CENTRE AGAINST

CENTRE AGAINSTAPARTHEIDDEPARTMENT OF POLITICALAND SECURITY COUNCIL AFFAIRS NOTES AND DOCUMENTS*24/79; I~iitSeptember 1979'- YN~V ~TRANSNATIONAL CORPORATIONSAND THE SOUTH AFRICANMILITARY-INDUSTRIAL COMPLEXbyAnn Seidman and Neva MakgetlaL-Note: This issue is published at the request of the Special Committee againstApartheid. Professor Seidman is Visiting Professor at Brown University,Providence, Rhode Island. She is the author of several books and articles on theeconomies and development of southern Africa.Mrs. Makgetla is a graduate student in economics. The views expressed are thoseof the authors.J79-234o07All material in these notes and documents may be freely reprinted.Acknowledgement, together with a copy of the publication containing the reprint,would be appreciated.Js

Table of ContentsPagesIntroduction . . . . . . . . . . . . . . . . . . . . . . . 1I. Transnational corporate investments in the South Africanmilitary-industrial complex ..... ... ................The South African control network ................. . . . . 6Iron and steel . . . . ........................... ...... 11Chemicals . ............. ......................... . .. 16Transportation industry ........ .*.. *. ....................... 18Electrical equipment and machinery . . . . . . . . . . . . .. . 22Computers . . . . . . . . . . .. ......................... . 25Nuclear technology . . .......................... . 0 . .. 27Other military-related industries . . . . . . . . . . 30The transnational corporate oil industry ........... . . . . . 32

II. Transnational corporate transfer of military equipment andweaponry . . . ..... . . . . . . . . . . . . . . . ..III. Direct and indirect transnational bank finance of militaryexpenditures . . . . . . . . . . . . . . . * 0 . . .. . .. . 42Transnational banks' South African affiliates . . . . . . . . . 44The transnational banks' contribution . . . . . . . . . . . . . . . . 48Transnational banks as wholesalers for credit to South Africa . . . . 53International banking consortia . . . 0 & . . .. . .. . . . .. 54Transnational banks' role in mobilizing foreign credit . . . . . . 55Home Government insurances and guarantee programmes . . . . . . . . 61 SouthAfrican gold . ....................... 63IV. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . .. . 66

-1-Introduet ionTransnational corporations continue to play a crucial role instrengthening the South African r6gime's military capability, despite the UnitedNations mandatory arms embargo, in three ways. First, transnationals continie toprovide technology and finance to build up the key advanced, capital-intensivemachinery and equipment industries that constitute the foundations of themilitary~.industrial complex that enables South Africa to boast that it can produce75 per cent of its own military requirementsdemestically. /Transnational firms with subsidiaries and/or affiliates in South Africa also ship inparts and materials for the basic military equipment and machinery they producethere. Secondly, transnational corporations sell to South Africa that 25 per cent ofthe weapons and military machinery which South African industry cannot yetproduce. Thirdly, transnational corporate banks and associated financialinstitutions continue to help the South African regime obtain the necessaryfinance to buy the military equipment and weapons produced domestically andinternationally.It is impossible to obtain aggregate data to expose the full extent of continuedtransnational corporate involvement in the South African military build-upbecause such activity has, over the years, been conducted in violation, first, of thevoluntary United Nations arms embargo imposed in the early 1960s; and,secondly, since 4 November 1977, the United Nations mandatory arms embargo.This brief paper, therefore, only provides illustrations of the way transnationalcorporations have participated in these three types of activities.I. Transnational corporate investments in the South African military-industrialcomplexThe rapid expansion of military expenditures by the South African minorityregime, following the Sharpeville massacre, significantly stiiulated themultiplication of transnational corporate investments there in the 1960s and 70s.The United States military journal, Armed Forces Journal International, observedthat South Africa's increasing expenditure on capital goods for the military, "has

resulted in development of skill locally, and has provided economic growth to thecountry." 2/ Transnational corporations investing in South Africa benefitted bothdirectly, in the form of contracts to sell parts and materials to the military, andindirectly in terms of a more generallyexpanded market.I/ Abdul S. Minty, statement to the United Nations Special Committee againstApartheid, A/AC. -115/L. 485.a/ Armed Forces Journal Internationa1 (Washington, D.C.), June 1973.

-2-South Africa's military expenditures multiplied rapidly after theSharpeville massacre, over six times by the end of the 1960s. By 1977/1978 it hadmore than quadrupled again to total $1,645 million. J/ In 1978/1979 it rose stillfurther to $1,929 million. /The South African Government, itself, entered directly into militaryproduction through ARMSCOR , a parastatal holding company created in 1969.About 70 per cent of the Government's defence expenditures for armaments goesto ARMSCOR's seven wholly-owned subsidiaries. _/ ARMSCOR makeshundreds of contracts' each year with private firms, including subsidiaries oftransnational corporations, to produce parts and materials for incorporation inmilitary supplies and equipment.After 1970, the South African army began to introduce the most modernequipment available. This was especially important to enable the scarce supply ofskilled white workers to man the expanding military force without drawing onblacks. The share of the defence budget allocated for "armament procurement andspecial equipment to replace obsolete gear" rose from about a third to half of thetotal in the first three years of the 1970s. 6/ About $280 million was spent onaircraft, $125 million on ammunition, and $110 million on radio, radar and otherelectro-technical equipment. The South African regime took steps to stimulatelocal manufacture of as many of the essential parts and equipment for its growingmilitary establishment as possible. 7/At the end of 1978, about Rl billion of ARMSCOR spending - two thirds of thetotal military budget on domestic armaments production in the coming fiscal year- was expected to provide further major stimulus for the socalled "private" sector.About 60 per cent of ARMSCOR's spending "goes directly into private enterprisecoffers and another R300 million is contracted to ARMSCOR's subsidiarieswhich in turn subcontract up to 75 per cent of their work to the private sector." 8/The United States publication, International Defense, 9 reportedin the early 1970s that South Africa could manufacture a wide range ofexplosives, ammunition, small arms, napalm bombs, guided missiles, aircraft,radios, mine detectors and other classified electronic equipment.Strict South African Government secrecy laws make it impossiblei, without directaccess to official South African Government or private company files, to assessthe extent to which individual transnational firms are involved in producing forthe South African military machine. Official reports show that private contractors

were awarded $52 million worth of contracts for military production in 1971/72,and double that amount in 1972/73. Most/ South Africa Digest (Pretoria: Government Printer) 30 September 1977._/ South Africa Digest, 3 November 1978./ Guardian, London, 5 December 1973.6/ Institute for Strategic Studies (London) Survival, June-July 1972. L/ "Call foran end to all military co-operation with South Africa",Notes and Documents, 18/73, 1 October 1973. 8/South Africa Digest, 3November 1978. 2/ International Defense, December 1971, Vol. 4, No. 6.

-3-of these funds were spent for engineering and electronics equipment andmachinery 1/ in which transnational corporations have invested heavily. In 1973,the Defence Department reported that half of the total armaments expenditureswere paid to about 200 contractors and sub-contractors in South Africa itself.These expenditures provided a considerable domestic demand for expandedmanufacturing production.In addition, transnational firms sold licences to local firms for a wide range ofmilitary equipment. In 1974, South African began to build its own F-1 Miragefighter planes under license from the French firm Dassault.It was already producing "in whole or nearly so ... advanced versions ofItpala aircraft (the Italian Aermacchi MB-326), Eland armoured cars, and manysmall arms including the Belgian FN rifle". AL/ According to its DefenceMinister, 3/ South Africa was expected to start building its own tanks soon.Domestic military purchases undoubtedly contributed significantly to theexpansion of demand required to stimulate domestic manufacturingindustries. In the midst of the slump in the mid-1970s, military spending by theSouth African Government was the primary spur to major sectors of the domesticeconomy.In 1977, following the United Nations Security Council imposition ofthe mandatory arms embargo after the death in detention of Steve Biko, the SouthAfrican Government announced that it would not hesitate to take over the plant ofany transnational corporation which refused to produce strategic materials uponrequest. This implied that any transnational corporation's South African affiliatemight, at any time, be required to produce military or military related supplies forthe South African Government if so ordered. i_/ARMSCOR's chairman made it clear that, despite the United Nation's*ilitary embargo, it would treat the licences it had obtained from transnationalcorporations for military production as little more than "recipes". He insisted, "wehave paid for them and we have every right to continue with production". U/1O/ Guardian, 5 December 1973.11/ Eveninx News, 19 February 1974.Armed Pbrces Journal International (Washington, D.C.), June 1973. Ibid.L4/ The Washington Post, 11 November 1977.I/ Financial mail, (Johannesburg), 13 June 1978.

Table 1Current defence industry in South Africa(a) Indigenous designYear Year indesign pro- Status of programe,Country Designation, description bxgun duction other informationTankMine-clearing vehicle"Whiplash" air-to-air miss, IR-homing196619761973 1972Government announced it was ready to start series pirduction of indigenous tanksbut no further details publishedNo further information since 1973Range: 550 kmElectronicsEngines NapalmChemical weapons: nerve gas, tear gas196919681960Local engine on Eland II ACManufactured entirely from local materialSelf sufficiencyachieved since large investments in arms industriesSource : World Armaments and Disarmament, Sipri Yearbook, 1978(Taylor and Francis, London, 1978, Stockholm International PeaceResearch Institute)South Africa

-5-(Table 1 continued)(b) Weaponscurrently produced under licenceLicensee Licenser South FranceAfricaDesignation. description Atlas AMirage FI-CZIA ZfighterYear orYear or licence 1971Year in production1971-78Status of programme. other informltiouiOrdered: 48 consisling of 32 FI-AZs and 16 FI-CZsEland armoured car

(Panhard AML 60190)France/FR "Jodo-Coutipho "-class Germany frigateIsrael "Reshef".class fastmiss craftItaly Atlas i#1p0l1 II lightstrike (MI1.326K)AFIC RSA-200 falconcivil/nlitary lightplaneAtlas Atf.3C"Bosbok"monoplaneItalyJUSA C4,%f Kud, (A.-60/AM-3C derivative)STOL. light obscrva-1965 1967Indig: - 100 %; second generation de-mloped locallyFeb Announced as indigepous1975 construction but perhapsorigilally to have been built inPortugalLate (1975) Displ: 430 t speed: 30 knots;1974 3 under construction inflaifa. 1 in S. Africa1973 197S Production of Ihpala Nlk Iended %%ith 151 built; 50 Mlk 11 ordered1965 1967 Production temporarilysuspended1971 1975(1974) 1975Most. if not all.asseniblcd by AtliasOrdcred: 37; dcliverics now thought to ha%c startedWorld Armaments andDisarnanint,(Taylor & Francis, London, 1978,SIPRI Yearbook 1978StockholmInternational Peace Research Institute).Source:

-6-By the 1970s, transnational corporations owned about 40 per cent ofSouth Africa's manufacturing industry. They played an especially importantrole in those strategic sectors which were essential to the strength andrelative independence of what had, over the years, become a powerfulmilitary-industrial complex. Iron and steel, chemicals, auto, electricalequipment and appliances, machinery, and engineering industries furnishthe industrial infrastructure essential for development of a relatively

independent military capacity. In the years following the Sharpevillemassacre, the major thrust of transnational corporate investments wasto provide advanced technologies, managerial skills and finance to thesestrategic sectors in South Africa.The South African control networkTo comprehend the significance of the transnational corporations'contiibution, it is essential to realize that the South African militaryindustrialcomplex is dominated by a closely interwoven network of Governmentparastatal, a small handful of giant domestic mining finance housesdominated by the Anglo-American corporation, and transnational corporateinvestors. This may be illustrated by the following diagramChart I: The South African military-industrial complex"Private Sector"*South African Government Parastatals "Privately" heldcorporations(State corporations)Administration ARMSCOR (military) Anglo-AmericanCorporationPolice ISCOR (iron and steel) plus six other miningArmy ESCOM (electricity and nuclear) finance housesAirforce SENTRACHEM (chemicals) TransnationalcorporationsNavy SAH&RR (harbors and railways) 40% of SouthAfricanSASOL (oil-from-coal) manufacturingNATREF (State oil refinery) Transnational corporateIDC (State development corporation) banks Etc. 60% of 20largest South*Designated as "private" by South African r6gime. African banksAs the South African Yearbook declared in the early lQ70s IL/the gold mining industry was "controlled by seven major groups or financialhouses." These were: the Anglo-American Corporation, Anglo Transvaal(Anglovaal)Rand Mines, General Mining and Finance Corporation (GM and FC),JohannesburgConsolidated Investments (Johnnies), Gold Fields of South Africa (GFSA, anassociate of a British company, Consolidated Gold Fields), and UnionCorporation, Ltd. Of the six major mining finance houses establishedbefore 1920, three were founded by South African diamond magnates (RandMines - Beit; GFSA - Rhodes; Johnnies - Barnato); two were controlled byGerman banks; and one, Anglo American, was "founded ... with South Africanand an extra injection of British and American - capital." 17/16/ De Ga ublishers, State of South Africa, (Johannesburg, 1973)./Ruth First, Christobel Gurney, Jonathan Steele, The South African ConnectionUdon: Maurice Temple Smith Ltd., 1972).

