The Global Pressure Cooker
An analytical examination of the international economic campaign that pressured South Africa towards democratic reform.
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Historical Context and Significance
The Disinvestment Movement
The campaign for disinvestment from South Africa emerged as a significant international protest against the nation's institutionalized system of racial segregation and discrimination, known as apartheid. While advocacy began in the 1960s, the movement gained substantial momentum and practical implementation in the mid-1980s. This concerted economic pressure is widely credited with compelling the South African government to initiate negotiations that ultimately led to the dismantling of the apartheid regime.
Catalysts for Action
The intensification of the disinvestment campaign in the mid-1980s was significantly influenced by the internal political resistance within South Africa. The introduction of the 1983 South African constitution, which further entrenched racial segregation, galvanized black South Africans to make townships ungovernable. The subsequent State of Emergency declared in 1985, coupled with widespread public resistance and the often brutal response from state security forces, was extensively televised globally. This heightened international awareness and amplified calls for economic sanctions and divestment.
International Legal Frameworks
The United Nations played a crucial role in attempting to establish a legal and political basis for international action against apartheid. In 1962, UN General Assembly Resolution 1761 called for comprehensive economic and other sanctions against South Africa and established the Special Committee against Apartheid. However, major trading partners, particularly Western nations, initially resisted these calls, deeming the situation not a threat to international peace and security. Later, in 1977, the UN Security Council passed Resolution 418, making the arms embargo mandatory, and in 1987, a voluntary international oil embargo was adopted.
United Nations Initiatives and Embargoes
Early Resolutions and Opposition
The United Nations General Assembly's Resolution 1761 in 1962 marked an early attempt to leverage international pressure by calling for economic sanctions against South Africa. This resolution also led to the formation of the United Nations Special Committee against Apartheid. However, key Western nations, including the United Kingdom and the United States, opposed these measures, arguing that sanctions were not a viable strategy and that the situation did not constitute a threat to international peace. An international conference in London in April 1964, organized by the Anti-Apartheid Movement, aimed to assess the feasibility of economic sanctions but failed to persuade the British government to adopt them, primarily due to economic interests.
Evolving Sanctions
While early calls for broad economic sanctions faced resistance, the international community gradually moved towards more targeted measures. The United Nations Security Council passed Resolution 418 in 1977, establishing a mandatory arms embargo against South Africa. This was a significant step, reflecting growing international consensus on the need for concrete action. Subsequently, in November 1987, the UN General Assembly adopted a voluntary international oil embargo, further tightening the economic screws on the apartheid regime.
The United States Campaign
Grassroots Mobilization and the Sullivan Principles
When the U.S. federal government proved reluctant to impose significant economic sanctions, anti-apartheid activists shifted their focus to lobbying individual businesses and institutional investors. This grassroots effort, often coordinated by faith-based organizations like the Interfaith Center on Corporate Responsibility (ICCR), sought to leverage corporate social responsibility. A pivotal element was the development of the Sullivan Principles in 1977, authored by Rev. Leon Sullivan. These principles mandated that companies operating in South Africa treat all employees equally, irrespective of race, directly challenging the country's apartheid laws.
Investor Pressure and Shareholder Activism
Beyond advocating for the adoption of the Sullivan Principles, activists targeted institutional investors, such as public pension funds. They lobbied for the divestment from U.S. companies with South African interests that had not yet complied with the principles. This strategy involved submitting shareholder resolutions, often rejected by management but serving to raise public awareness and damage corporate reputations. More critically, it posed a significant financial threat: major institutional investors withdrawing their investments could severely impact a company's valuation and access to capital.
Academic Mobilization and Divestment
Student Activism and Campus Campaigns
University campuses became significant centers of anti-apartheid activism, with students demanding that their institutions divest from companies involved in South Africa. Campaigns often involved protests, sit-ins, and the creation of shantytowns to draw attention to the issue. The first organized anti-apartheid group on a U.S. campus, CUAA, was founded at the University of California, Berkeley. These movements gained considerable traction, influencing university boards of trustees to re-evaluate their investment policies.
The Growth of Divestment
The momentum for divestment surged significantly in 1984, fueled by widespread media coverage of internal resistance in South Africa. This period saw a dramatic increase in the number of educational institutions divesting their assets. Early successes, such as Hampshire College in 1977 and Michigan State University in 1978, set a precedent. By 1988, over 150 universities and colleges had fully or partially divested from companies with South African ties, representing billions of dollars in assets.
