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TRC Final Report

Page Number (Original) 144

Paragraph Numbers 15 to 28

Volume 6

Section 2

Chapter 5

Subsection 3


15. As noted above, it is the aim of a recently established reconstruction and development fund established in Switzerland to persuade those who benefited substantially from doing business with Pretoria during the 1980s to contribute to the fund. It is estimated that the amount pledged by Swiss banks and investors currently totals less than 0.02 per cent of profits generated by Swiss banks and investors each year during the 1980s, during which period gross violations of human rights were committed on a wide scale.

16. This section examines the role of Swiss banks in South Africa during the apartheid era and the case for making a significant reparation claim against these banks.

17. The major Swiss banks were important partners of Pretoria during apartheid. Both Credit Suisse and the predecessor of UBS opened offices in South Africa within a few years of apartheid being institutionalised in 1948, and played a central role in marketing South African gold. They also invested in apartheid-era infrastructure in South Africa and in the homelands.

18. After the Sharpeville massacre in 1960, the chairman of the largest Swiss bank, UBS, was asked: ‘Is apartheid necessary or desirable?’ His response was: ‘Not really necessary, but definitely desirable.’

19. In 1968, the Swiss banks formed the Zurich Gold Pool and Zurich became the most important gold market in the world. In 1969, the Swiss banks imported over 1000 tons of gold – half the world’s annual production. Three quarters of this came from South Africa. The Swiss banks encouraged their customers to buy gold from South Africa and to buy shares in the gold mines.

20. After the 1976 Soweto uprising, the United Nations (UN) condemned apartheid as a crime against humanity and expelled South Africa. This was the time of the gold boom. In 1980, the gold price reached an all-time high of US$850 an ounce, filling Pretor i a ’s coffers. Soon afterwards, the gold price fell dramatically, the economy plunged into crisis and the apartheid government was forced to look for financial help from around the world. In 1984, President PW Botha visited Switzerland. In that year, his government took seven international loans, four of which were arranged by the Swiss banks. After the British, the Swiss banks were the most important lenders to the apartheid government at this time.

21. During the debt crisis of 1985, the Swiss banks played an especially important role. After Chase Manhattan, an American bank, cut back its lending facility, there was crisis in Pretoria. In a sudden loss of confidence, banks refused to lend money to South Africa and the government was unable to pay its debts. With pressure from the masses and internationally, there seemed no way to save apartheid. Swiss banks came to the rescue. Mr Fritz Leutwiler, former P resident of the Swiss National Bank, negotiated with the world’s banks on behalf of South Africa and secured an agreement to give South Africa a two-year break from paying its debts and 15 years to make the repayments. Despite international pressure, he refused to use the deal to force Pretoria to dismantle apartheid. Mr Leutwiler gave the South African regime a breathing space during one of its most violent and repressive periods – the late 1980s. While many countries were imposing sanctions against apartheid gold and the United States (US) had banned the direct import of gold bars, the Swiss banks continued to import over half the gold produced in South Africa.

22. South Africa was discussed repeatedly in the Swiss Parliament. Over 100 calls for sanctions were rejected. Despite this, there was recognition that the policy of the banks was dangerous. One parliamentarian declared: ‘Let’s be honest. Our businessmen just want to do business in South Africa at any price. And this policy is not a sound policy for our country internationally. One of these days it’s going to come back and haunt us.’


23. The case for reparations from the banks is based on three arguments :

    a As Pretoria’s key partner in the international gold trade, Swiss banks benefited over several decades from the exploitation of the black mineworkers, whose human rights were violated by (amongst other apartheid policies) the pass laws, the migrant labour system and suppression of trade union activity.

    b The banks ignored the call for sanctions against Pretoria initiated by the UN and continued to enrich themselves through the gold trade and lending.

    c The banks played an instrumental role in prolonging apartheid from the time of the debt crisis in 1985 onwards .

24. It can be argued that there are legal grounds for instituting a claim for reparation . The law governing the enforcement of contracts such as bank loans is heavily influenced by public policy considerations. The common thread is that contracts concluded contrary to public policy are unenforceable. In South African contract law, these agreements may fall into one of two possible categories – those that a re tainted with criminality or those that are per se immoral .

25. Hence a contract that is contrary to the community’s sense of justice is not capable of being enforced in a court of law. A significant date in this regard is 18 July 1976, the date on which the UN Apartheid Convention came into effect . Article 1 of the Convention reads:

1. The States Parties to the present Convention declare that apartheid is a crime against humanity and that inhuman acts resulting from the policies and practices of apartheid and similar policies and practices of racial segregation and discrimination, as defined in article II of the Convention, are crimes violating the principles of international law, in particular the purposes and principles of the Charter of the United Nations, and constituting a serious threat to international peace and security.
2. The States Parties to the present Convention declare criminal those organizations, institutions and individuals committing the crime of apartheid.

26. According to this, any credit institution or private money-lending corporation that financed the apartheid state ought to be targeted as a profiteer of an immoral and illegal system. It is also possible to argue that banks that gave financial support to the apartheid state were accomplices to a criminal government that consistently violated international law.

27. Arguments also exist based on the doctrine of ‘odious debt’. The principle is that debts incurred for illegitimate purposes by illegitimate parties are unenforceable. Debts incurred in the furtherance of apartheid would fall under the principle. The fact that the General Assembly of the UN did not recognise the apartheid government’s delegation as the legitimate representatives of the state of South Africa from 1965 onwards lends even more credibility to the argument . There are several precedents for the doctrine, including a 1923 arbitration case between the Costa Rican government and the Royal Bank of Canada. In this case, the US repudiated a debt incurred by Cuba and owed to Spain in its peace treaty after the US had taken sovereign control of Cuba at the end of the Spanish–American war. Similarly, the Soviet government repudiated the debts incurred by the Tsar in the previous Russian regime. An article in a professional journal written by lawyers at the First National Bank of Chicago in 1982 warn s lenders of the potential risks of making loans that infringe the doctrine.

28. Swiss banks are not the only lenders whose support for and enrichment under apartheid may provide grounds for reparations. British, German, French and North American banks are amongst those that financed Pretoria during the 1970s and 1980s. In addition, in 1976 and 1977 the IMF granted South Africa balance of payment loans totalling US$464 million, which helped to cover the increased expenses needed for the South African Defence Force (SADF) and were used to fuel the apartheid machine. More research is required on these matters.

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