Activists Tally the Effect of S. Africa Sanctions : Economics: The authors of divestiture see election as culmination of their efforts. But they now appeal for reinvestment.

The death toll from pre-election violence in South Africa had reached into the hundreds early this month, and an accord between Zulu nationalists and the African National Congress seemed more elusive than ever. From his vantage point in Phoenix, where he lives in retirement, the Rev. Leon H. Sullivan was viewing the turmoil with dismay.

“I keep remembering that our main objective was to end the apartheid system and get South African blacks the opportunity to vote,” he said one day recently. “But I have mixed emotions when I see the violence. I did not expect this cleavage between the Zulus and the ANC to continue once it got to the point where apartheid had ended.

“But,” he concluded, “I still have no question about what I worked for.”

Sullivan is one of the grand old men of the campaign to end South African apartheid through economic pressure.

A member of the General Motors board in 1971, he made corporate history by challenging the company’s management via a shareholder appeal to sell off--divest--its South African operations. In 1987, as the author of the “Sullivan Principles,” which bound U.S. corporations doing business in South Africa to promote racial equality and provide greater advancement opportunities for black employees there, he was banned from visiting the country.

Now the sanction campaign has effectively ended--ANC President Nelson Mandela called for a lifting of foreign restrictions last September--and its fruits will be on display next week with the country’s first multiracial elections.

With that in mind, Sullivan and other leaders of the campaign are assessing its role in the changes in South Africa and its effect on the country’s future course.

For the most part, they regard their achievement with unalloyed pride.

“The campaign could not have been more successful: It accomplished exactly what we set out to accomplish,” said Randall Robinson, who heads TransAfrica, a leading anti-apartheid campaigner. Many note that few other grass-roots campaigns have ever produced the kind of mass consciousness-raising among U.S. voters that the sanction drive did.

More than 100 U.S. localities imposed their own sanctions, refusing to do business with companies that had South African connections--a trend that helped push Congress to enact federal sanctions in 1986 over a Ronald Reagan veto.

Recalcitrant corporations found themselves shunned by important institutional investors and pressured by freshly politicized shareholders.

Scores of major corporations chose to avert public censure by withdrawing from South Africa altogether. Those remaining as signatories of the Sullivan Principles committed themselves to raising the living standards of their nonwhite employees through education and training programs.

“No company wanted to be identified with apartheid--that wasn’t the argument,” said William Moses of the Investor Responsibility Research Center, “but it was how best to address it. They would say that if they stayed, they could provide jobs and benefits, push the envelope from within. The Sullivan Principles didn’t fundamentally change South Africa or the way black South Africans lived, but it fundamentally changed the lives of those touched by the programs of their employers.”

Still, there is little question that overall the sanctions have damaged the South African economy, at least for the near term, and thus rendered it less able to provide the job growth necessary to satisfy black workers’ expectations of a better lifestyle. That could exacerbate the social tensions already manifesting themselves in sectional violence.

The situation revives the longstanding debate over whether sanctions were the proper--or the best--tool with which to influence South African politics.

“The question is, what did you hope to achieve?” said Herman Nickel, an opponent of sanctions who was U.S. ambassador to South Africa in 1982-86 and now is a consultant to a group called Global Business Access. “Is the economic damage caused sufficiently offset by the political gains?”

Nickel maintains that the demands of economic growth in the country were already forcing white businesses to bring blacks into the system as workers and even managers. In time that would have led to the political changes wrought by the political accord reached last year by Mandela and President Frederik W. de Klerk.

“All this you’re seeing now would have happened even without sanctions,” he said.

Anti-apartheid activists sharply disagree.

“There’s no evidence that economic growth would have changed anything in South Africa,” said Jennifer Davis, a native South African who is executive director of the New York-based Africa Fund. “The 1960s were years of tremendous economic expansion and also years of the intensification of repression.”

Others, such as Robinson of TransAfrica, believe that the sanctions were indispensable in forcing South African whites to confront the costs of apartheid.

“We began the sanctions effort in the 1960s, and all that time the apologists for apartheid argued that they would not work,” he said. “Meanwhile, the apartheid system got stronger and more Draconian. It was after the sanctions reached full bite and South African whites began to pay a real price for the system that it began to crumble. I think (the sanctions) changed fundamentally the cost-benefit calculus in a way that caused De Klerk to come to the table and to release Nelson Mandela” from prison in 1990.

