S. Africa will pay to evade sanctions. Enterprising middlemen willing to help Pretoria circumvent restrictions are likely to score big profits
The international sanctions imposed on South Africa will not cost Pretoria a great deal, but sanctions-busting will. Sanctions by the United States, the European Community, and Japan combined effect only 9 percent of the $16.5 billion in goods South Africa exported last year. Passing the sanctions was no great sacrifice to the US or the EC. The US will stop only about 25 percent of its South African imports, small to begin with, and the EC some 4 percent.Skip to next paragraph
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``The impact on international trade is very small. It's just a signal. And I think they've probably already gotten the message,'' says Colin Lawrence, associate professor of economics at Columbia University.
Nonetheless, Pretoria is determined to evade the bans. That may prove costly. Just how costly is difficult to assess. But already the nation's resources and manpower are being diverted.
Fred Bell, head of Armscor, the South African government armsmaker, was appointed chief sanctions-buster in July. ``Unconventional trading'' offices are reportedly springing up in other government departments. Johannesburg newspapers run ads for companies offering to help slip goods past the sanctions.
``Yes, sanctions are generally easy to get around,'' says Michael Mastanduno, a professor at Hamilton College. ``If the US had banned South African gold, you could call a Swiss bank, move it through there [to the US]. Fungible assets are difficult to control. Even items like steel can be shipped through warehouses set up in neighboring states, then stamped with `Botswana' or `Swaziland.' ''
Indeed, South Africa, reportedly, already masks product origins through such means as shipping steel through Singapore and packing oranges in crates marked ``Mozambique.'' South African Airways is also said to be negotiating with Swaziland and other neighboring states in case of an EC or Commonwealth ban on flights to and from South Africa itself. It's widely rumored that SAA will repaint and lease its jets under another country's colors.
And, adds Mr. Lawrence, a native South African, ``I know of a Canadian who imports food stuffs from South Africa. He has it repackaged in Europe before it comes over.''
But such tactics come at a price. ``You can't go through a third company or country without paying for it. Misdocumentation means somebody has to violate a law. And you pay for relabeling, extra transportation, extra handling costs,'' says Herbert Roskind, a longtime international trader.
``Sanctions mean you tend to buy more expensively and sell more cheaply because you have to pay someone for taking the risk. But we never had any difficulty in finding what we wanted,'' says a former Rhodesian government official. White-ruled Rhodesia endured 15 years of sanctions before becoming black-ruled Zimbabwe.
Last fall the US, the EC, and Japan placed similar bans on computers and nuclear technology sold to the South African police, military, and apartheid-enforcing agencies. This ban has already resulted in computer equipment selling at premiums of up to 50 percent.
If Europe were to choose to also ban coal imports, it is likely that South Africa would have to chop prices to attract new buyers. That could lead to lower coal prices worldwide. Middlemen are, therefore, often the chief beneficiaries of sanctions. ``It's a heyday for offshore trading companies,'' notes a Washington textile trade attorney. ``These guys love sanctions.''
Others who tend to profit are countries that have no qualms about trading with the South African apartheid state. Taiwan, for instance, is the only Asian country with full diplomatic relations with South Africa. Trade between the two nations increased sharply this year. Analysts say trade with Hong Kong, South Korea, Singapore, and Israel will also rise. Additionally, Pretoria recently decided to keep data on its trade with other countries classified.
It is yet unclear whether neighboring black African states will be harmed or helped by sanctions, though most analysts say the impact will certainly damage their economies. Since most Southern African trade goes through South Africa's ports, they may find themselves caught in the crossfire. A recent article in The Economist suggests that equipment bound for Zambia could easily be diverted to the production lines of South Africa's Transvaal region.
But if South Africa is forced to siphon goods through neighboring states to cloak their origin, this may provide ``frontline states'' with some leverage over Pretoria. A number of states in southern Africa, like Zambia, Zimbabwe, Botswana, Mozambique, Lesotho, and Swaziland depend heavily on South Africa for trade routes and job markets for emigrant labor forces.
``Sanctions are not necessarily aimed at hurting South Africa economically, but to force them to go to the frontline states,'' says David Hauck of the Investor Responsibility Research Center, a non-profit Washington-based policy group. But other analysts argue that the other states of the region are already too closely linked, too financially dependent on South Africa.
Analysts say whatever short-term costs South Africa incurs, a rising price of gold, could, in the long-term, offset the expenses. ``No one expects the economy to fall apart because of sanctions. But if it becomes a seige economy, some argue that the isolation may eventually put some psychological, if not economic pressure on the goverment,'' says one congressional research analyst.