TRC Final Report

Volume 4

Chapter 2

Subsection 12

Sanctions

131 The failure of multinational corporations to make submissions at the hearing was greatly regretted in view of their prominent role in South Africa’s economic development under apartheid. It was left to the AAM Archives Committee to explain the role of foreign firms in South Africa.

132 The AAM Archives Committee reported that the pattern of international investment in South Africa changed between 1960 and 1994. In the early 1960s, the involvement of the international business community was mainly through indirect investment, through trading in stocks and shares. By the late 1960s, however, direct investment by multinational corporations began to grow, bringing technological expertise into the country and giving multinational corporations a stake in maintaining the apartheid system. By 1971, over 500 British firms had South African subsidiaries. This gave international businesses a direct interest in maintaining the status quo.

133 The costs of maintaining apartheid began to mount, however, and from the late 1970s, the government and parastatal organisations began turning to the international banks for help. The AAM Archives Committee said that, after 1984, resistance grew and the costs of apartheid increased, resulting in a fall in the rand and a steep rise in inflation. It was not until then that it became less profitable for international investors to invest in South Africa: “Only then did firms begin to scale down.”

134 Following international efforts to impose formal sanctions, overseas investors developed a new tactic of forming partnerships with South African parastatal organisations. “They reduced their profile, but relinquished any pretence of autonomy and served the economic priorities of the apartheid state.” At the same time, companies were “bribed” by the government to start businesses in ‘border’ areas where they were offered tax breaks, Industrial Development Corporation loans and special rates for water, power and travel.

135 Nonetheless, in 1986/87, fifty-five of the 297 British firms in South Africa closed, and nineteen reduced their stake in the country. Over this period, 104 American firms sold their South African branches, leaving 157 United States-owned companies in South Africa. The withdrawals were, however, far from complete. Moreover, in general, they were effected in such a way as to minimise the adverse impact on the South African economy and to guarantee their parent firms a continued foothold. Their departure, said the AAM Archives Committee, was motivated by the same commercial criteria that had led them to set up in South Africa in the first place.

136 Foreign investment prevented governments from taking any real action against apartheid. The AAM Archives Committee concluded that:

The speed with which the apartheid edifice crumbled is the final proof of the way in which international business sustained apartheid.

In broader perspective

137 Several business submissions (most notably that of the AHI) suggested that they could have done more to fight apartheid. Mike Rosholt agreed, but pointed out in his submission that “to claim this today is to apply the perfect vision of hindsight, a privilege not available to one at the actual time”.

138 SACOB presents the argument as follows:

With the benefit of hindsight, it may be said that the enormity of the apartheid system required stronger responses from business on certain key issues ... In the ongoing debate about ‘gradualism’ versus the ‘all or nothing approach’ to get rid of apartheid, the stance of these organisations was to push the gradualism arguments to the maximum.

139 According to Professor Charles Simkins, the cautious approach to reform adopted by business leaders was in part a result of having to keep the rest of the business community on board:

As in all changing situations, one can divide the actors into three groups: those who sought to meet the challenges by innovation (the reformers), those who resisted change (the stand patters) and those who waited to see which way the wind was blowing before committing themselves (the expedient adapters) ...

The temptation facing stand patters was always to resist change by collaborating with the state in repression ... By contrast, the work of business reformers has been important in helping define the path to the present. Many attempted reforms soon fell by the wayside; others happened in a rather messy fashion; a few defined a substantially new dispensation in their field. If, from the perspective of the present, the arguments of the reformers look cautious and conservative, this is partly because they often were (though sometimes with more radical longer-term implications) not always understood. But the arguments were also often formulated cautiously in order to persuade stand patters and expedient adapters to move forward.

140 Implicit in any evaluation of the role of business under apartheid is an underlying conception of what the role of business should be in society. Two distinct points of view emerged.

141 The first was expressed in submissions from business which accepted that more could have been done by the business community to bring about change, thus implicitly accepting a moral role for business that extended beyond the conventional bounds of everyday business activity.

142 The other point of view denied that business could or should have acted from a moral standpoint. According to SANLAM:

Any notion that business could have acted as a watchdog of the government as far as human rights violations are concerned is totally unrealistic and should be dispelled. Business was unable to act in that way in the past and will not be able to do so in the future ... government is so powerful and dominant that a business organisation will seriously jeopardise its prospects of success by crossing swords with politicians.

143 While there are clear constraints imposed by political power, to say that business was incapable of crossing swords with politicians is to deny the power (and responsibility) that accompanies financial muscle and personal contacts.

144 Ann Bernstein argued that, by its very nature, business is not a moral being and hence cannot be expected to act as such.

Corporations are not institutions established for moral purposes. They are functional institutions created to perform an economic task (production of goods and services and so on). This is their primary purpose. They are not institutions designed to promote some or other form of morality in the world. Other institutions exist to fulfil these purposes. This does not of course absolve individuals within companies from moral choices, but that is a different matter.

145 She suggested that business contributed in a positive but unintended way through the impact of economic growth on social transformation:

Life is not a morality play. There are very few people who give up everything for their beliefs and ideas. Business in South Africa accommodated itself to the apartheid system. In doing so it provided jobs for millions of people, created infrastructure, unleashed democratising pressures (unintentionally) and sustained a base of economic activity that now provides a platform for economic growth in a democracy.

146 The former argument condemns all business people for having engaged in business under apartheid. The Bernstein argument, on the other hand, applauds them for such engagement (what others have identified as a close symbiosis between white business people and white politicians). Issues of realistic choice, differential power and responsibility (which are important when making ethical judgements) are downplayed in both arguments.

147 Business (not least for reasons of enlightened self-interest) is coming to recognise that morality is an important ingredient of viable business. Moreover, the conflict that characterised labour relations in South Africa shows that a failure by government and business to recognise the fundamental rights of workers provided the very incentive that Ms Bernstein questions, with the result that large numbers of people did give up “everything for their beliefs and ideas”.

148 The mandate of the Commission requires it to make recommendations to ensure that past violations of human rights do not recur in the future. This requires a conscious commitment to realistic moral behaviour grounded in a culture of international human rights law. It would be a sad day for the nation, faced as it is with the opportunity for renewal, if business were to dismiss social concern, business ethics and moral accountability in labour relations as being of no direct concern to itself.