-7-Most of the foreign capital available to the locallycontrolled mining financehouses was initially provided in the form of indirect investment through theLondon Stock Exchange or the money markets in London,New York, or continental Europe. By the mid-20th century, as the South Africans,themselves, reinvested their profits in mining, however, the relative proportion oflocal capital increased. 18 / The percentage of mining dividends paid abroadsteadily declined. In 1918, four out ofevery five dollars in profit was remitted abroad. By 1965 this had dropped toabout one in four. In absolute terms, however, foreign shareholdings and remittedprofits increased as the k nes expanded.Not only were the mining finance houses large in terms of theirtAtended investments in mining and other industries. They were so closelyintertwined that to conceive of them as separate entities would be entirelymisleading. As the official South African Yearbook observed, "6o-operationbetween the individual groups is close, and directors areoften exchanged." 12/By the 1960s, Anglo-American, by far the most powerful of the South Africanmining finance houses, had itself become essentially a transnational corporation.LO/ About 56 per cent of Anglo's shares were held in the United Kingdom, butAnglo had cemented close ties with the United States firm, Engelhard. Anglo'soverall assets were estimated in 1974 at over$T.4 billion, equal to about a fourth of South Africa's total national product. TheAngloAAmerican parent company, alone, had investments totblling $1.8 billion.The capital of the complex of mining, industrial and other kinds of companiesadministered within the group totalled over $5 billion.Anglo has become part of the world network of multinational corporations. Thisis illustrated by its relationship with Charter Consolidated, a British group whichacted as Anglo's agent in the United Kingdom and with vhich Anglo launchedmany ventures, not only in South Africa, but also internationally. Charter ownd10 per cent of Anglo. Charter's quoted and unquoted investments in the early1970s totalled almost a billion dollars. A little over a tenth are in the UnitedKingdom. Almost half are in South Africa. The remainder are scatteredthroughout Asia, Australia, the United States, continental Europe and the rest ofAfrica. South Africa provided 44 per cent of Charter's investment income in 1973,followed by Zambia.12/ Da Gema Publishers, State of South Africa, M. cit.2 See Anglo-American Corporation, Annual Report, 1971, for its assets,subsidiaries, and affiliates, unless otherwise cited.

-8-Anglo's partnership with Charter found expression partly in Anglo AmericanCorporation of Canada Ltd.,, which was established in 1966 to consolidate mostof Anglo, De Beers and Charter interests, including "both direct and indirectinvestment in copper, zinc, cadmium, gold, silver, potash and uranium mining,chemical, crude oil and natural gas production and prospecting operations." AAC

Canada owns 34.75 per cent of Hudson Bay Mining and Smelting, 40 per cent ofFrancana Development Corporation and 10 per cent of Anglo Lake Mines Ltd.Charter owns ten percent of Rio Tinto Zinc.It also held up to ten per cent of the equity of, among others, Falconbridge NickelMines of Canada; Alcan Aluminium; Union Corporation of South Africa; BritishPetroleum; Shell Oil; "Shell" Transport and Trading, Ultramar (which are all oilcompanies).; Berelt Tin and Wolfram (Portugal); and the United States firmsAtlantic Richfield, Exxon, Mobil Oil, Phillips Petroleum, Standard Oil (Indiana)and Bethlehem Steel.Anglo-American is also closely interlocked with the United States firm EnglehardMinerals and Chemicals Corporations (EMC), which markets ore and minerals,mines kaolin and other non-metallic minerals and refines and manufacturesprecious metals for industry. As a result of a complex series of stock transactionstaking place from 1969 to 1972, the Anglo-American group had come to ownabout 30 per cent of Englehard's common stock and 20 per cent of its preferredstock. 21/ Englehard family interests own about 11 per cent of the common and 7per cent of the preferred stock of the company. G. W. H. Reilly, who came upthrough the ranks of the Anglo-American Corporation to become president andchairman of its board of directors, also sits on the board of Englehard Mineralsand Chemicals Company.Another example of Anglo-American's extensive international links isthe Minerals and Resources Corporation, Ltd., a member of the groupincorporated in Bermuda. Oppenheimer is also its chairman. This firm acquired43 per cent of Trend Exploration Ltd., an unquoted United States company, with anumber of oil wells in the United States and Indonesia.Anglo developed a gold mine in Australia through another subsidiary, takingadvantage of the high gold prices in the world market.Members of Anglo's board of directors provide additional ties toother groups of international corporations. Anglo's chairman, Oppenheimer,serves on the boards of Barclays Bank_'and the Canadian Imperial Bank ofCommerce. G. C. Fletcher, a director of Anglo, Rand Mines and GM and FC, alsosits on the boards of Rio Tinto Zinc, Societe Nazionale Sviluppo ImpresseIndustrial, Societe Financiere Louis le Grand, and Soci6te Minitre et Maritime.Moody's Industrials, 1974, and Erglehbrd Minerals and Chemicals Corporation,Report to the Securities and Exchange Commission, United States of America,1971, pp.1-6.&2/ For the important role of Barclays in southern Africa see below.

-9-Dr. F. A. Zoellner. also on the board of GM and FC, was an advisor to theDresdner Bank A/G. ?/In short, the Anglo-American group, in itself, had become a transnationalcorporation which, although based in South Africa, had acquired investments andties in several continents through dozens of affiliates and subsidiaries. At thesame time, it had forged direct links through its board of directors with some ofthe largest transnationals in the world.

In the mid 1970s, the Anglo-American group merged with the Barlow Randgroup, the sixth largest of the big mining finance houses. The Barlow Rand grouphad a turnover of almost a billion dollars in the mid-70s. It hadbeen formed when a manufacturing conglomerate, Thomas Barlow and Sons, tookover a mining finance house, Rand Mines, in 1971. Rand Mines had previouslybeen linked with Anglo's United States affiliate, Englehard.Transnational corporations from all the Western nations expanded theirinvestments in South Africa's strategic manufacturing industries in the 1960s and1970s in collaboration with the South African Government parastatalsand the South African transnational corporation, Anglo-American. The Britishmanufacturing investments in South Africa date back into the early formativeyears when British firms played the primary role in providing technical assistanceas well as finance and the necessary capital goods and equipment for building upthe industrial base. Over the years, British firms tended to merge their interestswith those of South African firms, holding a significant proportion in the form ofminority shares. They continue today to provide technology and, as trade statisticsshow, to sell vital capital goods and equipment to their affiliates. As the Britisheconomy became increasingly enmeshed in the crisis of the early 1970s,furthermore, British manufacturing firms expanded their South Africaninvestments. In the mid-1970s, British manufacturing investments in South Africaand Namibia, combined &1rotalled almost a billion pounds sterling(L997.2 million) - more than double the 1971 figure (1407 million). Over halfthese were in basic military-related industries: chemicals (11 per cent); metalmanufacture (12 per cent in 1971; not given for the later year); and electricalengineering (18 per cent). 25/In the late 1960s and 1970s, American-based transnationals, too, expanded theirSouth African manufacturing investments. They concentrated on the newer, moresophisticated industries, like uranium processing, computer technology and motorvehicles. United States firm tended to accompany a high proportion of theirofficially reported manufacturing investments by direct control than did theBritish. 26/0/ A bank of the Federal Republic of Germany which played an important role inmobilizing funds for South Africa; see below.&4/ British statistics, like those of South Africa, combine Namibian data withthat of South Africa. (United Kingdom Board of Trade. Trade and Industry. 25February 1977).?5/ Ibid.gL/ Republic of South Africa, Second Census of Foreign Transactions, Liabilitiesand Assets, 31 December 1971, Supplement to South Africanrla"r_ larerlyih~pti, Ma~rch 1973.

- 10 -A considerable but unknown amount of additional United States capital isinvested in South Africa through companies based in other countries in whichUnited States firms hold shares. Firms of the United Kingdom, France and of theFederal Republic of Germany, in which United States transnationals participate,

also play a significant role in building up South African industrial capacity.Aggregate data as to the full extent of this indirect form of United Statesparticipation in South Africa is unavailable, though examples will be cited below.Transnationals of the Federal Republic of Germany multiplied theirmanufacturing investments in South Africa exceptionally rapidly in the late 1960sand early 1970s. Almost two-thirds of net investment of the Federal Republic ofGermany by the end of 1975 was concentrated in four branches : motor vehicles(23 per cent); chemical industry (19 per cent); machinery production (17.1 percent); and electrical machinery (6.5 per cent).French transnationals have not invested as much in South African manufacturingas did those from the Federal Republic of Germany or the United States.Nevertheless, heightened French interest has been reflected not only in theirexpanded trade, but also by increased French involvement in specific industrialprojects. 28_/Ironically, some Japanese firms, prohibited by their home Government frommaking direct investments in South Africa, invest there through United Statesfirms which own shares in them. Others licensed South African firms to assembleimported parts and materials to produce the Japanese product.The role of transnational corporations in providing the necessaryindustrial foundation for South Africa's military-industrial complex may best beillustrated by examining key strategic industries.a/ W. Schneider-Barthold, Die Beurteilung der Wirtschaftsbeziehung der BRDzur RSA,(Berlin: Deutsches Institut fUr Entvicklungspolitik, 1976),18/ "Activities of transnational corporations and their collaboration with ther6gime in South Africa", Notes and Documents, 21/77, July 1977.

- 11 -Iron and steelThe iron and steel industry is critical to domestic military production.High quality steel is essential for production of guns, tanks, rockets, airplanes andships; and military output has provided an important market for South Africa'sburgeoning iron and steel industry. South Africa's State steel corporation, ISCOR,founded in 1928, had, by the 1970s, gvown into a giant holding company, withtotal assets worth over R3 billion, and an annual output of over four million tonsof steel. 9/ It provided South African military-industrial producers with an assuredsource of low-cost, Government subsidized iron and steel products. It contributedto easing the nation's balance of payments problems, not only ending the importof steel, but, by 1978, exporting over a third of its output. 30/ISCOR's investments were financed, in large part, through borrowingincreasingly from transnational financial institutions. The South AfricanGovernment acted as guarantor. In the difficult year of 1975, alone, the netfinancial charges for ISCOR's accumulated loans totalled $87 million, 40 per centmore than its reported profits. 31/ ISCOR, in essence, has used the South AfricanGovernment's borrowing capacity to subsidize its low-cost iron and steelproduction.

Transnational steel companies continue to contribute the advanced technologies,parts and materials and capital which enable ISCOR to play its leading role in theSouth African industrialization programme. British steel firms were, historically,the first to provide technical assistance for South Africa's infant steel industry inthe early years. A number invested directly to take advantage of the South AfricanGovernment-created hot-house environment for steel industry growth. When theBritish Governmentnationalized iron and steel in the United Kingdom itself after the Second WorldWar, the newly-created British Steel Corporation acquired a number of SouthAfrican subsidiaries and minority shareholdings.in South African companieswhich had belonged to the fourteen major British steel companies from which itwas formed. These interests brought the British Steel Corporation intodirect partnership with South African private capital, especially the miningfinance houses. 2/In the summer of 1970, the British Steel Corporation agreed to a reorganization ofits South African interests which effectively handed over control of thesecompanies, in which it retained the largest single interest, to the South AfricanState owned ISCOR. This gave ISCOR more power and greater flexibility tobuild up South Africa's steel industry and, through it, to influence the entiresouthern African regionaleconomy. 33/2/ ISCOR, Annual Report and Financial Mail, (Johannesburg), 2 March 1979. /Financial Mail,(Johannesburg), 2 March 1979. L/ Star (Johannesburg), 12November 1971 and 29 October 1973: South African Digest, 22 February 197./ First, et al, The South African Connection, 22. cit.r bid.

-12-Table 2Reported annual sales and employment of some BritishSteel Corporation affiliates in South Africa 1975 - 1976EmploymentProduction activitiesBritish Steel Corp.(South African sales) Pty, Ltd.Stewarts and Lloyds of South Africa Ltd.,Dorman Long (Van Der Bihl Corp.) Ltd.,000 179,000 180,000No data 12,000 20,000Metal Service Centre and officesBlast furnaces, rolling mill steel works, plumbing and heating equipmentShipbuilding, repairing railroad equipmentSource: Dun and Bradstreet, Principal International Business, 5-1976, TheWorldMarketing Directory(New York, 90 Church Street., 19T7).Sales (M3

- 13 -In 1977, the British Steel Corporation still had what the South African FinancialMail termed "inextricable links" with South Africa. Britcor, RSC South Africa,owned 35 per cent of International Pipe and Steel Investments (IPSA), whileISCOR and Anglo-American held the remaining shares. IPSA in turn owned 52per cent of the shares of Stewarts and Lloyds. IPSA also took over Vecor (withplants at Vanderbijlpark and Vereeniging) and merged it with Dorman Long toform Dorbyl, in which it retained 56 per cent.In 1978, although affected by South Africa's industrial slowdown,Derbyl reported that it continued to expad its interests, buying up firms producingparts and equipment for local motor industry production; expanding its heavyengineering subsidiary; and developing its ship repair capacity where "we believeboth the Government and related authorities value thestrategic importance of the undertaking." Lh/The British Steel Corporation itself held a 21 per cent interest inStewarts and Lloyds which, despite the recession in South African industry,commissioned a high-speed weld mill for steel tube production in 1978, andproposed to spend $15 million in other new investments, taking advantage of theSouth African rigime's investment allowances to reduce taxes, over the next fouryears. 36 /The British Steel Corporation also, directly or indirectly, retainedholdings in Steel Wheel and AZLe, South Africa, and Pipe Couplings. In 1976, ittook up a 10 per cent holding in Consolidated Metallurgical Industries, in whichthe American firm, Allegheny Ludlum Industries, also held shares. This firmcommissioned a new ferro-chrome plant near Lydenburg.British Steel Corporation (BSC)(South Africa Sales, or Britsteel) continued to actas sales agent for the parent corporation throughout southern Africa. It madeknow-how available to local manufacturers, "frequently enabling them to developproducts competitive in the export markets of the world." Britsteel set up sixcontinuous casting machines for ISCOR. As the South African Financial Mailconcluded, "one way or another, BSC is very much a force in our own steel andengineering manufacturing industry." 3_2'Guest Keen and Nettlefolds (GKN), United Kingdom's largest privatemanufacturer of steel products, and one of the world's largest engineering groups,sold about 14 per cent of its world output in southern Africa in 1976, much of itproduced by South African subsidiaries. 3L/L4/ Financial Mail ,(Johannesburg), 19 January 1979. U/ Ibid.6/ Ibid., 21 August 1977.I/ Guest, Keen and Nettlefolds, Ltd., Annual Report. 1976 (London, 1977).

