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This resource is hosted by the Nelson Mandela Centre of Memory, but was compiled and authored by Padraig O’Malley. It is the product of almost two decades of research and includes analyses, chronologies, historical documents, and interviews from the apartheid and post-apartheid eras.

From 7 June 1985 New York Times, Nicholas Kristof, "Pretoria Curb: Business View"

If they become law, the sanctions against South Africa contained in a bill that passed the House of Representatives on Wednesday would probably lead many American companies to sell their operations there, business executives said yesterday.

The key provision, they said, was the prohibition against new investment in South Africa. The bill would allow American companies in the country to reinvest retained earnings, but business representatives said that would not be enough to keep their operations competitive in many cases.

The ban on new investment - coupled with prohibitions against new bank loans and the importation of South African gold coins and restrictions on computer sales - would substantially alter the way the roughly 300 American companies, plus dozens of American banks, do business in that country, according to analysts. Many executives added that the burden of the sanctions would probably be borne primarily by the majority black population.

The sanctions were approved by the House because of South Africa's policy of racial separation known as apartheid.

'Something Has to Give'

''Generally speaking, with the rate of inflation we have in South Africa, retained earnings are only going to be enough to keep at a standstill,'' Frank C. Lubke, managing director of Abbott Laboratories in Johannesburg and president of the American Chamber of Commerce in South Africa, said in a telephone interview.

He added: ''So something has to give, in terms of money that would be spent by American companies on other things. That could be discretionary spending on social programs -what American companies do for the black community. That would be sad.''

An executive at one of the American companies with the largest operations in South Africa also stressed that the provisions would encourage businesses to leave.

''Proponents have insisted that this is not a disinvestment bill, because you can reinvest retained earnings,'' he said. ''For companies that are affected by the business cycle, that is not the case. Consider a company that has lost money for a couple of years and needs new investment to keep up with foreign competition. It may be that when you need the investment, you don't have any earnings to retain.''

Other elements of the House legislation, and the provisions in a Senate bill approved by the Foreign Relations Committee, would have less impact, experts said. The bill is awaiting consideration by the full Senate.

Bank Loans

For example, both the Senate and House proposals would ban loans by American banks to the Government of South Africa. In fact, however, such loans have dropped off sharply, and most major banks have adopted policies prohibiting further lending of that kind. Bankers said privately that probably no new loans are being made by American institutions to the public sector in South Africa.

The House bill would also end lending to the private sector, which would have a greater impact. Lending to companies and banks in South Africa has risen sharply in the last few years, at the same time that lending to the Government has declined. Loans by American banks to the South African private sector rose from $1 billion in 1980 to $4.2 billion last year.

A spokesman for the Chase Manhattan Bank said yesterday that even if private lending were curtailed, the bank might still maintain its South African office, because it also serves other countries in southern Africa.

The spokesman and executives at other banks said restraints on lending to South Africa would not affect their overall performance significantly. In almost all cases, earnings from South Africa are only a tiny fraction of worldwide income.

Computer Sales

Provisions in the legislation curtailing computer sales to the public sector of South Africa would have a modest effect, analysts said. The House bill would ban computer sales to the South African Government, while the Senate proposal would only prohibit sales to those Government agencies that enforce apartheid.

The narrower Senate bill would not have great impact, according to analysts, because companies like the International Business Machines Corporation and the Hewlett-Packard Company already do not sell to those agencies that are directly involved in apartheid.

But the House bill might have more of an effect. ''We're very concerned about it,'' Barbara M. Kommer, Hewlett-Packard's manager of investor communication, said yesterday, ''but we don't think it will curtail the supply of computers to the Government.'' She added: ''There are a lot of other suppliers to the Government, other than U.S. suppliers. While it may be noble, it probably won't have any practical effect other than to hurt our competitiveness.''

Importing Krugerrands

The House bill would also ban the importation of Krugerrands, which investors often purchase as a way of holding gold. The United States imported 1.3 million ounces of Krugerrands last year, more than any other country, although the numbers are down sharply so far this year.

In the first quarter of 1985, imports of Krugerrands dropped 67 percent from the 1984 period. In part this reflected less interest in gold; imports of Canadian gold Maple Leaf coins fell by 48 percent. But the drop also appears to reflect concern about a possible ban on Krugerrand imports.

Alan Posnick, a vice president of Manfra, Tordella & Brookes, a major dealer of gold coins, said some people were already switching from Krugerrands to other gold coins.

This resource is hosted by the Nelson Mandela Centre of Memory, but was compiled and authored by Padraig O’Malley. Return to the Nelson Mandela Centre of Memory site.