The 1986 U.S. federal sanctions barred the export of most products to South Africa and the import of such commodities as fruits and vegetables and raw steel.

But blood had already been drawn. South African business people and many analysts agree that the single most damaging blow to the country was the drying up of international capital after 1985, when Chase Manhattan Bank refused to renew its $30 million in short-term loans in the country and said it would engage in no new lending.

Other U.S. banks, which had about $4.2 billion in loans outstanding to South African institutions, followed suit.

“When the banks took a tough stand, it became clear to the South African community that business couldn’t go on as usual,” Davis said.

Today’s estimates of the total cost to the South African economy from foreign divestiture range from $10 billion to $50 billon, much of that measured in higher capital expenses, higher consumer prices and the cost of illicitly circumventing trade embargoes.

But circumvent they did. Some estimates say the value of clandestine South African imports and exports equaled the value of overt, non-embargoed trade in most years during the sanction period.

Oil and other raw materials continued to come into the country, albeit at higher prices. And even in such staunch anti-apartheid African countries as Ivory Coast, one could find cans of Coca-Cola labeled in Afrikaans in the late 1980s.

As for the fact that the campaign’s economic burden often fell on black as well as white citizens, its leaders say it always involved a delicate balancing of short-term pain and long-term goals. Others maintain that the root of South Africa’s economic troubles is not the sanctions but the political system that provoked them.

“The basic cause of damage to the South African economy was apartheid,” said Dumisani Kumalo, a South African who is project director for the Africa Fund. “If you’re a country of 40 million people and you’re only harnessing the energies of 5 million, you’re not running the economy at full speed. It took millions of dollars to create these separate systems. The economy was overtaxed to fund a system that’s now discredited.”

One important element in the success of the campaign in the United States was its grass-roots nature--not unusual for a domestic political movement but rare for an effort to influence foreign policy.

Its organizers made a deliberate decision to start not in Washington but among the municipal and state councils of the U.S. heartland.

“The South African government had spent millions buying access to senators and congressmen,” Kumalo said. “So it was difficult for us to do anything in Washington. But at the state and city level, there was an even playing field.”

The resulting proliferation of local anti-apartheid initiatives was “quite extraordinary,” Moses said.

“At least 179 local entities decided to have local sanctions,” a response unique in its scale, he said. “The South Africa issue really caught fire. Last summer we were still finding new sanctions on the books.”

Many of these regulations hit companies in their pocketbooks by barring those with South African ties from receiving local government contracts, forcing corporations large and small to choose between doing business with South Africa or with, say, the city of Los Angeles.

“A lot of companies felt it was better to keep their business closer to home,” Moses said.

Among the most detailed was that of Los Angeles, which barred companies that had even the most trivial or remote connections with South Africa from doing business with the city.

“The idea was to give them a message about how the city fathers and mothers felt about South Africa,” said George Wolfberg, a financial analyst in the city administrative office who administered the program. “Literally thousands of companies had to sign an affidavit that they were not doing business with South Africa in any way.”

Today, of course, what South Africa needs is reinvestment. Many of the old campaign’s leaders are now turning their attention toward how to re-inject U.S. capital into the country in order to promote socially responsible corporate behavior in the post-apartheid era.

Since July, 1991, when President George Bush ended a five-year ban on new U.S. investments in South Africa, 45 companies have entered or returned to that market, according to the Investor Responsibility Research Center. Some have repurchased affiliates that they had parked with local investors for the period of divestiture. The number of U.S. companies now operating there is 152; in 1986, when the sanctions went into effect, there were 267, according to the center.

Most analysts agree that South Africa cannot make the transition to post-apartheid democracy without such an infusion of outside capital.

“The challenges ahead are more daunting than the ones we’ve overcome so far,” Robinson said. “Before, it didn’t matter that 7 million of 22 million blacks were living in self-erected shacks or that the education system was spending five to 10 times less to prepare black students than white ones. Now it does matter. But the money to correct this is not in South Africa.”

Sullivan himself has drafted a new set of principles for incoming investors, binding them to promote equal opportunity, management training, the support of black businesses and other idealistic goals.

U.S. Investment

ANC President Nelson Mandela called for a lifting of foreign restrictions last September, and the number of American companies doing business there is on the rebound.

U.S. companies in South Africa ‘86: 267 ‘87: 168 ‘88: 151 ‘89: 138 ‘90: 123 ‘91: 104 ‘92: 106 ‘93: 119 April ‘94: 152 Source: Investor Responsibility Research Center Inc.