- 14 -Table 3Holdings of Guest Keen and Nettlefolds, Ltd.,or its subsidiaries, 1 January 1977 in Africa100% holdingsGuest, Keen and Nettlefolds South Africa (Pty.) Ltd. South Africa

Other holdings of less than 100%Borg-Warner S.A. (Pty.) Ltd.(20% equity and 20% loan capital)South AfricaGuestro Industries (Ptic) Ltd.(50% equity and 50% loan capital)South AfricaSource: Guest, Keen and Nettlefolds, Ltd., Annual Report, 1976, London 1977Other transnational corporations play a significant role, especially in sellingISCOR more advanced technologies. Demag, a firm of the Federal Republic ofGermany, a subsidiary of Mannesman, AG also sold equipment to Rhodesia,despite United Nations sanctions. In the mid-1970s Demag's South Africansubsidiaries included: Demag Industrial Equipment, in which it owned 75 per centof the $200,000 investment; and Plastic Technical Services, in which i-t owned 75per cent of the $100,000 capital. Demag supplied over DM 90 million (about$437 million) worth of containerization to South Africa over one two-year period.-Other firms of the Federal Republic of Germany became members of aconsortium to construct a semi-manufacturing steel plant as part of the Sishen-Saldanha Bay project in the 1970s. Kloeckner was reported to have a 7.5 per centstake, and Hoesche was involved through its participation in Estel, a consortiumof the Netherlands holding 6.5 per cent. 3_/ DEMA (DuisbUrg, Federal Republic of Germany) Ein Bericht tber dasGeschftsjahr, 1976.U/ Rsnd DailY Mail, (Johannesburg), 8 March 1975.

- 15 -The United States Steel Company, one of the two biggest in the United States,began to explore the possibility of investing directly in mining and processingiron ore in southern Africa in the 1960s in co-operation with South Africaninterests. It had established four subsidiaries there by the early 1970s.Table 4United States Steel's South African holdings, 1971Feralloys Ltd. (South Africa) 31% ferromanganese andferrochromePrieska Copper Mines (Pty.) Ltd.(South Africa) 46% copper, zincZeerust Chrome Mines, Ltd.Source: United States Steel Corporation, Annual Report, 1972.United States Steel's Prieska Copper Mines established a plant for processingcopper and zinc concentrates in South Africa in the early 1970s. -2./ In 1975,United States Steel purchased a 19 per cent interest in Associated ManganeseMines of South Africa, a major manganese ore producer which also owned highgrade iron ore reserves. United States Steel contracted to buy over 3 million nettons of this ore (minimum 63 per cent iron) annually for 15 years beginning in1978. 1 This contributes foreign exchange to the South African r~gime, enablingit to buy abroad military and other items it cannot produce.

Although Japanese steel firms were prohibited by the JapaneseGovernment from investing directly in South Africa, they had, by the. 1970s,become a cricial market for South African crude iron ore, which they processed intheir own plants in Japan. At the same time, Japanese firms began to sell moreplant and equipment to ISCOR for its expanding steel industry. Nippon Steel,Kuwasaki Heavy Industries, and Mitsubishi Heavy Industries, Hitachi andMarubani and Mitsui sold its rolling mills and blast furnaces.As part of a network of linkages that South Africa began establishingwith other regional sub-centres, ISCOR, in the 1970s, formed a steel tradingcorporation, ISKOOR, with the largest Israeli steel processor, the Koor group.Koor retained 51 per cent, and ISCOR acquired 49 per cent. ISKOOR purchasedsteel on the world market for Israel, presumably buying as much as possible fromISCOR. 42/40/ United States Steel, Annual Report, 1975.SIbid.!/ ISCOR, Annual RePort, 1974.

- 16 -ChemicalsThe growth of South Africa's chemicals industry has significantmilitary implications. By the 1970s, South Africa was able to produce its ownnapalm, nerve gas and tear gas. ! There seems to be evidence that South Africantroops used nerve gas in their attacks on refugee camps in Cassinga, Angola. VTransnational chemicals corporations collaborated with the South Africanparastatal, Sentrachem, to build the industrial foundations which has created thisdomestic production capacity. Their role is particularly important because thechemicals industry is highly capital-intensive and has economies of scalerequiring a market considerably larger than that of South Africa. South Africa,therefore, remains heavily dependent on the import of transnational firms' basicchemicals inputs and technical know-how. The South African chemicals plantsconstructed as a result of South African Government pressures depended heavilyon foreign technological information. 45/The South African parastatal chemicals firm, Sentrachem, was formed as a resultof a merger sponsored by the South African Industrial Development Corporationbetween several South African firms and the British company, BP Chemicals.This gave the British Government an indirect interest in the South Africanchemicals industry, since it had holdings in BP. Sentrachem grew rapidly in the1970s. Its assets multiplied lmost three times from $71.4 million in 1972 to$174.9 million in 1976. 'L4/Although Sentrachem remained a South African parastatal, it depended "to a greatextent on international links to stay abreast of an industry of great technologicaldepth and rate of change." 47_/ Many of the group's products were made underlicences obtained from international firms. One observer emphasized, "indeed,several of these companies have expressed their confidence in the South Africanchemical industry by sharing with Sentrdehem in the manufacture of various

products. Not only have they provided production and marketing know-how, theyhave also made direct capital investments in Sentrachem's plants."8_8/The British chemicals transnational, Imperial Chemicals Industries(ICI), collaborated extensively with both public and private South African capitalto develop South Africa's chemicals industry. South Africa had, by the 1970s,become ICI's second largest export market after the United States. 4_9 / ICI(South Africa), although a very small part of the British parent firms s world-wideinterests, ranked 21st among South Africa's top 100 companies in the mid-1970s.It owns three subsidiaries and markets basic chemicals, resins, dyestuffs, andplastics that can not be manufactured economically in South Africa.W/ SIPRI Yearbook 1978 (London, Taylor & Francis, 1978; Stockholm,International Peace Research Institute)!/ Africa News (Durham, North Carolina), 18 September 1978. Financial Mail(Johannesburg), 24 May 1971.Sentrachem, Annual Report, 1976.Financial Times (Johannesburg), 20 May 197.!L imL, Annual Revort. 1976.

- 17 -ICI owns 42.l/2per cent of African Explosives and Chemicals Industry (AECI).ICI's chairman is AECI's deputy chairman. The South African affiliate ofAnglo-American, DeBeers, owns another 42.]/2 per cent, hile the South Africanpublic holds 15 per cent. 50/ AECI collaborates directly with the South Africanparastatal, Sentrachem, to develop key chemicals projects. 5-/ It provided thetechnical expertise for Sentrachem's $350 million project to produce fuel frommaize and sugar cane which became a high priority item after the Iranianrevolution.AECI, the fifth largest South African company,52/ has become a lynchpin of theSouth African economy. It operates two of the largest commerci'alexplosives factories in the world, and is the "sole supplier" of explosfres to theSouth African Chamber of Mines. 53 / It constructed munitions plaxits for theSouth African Government.Reflecting its importance to the South African military-industrialcomplex, AECI continues to prosper despite the impact of the internationaleconomic crisis on the South African econonV in the mid-70s. Group salesincreased over a third in 1977 and a third more in 1978, while group profits rose54 per cent in the latter year. 54/Almost a fifth of all of the Federal Republic of Germany's firmsexpanding investments in South Africa were poured into the chemicals industry.The biggest chemicals firm of the Federal Republic of Germany, Hoechst,established two South African subsidiaries. One of these itowned outright, the other, Safripol, it shared (51-49 per cent) with South Africa'sparastatal, Sentrachem.The firm, Bodische Analyn and Soda-Fabrik (BASF) of the FederalRepublic of Germany owned R3.5 million worth of assets in South Africa in1975. One of its subsidiaries engaged in a joint venture with the

British-South African firm, AECI, to produce formaldehyde and kaurit urea, aswell as potash and paraffins. Its South African sales totalled R30 million in themid 70s. 55/L/ AECI, Annual Report. 1974.L/ As Denys Marvin, President of AECI explained: "The only way in which onecan possibly justify putting in some of these highcost plants ... is by doing itjointly with the competitor .... We are doing it with Sentrachen in our PVCCoalplex project. We couldn't justify it from the national viewpoint, and wecouldn't Justify it from the shareholder's viewpoint if the two of us were to presson in the same direction, putting in over-capacity at a time when this country hasno resources to spare."/ Financial M<il, (Johannesburg), 21 April 1978./ Ibid., 22 April 1977.k/ Ibid., 12 January 1979.S/ 29 August 1976.

- 18 -The FBA Pharmaceuticals, Johannesburg, a subsidiary of the firm Bayer AG ofthe Federal Republic of Germany, is reported to have the capacity to manufacturethe nerve poisons, Tabun , Sarin and Soman, in lieu of insecticides. 1/A number of United States firms had invested in the South Africanchemicals business by the mid 1970s. Dow Chemicals, in Dow Today, proclaimedits aim of remaining in South Africa where "we have a sales office and a smallwarehouse employing a total of 39 people." 57_/ What Dow did not explain iswhat kind of chemicals they are importing, but it has been suggested that they, toomight be providing nerve gas. 8/Transportation IndustryA crucial element in the South African minority r6gime's military planning is theexpanded capacity to transport military equipment and personnel rapidly at lowcost over widespread geographical areas. Large bodies of the limited numbers ofwhite troops need to be able to shift rapidly from one potential trouble spot toanother. Transnational corporate investment, pressured by the South Africanr6gime's policies, has helped build up the most modern transport industry on thecontinent.The motor car industry supplies the defence forces with transportand other equipment as well as engines and components for tanks and militaryvehicles. It also supplies the police force with vehicles, and where local vehiclesare not made, they are imported. For example, British Leyland Land Rover Kitsare imported from the United Kingdom, assembled in South Africa, and suppliedto the South African Police Force. 59/By the 197Os, some 12 transnational corporate auto producers hadentered the South African market. The economic crisis of the mid 1970s,combined with the high prices of oil, deeply affected their operations, saddlingthem with combined losses of over $40 million. In this environment, Anglo-American Corporation's auto subsidiary, fling, initiated an aggressive campaignwhich, in less than two years, had cornered a fourth of the national market. Its

first step was to purchase Chrysler South Africa, leaving the parent United Statescompany of that name with a 25 per cent holding, and consolidating production ofChrysler, Dodge, and lItsubishi cars and trucks (Chrysler had been producing theJapanese firm's cars and trucks5/ Alliance Bonn-Pretoria, Berlin/Dresden, 1967, p. 46. a/ Reprint in South AfricaDigest, 26 January 1979.5/ According to former South African soldiers, reported by Don Morton,Coordinator, SAMRAF (South African Military Refugee Aid Fund, 138 BerkeleyPlace, Brooklyn, New York, 11217) in interview, 7 June 1979. 1/ Abdul S. Minty,report to the United Nations Special Committee against Apeid, .AC-15/L.85, 22December 1977.

- 19 -in its South African plant, enabling it to evade the Japanese Government'sprohibition against direct investments there; Chrysler owns 10 per cent of theJapanese parent firm)§/ together with its own Mack trucks and Mazda cars. Theresulting firm Sigma Motor Corporation (SMC) proceeded within a few months totake over the French firm, Peugeot-Citroen, for $34 million, moving their modelsinto Sigma's production line, too. In 1978, Sigma Motor Corporation merged itscommercial vehicle operations with those of the British firm, Leyland Motor Car,to form Sigma Leyland Motor Vehicle Co. in which Anglo retained a 51 per centinterest, and the British firm Leyland, 49 per cent. British Leyland, like the UnitedStates Chrykler company apparently concluded that it would continue "reapingprofits from its partnership with Sigma," while countering "pressure from the anti-apartheid lobby in the United Kingdom" if it did not control the South Africancompany. 61, Thus Sigma Motor Co. brought together these major auto firmsunder direct South African control, while the transnational corporations continueto provide capital and technology through their minority holdings. Their homebased factories continue, too, to produce those parts and materials which theSouth African company cannot yet produce, constituting about a third of the finalproduct.Other transnational corporations continue to operate their own South Africansubsidiaries directly. The United States transnational firm, General Mtors, (GM)the biggest non-oil company in the world, remains an important direct investor inthe South African transport industry.62/ It retains its outright ownership of anassembly plant and a manufacturing factory in Port Elizabeth, and an enginemanufacturing plant just outside that city. It produces several GM models, and arange of locally manufactured components such as radiators, engines, batteries,spark plugs, springs and sheet metal parts. GM's engineers designed the "Ranger"for production in South Africa, and GM sells it through its world-wide marketingoutlets. GM's South African operations alone constitute those of a large firm,although they produced only four per cent of GM's world wide output. GMproduces locomotives for use by the South African Government's parastatal, theSouth African Harbours and Railways Corporation. General Motors, after itacquired 34 per cent of Isuzu, Japan's third ranking truck manufacturer, began toproduce small sized Isuzu trucks at its Port Elizabeth plant in South Africa. GM

has been designated by the South African regime as a national key point industrybecause of its strategic importance for the continued operation of the SouthAfrican military. In a secret memorandum delivered by hand to the Detroit GMoffice, 63/ GM's South African affiliate spelled out the implications of this status :"industries or services designated as National Key Points60/ Y. Kitizawa, from Tokyo to Johannesburg (New York: ICCR, 1975), p. 20.61/ Business Week, 21 August 1978.62/ Corporate Information Center, National Council of Churches, Church Investents, Corporations and South Africa (New York, 1973), PP. 95ff. §J/ GeneralMotors South Africa (Pty.) Ltd., Inter-Office Memo, published by InterfaithCenter on Corporate Responsibility, National Council of Churches, May 1978.

