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Many US Firms Pulling Out of South Africa

September 11, 1985

WASHINGTON (AP) _ Many U.S. companies and banks have been slowly pulling back from their dealings with South Africa in business moves that one economist says make official sanctions ″pale by comparison.″

Hundreds of millions of dollars in U.S. investments remain in South Africa. Yet government figures show an annual decline, except in private loans, since 1981.

″The private market is sending a much stronger message than official sanctions have to the South African government that their policies are creating an economic climate that is unconducive for conducting business,″ says Jeffrey J. Schott, research associate at the Institute for International Economics.

House-passed economic sanctions, while going slightly beyond those announced by President Reagan on Monday, ″pale by comparison to what the private sector is doing,″ Schott adds.

Many companies say their decisions to limit business in South Africa were dollars-and-cents judgments, in some cases prompted by laws discouraging ties with the apartheid regime.

Motorola Inc., for example, dropped its sales of two-way radios to the South African police forces this year in response to a New York City ordinance barring purchases from firms dealing with South Africa, spokesman George Grimsrud said. The company had no choice if it wanted to sell radios to New York City.

Some of the other companies pulling back from South Africa business:

-Engelhard Corp., a big New Jersey manufacturer of chemical and metalurgical products, this year liquidated its wholly owned South African affiliate. The operation had $4.5 million in sales in 1983, 2 percent of the company’s total.

″It was a pure business decision, based on the present performance of that business, the growth potential and the overall economics involved,″ said spokesman Frank Vitale.

-Phibro-Salomon Inc., an investment banking firm, announced last month a withdrawal from South African operations. Spokesman Mel Adams declined to comment on reasons. The company’s South African assets had been estimated at less than $420 million.

-The DoALL Co., a Des Plaines, Ill., machine toolmaker, closed its South African sales office. Spokesman John Flink said the decision was mainly based on industry factors and that the company wants to remain in the South African market.

-Coca-Cola Co. announced sale of majority interest in its group of South African bottling plants to a South African company, though it will continue to hold a minority stake. Soft drink sales in South Africa have been down, spokesman Randy Donaldson said.

-West Point-Pepperall, a Georgia-based textile company, sold its minority interest in a South African affiliate to local managers for one rand - less than 40 cents. ″Really there was no relationship between the social activity there,″ said spokesman Donald Downs. ″It was a purely business decision based on the fact the operation wasn’t profitable.″

Some companies acknowledge that political factors have been involved in their decisions.

Bank of Boston spokesman Wayne Taylor says that because of the racial turmoil his bank no longer finds South Africa ″an attractive place to do business.″ He acknowledges pressure from anti-apartheid U.S. customers.

″I would be disingenuous if I said that didn’t enter into our thinking,″ he said.

″While most of them cite economic reasons, and with good reason ... I think it’s also just fact that politics come into consideration at some point,″ says Cathy Bowers, an analyst with the Investor Responsibility Research Center Inc., which surveys U.S. and British business activity in South Africa.

Ms. Bowers said the center’s survey found the number of U.S. companies with sales or assets in South Africa has declined from 284 in January to around 270.

Companies that are leaving, she said, have relatively small operations in South Africa. ″The large companies that have pretty big stakes are there to stay.″

The latest jolt to South African business was a credit pinch-off last week by U.S. banks.

The banks are expected to resume lending money to South Africa companies after that country ends a four-month moratorium on repaying loans, but economists say the bankers’ moves were the most significant step yet to affect private businesses in the controversy over South Africa’s racial policies.

″Political and economic issues have tended to merge in that country,″ said John Falb, head of the multinational department of Republicbank Corp. of Dallas.

″Most American banks that have lent money to that country are in a wait and hold, wait and see, situation,″ he added. ″We wouldn’t be extending new loans until we find out just what the South African government intends to do and how they intend to react to the current economic situation.″

Harris Bank of Chicago decided to end all loans to South Africa in March, spokeswoman Mary Ullrich said. ″The reasons had to do with the political and economic situation in that country,″ she said. ″Our concerns about the risk in that country ... led us to withdraw.″

Commerce Department figures show U.S. business investment in South Africa, apart from loans, was $1.8 billion at the end of 1984, down from $2.3 billion at the end of 1983 and a high of $2.6 billion in 1981.

Some companies say they are firm in their intention to remain in South Africa.

″There’s been no change; it’s just business as usual,″ said Cameron Calder, vice president of international operations for American Cyanamide, the big chemical company. Its South African affiliates have 700 employees and had 1983 sales of $50 million.

Borg-Warner Corp. says it has no plans to cut ties to a South African affiliate which manufactures auto and truck parts, although president Clarence E. Johnson says the continuing racial violence ″gives us some long-term concerns.″

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