Key University Cases
Notable campaigns included Columbia University, where student protests led to trustee re-evaluation; Smith College, where student actions resulted in divestment of $39 million; Harvard University, which eventually adopted selective divestment after sustained pressure; and the University of California system, which divested $3 billion in 1986, a move recognized by Nelson Mandela as highly significant.
State and Municipal Actions
Legislative Momentum
Beyond academic institutions, anti-apartheid activists successfully lobbied state legislatures and city councils across the United States. Many localities enacted legislation mandating the sale of South Africa-related securities from public pension funds and adopted selective purchasing policies that favored companies not doing business with South Africa. By the close of 1989, a significant number of states, counties, and cities had implemented binding economic actions against companies involved with the apartheid regime.
Nebraska's Pioneering Role
Nebraska holds the distinction of being the first U.S. state to divest from South Africa. Initiated by state senator Ernie Chambers, the effort began with a non-binding resolution in 1980 calling for the reallocation of state pension funds invested in South Africa. This was later strengthened by legislation in 1984, mandating the divestment of all funds from companies engaged in business with South Africa, resulting in the divestment of $14.6 million.
Federal Legislative Efforts
The Comprehensive Anti-Apartheid Act of 1986
Building on state and local actions, federal legislation gained momentum. The Comprehensive Anti-Apartheid Act of 1986, introduced by Congressman Ronald Dellums, imposed significant sanctions. It banned new U.S. investment in South Africa, prohibited sales to its police and military, and restricted new bank loans, with exceptions for trade. The Act also banned imports of specific South African goods. Despite a presidential veto by Ronald Reagan, Congress, notably the Republican-controlled Senate, overrode it, demonstrating the political strength of the anti-apartheid movement.
Tax Measures and Further Legislation
Further federal measures aimed to increase economic pressure. In 1987, an amendment to the Budget Reconciliation Act removed the ability of U.S. corporations to receive tax reimbursements for taxes paid in South Africa, effectively subjecting them to double taxation and significantly increasing their financial burden. Although a more stringent sanctions bill mandating complete withdrawal of U.S. companies and trade restrictions failed to pass the Senate in 1988, its progress through the House signaled to both the South African government and U.S. businesses that more severe sanctions were likely if the political situation remained unchanged.
Economic Ramifications for South Africa
Capital Flight and Currency Devaluation
The disinvestment campaign, particularly from mid-1984 onwards, had a profound impact on South Africa's economy. The country experienced substantial capital flight, with net outflows totaling billions of South African Rand annually through the late 1980s. This outflow led to a sharp decline in the international exchange rate of the South African rand, making imports more expensive and fueling domestic inflation, which ranged between 12% and 15% per year.
Government Responses and Controls
In response to the damaging outflow of capital, the South African government implemented stringent measures. In September 1985, it imposed a system of exchange controls and a debt repayment standstill. These controls restricted the removal of capital from the country, and foreign investors could only repatriate investments through the financial rand, which traded at a significant discount to the commercial rand. This mechanism effectively reduced the dollar value received by companies disinvesting.
Criticism and Counterarguments
Internal Opposition
Within South Africa, the disinvestment campaign faced opposition from various political leaders. Mangosuthu Buthelezi, leader of the Inkatha Freedom Party, argued that sanctions would primarily harm the people of Southern Africa, particularly black South Africans, leading to increased hardship. Similarly, Members of Parliament Helen Suzman and Harry Schwarz, while opposing apartheid, contended that disinvestment would exacerbate economic difficulties for black citizens and hinder the prospects for political negotiation. They viewed such sanctions as potentially counterproductive and self-defeating.
International Critiques
Internationally, critics like British Prime Minister Margaret Thatcher expressed concerns that sanctions would lead to poverty and starvation, thereby undermining the very populations they aimed to help. Her Foreign Secretary, John Major, suggested that disinvestment primarily served to assuage the consciences of those imposing sanctions rather than benefiting black South Africans. Many conservatives also criticized the campaign, pointing out the perceived hypocrisy of applying sanctions to South Africa while maintaining relations with the Soviet Union and China. Libertarian economists, such as Murray Rothbard, argued that increased free market engagement, rather than sanctions, would be the most effective means to dismantle apartheid.
Constructive Engagement
An alternative policy favored by some, including U.S. President Ronald Reagan, was "constructive engagement." This approach advocated for maintaining dialogue and engagement with the South African government, believing that gradual influence and cooperation would yield better results than punitive economic measures. This policy contrasted sharply with the direct pressure exerted by the disinvestment movement.
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References
References
- Panel discussion, 6 October 2014, speaker Andrea Prichett, at 47:30, https://www.youtube.com/watch?v=kQfF1702dQI
- How students helped end apartheid. University of California, May 2, 2018
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