in getting 19 U.S. states, 70 cities, 13 counties and 116 colleges to take economic action against companies that do business in South Africa.

On October 2, 1986, the U.S. Congress passed the Comprehensive Anti-Apartheid Act of 1986, banning new bank loans to both the public and private sector. This act, which was passed over President Reagan's veto, was a major victory for the anti-apartheid movement in the United States. Currently, U.S. banks have $3.1 billion in outstanding loans to South Africa, down from $4.7 billion in December 1984.

But the act, despite its name, is hardly comprehensive. It allows for continued rollover of old loans, and permits the continuation of trade loans. For this reason, anti-apartheid activists are now increasingly focusing on trade loans and correspondent bank relationships.

The first major set of victories was won when many U.S. banks agreed to end loans to the public sector in South Africa, a policy adopted by may lenders by the end of 1984. In early 1985, an increasing number of banks extended their no loans policy to the private sector. This included the First Bank System, the Bank of Boston, and Norwest Corp. The crisis came to a head when one U.S. bank, Chase Manhattan, quietly informed its customers in South Africa that it would not make any new loans or roll over old loans. The financial crisis caused by the refusal of U.S. banks to renew billions of dollars of loans forced the South African government to declare the debt repayments standstill.

Citibank, the only U.S. bank operating in South Africa as a commercial bank, has become a main target of American activists. Citibank was also the target for the United Democratic Front, which organized a sit-in at Citibank's Johannesburg office in April 1985. Citibank is estimated to have some $800 million in dollar loans to South Africa. In addition, even after the debt moratorium Citibank continues to make loans from rand deposits and 'blacked dollars' held by its subsidiary in South Africa. Citibank has been growing fast in South Africa, with assets increasing in rand terms by 72.8% in 1985 and by 152.4% in 1984.

The growing disinvestment campaign, especially at the state and municipal level, has been a key development in the anti-apartheid movement in the U.S. New York City's 1985 bill which prohibits deposits of city funds in banks that make loans to the South African government and its agencies forced many banks, including Citibank, to agree to end all public sector loans. Barclays' U.S. subsidiary has also been a target of anti-apartheid action in Rockland County, NY. In Los Angles, where the city has a strong anti-apartheid law, several banks, including Bank of America, announced that they would make no new loans to the public and private sector. Even NCNB, a bank that has been one of the larger U.S. lenders to South Africa, succumbed to anti-apartheid pressure and ended all loans.

With the dramatic growth of the disinvestment campaign, a growing number of U.S. corporations are pulling out of South Africa. More that 60 companies have done so in the past two years, although many, like IBM and General Motors, continue to do business in South Africa through licensing agreements. As this happens, a new focus of the U.S. anti-apartheid movement will be trade and technology transfer. Especially in trade, banks play a key role. Without financing from U.S. banks, South Africa-U.S. trade would be sharply hit. U.S. banks will continue to be a target of the anti-apartheid movement as long as they continue to finance this trade.