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Mandela Feted, but Business Is Wary : Investment: The South African president is embraced as a hero in White House ceremonies. U.S. corporate officials worry about stability.

October 06, 1994|PAUL RICHTER | TIMES STAFF WRITER

WASHINGTON — South African President Nelson Mandela was embraced as friend and hero in White House ceremonies Wednesday but got a politely noncommittal reception from the audience that now counts even more for his government--the American business community.

On the second day of a five-day U.S. visit to solicit investment, Mandela met with President Clinton to discuss aid for economic development, housing, education and electrification in South Africa. The principal program they discussed was a $100-million fund for development of new businesses, half of which is earmarked for South Africa and the remainder for neighboring states.

"You can be certain that the United States will do everything in our power to support the new nation," Clinton said in a ceremony on the White House's South Lawn that followed a one-on-one afternoon meeting with Mandela.

Yet officials of some American corporations who talked to Mandela and his entourage earlier this week were saying that, despite their growing confidence in the 5-month-old regime, they need to see more before they can undertake the kind of expansion that the South African government so badly needs.

In a news conference, Mandela put off U.S. requests to supply police for Haiti when U.S. troops are replaced by U.N. peacekeepers, a move expected next year.

Mandela, while praising the "worthy" objective of the U.N. effort, said his government must first confer with other governments of southern Africa.

"If we are involved in an operation anywhere in the world, we would like this to be a collective decision from our region," he said.

Since Mandela arrived Monday, PepsiCo Inc. has announced that it will return to South Africa, after a nine-year absence, with a $20-million bottling venture. Duracell International Inc. said that, with $13 million in U.S.-government-financed political risk insurance, it plans to resume distribution of its batteries in South Africa. And the Subway Corp. said that with government financing it would begin a program to open 80 of its sandwich shops in the country.

Since September, 1993, when the South African government agreed to free elections, about 30 American companies have begun various expansion moves, from acquiring subsidiaries or affiliates to opening branch offices, according to the Investor Responsibility Research Council in Washington.

And such companies as Ford, General Motors, Heinz and Electronic Data Systems are believed to be contemplating such expansion.

Yet many other businesses are saying that they are hesitating because of concern about the volatility of South African politics and the potential for profits in the distant country of 40 million people. International companies and investors remain skittish about the daunting prospects of integrating a long-divided society.

"You can't help but be impressed by Mandela," said an official of one company who met with the South African leader this week and who asked to remain unidentified. "But there has to be more than sympathy to this calculation."

Dan O'Flaherty, executive director of the U.S.-South African Business Council in Washington, said the move back into South Africa has so far been small.

"I would call them hedged bets," he said.

While South Africa is especially eager for manufacturing businesses, the relatively high wages of unionized workers there make manufacturing for export less attractive.

Also, South Africa has been a bastion of protectionism, with high tariffs and subsidies. Those tariffs are to be dismantled over a period of six to eight years if the pending global trade measure, the General Agreement on Tariffs and Trade--now to be called the World Trade Organization--is approved.

Even so, outside firms would have to compete with huge South African companies carefully nurtured and protected by the government.

"This has been one of the most highly protected economies in the world," O'Flaherty said.

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