America's South African Dilemma

Should U.S. firms pull out--or stay and work for change?

As never before, American multinationals in South Africa are coming under fire in the U.S. At one shareholders' meeting after another, critics hurl epithets ("partner in apartheid," "friend of discrimination"). The N.A.A.C.P., hardening its stand, now calls for a total withdrawal of Yankee firms from white-dominated parts of South Africa. The Rev. Leon Sullivan, a black minister from Philadelphia and a director of General Motors, has been urging a strict code of conduct for U.S. companies in the land of apartheid and demanding that they actively help black workers overcome various bars to forming unions. Anti-apartheid protests stand to intensify on campuses this fall, and many universities and foundations have decided to sell their shares in corporations operating in South Africa. Concedes a ranking General Electric executive: "No responsible firm today could ignore the concerns of large blocks of shareholders in the churches and universities."

The furor raises complex, emotionally charged questions. Advocates of a U.S. economic pullout claim it could hasten the end of apartheid. But would it really? Most U.S. companies argue that they are helping South Africa's blacks by staying there and working for change. But are they doing enough?

Some 350 American companies have invested a total of $1.5 billion in South Africa, and they are the chief purveyors of its modern technology and consumer goods. Ford, South Africa's biggest automaker (1977 sales: 42,874 vehicles), and GM together account for 26% of the automotive market. Goodyear, General and Firestone dominate tire sales; Exxon, Mobil and Caltex are leaders at the fuel pumps. Kellogg's cereals are found on 40% of South Africa's breakfast tables, and Otis elevators convey riders in two of every five office buildings. IBM enjoys a near monopoly in data processing, challenged only by Control Data. Even though embargoes prevent U.S. companies from selling South African manufactured goods in almost all black African markets, most of the firms are thriving on domestic sales alone. Says Dick Strain, the local head of Eli Lilly: "South Africa has the sophistication of a Western market and the development potential of a Third World country."

When U.S. companies first began moving into South Africa during the gold rush of the 1880s, they not only saw their market as the country's whites (now about 16% of the 28 million population) but they also employed whites almost exclusively. In those days the white Americans, still imbued with their own pioneering heritage, identified strongly with the Dutch-descended Afrikaners, who were also frontier people. That attitude continued in the post-World War II years as newly arriving U.S. firms brought technology and industrial development to South Africa. Yet by the late 1960s, as whites deserted factories for better paying service jobs and the need for labor increased dramatically, American firms were forced to turn to the unskilled blacks and mixed-race coloreds. As they did so, they also adopted the humiliating practices of apartheid: segregated eating, dressing and toilet facilities; low pay and no promotion for blacks; no union representation; abysmal living conditions in company dormitories and housing complexes.

To a degree, that is changing. Because industrial peace is so vital to the white supremacist government of Prime Minister John Vorster, labor inspectors seldom object to the bending of apartheid rules even in South African-owned plants. Since the presence of the multinationals is much valued by the regime, they enjoy even more latitude in defying apartheid.

Prodded by pressures at home, 103 U.S. firms, including nearly all the biggest ones, have signed a code drawn up by Sullivan last year.* Six months ago, U.S. firms started an American Chamber of Commerce with the aim of accelerating anti-apartheid efforts. "Will it work?" muses the chamber's president, Clifford Lyddon. "In the long run, I guess so, but the blacks are reluctant to take advantage of opportunities because they have grown up in an environment that says shut up and stay in your place." And while their ability to change that environment is necessarily limited, the companies' efforts to do what they can have varied widely--so far.

TIME Johannesburg Bureau Chief William McWhirter made a survey of 60 U.S. firms, to which he submitted a detailed questionnaire delving into pay scales, working conditions and advancement opportunities for blacks and coloreds. He also visited plants and spoke to nonwhite workers in their communities. According to his findings, Ford deserves top marks for doing away with the most noxious symbols of apartheid. The company regularly consults nonwhite employees on plant problems and even recognizes black unions; though such unions are not specifically prohibited, black organizing is effectively blocked by South Africa's labor code, which excludes unionized blacks from officially recognized wage negotiations and denies them the right to strike.

This year Ford has also set up an apprentice program for blacks; though at present only 43 trainees (out of a total of 3,278 nonwhite workers) are enrolled in the five-year course, the company plans to expand the program over the next two years. Other Ford achievements: a desegregated sports program, in which the races mix easily in soccer games and in company recreation rooms, and a home-loan plan that has enabled 212 nonwhite employees to build their own houses.

Though few have yet moved as far as Ford, other companies have also taken steps against apartheid. Colgate-Palmolive, which has a plant near Johannesburg, assumed most of the costs of operating a black township school in a neighboring community to ensure higher educational standards for nonwhites than in government-run schools. While a very few firms, notably IBM, have long had equal-pay-for-equal-work policies, many more companies have lately been moving to redress a particular grievance of blacks: a system of bonuses that traditionally allowed whites to earn about three or four times as much as blacks in similar jobs. Goodyear undertook a two-year effort to eliminate bonuses and revise its entire pay and job classification structure on the basis of aptitude tests. Result: wages of blacks and coloreds generally went up (some by as much as 100%), while some whites took pay cuts of up to 10%.

