U.S. companies in South Africa have been forced to reassess operations following the surge of violence in that country and stepped-up pressure from apartheid opponents, according to some corporate executives and spokesmen for business groups.
Three major U.S. companies -- the investment house Phibro-Salomon Inc., the advertising firm BBDO International Inc. and Apple Computer Co. -- have announced in recent days that they are selling their operations in South Africa or cutting off sales to that country.
These actions, following similar decisions by at least six large U.S. banks, are seriously chipping away at the resolve of U.S. companies to do business in South Africa, according to some business executives.
Most companies with large operations say they have no plans to abandon South Africa, but many say they are postponing plans for expansion and are keeping a close eye on the political situation. However, many other companies with a smaller presence apparently are considering a break in corporate relations with South Africa.
At least part of the reason for this erosion is the sharp downturn in the South African economy that had caused a decline in U.S. operations even before the violence. But pressure also has been intensified in the past few months by legislation to impose economic sanctions on the South African government and the growing number of disinvestment bills being passed by state and local governments.
Last week, New Jersey's Republican Gov. Thomas H. Kean jolted that state's business community by signing a sweeping disinvestment bill that will require the state pension system to sell about $2 billion in investments in companies with South African operations.
That decision, which Kean said was prompted by the tough no-compromise speech by South African President Pieter W. Botha on Aug. 15, will force state pension managers to sell holdings in 58 U.S. companies including such major firms as General Motors Corp., International Business Machines Corp., General Electric Co. and Mobil Corp.
"It's clear the companies are reassessing," said Bob Geary, vice president of the New Jersey Business and Industry Association, which had lobbied Kean to veto the legislation. "Most of these companies don't do enough business in South Africa that they want to jeopardize their securities in the American capital markets. My sense of it is that the smaller their operations over there, the closer they are to pulling out."
"The pressure here is really starting to take its toll," said Jennifer Davis, executive director of the American Committee on Africa, an antiapartheid group that counts about 20 companies that have closed or sold their South African interests this year.
About 300 U.S. companies have operations in South Africa with investments totaling about $2.3 billion. Although all of these companies have felt the heat from the antiapartheid campaign in this country, there are few signs that the larger U.S. manufacturing companies are ready to curtail their businesses.
"The major people aren't going to pull out," said Douglas Hill, executive vice president of Goodyear International, which has 2,482 employes in South Africa.
Most of these companies have argued that they are a progressive "force for change" that is gradually eroding the underpinnings of apartheid. Virtually all major U.S. firms are signatories to the Sullivan Principles, a code that pledges them to maintain nonsegregated facilities and pay equal wages to their black workers.
But the companies' argument has been at least partially undermined in recent weeks by Botha's refusal to offer any new proposals for reform, some executives acknowledge.
"At some point, you have to ask, what's it going to cost you to stay there," said St. Clair Tweedie, director of government relations for American Cyanamid Corp., who recently returned from South Africa.
Tweedie emphasized that American Cyanamid, which has a chemical plant in South Africa that employs about 500 workers, is "committed to staying there." But he said the company is "concerned" about its workers' safety, and the recent political unrest has forced the company to scrap any plans to expand in South Africa.
"Obviously, we are extra concerned because if the violence escalates a lot more, our people could be in a lot of danger," said Robert Duncan, senior vice president of Control Data Corp, which has 300 South African employes. "I don't see it as an immediate danger. But with an escalation, you can't help but worry."
Perhaps the most troublesome development for U.S. companies is the number of state and local governments that are going beyond disinvestment and taking steps to stop purchasing goods from firms with South Africa operations. In announcing his decision on the disinvestment bill, Kean said he will also consider issuing such a no-purchase order. Philadelphia and Newark, N.J., are among the cities that have already taken or are considering similar actions.
One of the problems in assessing the impact of recent developments is that most of the companies that have pulled out of South Africa said they did so because of its depressed economy or an overall retrenchment of their subsidiaries, rather than political pressures.
For example, earlier this year, PepsiCo Inc. sold its South African bottling operations to local investors, describing it as part of a larger divestiture of its overseas bottling plants. Other companies that have left South Africa this year, without mentioning antiapartheid pressure, include Singer Inc., General Foods and Tidwell Industries Inc.
"The companies are very close-lipped about this," said David Hauck, who monitors South African investments for the Investor Responsibility Research Center. "Generally, they say that they don't want to leave and they regret it, but their subs [subcontractors] aren't making any money down there."
But in recent weeks, that tone has started to change. Apple Computer canceled its contract with its South African subsidiary "because of the apartheid situation in that country," a company official said last week. The Bank of Boston said it would no longer make loans to South Africa because the recent unrest has called into question "the economic and political stability of the South African government."