The following article was published in Liberation New Service, #831, November 20, 1976. Liberation News Service, then in it tenth year, was a twice week packet of news copy and graphic material used by hundreds of student and progressive publications across the U.S. Unfortunately it no longer publishes. There has been some discussion of placing all issues on the web. Please note that the address for the American Committee on Africa at the end of the article is no longer current. I have corrected a few typographical/spelling errors. If you got to this web page directly from a search engine, be sure to go to my home page. There you will find other information apartheid and democratic South Africa. There is also current and historical information on other African countries. There is information on how to contact me. Other South Africa related pages on web site that may interest you include Campaign for Sanctions and Divestment, Arms Embargo against South Africa and my Bibliography page. For information since the end of apartheid see my South Africa Today page. Richard Knight, posted December 2002 U.S. BANKING ON SOUTH AFRICAN APARTHEID by Richard Knight "I recognize that our primary long term interests in Africa are -- and will remain -- economic. We must not let the present political problems in southern Africa distort our perception of that reality." -- William E. Schaufele, Jr. Assistant Secretary of State for African Affairs February 18, 1976 NEW YORK (LNS) -- Major new bank loans totalling at least $777 million are helping to shore up South Africa's white minority regime in 1976. Some of the United States' largest and most powerful banking concerns are involved -- New York Citibank, Chase Manhattan, Morgan Guaranty Trust, Manufacturers Hanover, Orion and Bank of America. Black liberation groups within South Africa and their supporters in the United States strongly oppose the loans. They maintain that it is precisely this foreign assistance that has allowed the white-minority government to remain in power for so long. In challenging a planned multi-million dollar Citibank loan, an American Committee on Africa spokesperson commented recently that "Particularly at this time, the loan can only be interpreted as an attempt to bolster the South African regime when it is being pressed for fundamental change from inside." The South African economy does need bolstering, for its balance of payments deficit -- the difference between the value of its imports and exports -- is growing. This is due largely to the decline in the price of gold, which is expected to bring in only about two-thirds of the foreign exchange it did in the last two years. Since gold makes up well over one-third of South African's foreign exchange income, this loss is quite drastic. While South Africa's income is declining, the cost of imports is rising. For instance, South Africa must import all its oil, which has gone up in price dramatically in the last two years. The total cost of South African imports has doubled since 1972 to over $9 billion in 1975. It is estimated that South Africa's current deficit is over $2 billion a year. Further, government spending is up drastically -- 44% higher for the April-June quarter of the current fiscal year than last year. Defense spending has increased 42% over 1975, in a direct reaction to the independence won in Mozambique and Angola, the growing strength of the national liberation movement in Zimbabwe and Namibia, and the recent black uprisings throughout South Africa. Much of the increased government spending has been paid for, not by economic growth, but by printing money. The result has been an inflation of 11.5% with no real growth in the economy. Yet if jobs were to be provided for the 250,000 new people, mostly black, who enter the labor market each year, the South African economy would have to have a growth rate of 6.5%. This rate is unattainable, at least in the near future. The growing unemployment will naturally create conditions of even greater labor unrest among black workers. The Loans U.S. banks and their overseas branches currently have some $2 billion in loans to South Africa, according to Senator Richard Clark, Chairman of the Subcommittee on African Affairs. South Africa has been borrowing increasingly large sums from private banking institutions. In 1975 the figure jumped to $1.8 billion from just under $l billion in 1974. And in 1976 the figure is expected to jump again with a large portion of it coming from the United States. Despite the increase in loans, South Africa is much more of a risk than it was before -- politically as well as economically. The loans are at higher interest rates, well above the prime rate offered to countries with good credit. Most of the loans made by U.S. banks in 1976 were for South African government corporations involved in specific development projects. The largest single U.S. loan was made to the Electrical Supply Commission (Escom), a government corporation which supplies most of the country's electrical power. Escom's current expansion plans include the construction of three coal fired electrical generators. Since South Africa has an abundance of coal, this will cut down on its need to import oil, a major saving in foreign exchange. Another loan has gone to the Iron and Steel Corporation (ISCOR), and several to companies involved in mineral extraction, notably to Richards Bay Minerals and to the Phosphate Development Corporation (Foscor). These are aimed at increasing South African exports, thereby improving it balance of payments. One particularly interesting loan has gone to South African Airways for the purchase of Boeing airplanes from the U.S. These planes are an example of the "dual purpose" items which South Africa is eager to purchase -- which could be used for military as well as civilian purposes. Chase Manhattan has made a significant loan to the Industrial Development Corporation. While hardly the largest, it is important because this loan was guaranteed by the U.S. Export-Import Bank. Since the Industrial Development Corporation is a government corporation, the U.S. government is in effect guaranteeing a loan to the South African government. In the past, the Ex-Im has generally denied loans. But indications are that Export-Import financing and guarantees may well become increasingly important in loans to South Africa. Dillion