- 20 -v.. will be accorded protection in emergencies through the mediumof the Citizen Force Commando system .... (white personnel) areencouraged by authorities to Join a local commando unit."The memo explains the dual role of top GM personnel under military control"The 'G.M. Commando' would assume guarding responsibility for theG.M. plants and would fall under the control of the local militaryauthority for the duration of the emergency. It is envisaged ..... thatplant personnel could be engaged in a composite function, i.e. partnormal work and part guard duty in such situations."This double-edged role is required for top GM personnel because of the relativescarcity of skilled whites;"compulsory military service is applicable only towhite male citizens. The concept of utilizing plant personnelin a dual function is related to the fact that key skills, technicaland managerial expertise are concentrated in the same population groupfrom which defence requirements ... must be drawn."Ford, the second largest auto company, in the United States, established its firstplant in South Africa in 1923 as a subsidiary of its Canadian subsidiary. 64/ Bythe 1970s, it owned administrative offices, assembly plants for cars, vans, tractorsand trucks, an engine plant, and a parts and services depot.South African affiliates of Volkswagen (VW), Daimler-Benz and Deutz, theleading transnational auto firms of the Federal Republic of Germany, had, by thelate 1960s, captured an important segment of the South African market. TheGovernment of the Federal Republic of Germany and the member State,Niedersachsen, each owned 20 per cent of the capital of Volkswagen 61/ whichcontrolled about 15 per cent of the South African car market. In 197 VWincreased its South African investment about 60 per cent, 66./ and announced thatit planned to"invest another R5 million in its South AFrican works inthe late 1970s." 67/The parent firm, Daimler-Benz of the Federal Republic of Germany, was held28.5 per cent by the Deutsche Bank, 25.2 per cent by Mercedes-AutomobilHolding (an affiliate of the Commerzbank, Deutsche Bank, andBayerische

Landesbank) and 14 per cent by the Kuwaiti Government. L/ In turn, Daimler-Benz owned 26.7 per cent of the United Car and Diesel Distributors of SouthAfrica, which itself owned 100 per cent of the Car Distributors Assembly ofSouth Africa.64/ Corporate Information Center, Church Investments, Corporations and SouthAfrica, _M. cit.§J/ For extent of involvement by Federal Republic of Genany in industrial firms,see Centre Europ6en de l'entreprise publique, Les entreprises publiques dans laCEE (Paris: Funod, 1967), 286ff. For specific firms, see Financial Mail(Johannesburg), 22 April 1977.661 Volkswagenwerk AG, Report for Year of 1976 (Wolfsberg, Federal Republicof Germany)6/ South Africa Digest, 17 October 1976.Commerzbank (Kin,Federal Republic of Germany)Wer Gehtrt zu Wem, 1976.

- 21 -The transnational firm, Klockner Daimler and Man of the Federal Republic ofGermany, have delivered over a hundred heavy duty tractor engines to Pretoriafor transportation of military tanks. 69/ Daimler Benz UNIMOG military vehiclesare basic equipment of the South African armed forces. 7_Q/The firm, Deutz, of the Federal Republic of Germany, produced the first whollySouth African-made tractor with its own locally manufactured diesel engine in theearly 1970s. 71/ The South African army had also begun to use armouredlocomotives supplied by Klockner-Humboldt-Deutz and Man. 7_.Although the Japanese Government officially prohibited investmentsby Japanese firms in South Africa, Japanese auto companies licensed localassembly plants to produce their vehicles inside South Africa in order to capture alarger share of the market there. Toyota first established a motor assembly plant inDurban in 1962, with an initial loan of R1.5 million from Wesco InvestmentCompany and Johnnies, one of South Africa's major mining finance houses.Toyota South Africa remained essentially a franchise holder for the wholly-SouthAfrican-owned concern so that technically there was no direct investment by theJapanese parent company. An Afrikaaner family, the Wessels, owned two-thirdsof the shares. The Japanese firm provided the expertise, technology in the form ofpatents and blue prints, management skills, personnel training and advice, andnew methods for improving plant production. 73/In 1974, the company constructed a new R1.8 million plant to assemble trucks forwhich it imported the parts. Toyota South Africa sold more trucks than cars. Sincetrucks did not fall under the South African Government's requirement that twothirds by weight of cars must be produced domestically, most of the truck partswere still imported, providing the Toyota Company of Japan with an expandingSouth African market. Toyota South Africa began to produce models that servedas combined cars and trucks, a further device for evading South Africa's localcontent restrictions. Nissan Motors, Japan's second largest auto maker, betterknown as Datsun, first began to ship parts for assembly in South Africa in 1966 ata plant in Rosslyn, a border industrial area near Pretoria. Nissan licensed a new

engine manufacturing plant in 1973. The financing of the plant, about R2.7million, was channeled through Nissan's United States subsidiary. Basicequipment included machinery supplied by Herbert-Ingersoll of the UnitedKingdom, Nagel of the Federal Republic of Germany, Press Metal Co. of SouthAfrica, and Ferrand of Scotland. Nissan openly expressed dissatisfaction with theJapanese Government's "non-investment" policy. 7k/69/ Wehrdienst, No. 461/1974L/ ZDF TV News, "Heute", 28 March 1976.71/ South Africa Digest, 27 September 1974. 7/ Stern (Bonn), 2 March 1977.YJ/ Y. Kitizawa, From Tokyo to Johannesburg, 2_2. cit., p. 23. 7/ Star.(Johannesburg), 7 April 1974.

- 22 -Electrical equipment and machineryTransnational corporations built up South Africa's electrical equipment andappliance industry, providing the technologically-sophisticated, capital intensivemachinery necessary to strengthen the rule of the South African minority. SouthAfrica abounds in sources of potential electric energy, both hydro and nuclear,although it must import almost all of its petroleum. Systematic electrification ofthe economy has permitted the utilization of the most advanced automated,computerized techniques needed to overcome a chronic shortage of skilled labourwithout upgrading blacks.United States transnationals have long played a leading role in SouthAfrica's electrical equipment and machinery industry. General Electric (GE), thelargest electrical firm in the United States first began operations in South Africain 1898 through South Africa GE (SAGE). SAGE became the biggest electricalcompany in the country, manufacturing a wide range of household appliances,industrial controls and capacitors, and importing additional items for both theconsumer and industrial markets. SAGE manufactures railway locomotives forthe South African Government.In 1978, the United States parent company sold its consumer electrical equipmentand appliance industry to a South African firm, Defy, in which it retained a 23.5per cent holdingT5_/ This reduced GE's direct employment of blacks, but thetransnational continued to provide technology, parts and materials to Defy, and toshare in the profits. It continued its direct operation of more basic electricalequipment and machinery production.International Telephone and Telegraph (ITT), ninth among the largest firms in theUnited States, had also made extensive investments in South Africa. Onesubsidiary, Standard Telephone and Cables (STC) became another of SouthAfrica's largest electrical manufacturing concerns, producing a wide range oftechnologically complex electrical equipment. It supplied communicationsequipment for the police and Simonstown Naval Base, and recruited engineers tooperate the naval base equipment. In 1976, it reported that 70 per cent of its saleswere made to the South African Government.In 1978, ITT, too, sold a majority of its shares in Standard Telephone and Cablesto a South African partner _U/. Like GE, it continued to supply technical

expertise, parts and materials, and share in the South African firm's profitsthrough its minority shareholding.A second ITT subsidiary, ITT Supersonic, Africa, was initially established as amarketing agent for ITT's Rhodesian subsidiary, Supersonic Radio ManufacturingCompany. It then began manufacturing radio equipment in the Pietersburg"border areas" in South Africa, profiting from the exceptionally low wages paidthere. In June 1977, ITT sold this subsidiary to a local South African electronicsfirm, but retained a 36 per cent interest and continued to provide overseaslinkages. 78/DJ Africa New,;, 13 November 1978.T/ IT' in South Africa, May 1976.Y11 Africa News, 13 November 1978.7/ Ibid.

- 23The United States firm, Sperry Rand, established a subsidiary which, in the mid-1970s, sold about R7 million worth of aerospace, communications and farmequipment annually in South Africa. U/ Much of this equipment was capable ofmilitary, as well as civilian use. The parent company's output was usedextensively by the United States Air Force. §/ How many of the same items aresold in South Africa is unknown.British firms are also engaged in the electrical equipment and supplyfield. The British General Electricity Company's (GEC) South Africansubsidiaries produce transformers, consumer and light industrial goods, includingabsorption refrigerators, and telecommunications equipment. §l/ Plessey SouthAfrica Holdings, which owns two subsidiaries, is itself a subsidiary of the Britishfirm of the same name. One of its subsidiaries, in which it holds 74 per cent,produced semi-conductors and related devices in the 1970s. 2/ Reflecting thehistoric interdependence of British and South African interests, Plessey SouthAfrica also owned 74 per cent of the Tellurometer, a firm operating primarily inUnited Kingdom. 8/Companies of the Federal Republic of Germany invested heavily in South Africa'selectrical and communications industry in the 1960s and 1970s. Siemens8 4/South Africa is 52 per cent owned by the company of the Federal Republic ofGermany of that name, and 2h per cent by the South African parastatal, theIndustrial Development Corporation. The remainder is held by two South Africancompanies, the Federale group, and South African Mutual Insurance. The parentcompany also was closely tied to the Deutsche Bank.By the mid 1970s, Siemens South Africa owned seven plants producing electricalcomponents, data and telephone systems, and power and medical equipment. Itproduced a third of all South African post office telecommunications and railwaysignalling equipment. It built the transmission system linking the Cabora BassaDam to the South African electrical grid. It had become the parent firm's fifthlargest subsidiary in terms of sales and its largest area of investment after Brazil,Austiria and the Federal Republic of Germany itself. Siemens, Monchengladbach,

supplied an instrument for gauging rocket flights to the station at St. Lucia, Natal.85/Dun & Bradstreet, Principal International Business. 1975-76: The WorldMarketing Directory(New York, 1977), P. 1184.8o/ Sperry Rand, Annual Report, 1975. 81/ Dun & Bradstreet, op. cit., p. 1175.L2/ Ibid.8/ Plessey (United Kingdom), Annual Report, 1975. 8/ Siemens, Annual Report,1974/75. Q / Wolf Geisler, The Military Cooperation between the FederalRepublic of Germany and South Africa in the Nuclear and ConventionalField,translation of article published in book, "Sudafrika:Rassimus-Imperialismus-Befreiungskampf"Palhl-Rugenstein-Verlag,K*'n, Federal Republic of Germany, April 1978).

- 24 -The United States transnational electricity firm, General Electric,owns 15 per cent of another §redominantly firm of the Federal Republic ofGermany which expanded its South African business in the 1970s: AEG-Telefunken which became a major manufacturer of electrical equipment andappliances there. It helped set up South Africa's television network,86,!_/ and wasalso heavily involved in providing components for Project Avocaat, an advancedmilitary communications system that was part of the military build-up on theCape route. - /The Stienmuller engineering group of the Federal Republic of Germanyreceived a contract from the South African Parastatal, ESCOM, to supply aboutRI00 million worth of boilers for the Kriel and Endrina thermal power stations.As part of the deal, the company agreed to produce industrial equipmentlocally and seek export markets. WFrench-based electrical firms expanded their operations in South Africa in thecontext of groving French trade and military involvement. A French consortium,Telespace, won a contract to build South Africa'sfirst satellite earth station to provide telephone, telegraph and telex channels allover the world, as well as one TV channel via the Atlantic. 89/Philips of the Netherlands, expanded its operations in South Africa in the late19709, investing about RIO million in new plant and equipment. By 1977, it hadfour major subsidiaries there, two of them in close relationship with SouthAfrican capital.As in the auto industry, Japanese firms licensed South African firms to assemblyand sell Japanese electrical equipment and appliances. Hitachi Electric, the largestelectrical machinery manufacturer in Japan, began supplying South Africa withtransistor radios, high-fidelity and other equipment in the early 1960s. In 1970, itopened an assemblyfactory in Pinetown, Durban, run by United Electronics Corporation. TokyoShibaura Electric Co., Japan's second largest electric machinery maker, began theassembly and sale of "Toshiba" brand electric appliances in 1970 in a jointventure with Gallo African Co. of South Africa. 2/ Matsushita Electric Co., theworld's largest manufacturer of electric and gas a pliances, established an

assembly plant in 1972 as a Junior partner in a Joint venture with BarlowsManufacturing of South Africa. Matsushita provided technical assistance toBarlows for colour TV production. 1/8K/ South African Financial Gazette,15 November 1974; AEG-Telefunken,Annual Report. 1 T6.Sechaba, November - December 1975.-Sunday Times, (South Africa),13 June 1971.Ibild.E_/ Nixon Keizai Shimbun (Japan), 26 June 1970. 2/ Star,(Johannesburg), 24March 1978.

- 25 -Japanese firms, like their United States and European counterparts, sell electricalequipment to the South African parastatal, ESCOM. Hitachi Co. and TokyoShibaura Electric, for example, provided two sets of hydro-electric powergenerator equipment for South Africa's R1O00 million Orange RiverDevelopment project. 92,'The Swiss firm, Brown Boveri and Company, in co-operation with its subsidiariesfrom France and the Federal Republic of Germany, sold six 350,000 kwh turboalternator sets each to three ESCOM generating stations at Arnot, riel andGrootvlei. It supplied a huge rectifier for the Alusef which provided more than afourth of the energy consumed in Natal. By 1976, Brown Boveri had acquired twosubsidiaries in South Africa which produce equipment for power distribution andtransport.Co2muters"Computers flashing out reference numbers, photocopiesrelayed by telephone, perhaps even instant transmission of fingerprintsall to keep track of members of the population. Sounds like GeorgeOrwell's 1984, doesn't it? Well, it's South Africa's way of modernizingand streamlining its pass and influx control system". 2/The computer industry has come to play a vital role in the South Africanminority's system of surveillance and control over the daily lives of the blackpopulation, as well as strengthening its military capacity.Since 1967, an ICL computer (British-make) has been handlingmore than 10 million registration numbers and places of domicile of blacks inSouth Africa. Computers are used extensively by Bantu Boards for administrativejobs - in rates and rents, for example. 9!L/ Computerized "aid centres" were usedto return some 38,500 persons back to the bahtustans, in 1976 alone, for violationsof "control" standards. "Citizens" of the nominally "independent" Transkei andBophuthatswana were fingerprinted and given travel documents" which servedthe function of previously used pass books. All Africans over 16 years of agewere fingerprinted, to ensure easy identification and control. And the entirecontrol mechanism was streamlined with the essential introduction of computers,part of the furiously growing South African market for transnational corporatecomputer supplies and services.

