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Opportunities Have U.S. Firms Knocking on S. Africa's Door : Trade: Interest is growing, but state and local governments honoring sanctions are still a deterrent.

August 30, 1993|PETER ALAN HARPER | ASSOCIATED PRESS

NEW YORK — Some companies are slipping in quietly, some more brazenly. Others are trying to learn the rules of engagement in post-apartheid South Africa, where a foreign business rush seems just around the corner.

With trade shows and conferences scheduled during the next few months, it's clear that a broad U.S. business interest is growing toward South Africa, where the systematic repression of the black majority is crumbling.

A key deterrent for now is that 165 U.S. state and local governments still won't do business with any corporation in South Africa, honoring sanctions the anti-apartheid movement promoted to force the change now taking place.

However, investment and trade could flow more freely after September, when a special session of Parliament meets to establish a Transitional Executive Council and confirm the April 27, 1994, date for the first universal elections.

Nelson Mandela, president of the African National Congress, the leading black South African political organization, has said he will request a formal elimination of remaining sanctions if Parliament acts favorably.

Mandela simultaneously has been urging companies that had vacated South Africa to consider reinvesting in his homeland. He has even said businesses that remained in South Africa won't be penalized.

The shifting climate has created opportunities, emotional debates and unexpected economic bedfellows.

Twenty-seven American companies have gone into South Africa since the Bush administration lifted federal sanctions in 1991, putting the total U.S. corporate presence there at 133, says the Investor Responsibility Research Center, a Washington group that tracks such movement.

Still, that's half the number of U.S. companies in South Africa in 1986.

Ten of most recent entries are computer or software companies. Much of the investment involves establishing intermediaries to sell products and services.

Most of those companies haven't signed the so-called Statement of Principles, an offshoot of the Sullivan Principles, which called for companies to help accelerate the end of apartheid.

All risk the wrath of large shareholders and the possible loss of business from state and local governments that penalize companies with South African ties. But that apparently is not a big concern for them.

"They weighed the pros and cons and think they can get away without signing the principles or they are gambling that in a few months it will all go away," said Alison Cooper, an Investor Responsibility Research Center researcher.

Digital Equipment Corp. of Maynard, Mass., one of the world's leading makers of large computers, went into South Africa this summer without signing the statement of principles.

Because of that, the Pension Reserve Investment Management board, Massachusetts' public pension plan and a large Digital shareholder, followed its rules and began selling its 51,300 Digital shares.

Mark Fredrickson, a Digital spokesman, said it hadn't broken any laws or regulations. Asked about the state pension plan's reaction, he said the company was talking to the big investor about changing its mind.

Fredrickson said many businesses like Digital "want to take a look at this from an intelligent standpoint." He said the Massachusetts pension plan response reflected "bureaucrats that have a rule about checking off a box."

"It's basically a business choice, isn't it?" Fredrickson said. "Given the numbers of shares outstanding, the millions of shares, it would not make a substantial impact."

That type of corporate reaction has aroused anger among many anti-apartheid activists. In their view, it reflects a weakening of the outside pressure that has helped dismantle the apartheid system.

"I think there is an important role to be played by multinational corporations in a democratic South Africa," said Donna Katzin, another researcher at the Investor Responsibility Research Center. "That role needs to be effectively defined according to the standards set by the South Africa majority organization."

With or without rules, many American companies have been willing to do business in South Africa. They speak in strictly economic terms.

J. Daniel O'Flaherty, chairman of the Washington Business Coalition, which counts roughly 50 U.S. companies doing business in South Africa among its 500 members, said there are positives to be considered.

Among them, he said, is the nation's highly developed infrastructure and credit-worthiness because it has almost no international debt. O'Flaherty called South Africa a good place for a company to establish an African home office.

"You can function and do business in ways you can not do in most of the African continent," he said.

South Africa's mining and metals industry represents an enormous market for American machinery and its economy will require vast amounts of capital for re-integration into the global marketplace, he said.

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