Some US Firms Again Look at South Africa

A SMALL but growing number of American companies have been going back to South Africa since the federal ban on new investment in that country was lifted in July 1991.

In the past 19 months, about 20 United States companies have opened offices, established subsidiaries, or placed employees in South Africa, up from three firms in 1991. In the 1980s 168 US firms pulled out of South Africa because of its apartheid policy, according to the Investor Responsibility Research Center (IRRC) in Washington. Microsoft, Lotus Development Corporation, Visa International, and Cummins Engine Company are among some of the firms now doing business there.

"The number has picked up quite a bit," says Alison Cooper, a spokeswoman for the IRRC. But "we're not seeing huge operations going in." About 123 American firms have direct investment or employees in South Africa, but most of the new operations have fewer than 25 workers, Ms. Cooper notes.

Because of political instability in South Africa, most US firms have not invested in plants and equipment but have made less risky licensing and distribution agreements with South African companies.

"A lot of these [US] companies may be testing the water by just establishing a distributorship instead of opening an office," Cooper says. Since July 1991 the number of American firms with non-equity links in South Africa has jumped from 184 to 349, according to the IRRC.

Most US firms contacted for this article declined to comment on their involvement with South Africa. About 160 city and local governments have laws penalizing US companies that do business in South Africa. These local authorities "don't give city contracts to a company that has ties with South Africa," Cooper says.

"We haven't lost any business because of [the selective contracting law]" says Rebecca Seel, a spokeswoman for Lotus, which has two distributors in the country. Lotus has explained to local governments its equal-treatment policy for its nonwhite workers in South Africa.

"When [President Frederik] De Klerk initiated the dismantling of apartheid in 1990, South Africa suddenly appeared on a US corporate radar screen," says Emily Solomon, an international trade specialist for the US Department of Commerce. But most American companies need a green light from Nelson Mandela and their local and state officials. Mr. Mandela has said he will welcome new investment in South Africa only when a nonracial government is in place. Many US companies await Mandela's go ahead.

Despite the political turmoil in South Africa, there is strong market potential for US products, Ms. Solomon says. Last year American exports to South Africa totaled $2.4 billion, up from $2.1 billion in 1991. US computer firms captured about 50 percent of the software and 20 percent of computer hardware markets.

South Africa imported $300 million in US grain last year. It is the largest importer of parboiled rice, averaging 340,000 metric tons each year. Uncle Ben's Rice concluded a distribution deal Feb. 1 with Royal Foods, a local food company.

Last year, the US Export Import Bank guaranteed a 12-year loan to South African Airways for the purchase of a $90-million Boeing 747 and is expected to finance another plane this year, says Charles Leik, vice president of the Africa and Middle East division of EXIM Bank. Ultimately, the US economy benefits from this, Mr. Leik says. Each $1 billion of increased exports creates 20,000 to 30,000 jobs in the US, according to the Commerce Department.

But what is good for the US economy is not necessarily good for the African National Congress (ANC). "In the near future, when we have an interim government, we will need foreign investment," says Madoda Hlatshwayo, deputy chief representative for the ANC office in Washington. "But right now when people are being abused ... economic developments and benefits only go to the white community, not to the African community."

"Sanction is the last political card [for the ANC] in negotiating with the government," says David Altman, president of Made In USA Inc., a Washington-based marketing company. Mr. Altman is preparing for a "Made In USA Expo" in Johannesburg in September and expects more than 200 US firms to attend. The Expo is a chance for US firms to compete with Japan and Europe, he says. "While there has been a sanction [by the US government], the Europeans and the Japanese have been enjoying themselves without real c ompetition from America for the last 12 years."

You've read  of  free articles. Subscribe to continue.
QR Code to Some US Firms Again Look at South Africa
Read this article in
QR Code to Subscription page
Start your subscription today