Computers were welcomed by the ruling minority as a means of resolving thecrisis brought about by the shortage of (white) skilled labour without upgradingblacks. By the 1970s, as the managing director of Burroughs in South Africa toldresearchers: 9J_/2/ South African Financial Gazette,21 May 1971; Nigon Tokyo Shimbun (Japan)23 August 1973./ Financial Mail. (Johannesburg), 24 March 1978. 2/ J. Starkey, in Ibid.o/ iM in South Africa (New York: National Council of Churches, 1972) P.3.

- 26 -"The economy would grind to a halt without access to thecomputer technology of the West. No bank could function; the Governmentcouldn't collect its money and couldn't account for it; business couldn'toperate; payrolls could not be paid. Retail and wholesale marketingand related services would be disrupted."By 1974, the total mumber of computers was estimated at morethan 1,000 with a value of $365 million. 96/ As the South African economyplunged into recession in the mid-1970s, computers still continued to "sell like hotcakes" with market growth estimated at between 20 and 30 per cent a year. 9T/By 1976, the number of computers had increased to 1,500 representing more than$500 million. Only the United States and the United Kingdom were said to spendmore than South Africa on computers as a percentage of GNP. 9/Transnational corporations invested heavily in this expanding market. A jointUnited States-South African venture between Anglo-American Corporation andthe United States Computer Sciences Corporation offered South African firmsaccess to a world-wide time sharing network to provide maximum computerusage at lower costs than they would have incurred had each had to install theirown machines. Known as Infoset, the project integrated two South Africancenters into a network of four centres in the United States. one in Canada, and twoin Australia. 92/By the early seventies, the United States transnational, InternationalBusiness Machines (IBM), the sixth largest firm in the United States, controlledabout half of the South African computer market. The International ComputersEquipment Finance Corp. (ICLEF), in which the British firm, ICL, had substantialholdings, held another third. The inclusion of John Starkey, managing director ofthe ICL's South African subsidiary, on the Queen's New Year's Honours list citinghis "services to the British commercial interests in South Africa" seemed tosuggest "an official British stamp of approval on doirgbusiness" with SouthAfrica. lQO/South Africa was the best ICL sales area outside of Europe. ICL,itself, represents a complex mix of British Government and privatecapital. In 1977, ICL sales in South Africa jumped .68 per cent, puttingit into the lead as South Africa's number one computer supplier. i01/V/ Maaeme, South Africa, November 1974, p. 33.2/ South African Financial Gazette, 29 March 1975.Mana ent, . cit., November 1974.

2/ First, et al, The South African Connection, cit., p. 107.10(/ Financial Mail, (Johannesburg), 12 January 1979.M1/ Sunday Times, (Johannesburg), 25 February 1977.

- 27 -The South African subsidiary of the United States transnational,International Business Machines (IBM), although dropping into second place in1977 behind ICL, nevertheless had developed an extensive business in SouthAfrica. It employed 2,600 workers 102f mainly whites, to service its equipment.Despite United States Government efforts to cut back on sales of services orequipment to the South African military in line with the United Nations embargoof 1977, IBM's South African subsidiary announced it would continue to supplyspare parts and service to military or police computers as long as the partslasted.lO__/Also, since the IBM computers used by the South African Departmentof Defence were commercial models similar to those used by other Governmentagencies and corporate customers, it appeared difficult to United StatesGovernment officials to monitor the spare parts they might receive. The SouthAfrican Government had established a co-operative network among Governmentagencies to handle work for any Government office. 104/In response to anti-apartheid criticism of the role of transnationalcomputer firms in South Africa, IBM's chairman declared in April 1977: l_1/"We would not bid any business where we believe that our productsare going to be used to abridge human rights. However, we do not seehow IBM or any other computer manufacturer can guarantee that they willnot be. The facts of the matter are that we do not and cannot control theactions of our customers, and it would be grossly misleading to espousea policy that we cannot enforce."Nuclear technologySeveral Governments expressed concern in 1977 over an installation in theKalahari Desert in Namibia observed by satellite reconnaisance, which resembleda testing facility for nuclear explosives. The South African r6gime denied that itplanned to produce nuclear bombs, but it refused to sign the non-nuclearproliferation treaty. Its spokesman also denied that they had promised the UnitedStates Government not to produce nuclear weapons. 106/, Nuclear weaponsanalysts became convinced, that, if the minority regime did not already have thecapacity to produce nuclear bombs it soon would have it. in/Transnational corporations provided the essential technological foundation whichhas enabled the South African regime to transform its extensive uranium depositsinto nuclear power and potentially into nuclear weaponry. Experts underscore thefact that there is no such thing as solely "peaceful" nuclear technology. 108 .'Transnational corporations from several countries collaborated as well ascompeted to directly hand over to South Africa's minority regime the nucleartechnology, including the complex equipment required, to produce nuclearweapons.LO.2 Dun& Bradtreet, .2p. cit. 1177. M r t/ Computer Weekly, (UnitedKingdom), 31 March 1978.

Financial Mail, (Johannesburg), 25 February 197. SL IBM annual meeting, April1977.New York Times, 25 October 1977.107/ See Ronald W. Walters, "United States Policy and Nuclear Proliferation inSouth Africa," in Western Massachusetts Association of Concerned AfricanScholars, U.S. Military Involvement in Southern Africa,(Boston:South End Press,19T8), pp. 192-196.1 Raimo Vayrynen, "South Africa: A Coming Nuclear Weapon Power?"in InsIResearch cn Peace and Violence, Vol. 7, No. 1, 1977, P. 34.

- 28 -Siemans began selling computers in South Africa in 1971. It installedone at the ISCOR steel mill at Vanderbijlpark and provided another tooperate the traffic control system in Capetown. log/ It purchased a localfirm, Sati, which produced a locally designed computer, Isis. After suspendingsales of its international models for several years, itsparent firm rendered "the local fray" to sell its large frame machines.In 1978, it advertised that its computer installations were backed by6,700 employees and nationwide facilities for manufacturing and service. 20_/Kienzle, another firm of the Federal Republic of Germany, installed a computerforISCOR's Newcastle Plant. The mini-computer manufacturer of the FederalRepublic of Germany, Nixdorf, set up a South African subsidiary in1973 and reportedly captured a large slice of the market.Increased military expenditure in the mid-1970s, as well as thegrowth of consumer electronics in addition, gave a boost to South Africanproduction of components by transnational corporate affiliates. 1 Siemens,entered into a partnership with a South African firm, Sames, to produce semi-conductors behind a tariff wall. ICL, the British firm, entered into talks with theGovernment on the possibility of producing one of its smaller computers in SouthAfrica. Anglo-American's subsidiary, Computer Sciences, had already begun toproduce prototypes of its SAM intelligent terminal. Ankar Data, a local firm withSwiss backing, had been manufacturing intelligent terminals for two years.South Africa has long been known to nave uranium, as a by-product of its goldoutput. It developed the essential uranium enrichment capacity over the years inclose collaboration with transnational corporations backed by their Governments.This augmented South African foreign exchange earnings for the sale of itsuranium; ensured enriched uranium for its nuclear power plants to provide analternative source of electric power, further reducing its necessity to import oil;gave it the possibility of producing nuclear weapons; and provided it with animportant lever for political bargaining to gain support internationally for itsoppressive regime. JThe United States Government and private firms first became involved in theSouth African nuclear business back in 1952 when the first South Africanuranium plant was opened under a tri-partite agreement between the British, theUnited States and South African Governments. At that time, United States and the

United Kingdom were the sole purchasers of South African uranium. South Africabought her first nuclear reactor, Safari 1 from theUnited States in the edrly 1960s. It was installed with the aid of the United Statescorporation, Allis Chalmers. South African nuclear scientists were invited to theUnited States Atomic Energy Commission laboratory at Oak Ridge for training.The United States firm, Foxboro Co., sold two large computers to the SouthAfrican Pelindaba research center in 1973, computers which probably could nothave beenobtained elsewhere. 113/9 Financial Mail, (Johannesburg), 14 March 1975; Sunday Times (SouthAfrica),6 April 1975.11Y Financial Mail, (Johannesburg), 10 February 1978./ Financial Mail, (Johannesburg), 16 March 1979.W Walters "United States Policy and Nuclear Proliferation..." . ._Q/ Ibid.

-29-In 1974, the Oak Ridge-based United States Nuclear Corporation exported 45kilograms of enriched uranium to a research reactor in South Africa, after theNuclear Regulatory Commission 3_14/obtained South African agreement that itwould not use it for nuclear weapons. The United States again provided enricheduranium to South Africa in 1975 and 1976. In initially pledged to sell more to theFrench-American nuclear power plants to be completed in South Africa by 1984.In all, the United States had sold or was ccxmitted to sell 300 pounds of weapons-grade uranium, from which 15 atomic bombs could be produced, to South Africa.114/ In 1978, the United States decided to end all sales of enriched uranium toSouth Africa and returned the advance payments the South African regime hadmade for future sales.The United States delegation to the United Nations explicitly insisted,however, that nuclear co-operation be left out of the 1977 mandatory UnitedNations embargo on the sale of military equipment to South Africa. I6/The Federal Republic of Germany's firm, Urangesellschaft, Gmbh,aned the British Rio Tinto Zinc and South African capital to invest DM 70million in the Rgssing Uranium mine in Namibia. It withdrqw due to pressurefrom the Government of the Federal Republic of Germany which owned sharesof its parent company, VEBA AG, because, as the Minister of EconomicCooperation declared, "Government support for the uranium project would bebound to damage the reputation of the Federal Republic of Germany in blackAfrica." 117/ Nevertheless, in the 1970's, the Federal Republic of Germany wasobtairing about 40 per cent of its nat-ral uranium from South Africa.In 1973, firms of the Federal Republic of Germany, including STEAG(Steinkohlen-Elektrizit.tsAG, a branch of Ruhrkohle) and Gesellschaft firKernforschang started t6 explore the possibility of collaboration in developing theSouth Africa's uranium enrichment process. 118/ In August, 1973, STEAGreached an agreementwith the South African State-controlled Uranium

Enrichment Corporation (UCOR) which was re-written (following widespreadanti-apartheid criticism in the Federal Republic of Germany itself) in 1974 toprovide a feasibility study of the South Africanenrichment process. STEAG is indirectly linked to the Government of the FederalRepublic of Germany which owns Salzgitter (100'per cent) and is involved inother firms which own shares in STEAG. A majority of the Federal Republic ofGermany firms, which were active in nuclear-related business had, between them,17 subsidiaries in South Africa.1FThe-United States Agency which grants licences for exportation of nuclearmaterial..i~/Vayrynen, "South Africa: A Coming Nuclear Weapon Power," a.cit., p.34. AYwestern Massachusetts Association of Concerned African Scholars, United StatesMilitary Involvement in Southern Africa, 22. cit. p. 4. UV Star,(Johannesburg), 23January 1971. 181 For chronological outline of Federal Republic of Germanyfirms' involvementin South Africa's nuclear build-up; see Geisler, The Military Cooperation betyeenthe Federal Reublic of Germany and South Africa in the Nuclear and fdnventionalField, o_. cit.,

- 30 -The enrichment process developed in South Africa is similar to the het-nozzleprocess developed at the Karlsruhe Atomic Energy Research Institute in theFederal Republic of Germany. Some 1200 South African researchers andengineers had benefited from the two-way flow of personnel between Karlsruheand Pelindaba, the South African research station. The 1973 agreement betweenUCOR and STEAG gave the former a licence for the enrichment process,presumably also providing STEAG assistance to resolve technical bottlenecks forcommercial use of the process. The Pelindaba plant was completed in 1976.Three transnational corporate consortia competed to sell two power reactors toSouth Africa for its new nuclear power plants .4_/ The first consisted cf GeneralElectric (United States), Rijn-Schelde Verolme, Vereinigde Bedrijven Brodero,Ingenieursbureau Compino (Netherlands), and Brown Bovery International(Switzerland). The second was Kraftverunion, a joint venture of Siemens andAEG-Telefunken (in which the United States firm, GE, held shares). The thirdwas Framatome involving Spie-Batignolle and Alstheoms and the FrenchCreusot-Loire group in which the United States firm, Westinghouse, held 15 percent of the shares.South Africa awarded the deal to Framatome, reportedly because of Frenchmilitary assistance to South Africa. Westinghouse provided much of the technicalinput.Other military-related industriesThe development of an engineering industry is vital for an integrated, increasinglyself-reliant military industrial production. It facilitates the adaptation andincreased local production of industrial items in the context of the particularconstraints and resources of the domestic economy. In 1979, E.C. Ellis, executivechairman of the United Kingdom South African affiliate, Dorman Long

Vanderbilj Corp. declared, "South Africa. has a heavy engineering industrycapable of replacing theimportation of virtually any type of mechanical machinery and plant should theneed arise."1__O/ United Kingdom based engineering firms, while not as large assome of those in the more capital-intensive industries discussed above, continuedto provide technical expertise to South Africa. Their activities are summarized inTable 5.112/ South Africa Digest, 30 July 1976 and 24 June 1976.i__/ Ibid., 26 January 1979.

