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Exodus of U.S. Firms Quickens in South Africa : Big-Company Pullouts May Have Domino Effect

June 07, 1986|BILL SING | Times Staff Writer

The exodus of U.S. companies from South Africa has grown dramatically in the past year and a half and has reached a new, more critical stage: Now, more American firms with large work forces there are leaving, considering leaving or reducing their operations.

Firms with hundreds of employees in South Africa, such as General Electric and PepsiCo, are among 50 American companies that have pulled out since the beginning of 1985, including 12 so far this year. That compares to only seven firms that withdrew in 1984, according to the Washington-based Investor Responsibility Research Center.

Others, such as Xerox and International Business Machines, are considering withdrawals, while firms such as American Telephone & Telegraph and Apple Computer have stopped sales to some or all South African customers.

Banks Stop Loans

Meanwhile, Security Pacific and Wells Fargo are among 29 of the 105 largest American banking firms surveyed that have banned new loans to either private or government borrowers in South Africa, up from only three banks two years ago, the research center said. Fifty-five of those banks ban loans to the South African government, up from 26 in 1984.

The increasing disenchantment of American firms reflects the continuing slump in the South African economy and growing racial strife. It also illustrates the increasing effectiveness of pressure for divestiture by American state and local governments, investors and opponents of apartheid, South Africa's system of racial segregation and discrimination.

"There is no question that more and more mainstream firms are reconsidering their position" in South Africa, said Marcy M. Murninghan, president of the social investment services division of Mitchell Investment Management Co., an investment advisory firm based in Cambridge, Mass.

More pullouts of large companies--those with several hundred employees and millions of dollars invested--could spur the withdrawals of many more of the approximately 260 U.S. firms still operating in South Africa, some observers say.

"If we see IBM or Xerox beginning to head for the exits, there will be a domino effect," said Timothy Smith, executive director of the Interfaith Center for Corporate Responsibility, a New York-based coalition of religious groups that own stock in corporations.

Most U.S. companies pulling out so far have had only small numbers of employees in South Africa, such as American Express (four employees), Boeing (three employees) and Flow General (seven employees). For most, the withdrawal has been relatively painless.

Big Firms Leaving

But the past year has seen the departure of at least 10 U.S. businesses with 100 or more employees there, compared to five in the year before that, according to the Investor Responsibility Research Center.

Companies withdrawing since June, 1985, according to the center, include Carnation (1,043 employees), BBDO International (340 employees), Computer Sciences (550 employees), General Electric (727 employees), Motorola (250 employees), VF Corp. (960 employees), Alexander & Alexander Services (291 employees), Manpower (102 employees), Eaton (375 employees) and Bell & Howell (166 employees).

In the year before that, the largest of the companies withdrawing were Blue Bell (with 600 employees), International Harvester (now Navistar Corp.) (556 employees), Oak Industries (299 employees), Pepsico (556 employees) and Singer (100 employees). Another firm, Tidwell Industries (150-200 employees), withdrew in 1985 but would not say in what month.

Other firms selling to South Africa but without employees actually stationed there also have been reducing their activities. Most notable is AT&T, which announced earlier this year that it will phase out purchases of special metals from South Africa and end sales of communication services and computer products to that country.

Reducing by Attrition

Other firms, such as IBM, are quietly reducing their presence by not replacing workers leaving through attrition. And in 1985, no American company started or acquired operations in South Africa for perhaps the first time in a decade, according to Patrick McVeigh, vice president of investments for Franklin Research & Development, a Boston-based investment advisory firm.

As a result, total American investment in South Africa continues to plummet. At the end of 1985 (the latest date for which complete figures are available), it totaled $1.3 billion, down from $1.8 billion a year earlier and a peak of $2.6 billion in 1981, according to the U.S. Commerce Department.

Although the American pullout has affected at least 7,600 jobs in South Africa since the beginning of 1984, it has not resulted in a large increase in unemployment there because most of the U.S. firms withdrawing have sold their South African subsidiaries to their South African employees or to South African or other foreign companies, rather than shutting them down.

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