Mobil has been in South Africa for 80 years, but it has hired most of its 1,326 nonwhite employees (out of a total of 2,961) during the past eight. It has also striven to train and promote nonwhites. Now most of the supervisory jobs at the Mobil refineries in Cape Town and Durban are held by nonwhites.

Because South Africa has, at the latest count, only 5,000 black university graduates, IBM has been unable to find many qualified applicants for technical jobs. Hence the company last year donated $175,000 and the services of a senior manager to the University of Zululand to develop courses in data processing and systems analysis.

Quebec Iron and Titanium Corp., which is owned by Kennecott Copper and Gulf & Western, has persuaded its four South African partners to adopt the Sullivan Code in their new mining venture in Zululand. Boasts Q.I.T. President Pierce McCreary: "We have been a very positive force in South Africa."

Even so, since old prejudices die hard, progress is often slow and uneven. Despite its commendable record in other fields, Ford has not yet overcome apartheid in the canteen at its plant in Neave, near Port Elizabeth. Though all workers are served at the same cafeteria, the whites eat on one side of a partition and nonwhites on the other side. Few other companies follow Ford's example and encourage nonwhites to participate in negotiations about wages and work rules.

Complains Ravindra Joshi, secretary of Durban's Institute for Industrial Education, which is pressing for the establishment of black unions: "The real problem is that black workers just don't have any say in their companies."

Among the U.S. firms that have been most severely criticized by South African black activists are Revlon and GM. While Revlon has been cited for lack of training programs, unfair pay policies and other grievances, the GM case has been especially ironic in view of Sullivan's presence on the parent company's board. But last summer, after 278 blacks and coloreds had signed papers to have dues deducted for a union, they were invited to the company's welfare department and asked if they understood what they had done; most of the workers subsequently withdrew their dues deduction, and the unionizing effort stalled. By way of explanation, Rodney G. Ironside, GM's personnel director in South Africa, declared that the company only wanted to help the employees: "There are 114 ways a black can be relieved of his money and GM is not going to be one of them." GM's Detroit headquarters has since moved to push its South African subsidiary more into line with the Sullivan Code. Two weeks ago, it announced that it would spend about $4.5 million to integrate some segregated facilities (including lavatories and locker rooms) and set up programs to prepare more nonwhites for supervisory jobs.

A major impediment to progress is the caution of the blacks, who are wary about pressing for advancement individually and, even more often, are not encouraged to do so. Also, some of the blacks who do achieve higher posts find themselves alienated from their friends and family and suffer severe stress symptoms.

Many critics call for an outright withdrawal from South Africa on the theory that a sudden exodus would undermine the Vorster regime. Says Franklin H. Williams, a black activist who was U.S. ambassador to Ghana in the late 1960s: "What American companies have done so far has been essentially cosmetic. The basic inhumanity of life for blacks in South Africa continues unabated." The New York-based Interfaith Center on Corporate Responsibility, a coalition of several Roman Catholic orders and Protestant denominations, urges a U.S. withdrawal unless, as Director Timothy Smith puts it, the government "takes steps to give full political, economic and social rights to the black majority."

So far, only a few companies have pulled out. Polaroid canceled its dealings with a South African licensee because its film was being used on the infamous passbooks that blacks and coloreds are required to carry and show upon demand to the police. Citibank will no longer make loans to the South African government; the First Pennsylvania Bank will give no loans of any kind. GM, Kodak and Control Data have said they will not expand their South African operations.

These steps scarcely add up to anything like a general U.S. corporate retreat--nor should they. In South Africa itself, such a withdrawal is a strategy favored mainly by some white liberals and middle-class black activists. Though they often talk pullout in public, the black militants within the labor force are far more pragmatic in private. A black union leader told McWhirter: "I would say companies should withdraw. But if they did, it would be death for all of us."

A U.S. exodus could do more harm than good for nonwhites. American-owned businesses might be taken over by other multinationals, notably the Japanese, that are far less responsive to the blacks. Possibly the South African government would seize control of some companies and make the American owners deposit the proceeds of their forced sales in government securities.

At present the realistic course is for American business to stay in South Africa but to use its influence more effectively to bring about change. Despite pronouncements about being committed to ending apartheid, too many U.S. companies engage merely in tokenism. For example, in none of the 60 plants visited by McWhirter was a copy of the Sullivan Code easily available to nonwhite employees. Many local managers have moved too shyly and slowly to remove the most reprehensible barriers of apartheid and to advance nonwhites. But home offices could order their subsidiaries to act more forcefully. That is precisely the solution advocated by Sullivan, who feels it is too soon to dismiss the creative possibilities of U.S. enterprise. "The real test is not what the principles say; they are just words on a piece of paper," he contends. "The real test is what happens in South Africa to eradicate racial discrimination."

As the growing number of Sullivan Code signatures suggests, most U.S. corporations have decided they are willing to be judged by that standard. Now it is up to them to turn in performances that will quiet their critics and bring more tangible benefits to the blacks and coloreds of South Africa. .

*The Sullivan Code: total desegregation of eating, work and toilet facilities in plants; equal employment opportunities; comparable pay for all employees in the same jobs; development of apprentice and management trainee programs for nonwhites; promotion of blacks and coloreds to higher posts; improvement of employees' living conditions; and support for unionization efforts by nonwhites.

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