- 31 -Table 5Some of the principal United Kingdom based engineering firmsoperative in South Africa in i96Name of United Kingdom CompanyAcrow Engineers Hadon Carrier Powell DuffrynName of South African CompanyAcrow Engineers Air Conditioning and Engineering Co. Hamworthy EngineeringAfricaSales Employment8000 3000Nature ofActivitiesLumber £ allied woodwork; asbestosVentilation contractorsND Manufactures HeatingEquipmentVickersND EngineeringcontractorsSource: Dun & Bradstreet, Principal International Business, 1975-1976, TheWorldMarketing Director (New York: 99 Church Street, 1977).Vickers

- 32A number of United Kingdom firms continued to manufacture and sell machineryother than electrical equipment and appliances in South Africa.A few transnationals from other countries entered this field, too.Table 6Holdings of other transnational companies in South Africa'smachinery and equipment, except electrical, manufacturing industryName of parent South African Sales Employment Nature of Activitiessubsidiary (R 000)Klein Schanzlia KSB Pumps ND 120 Manufactures pumps,compressors,

and Becker Ag valves(Federal Republic of Germany)Massey-Ferguson Massey-Ferguson 38,000 1,500 Manufacturesagricultural(Canada) equipmentThe transnational corporate oil industryLike every other modern industrial economy, South Africa needs oil tofuel its transport system, industrial sector, chemicals production,agricultural machinery, and fishing and shipping fleets. Above all, itmust have oil for its capital-intensive military equipment and machinery.As Paratus, the journal of the South African Armed Forces, has pointed out,the concept of "mobile warfare.. .has made petrol a critical item in thetime of operations. 12_Ander South African law, oil appears to be considereda "munition of war" as the United States transnational oil firm, Mobil,was informed by its South African solicitors.i_/"As oil is absolutely vital to enable the army to move, the navy to sail and the airforce to fly, it is likely that aSouth African court would hold that it falls within...the definition of munitions of war."Under South African legislation, it is an offence for an oil companyoperating in the country to refuse to supply the armed forces.=/ It has been shownthat all five oil "majors" in South Africa - Shell, BP, Mobil,Caltex and Total - regularly sell oil products to the military. agi/2JMajor J.A.H.J. Smith, "Verspreiding van Petrol tydens Operasies"Paaratus, August 1973, p. 23, translated in Martin Bailey andBernard Rivers, "Oil Sanctions against South Africa" Notes and Documents,No. 12/78, June 1978, p. 19.22 Extract (Section 3.3.3) from legal opinion prepared by HfaymanGodfrey & Sanderson (Johannesburg) for Mobil, dated 1, July 1976(submitted by Mobil as part of its evidence to the United States Senate,17 September 1976); cited in Bailey and Rivers, "Oil Sanctions againstSouth Africa", 2 cit., p. 19.1W Legislation on -"Conditional selling" is embodied in the NationalSupplies Procurement Act, No. 89 of 1970, cited in Bailey and Rivers,.2. cit., p. 20.~ Testimony, 1 December 1977, cited in Bailey and Rivers, o_.cit., p. 20.

- 33With all its other mineral riches, however, the one South Africa lacks is oil. Tocompensate, the South African Government has made every effort to reduce itsdependence on oil by intensive development of other energy sources, includinghydroelectric and nuclear power. Partly as a result of transnational corporatecontributions of the most advanced technologies in these fields, it successfullyreduced its dependence on oil to only about a fourth p of its total energy needs,probably the lowest level achieved

by any industrial economy in the world. But its demand for that irreducibleminimum remained.Transnational corporations have assisted South Africa's minority r~gime in everyaspect of its efforts to meet its irreducible minimum need for oil.To guard against the possible effect of an oil embargo, the South AfricanGovernment has taken measures to build up stockpiles of oil. How large these areremains unknown. The South Africa Digest, in 1979, cited reports that theytotalled about 18 months supplies. I/The transnational oil companies have been required by the South Africanregime to "...hold large stocks at their own expense. This requirement was,indeed, made a condition of the franchise given to oil companies to build orexpand refineries."1?/ In 1967, an American firm, Penis and Scission, receivedthe first contract to complete undergroundstorage facilities.0§/Transnational corporations provided the essential technology thatenabled the South African regime to build SASOL to produce oil from its vastcoal reserves. In 1955, it completed SASOL I, which uses the Fischer-Tropschemethod, developed in Germany between the two worldwars, to produce about one per cent of South Africa's current oil requirements. /A much larger plant, SASOL II, was undertaken in the 1970's, to be completed by1981. It was to be the largest industrial complex in the nation, with cost estimatesof R2,458 million in 1977. It was to be financed from three sources: R1,666million from the Government's Strategic Oil Fund, R492 million in the form ofexport credits provided by transnational firms, and R300 million fromParliamentary appropriations.-lo/ Its totaloutput was to contribute 12 per cent of South Africa's oil needs, bringing bothSASOL projects contribution to 13 per cent of the nation's requirements.Transnational corporations played a critical role in the constructionof SASOL II. The United States firm, Fluor, undertook the basic constructioncontract. Another United States firm, Raytheon, subcontracted for about $350million of the construction operations through its subsidiary, Badger. 31/ TheLurgi Company of Frankfurt, Federal Republic of Germany, engineered andsupplied the gasification and other major equipment. Deutsche Babcock, FederalRepublic of Germany, also participated in the construction. The United Statesfirm, Honeywell, provided much of the required electrical equipment.1 South Africa Digest, 2 March 1979.g South Africa Digest, 10 November 1979.12T Peter Odell, Oil and World Power: Background to the Oil Crisis(Harmondsworth: Penguin, fourth edition, 1975), cited in Bailey and Rivers,o_.cit., p. 56. 1__Southern Africa (London21 April 1967, cited in Bailey andRivers, p.cit.,p.56. g For discussion, see Bailey and Rivers, o_.cit.,pp.51 ff. JChairman's statement, 1977 annual general meeting of SASOL, reprinted inFinancial Mail, 4 November 1977; cited in Bailey and Rivers, 9R-=t,p. 52. 11/Informationsdiens ttl'od e . a (Bonn), December 1."7,

Table 7 : Principal subsidiaries of the fiveSubsidiary

Home of ParentUnited StatesUnited StatesBPBP Oil South AfricaShell and BP South African Petroleum Refineries Shell and BP South AfricanManufacturing Company of South AfricaTrek BeleggingsDucknams Oil Africa Chemico Price's South AfricaSealracheun BP Development Company of South Africa% Shares Owned100% 23.8%ActivityBest estimate of totalinvestmentRefining and marketing Lubrican refinery(1978) R291 millionCaltex (Standard oil of California and Texaco) Caltex Oil (South Africa) SouthAfrican Oil RefineryMobilMobil Refining Company Southern AfricaMobil Oil Southern Africa South Africa Oil Refinery Condor Oil VialitRoadmlx Holdings100% 100%32.9%100%100% 2672MarketingLubricantrefining ManufacturematerialMarketing.00%RefiningZ5%17.5% 100% 15Z20%20%100%(1976) R290 millionof road surfacing(1976) R140 million with a further R375 planned by 1981.Lubricant refining oil company Lubricant marketingCandlesChemicals Oil ExplorationRefining

United Kingdommaior oil companies in South Africa, 1978

Table 7 (continued)United Kingdom100%Oil MarketingRefiningShellShell Oil South Africa Shell and BP South African Petroleum Refineries Shelland BP South African Manufacturing Co.Shell EksplorasieSuid-Afrika100%(1975) R250 million, with a further R500 million planned by 1985Source: M. Bailey and B. Rivers, "Oil Sanctions Against South Africa", Notesand Documents 12/78, June 1978.Lubricant refining Oil Exploration

- 36In 1978, as the Iranian rewv1ution appea to ihreatenSouth Africa's major source of imported oil and skyrocketing gola pricesincreased the minority regime's foreign exchange earnings, plans were made toexpand SASOL II still further, expending R3.3 billion on the highly secretproject. By 1978 more than 230 contracts had been placed with SouthAfrican consultants and contractors, accounting for 60 per cent of the cost. Theseincluded subsidiaries of transnational firms, like the British Steel Corporationrsaffiliate, Dorbyl. But overseas transnationals continued to play the major role inproviding critical technical guidance and keyimported inputs. Fluor was again selected as "contractor for phase three and fourextensions for SASOL II".I_/ Fluor's South African business accounted for 13 percent of its 1978 world wide turnover. M/ Fluor frameda consortium contract with Babcock and Wilcox, Dillinger Engineering andContracting, General Erection and Roberts Construction for supply of labour andconstruction services. Siemens was involved in the construction of the mine.1)4/But the most vital role of transnational corporations in supplying South Africa'sstrategically essential oil needs continued to be that of the major oil firms inimporting and refining crude oil produced in their wells elsewhere in the world.Eight major oil companies are engaged in refining and/or distributing oil productsin South Africa. Six are completely foreign-owned. One is largely foreign owned,and the eighth is the South African parastatal, SASOL.By the 1970s, four subsidiaries of transnational oil firms, Mobil,Shell, British Petroleum, and Caltex, supplied 75 per cent of the total regionaldemand for petroleum products. Each had about an 18-22 per cent share of themarket. CPF, a subsidiary of the French national petroleum firm, Total, had a 10per cent share. SASOL, Trek ( a locally-controlled company), Esso and Sonap(backed by Portugese interests) accounted for between 2 and 4 per cent each.

Most of the refineries were built by consortia of these firms. They claimed thecrude was mostly imported from Iran. 2/ Whether the big oil companies shippedin crude oil they extracted from otheroil-producing countries was impossible foroutsiders to determine. Withthe fall of the Shah of Iran, and the new Government's declaration that it wouldend sales to South Africa (as well as cancellation of its plans to construct newnuclear power facilities), it was expected that South Africa would suffer shortagesof crude - unless the oil companies shipped in supplies from elsewhere.Ia/ Financial Mail, (Johannesburg), 2 March 1979. 1 Financial Mail,(Johannesburg), 16 March 1979.L Financial Mail, (Johannesburg), 2 March 1979. J United States SenateSubcommittee on African Affairs of the Committee on Fbreign Relations,Hearings, September 1976 (Washington, D.C.:Government Printing Office, 1977)p. 285.

- 37 -Bernard Rivers, a British economist stated the following at a meeting of theSpecial Committee against Apartheid:"...It was difficult to compile statistics on South Africa's oilsupplies because the oil-exporting countries frequently depended on themultinational oil companies for information concerning thedestination of their oil. Crude oil was sometimes carried toSouth Africa by ships belonging to multinational companies withsubsidiaries in South Africa, having been purchased in MiddleEastern countries which *ere members of OPEC, and whidh had recentlyattempted to enforce an oil embargo against South Africa. One ormore of the parent oil companies were clearly undermining the policyof various Middle Eastern OPEC members by failing to inform themthat their oil was being exported to South Africa."(A/AC 115/SR.361,paragraph 31,). 136,'The British Petroleum Company (BP), in which the British Governmentholds shares, played a major role in building up South Africa's oil refineryindustry, as well as its petro-chemicals industry. It owned 20 per cent of theshares of the South African parastatal, Sentrachem. By the mid 1970's, BP,together with Shell, controlled about 25 per cent of the South African oil productsmarket. Over the years, Shell-BP also constructed a lubricating plant and a tankerterminal at Reunion, a few miles south of Durban. The Shell/BP refinerySAPREF; had the biggest output of any single commercial South African refinery,next to the huge State controlled NATREF. Shell/BP owned or supplied about1700 service stations throughout southern Africa. Shell also became involved incoal mining in South Africa.Shell and BP each own 18 per cent of Trek Beleggings Beperk, "Trek", whichthey had established together with the South African parastatal, the IndustrialDevelopment Corporation (which retained 9.5 per cent) and the Afrikaans miningfinance house, General Mining. Trek owned or supplied another 193 servicestations in South Africa.lI/ Trek began construction of a R2 billion oil refinery in

the Saldanha-Vredenburg area under conditions of considerable secrecy in 1978.1-38Next to manufacturing, oil had become the most important sector of United Statesinvestment in South Africa by 1973.* Three United States firms, Caltex, Mobil,and Esso, together, controlled almost half of the South African market forpetroleum products by the 1970's. Two of the remaining three refineries owned bycommercial interests belonged to United States firms.1/ United Nations document A/AC.115/SR.361.U Corporate Information Centre, Church Investments, Corporations, andSouth Africa, 2E. cit.8 South Africa Digest, 10 November 1978.

