British companies find it hard to cut big South African stakes

Despite its move to disengage from South Africa late last year, Barclays Bank is still being boycotted by anti-apartheid groups and, along with many other British companies, continues to remain heavily involved in the country. Indeed, Barclays and the London-based Anti-Apartheid Movement (AAM) recently held discussions about Barclays's continuing, albeit reduced, presence in South Africa.

Now, as Barclays struggles to satisfy the critics, other British companies have become the target of anti-apartheid groups. Royal Dutch/Shell, one of the main suppliers of fuel in South Africa, has recently been the focus of a full-scale international boycott, and pickets have been mounted outside branches of Standard Chartered, a British merchant bank, around the world.

Some 280 to 300 British companies have investments in South Africa. Their involvement represents about 40 percent of all foreign investment, according to the Anti-Apartheid Movement.

The value of direct British investments in South Africa is estimated at about 2.7 billion ($4.25 billion), according to the United Kingdom-South African Trade Association. This figure stood at nearly 6 billion several years ago, but has fallen largely because of the recent collapse of the rand, the association says. Jobs tied to the economy

The heavy British presence in South Africa stems from its colonial and trading presence in the country during the days of the empire.

``The historical link dates back to last century after the Boer War,'' says Tim Bird, the spokesman for the UK-South African Trade Association. ``There has been a longstanding historical link between the two countries and it extends to all sorts of things, including family and language ties.''

These traditional connections have remained strong, and many British jobs and profits now depend on exports to South Africa.

At the same time, Prime Minister Margaret Thatcher's opposition to divestment and her refusal to apply sanctions has given important psychological support to those companies reluctant to withdraw from the country.

The list of corporations with a high profile in South Africa reads like a Who's Who of British industry. Besides Royal Dutch/Shell, it includes British Petroleum, Imperial Chemical Industries, Plessey Company, Lonrho, EMI Industrial Electronics, and ICL (UK), among many others. They have all invested on a significant scale in South Africa, but the precise amount of investment in the country varies widely and is difficult to pin down.

The AAM contends Royal Dutch/Shell, the Anglo-Dutch giant, is involved in many ways in the country. It claims the corporation owns half of the largest oil refinery in South Africa outside Durban, that it is opening more gas stations in addition to the several hundred it already controls, and has recently opened a lead and zinc mine in the country.

BP also has a full chain of gas stations, sells oil to the police, and has coal mining interests in South Africa.

Imperial Chemical controls nearly 40 percent of AECI, its South African associate, which is involved in making explosives for the mining industry and is also believed to produce tear gas for the police and the Army, according to the AAM.

Plessey, an electronics manufacturer, has been accused of breaching the arms embargo to South Africa by supplying it with high-tech communications and radar equipment.

These companies have their own views of their involvement in South Africa. BP says it does not discriminate against anyone who wishes to buy oil and does not sell oil only to the police. Imperial Chemical denies any link with the South African security forces and says AECI does not manufacture tear gas. Plessey contends that it has supplied air traffic control systems meant for civilian uses and has done so with the approval of various British governments.

Of the banks, Standard Chartered is the world's largest lender to South Africa, with $1.2 billion in loans to the country, according to the AAM.

Barclays, however, attracted the most attention in Britain last year when it sold its remaining 40.4 percent stake in its South African associate, Barclays National Bank Ltd., for the equivalent of 82 million ($130 million).

Nonetheless, anti-apartheid groups are still waging a scaled-down boycott and demanding that the bank sever all links with South Africa.

Barclays has not yet repatriated the funds obtained for the sale of its shares in its former South African associate, and it continues to treat this firm as a correspondent bank. In addition, with the South African government's freeze on the repayment of foreign debt, Barclays is still owed more than 700 million ($1.1 billion) in loans. Bank eyes US market

The anti-apartheid groups are demanding that Barclays either seriously press the South African government for the repayment of the loans or resign from a committee of international banks that is attempting to negotiate a settlement.

Barclays's pullout last year followed a host of similar decisions made by American companies such as International Business Machines, General Motors, and Eastman Kodak, which said they were leaving because of South Africa's racial segregation laws.

The Barclays move represented an about-face in policy for the bank. After years of advocating constructive engagement in South Africa as the best way to bring about change, it abruptly abandoned this approach. Its action was dictated by commercial and political pressures the bank was facing elsewhere.

``There was a lot of political pressure to pull out,'' says Norrie Morrison, an analyst at Kleinwort Grieveson Securities. ``With the bank under such political pressure, it meant that economically it was bad news.''

In Britain, Barclays's share of the student market dropped from 25 percent to 17 percent in the last three yearsbecause of vigorous anti-apartheid lobbying. Although this may appear to be insignificant, today's students are seen as tomorrow's professional class, and they are banking elsewhere.

Equally, in the commercial world of corporate clients, Barclays had been losing some accounts to rivals and foreign banks.

With the depressed South African economy, the decision became financially easier, because Barclays's South African associate contributed only 2 percent to the parent company's profits during the first half of 1986. The political cost of having to explain its position to shareholders outweighed any financial gain the group might have derived.

One of the most crucial factors in the Barclays decision is thought to lie in the United States, where the bank has major expansion plans and assets of more than 10 billion. Barclays is seeking to move away from its traditional colonial base and become more oriented toward the Pacific, with much of its efforts concentrated in North America.

Barclays has just completed new headquarters on Wall Street and has a consumer finance company in more than 30 states, with small retail banking outlets in New York and California. It is believed to be seeking to expand further by acquiring a New York investment bank to complement the conglomerate it created in London ahead of the ``Big Bang,'' when the securities market was deregulated last October.

To accomplish these goals, it did not want the stigma of being a major player in South Africa.

Although many British companies have no immediate plans to withdraw completely from South Africa, a handful have reduced their interests over the last year. Hill Samuel & Co., a British merchant bank, has dropped its stake from 70 percent to 15 percent of its South African subsidiary. Prudential Insurance and Legal and General Insurance have reduced their holdings.

It is not clear whether companies have adopted this strategy because the situation is no longer commercially sound, or if it represents an effort to deflect bad publicity and retain a presence in case the situation improves.