Reade and Company, a major U.S. investment banking house, has been hired to plan the financing for a new South African coal gasification plant. Dillion Reade has hired White House advisor Peter Flanigan, also chairman of the Council on International Economic Affairs, to handle the account, and Flanigan has made it clear that he too hopes to get Ex-Im backing. Perhaps the strongest indication of U.S. willingness to grant Ex-Im support comes from President-Elect Carter himself. In the November 5 Financial Mail, a major South African business magazine, he was asked if he would "free up American investment through the Export-Import Bank loans and otherwise encourage an increase in private American lending and corporate activity in South Africa?" Carter's answer was an unequivocal "Yes, indeed," and he quickly went on to tie the increased investment to U.S. efforts to bring "peace" to southern Africa. Opposition to the Loans Both the African National Congress and the Pan Africanist Congress, the liberation movements of South Africa, have called for the withdrawal of foreign investment. And, in a policy statement issued in 1972, the South African Student's Organization (SASO) said it "sees foreign investments as giving stability to South Africa's exploitative regime and committing South Africa's trading partners to supporting the regime. For this reason, SASO rejects foreign investment." Nine SASO members are currently on trial in South Africa are charged with advocating the economic withdrawal of foreign investment, among other things. A typical defense of loans and investment to South Africa was given by the Executive Vice President of Citibank, George J. Vojta, before the Senate Foreign Relations Committee in September. He reasons that apartheid now restricts the functioning of the capitalist economy since it restricts the purchasing power of blacks. Therefore, as Vojta put it, "By contributing to the creation of a pluralistic marketplace, we think we assist in the development of a more pluralistic system." This is an old argument -- that investment and the pressure of the market place will create social change. Change will come, the argument goes, because it will benefit the white capitalists who will force the government's hand. This rationale runs contrary to the historical facts. The South African economy has always been a joint venture of foreign capital and white settlers who both profit handsomely at the expense of blacks. It is foreign capital, mainly English, which developed the mines, still the backbone of the South African economy. Today, the system has changed little. There has been considerable industrialization in the post World War II period, but the structure of foreign capital in alliance with local white capitalists has not changed. Indeed, contrary to the argument that with industrial growth the condition of Africans would improve, conditions have gotten worse. It was in the Post World War II era of industrial growth that the Nationalist Party (now headed by John Vorster) came to power and much of the most repressive legislation was passed. In fact, real income for Africans has declined since the war. According to Barbara Rogers in White Wealth and Black Poverty the average per capita income of Africans from 1958 to 1970 increased 3.3% per year while inflation was just under 5% per year. Thus real income decreased. Given the current economic situation in South Africa and an estimated rise in unemployment of 22,000 per month, real per capita wages will decrease even more. U.S. Interests It is unlikely that the South African government would so actively seek loans and foreign investment if it thought that in the end it would remove itself from political power. It is also unlikely that U.S. banks and corporate investors would be willing to see apartheid disrupted when it is precisely that system which provides such a profitable source of cheep black labor. Southern Africa, and South Africa in particular, are also extremely important to the West for its wealth of natural resources and its geographical location. South Africa has the largest known reserves of gold, platinum, chrome, manganese, vanadium and fluorspar. It also has large deposits of antimony, asbestos, coal, copper, diamonds, iron ore, lead, limestone, nickel, phosphate, titanium, vermiculite, zinc and zircon. South Africa's large uranium deposits will also be increasingly important as oil gets more scarce. These minerals are crucial for the industrial economies of the West and for military purposes as well. Furthermore, South Africa is an important foreign market for the U.S. Of total U.S. exports to Africa in 1975, 31% went to South Africa. And the country's share of direct U.S. investment in sub-Saharan Africa has increased from 38% in 1972 to 47% in 1973 to 56% in 1974. This trend is unlikely to change. Accumulated U.S. corporate investment in South Africa is estimated at almost $2 billion. In 1975 Caltex, jointly owned by Texaco and Standard Oil of California, announced expansion plans of $134 million to increase South Africa's refinery capacity. Also in 1975, Kennecott announced a $120 million investment through its two-thirds owned subsidiary Quebec Iron and Titanium Corp. Titanium is used in paints, paper, plastics and rubber, and South Africa's titanium deposits are substantial. South Africa is also important strategically to the United States, and the West in general. The major oil route to Europe must go around South Africa, and the country also borders on the Indian Ocean. Most of the east coast of Africa is controlled by countries that do not want a U.S. military presence. For this reason, the use of South African navel facilities could be extremely important. The Pentagon recently even floated the idea of establishing a navel base in South Africa. And few observers doubt the increasingly close ties between NATO and South Africa, even if they are unofficial for political reasons. Increased opposition to apartheid inside South Africa comes in sharp conflict with white South Africa's economic and strategic importance to the West. It is in this context that the new U.S. loans must be viewed. * * * For more information on the campaign against U.S. bank loans to South Africa, contact the American Committee on Africa, 305 East 46th Street, New York, N.Y. 10017. --30-- Visits to this page since April 3, 2003 |