The introduction of the most advanced technologies by United States firmsactually contributed to reducing African employment. Texaco published datapurporting to prove that it had upgraded African workers from 1962 to 1977.Scrutiny of the data shows, however, that, while the company increased outputduring the 15 year period, it cut back on total employment by several hundreds ofworkers. Furthermore, it reduced the proportion of blacks from 62 per cent of thelabour force in 1962 to 41 per cent in 1977.1/Mobil Oil refines about 8.8 per cent of its worldwide refined products in Africa,but its South African refineryproduced about 87 per cent of this total-lO0thousand barrels a day.2l_/ In late 1978 a Mobil subsidiary, Condor Oil, openedan oil recycling plant which now provides about 6 per cent of South Africa'slubricating oil needs. Mobil staff designed and engineered the plant for which 90per cent of the materials were provided by South African industry.4/ Presumably,Mobil imported the rest from its transnational corporate connexions abroad.In 1976, Mobil incorporated its operations in Namibia, which it had previouslyoperated from its South African office, as a separate company. Its Namibia assetswere about $6 million, including inland depots, about 10 service stations, and acoastal terminal at Walvis Bay. 1WStandard Oil of California, which owns Caltex oil refinery in South Africa withTexaco had by the 1970s become the biggest company in the world.In 1975, Standard Oil of California acquired 20 per cent of the common stock ofAMAX, Inc., which, in-close collaboration with South African mining financehouses, had extensive interests in southern Africa.In 1975, Caltex began to expand its output with the goal of almost doubling itfrom 58,000 barrels daily to 100,000 barrels daily by 1978. Caltex also owned23.8 per cent of Mobil's lubricating oil refinery in Durban.Compagnie Frangaise des Petroles, partly owned by the French Government,originally had complete control of Total South Africa. In 1969, however, it sold ablock of shares in Total to a local Afrikaaner house, Volkskas. Total retained a 30per cent interest in the State-owned oil refinery, NATREF.I Texaco Star. (Texas, Inc. ), 4 November 1977.14/ Mobil Oil, Annual Report. 1976. W South Africa Digest, 19 January 1979. WUnited States Senate, Subccnittee on African Affairs, op.cit.- 38 -

- 39 -How South Africa obtained its oil after Iran declared its determination to endshipments is not clear. Bits and pieces of evidence have emerged. Shell apparentlyhas a contract with Bahrain to ship oil to its South African refinery.The president of the Deak Perera Group, said to be the leading retaildealer in gold and foreign currencies the ough 58 offices and banks worldwide,reported South Africa was exchanging unknown amounts of gold bullion forSaudi Arabian and Kuwaiti oil. i/A ship of the United States oil firm, Standard Oil ofOhio, was sighted on its way to the South African terminal. And South Africaappeared able to buy crude at 60 per cent more than OPEC prices by purchasing iton spot contract at Rotterdam. ! South Africa's Globe Engineering Works atCape Town reported that it services the United States tanker, Atlantic, the FrenchTanker, Jade, and the British tanker, Lima,1!_ / suggesting close on-going linksbetween transnational oil firms and South Africa.These pieces of evidence tend to confirm reports by the SouthAfrican Financial Mail that for "the oil majors, with supply commitments to theirSouth African refining and marketing subsidiaries, the loss of Iran has forceddrastic rescheduling of their supply chains. 146! It added, "The base load of SouthAfrica's crude oil requirements is probably being carried by sources to which theoil majors have access with a reasonable prospect of medium to longterm on acontractual basis. In addition to these limited sources, the oil companies andSASOL will probably negotiate term contracts with international brokers and taketheir chances on the spot market." 11.7The Financial Mail suggested that the oil majors were not acting without thesupport of their Governments. It reported that, when the summit conference of theHeads of Government of France, the Federal Republic of Germany, the UnitedKingdom and the United States met in Guadeloupe in January, they huddled onRhodesia, Iran, oil and South Africa, and proposed that "the United Kingdom andthe United States would guarantee South Africa's annual oil imports of 15 milliontons for an indefinite period. In return, Pretoria would resume full diplomaticpressure on Salisbury to bring about a peaceful solution there." 2.8/Standard Oil of California, Annual Report. 1976.1 New York Times, 25 June 1979.SFinancial Mail, (Johannesburg), 9 February 1979.6 South Africa Digest, 18 May 1979. SFinancial Mail, (Johannesburg), 9February 1979.148 Ibid.

- 40 -The Financial Mail argues that "it is unlikely that the...Congresswould allow the White House to ship domestic United States oil abroad," 2/ butUnited States Energy Secretary, James Schlesinger declared, "there wassubstantial evidence that petroleum products that normally would be going to theUnited States have been diverted to Europe by oil companies looking for higher

profits." 11I Privately, United States officials reportedly said that that 200,000barrels a day were involved. Schlesinger himself had urged United Statescompanies to enter the Rotterdam spot market. How much of this might be goingto South Africa remained unknown.The international oil companies seemed to be using their position assuppliers of a "scarce and strategic commodity" to muscle into South Africa's coalindustry, according to the South African Financial Mail.jl_/ BP, Shell, and Totalhad obtained an allocation of almost half of South Africa's lucrative coal exports,apparently on the assumption that "the more business the oil majors can do inSouth Africa...the less inclined they will be to close South Africa's oil tap."II; Transnational corporate transfer of military equipment and weaDorSince the imposition of the voluntary United Nations embargo in 1963, and evenmore since the imposition of the mandatory United Nations embargo in 1977,transnational corporations have not openly engaged in the transfer of militaryweapons and equipment to the South African Government. Nevertheless, SouthAfrica has been able to obtain their products in a variety of ways despite theembargoes.According to Stockholm International Peace Research Institute (SIPRI)valuations, South Africa imported, between 1970 and 1977, $780 million (inconstant 1975 dollars) worth of major weapons -- armoured vehicles, ships,missiles and aircraft -- about 50 per cent from France, 20 per cent from Italy, 18per cent from Jordan, and 14 per cent from Israel. iDiscovery of the channels by which these weapons, parts and materials formilitary purposes are sold by transnational corporations, involves extensivedetective work which is difficult for ordinary citizens to undertake. Only bits andpieces of the evidence have been discovered, a few of which are indicated here forillustrative purposes.W Financial ail,(Johannesburg), 12 January 1979.150/ Ibid.1/ Ronald Koven, Washington Post, May 1979. IL2 Financial Mail,(Johannesburg), 12 January 1979. a SIPRI Yearbook, I 78, opgcit.

- 41 -One channel remains open because Governments have not prohibitedso-called "grey" area transfers. Within months after the United Nations passed themandatory arms embargo in 1977, the United States Government had permittedthe Cessna Corporation of the United States to sell Cessna aircraft to SouthAfrican buyers, allegedly for private use. Yet there is wide spread evidence thatCessna aircraft can easily be converted to military use. MV The definition of"arms and military equipment" by countries like the United Kingdom, the UnitedStates and the Federal Republic of Germany has tended to be so narrow that SouthAfrica has in this way managed to secure a wide range of equipment from thesecountries for its armed forces. 11 Furthermore, the "grey area" is defined iunilaterally and is often narrowed or broadened as deemed fit, sometimes becauseof a change in Government, but generally toward "grey area" sales rather thanprohibitions,_156/ This problem is even more significant in the provision of spare

parts for weapons and military equipment already supplied to South Africa. Thespares may be sold to so-called civilian companies in South Africa which may inturn sell them to the South African military or police. This ensures that SouthAfrica obtains all the spares and components it needs, as well as engines forlocally assembled aircraft.Where materials are not excluded from coverage by "grey area" definitions,transnational corporations have devised other techniques to shiptheir output to South Africa. The Space Research 'Corporation, with a 8,000 acrefactory site straddling the United States-Canadian border, apparently transshipped155 mm. long-range artillery shells to South Africa through testing bases inAntigua and Spain. I Another United States firm, Olin Corporation, wasconvicted in 1978 of selling 3200 firearms produced by its Winchester division toSouth Africa via transshipment points in Austria, Greece and the Canary Islands./ This was the first time a United States corporation was indicted for violating theembargo on South Africa. (In 1976, an employee of Colt Industries, wassentenced to a year in prison for selling handguns to South Africa via several thirdworld countries.)Six type-S-l13 speed-boats were being mounted for South Africa under Israelisupervision in mid 1978, four in Haifa (Israel) and two in Durban (South Africa),using construction plans and imported parts made in the Federal Republic ofGermany where they are produced by Mssrs. Lurssen, Bremen/Robert Sylvester, op.eit.l~/ Minty, Report to the Special Committee against Apartheid. op.cit., p. 2.&6 Ibid.I/ Rutland Herald (Vermont, United States of America) 12, 15, 22, 26 December1978. J/ New York Times, 31 March 1978.1/ Klare and Prokosch, "Evading the embargo...." o.cit., p. 166.

- 42 -for use by the Federal Navy. IQ/ Anti-radar equipment of theMesserschmidtBolkow-Blohm company has been delivered to South Africa sincethe end of 1977, and two South African technicians were trained in handling theequipment by the company at their shooting test ground at Ottobrunn. Thedeliveries were named "project Sandwich." 161III. Directand indirect transnational bank finance of military expendituresIntroductiont Transnational banks have played and continue to playan important role in providing finance for the build up of the South Africanmilitary-industrial complex. It is, however, even more difficult to obtain precisedata on this aspect of transnational corporate activities than in the case ofindustrial firms. The typical confidentiality of relations between banks and theirclients had become compounded, by the late '60s, by their desire to avoid thegrowing criticism of anti-apartheid groups. 6 Furthermore, money is a fungiblecommodity; transfers between parent transnational banks and affiliates, as well asbetween their corporate clients and South African parastatal and Governmentagencies, are difficult to monitor. Yet available evidence suggests thattransnational banks remain among the most important transnational institutions

for the South African r~gime, for they help to provide essential finance andforeign exchange for the purchase of military material and the machinery andequipment needed to produce it.In the mid 1970s, the role of trandnational banks was vital in helping South Africaovercome its balance of payments crisis caused by rising oil/o cf. stern# Hamburg, 28 July 1977; Fock, Schnellboote, Vol. 2,Herferd, 1975,p.225; Federal Parliament, 8th Period of legislation, 61st session, Bonn, 12August 1977. Reply of Secretary of State GrUner to an inquiry by Mrs. L.vonBothmer, mP; and Appendix Export List of the External Trade Regulations for theImplementation of the External Trade Act No.0009-B3, Comment No.1, FederalParliament,Printed Matter 8/68, 11.1,1977, subject area 7400. ikVGeisler, op.cit.12/ A number of organizations, ranging from the United Church of ChristCommission for Racial Justice to the United Electrical, Radio and MachineWorkers of America and the International Union of United Automobile andAerospace Workers, joined in support of the campaign to end United States bankloans to South Africa (Committee to Oppose Bank Loans to South Africa, 305East 46th Street, New York, N.Y.,22November 1977); the World Council of Churches has taken a similar stand. Anti-apartheid activities are being focused on banks in the United Kingdom throughthe Anti-Aprtheid Movement, and by 1973, Barclays had lost an estimated £10million in accounts due to boycotts. In the Federal Republic of Germany and theNetherlands, the Anti-Apartheid Movement has also mounted a campaign againstbank loans.

- 143 -prices and increased military and military-related imports. 1970's, the balance ofpayments crisis was ended because of non-military-related imports, fostered bythe South African measures and industrial stagnation, and the rising price ofinternational market. Chart II M millionsBalance n curren account [100=o ~: ._j0-1000-2000 r-- I-3000 Seasnay used annual tateBy the latethe decline of Government gold on the1974 1975 1975 1977 1978Sourcet South African Reserve Bank, Quarterly Bulletin, Dec., 1978Nevertheless, the military-industrial complex had to continue tobuy critical military-related inputs on the world market, and for this itneeded the assistance of transnational banks to ensure that it had adequate foreignexchange. The cost of imported oil, initially estimated to be about $i,8 billion infor 1979, was expected to rise about a third to something like $2.3 billion as aresult of rising oil prices and the necessity of major oil transnationals resorting to

the spot market after the Iranian revolution. In addition, South Africa's minorityr6gime was compelled to spend almost $200 million annually to import themilitary equipment and machinery its domestic industry could not produce.Beyond that, it had to spend hundreds of millions more to import the machineryand equipment to produce military weapons domestically, as well as parts andmaterials to produce the wide range of items which could not be produced bydomestic factories. (See discussion of domestic industry above).16/ Financial Mail, (Johannesburg), 15 February 1979.

- 44 -The danger persisted that, if South Africa's industry recovered from its slump, andimports rose, and/or gold prices fell, South Africa might once again confront abalance of payments crisis. This danger was accentuated by an outflow of capitalwhich consisted of remittance of profits and interest and principal repaid on thedebt accumulated during the mid 1970's. About $1200 million was shipped out inthe form of interest and dividends alone in 1977.L4_/ The danger was symbolizedby the R210 million shrinkage of the Reserve Bank's foreign exchange from R575million at the end of November 1978, to R365 million at the end of December ofthat year._/The South African Government, throughout the 70's, however, borrowed far moredomestically than internationally to pay for its growing military establishment.Here again, it relied heavily on the role of the transnational banks which owned amajor share of the domestic banking assets.Transnational banks' South African affiliatesTo understand the way transnational banks help to finance the South Africanmilitary-industrial complex, it is essential to comprehend the dominant role theyplay in the South African banking structure. A small handful of transnationalbanks hold about two-thirds of the assets of the biggest 20 banks in South Africa,a far higher percentage than foreign firms hold in any other sector of theeconomy. Not only do they help mobilize domestic and foreign credit for theSouth African minority r6gime's military programme;their own reports indicatethat they funnel capital into Southern Rhodesia despite the United Nationssanctions against that illegal t6gime. As South Africa refused to enforce theUnited Nations sanctions against Southern Rhodesia, it was difficult to tracecapital passing between South African and Southern Rhodesian subsidiaries oftransnational banks. Although the parent banks claim to have had no control overtheir Southern Rhodesian subsidiaries, the subsidiaries themselves advertisedthei international links. 167/Two British banks, Barclays and Standard, remain by far the largest transnationalbanks operating in South Africa. The eight domestic affiliates of these two banksstill control over half the assets of the 20 largest South African banks.Subsidiaries of three other transnational financial institutions, Hilsam, UnitedKingdom, Citibank, United States, and Fiench Bank, also ranked among the top20 South African banks in the early '70s. Their assets constituted less than five percent of the total. Far more significant were the contacts their presence providedfor their transnational clients, as well as domestic South African firms.

