The Corporation's South Africa Investment Decision

"In recent past, foreign capital, in particular American capital, could defend its presence in South Africa by claiming it followed progressive employment practices that set a standard for others. In the pre-Soweto period when most South African blacks could visualize only a gradual process of improvement in their status, this argument carried weight. Advent of black consciousness, especially among urbanized young and dissatisfaction with pace of events has brought a shift in attitudes. Measures which only relieve hardships like marginal raises, subsidized meals, school fee allowances, and personal loans are seen as panaceas which evade question of basic rights of workers. Moreover benevolence toward workers which may impress stockholders at home fails to get at issue of whether presence of foreign firms represents collusion with and effort to profit from apartheid."

--Official telegram from William G. Bowdler, U.S. Ambassador to South Africa, March 1977

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The Harvard Corporation's recent policy statement on its South Africa-related investments fails to address the central ethical issues raised by the role of U.S. corporations and banks in that country. In refusing to call for the total, immediate withdrawal of U.S. firms from South Africa, Harvard ignores the manifest wishes of the South African people, Rather, it attempts to develop a case-by-case analysis, employing vague mechanisms and criteria. The Corporation argues that companies which operate in South Africa "should follow...practices that will ameliorate the effects of apartheid." [emphasis added] Obviously, President Bok, Hugh A. Calkins '45, George Putnam '49, Treasurer of the University, and the Corporation members have not recognized that the people of South Africa desire to end apartheid, not ameliorate its effects.

The Corporation claims that "opinions can readily be found" against withdrawal of U.S. corporations from South Africa. Yet they are able to cite only one: Percy Qoboza, a newspaper editor and former Nieman fellow, who made his statement just after being released after five months of detention. The Corporation never mentions the hundreds of African leaders and anti-apartheid organizations in South Africa that have demanded that foreign companies cease operations there, flouting the South African law that says calling for withdrawal may be considered an "act of terrorism" punishable under South African law by imprisonment or death. In the tradition of white paternalism, Harvard chooses to prescribe for the blacks what is good for them.

A central premise of the Corporation's report is that it is possible for U.S. companies remaining in South Africa to play a "progressive" role by improving working conditions for blacks. As the Corporation itself admits, this possibility is extremely uncertain. There is no reason to expect American companies to modify their labor policies in South Africa--even in this country, U.S. firms are not noted for their spontaneous improvement of working conditions. It seems highly unlikely that they will go out of their way to liberalize their labor policies in an environment hostile to these efforts. In fact, their past record in South Africa is far from satisfactory.

But the most important defect in the employment practice argument is simply numerical. U.S. companies employ less than one half of one per cent of all black South African workers, and although we have repeatedly asked the Corporation to explain how improvement of working conditions for these few will break down apartheid, we have yet to receive a credible answer. The Corporation says only that the companies may "lead by example" --an answer that totally ignores the understandable reluctance of employers to increase wages for altruistic reasons.

But even if the companies did improve work conditions--letting Africans share restrooms and cafeterias with whites, for instance--it would not in any way compensate blacks for the whole racist apartheid system, which keeps blacks out of skilled jobs, forces them into migrant labor, systematically breaks apart families, and denies them basic rights of citizenship and franchise.

Although it expects far-reaching changes from the improvement of working conditions in U.S. firms, the report minimizes the firms' role in South Africa in other areas. It claims U.S. investment represents "only a small faction of the local economy." This is simply untrue. As the Investor Responsibility Research Center (IRRC), a Washington-based group that examines ethical implications of corporate investment, points out, U.S. subsidiaries in South Africa provide important strategic inputs to the South African government--for instance, they supply almost half the market for computers; a third of the country's motor vehicles; and over two-fifths of its petroleum. In these sectors and others, U.S. companies provide important military inputs and form the basis for much of the white-controlled apartheid economy. The companies provide crucial contacts with world markets, needed foreign exchange, tax revenue, and sophisticated technologies.

On the basis of the claim that U.S. investments in South Africa are insignificant (a claim, incidentally, which it never attempts to buttress with theoretical or empirical evidence, the Corporation says withdrawal of U.S. companies will be ineffective. This completely ignores the strategic and political significance of U.S. investments.

Furthermore, the Corporation states that South African or other foreign firms will be able to take the place of U.S. companies. Again, it provides no support for this conclusion. If U.S. companies withdrew it would finally convince whites in South Africa, as the white newspaper editor Donald Woods has pointed out, that they cannot ultimately rely on U.S. support to bolster apartheid. Foreign firms would be unwilling to take over from American investors, for they would view the situation as much more "unstable."

In fact, in most cases, foreign firms cannot supply the technologies now made available to the apartheid regime by U.S. multinationals. Where alternative technologies are available they are often more expensive. Similarly, U.S. banks--suppliers of fully one-third of South African credit needs--cannot be replaced, except at prohibitively high interest rates. In any case, it would be difficult for the regime to continue to arm the military at the same high rate it has recently.

President Bok has promised to call for withdrawal from South Africa of those companies that do not disclose data on their employment and sales data and other policies within a year. But it is illegal for companies in South Africa to publicize sales to the military or Rhodesia. Such transactions are camouflaged as sales to other government agencies. The United States Department of State claimed it could not investigate Mobil Oil marketing in Rhodesia, because of these practices; does the Harvard Corporation think it can be more effective?

The Corporation intends to implement its policies via an ill-defined, time-consuming case-by-case analysis of the practices of each company. Unless Harvard specifies clearly the standards it intends to apply, this analysis will produce mountains of paper, hours of debate, and years of delay--but no real change in the University's position, let alone the position of South African blacks.

In any case, the Corporation has set up no group to evaluate the companies. The ACSR, we have been told many times this year, is designed to deal with ethical questions related to Harvard's investments. Yet when the ACSR voted overwhelmingly last week to support shareholder resolutions calling upon Motorola and 3M corporations to discontinue their South African operations, Hugh Calkins, acting on behalf of the Corporation, decided instead to abstain. This action made a mockery of their protestations of reliance on the ACSR--itself hardly a representative body. Unless the Corporation itself intends to review every company, it must either respect the ACSR's recommendations or establish another agency to consider these questions.

Particularly disturbing, considering the Corporation's professed abhorrence of apartheid, is its reluctance to initiate shareholder resolutions, as the ACSR and Southern African Solidarity Committee (SASC) recommend. The Corporation bases this policy entirely on the speculation that it would then be bombarded with requests to initiate many other resolutions. Were this to happen, however surely the Corporation could decide on an appropriate course of action. As the Corporation has already stated that South Africa is a special case, it could refuse to act on other topics; or it could, if it chose, decide to take an ethical stand in several areas. Since it is finally committed to evaluating corporate activities in South Africa, and to taking a moral position, the Corporation should act on its findings. Considering that the Corporation rejects divestiture in favor of "working within the system" it is only right that it uses its influence as effectively as possible within the corporate structure.

For these reasons the Harvard Corporation's report is absolutely unacceptable. At the same time that we press the Corporation to implement the few positive sections of its policy, we will continue to work for a more acceptable decision.