11 South African Reserve Bank, Quarterly Bulletin, December 1978.1/ Financial mi. (Johannesburg), 12 January 1979.1 See, e.g., Barclays Bank, Report and Accounts. 1976: Standard & Chartered.Annual Report, 1976, which shows the banks of the same names in SouthernRhodesia as associated companies; see also Barclays International, DCO Story,(London, 1975, pp. 250 ff).1/ E.G., Standard Bank advertisement in Thorn's Commercial Publications,Industry and Commerce of Rhodesia, 1974: "With 14,000 offices throughout theworld, the Standard Bank is well placed to assist you with international businessmatters"; and Barclays advertisements in Property& Finance (Salisbury, 1971)"As a Rhodesian manufacturer... pays me to study Barclays Bank market reportsbecause.., a bank that operates in over 40 countries must have their finger on thepulse of international trade.... they have direct contacts too." Grindlaysadvertisements in Development %Mazine (Salisbury, February 1977) refers to thebank's "over 00 offices in 41 countriLes around the world,*

- 45 -'Barclays Bank is the leading bank of South Africa. Its bank network of almost1000 branches spreads throughout that country into Namibia.Barclays, both internationally and in South Africa, is closely interlinked with theleading South African-based transnational corporation, Anglo-American. HarryOppenheimer, head of Anglo-American, sits on the Board of BarclaysInternational, along with Sidney Spiro, chairman of Charter Consolidated,Anglo'6 British-based "overseas arm."168/ AngloAmerican is one of the biggestcustomers of Barclays, South Africa, and its biggest South African shareholder. In1976, Barclays'purchased Wesbank, the seventh largest South African bank, inwhich Anglo-American held 70 per cent of the shares. This transaction increasedAnglo-American's ownership in Barclays, South Africa, from 15 to 32 per cent. Inaddition, ditectors of three other mining finance houses, Barlow Rand, Anglovaaland Union Corpvration, sit on the board of Barclays, South Africa. BarclaysSouth Africa is the transnational parent company's largest single holding.Barclays Bank's Rhodesian associate had assets in the early seventies reported atover Rh$141 million, with 37 branches and 50 fixed and mobile agencies. Despitethe United Nations boycott, Barclays Rhodesia stressed "as part of its services itsstrong international links." 16/ From its Salisbury head offices, it operated abusiness and trade promotion division and realized gold bullion sales.Barclays South Africa has become closely linked in a variety ofways to other South African banks.l2/ It owned a minority of shares in UnionAcceptance Ltd. (UAL), the 11th biggest South African bank in terms of assets.UAL was established in 1955 by Anglo-AmericanCorporation in conjunction with the London-based merchant bank, LazardBrothers. In the 1970's, UAL merged with the South African banks, Nedbank andSyfrets, under the overall control of the Nedbank group, to create a conglomerate,Nedsual, with total assets of R2 billion, greater than all the other merchant banksput together.

Nedsual holds about two thirds of the Rhodesian Banking Corporation (Rhobank)which, in the mid-TOs held assets of about Rh$75 million. The Rhodesian groupincluded a commercial bank, a finance house, a merchant bank and insurancebrokers, and a travel agency. It also has an international division. Nefricho, thegroup's merchant bank, helps firms doing business in Rhodesia to obtain bothimport and export finance and foreign exchange, presumably largely throughNedsual offices in South Africa.1/ Financial Mail, (Johannesburg), 50 January 1976. I& Thorn's CommercialPublications, Industry & Commerce in Rhodesia,1974, (Salisbury: MardonPrinters, 1974).170/ Financial. Mail, (Johannesburg),"Barclays Bank Supplement," 30 January1976.171/ Thom's Commercial Publications, Industry and Commerce of Rhodesia,1974,01D. cit.

- 4~6 -The second largest bank in South Africa is a subsidiary of theUnited Kingdom parent firm, Standard and Chartered Bank. Standard Bank ofSouth Africa has over 800 branches, with a full branch at Windhoek, Namibia. Inaddition to its banking operations in South Africa, Standardis one of South Africa's major agents for the sale of gold. In the mid1970's, 20.percent of Standard's world wide profits ogiginated in SouthAfrica.Like Barclays, Standard's activities extend into Rhodesia and, despite the UnitedNations sanctions, Standard's Rhodesian affiliate continued to operate there afterUnilateral Declaration of Independence (UDI). Its Rhodesian commercial bankaffiliate's assets more than doubled during the UDI period, reaching over Rh$200million by 1973. It has 44 full branches and a network of agencies throughout thecountry.It provides export and other types of insurance through Rhodesian insurancebrokers. Its Stuadard Finance offers long-term finance, hirepurchase and leasingfacilities. M/Hilsam, a member of the British Hill Samuel group, had become the third largesttransnational bank in South Africa in terms of assets by the 1970's. It had beenestablished in 1960 by the British parent firm to conduct merchant bankingbusiness in South Africa. Merchant banking remained its most importantactivity.170 Hill Samuel also established several subsidiaries in Rhodesia. 171.The UDC, South Africa's 16th largestbank, has become strictly speaking a South African bank, in that a majority of itsshares were held Ia South Africa. It remains, nevertheless, affiliated to the Britishcompany, United Dominions Trust.1l_/ It also had an affiliated institution, UDCLtd., in Rhodesia. The United Dominions Trust had smaller affiliates in severalother former British colonies in Africa._./ Standard & Chartered Banking Group, Annual Report. 1975.

1W Thorn's Commercial Publications, Industry and commerce of Rhodesia. 1974,o. cit.1 Hilsam (South Africa), Annual Financial Statement, 1968.1 Who's Who in British Finance, 1972 (London: Gower Press).

Reflecting the growing penetration of South African markets by United Statestransnationals, the United States based Citibank had emerged as the fourth largestforeign banli in South Africa by the '70s in terms of assets. Citibank set up itsfirst South African branch in 1958. By 1976 it had established eight banks in themajor industrial centers throughout the country. Citibank created an additionalchannel into the South African banking field when, in 1963, itpurchased 16 /3 of the total shares of the British firm, M. Samuels. 176/ 7hisgave it access to the Hill Samuel group's affiliates in South Africa (includingHilsam)and Rhodesia.Citibank's overseas holding corporation, Citicorp, also bought 49 per cent of theBritish bank, Grindlays, and Grindlays' chairman sat on Citicorp's board ofdirectors. l_/The British bank, Lloyds, one of the four largest in the UnitedKingdom, owns 41 per cent of Grindlays. ith/ Grindlays' Rhodesian subsidiarywas originally established when it took over the Ottoman Bank in Rhodesia in1969, three years after Unilateral Declaration of Independence (UDI). Two yearslater, Grindlays opened its own finance house in Rhodesia, GrindlaysInternational Finances. By the mid-70's, its assets were reported at Rh$35 milliona7_/ Grindlays also established a third Rhodesian affiliate, Von Seidel GrindlaysTrust Co. 180Chase Manhattan Bank, a second big Rockefeller bank, established abranch in South Africa in 1959. By 1965, when it had three branches there, itpurchased a 15 per cent stake in the British Standard Bank, giving it access to thelatter's extensive southern African branch networka8l/ Chase executives joinedStandard's board of directors, and a Chase officer served with Standard's centralmanagement group in London. Chase merged its South African branches withthose of Standard, South Africa, which then handled its South African business.IL2/16/ National City Bank of New York, Annual Report, 1963.Xf Ibid.L/ The Banker (London), August 1977.2W Thorn's Commercial Publications, Industry and Commerce of Rhodesia,1974.LQ/ Advertisement in Development Magazine (Salisbury), February 1977. IL1/Chase Manhattan Bank, Annual Reports, 1959, 1965.1 V2 Chase Manhattan Bank, Annual Report, 1965.- 47 -

- 48 -In 1975, the United States Federal Trade Commission required Chase to divestitself of its Standard holdings.16. / Chase then exchanged its shares of ownershipin Standard for a 7 per cent share in Midland Bank, one of United Kingdom'slargest commercial banks. Midlands itself participated in South Africa as a

member of the European Banking consortium, EBIC Chase sold its Midlandshares and re-established its own representative office in South Africa in 1975. 8Thereafter, Chase conducted its business there on an essentially wholesale basis.The,. gpk of America, the largest bank in the world, established close ties withKIlnwort Benson, Lonsdale (London) and its subsidiary,Kleinwort Benson, Ltd..,which was also based in London. Kleinwort Benson helped the South Afric"Government establish the Accepting Bank for Industry, a merchant bank, andacquired shares in that bank. 15 Kleinwort Benson Lonsdale also purchased, a 33per cent interest in J.L.Clark and Company, an industrial holding company inSouth Africa. 186/ The Bank of America's London subsidiary, Bank of AmericaLtd., shared three directors with Kleinwort Benson Lonsdale and/or KleinvortBenson. I8 One of them became chairman of the New York and Londonsubsidiaries of Kleinwort Benson which dealt with gold bullion. Another becamea director of the consortium bank, Midland and International Banks, Ltd.,18_8§whose members included the Midland Bank (45 per cent), the Toronto DominionBank (26 per cent) and Standard Chartered Bank (19 per cent.) 192/French banking interests were directly represented among the transnational banks'affiliates in South Africa by the French Bank. French Bank ranked only fifthamong the transnational banks' affiliates there in terms of assets. It had sevenoffices in South Africa's main towns by1976, as well as one in Windhoek in Namibia. French Bank is owned by 'heBanque de L'Indochine, Paris, together with several South African partners:Union Corpration, Federated Stores, and the Old Mutual and the MessinaDevelopment Co , an Anglo-American Group member. 190The transnationil banks' contributionThe transnational banks' southern African affiliates helped tomobilize funds to build up the South African military-industrial complexin several ways. Their commercial affiliates, for example, advanced almost Albillion in various forms of credit to different sectors of the South African politicaleconomy in one year, 1975, alone. About three fourths of these were general loansto the public and private sectors. The rest were hireNew York Times, February1975.SInterview with Tim Smith, Interfaith Center on Corporate Responsibility, basedon interview with Chase Manhattan Bank officials in New York. See alsoFinancial Mail, (Johannesburg), 29 April 1977, for statements as to plans toexpand South African business, despith press releases issued in the United Statesthat Chase would not make loans which would support §partheid.The ChaseManhattan representatave in South Africa, Steve Pryke, is executive secretary ofthe newly established American Chamber of Commerce in South Africa(Financial Mail,Johannesburg ,30 September 1977.) 1/ Karl Lanz, ed., Banks ofthe World (Fritze Knapp Verlag, 1963).19 The Banker Research Unit, Who Owns What in World Banking.1974-5.Who's Who in British Finance, 1972 (Gower Press).Ibd.World Banking. 176-77 (Investors Chronicle). Q Financial Mail,(Johannesburg), 15 April 1977.

- 419 -purchase loans, leases and acceptances. &/An unknown percentage of these loans were made directly to the South AfricanGovernment. Some of them were military loans, since the Government requiredcommercial banks to buy bonds to finance its military buildup. Barclays SouthAfrica, after announcing its purchase of R10 million in South AfricanGovernment defence bonds, was widely criticized by United Kingdom anti-apartheid groups. British Government officials called in the officers of the parentcompany for questioning. Frank Dolling, chief executive of the South Africagroup, asserted that "Barclays was deeply concerned at the insensitive nature ofthe investment in defence bonds and at the nature of the publicity given to it bytheir South African subsidiary." He gave his undertaking that "the bank willdo whatever possible toensure such action will not happen again." &2The Rand Daily Mail, however, reported, "the pledge by BarclaysInternational to keep tighter control over its South African subsidiary'sDefence Force links was described as virtually meaningless by a top SouthAfrican' financier", the Registrar of Financial Institution. 1 Other transnationalbanks did not publicize their purchases of South African defence bonds, butpresumably they too bought them in accotdance with the requirement of SouthAfrican law. The South African arms parastatal, ABMSCOR, floated loansdirectly on South Africa's capital mrket in 1978for R40 million, and planned to borrow R30 million more.Beyond loans made for directly military purposes, the commercialbanks and their various affiliates contributed far more extensive credit facilities tothe South African Government for general purposes. Table 9 shaws the sourcesfrom which the Government borrowed funds on a long term and a shortterm basis.The banking sector clearly provided the major share of theshort-term credit. It also provided a significant share of the long-term credit whenthe fact that the banks themselves entered into pension and insurance plans istaken into consideration. Given that money is fumgible, credit made available tothe Government for non-military purposes inevitably releases tax revenues tofinance more direct military expenditures. In other words, in the context of theSouth African military-industrial complex, all South African Government debtmust be perceived as having millitary Implications. The amounts provided by thetransnational corporate bank affiliates cannot be explicitly separated out. Whenone recalls, however, that they control about two thirds of the assets of the 20largest banks in the country, one can only conclude that they must play asignificant role in providing these large amounts of credit.1 Calculated from "The Biggest Banks," Financial Mail (Johannesburg),23 April 1976.i/ South Africa News, (London), 30 January 1976.i/ Rand Daily ail, 14 January 1977. 124/ South Africa Digest, 3 November 1978.

- 50 -

Table 8. Total South African Government debt, 1971-1978 (R millions and pereeat)R millions5,5986,505 7,147 7,4769,208 10, 781 12,61514,626% of total debt93%92.8% 95.2%93.6Z 91.2% 89.0% 90.3% 92.1%R millions416502361509 8861325 13561258% of total debt7%7.2%4.8% 6.4% 8.8% 11.0%9.7% 7.9%R millions=100%6014 7007 7507 798610094 12106 1397115883Source: South African Reserve Bank, Quarterly Bulletin, December 19T8. Note:A far larger shareof transnational corporate bank loans were made to the so-called "private" sector,including parastatals].19711972 19731974 1975 1976 19771978

- 51 -The South African Government enjouraged the growth of merchant banking, abusiness in which transnational banks became deeply involved, as part of its effortto attract foreign capital after Sharpeville. Merchant banks typically become moredirectly involved in the ownership and management of corporate enterprise thancommercial banks. The tzansnational banks' South African merchant bankingaffiliates contributed not only to the provision of long-term loans for the privateand public sectors, but also to financing equity capital of transnational affiliatesand domestic firms in South Africa.Transnational financial institutions also helped mobilize the smaller

savings of individuals through insurance and pension programmes.By 1976, whenthe South African Government passed a bill paving the way for domesticownership of the majority of shares of all insurance companies in South Africa,life insurance companies there had accumulated assets worth more than t4 billion.& About 14 per cent of this, almost R500 million, was held by South Africanaffiliates of transnational life insurance companies. _/ Barclays Bibsal became thethird largest insurance broker in the country, offering over 100 Linds of insurancethrough its extensive commercial bank network._98/ Standard Bank's SouthAfrican subsidiary had also entered the insurance brokerage business.Transnational financial institutions broadened the scope of their activities in the'60s and '70s to facilitate the growth of the South African military industriKlcomplex. Their affiliates began to purchase heavy industrial equipment, puttingup the necessary foreign exchange, and then leasing it to the private South Africanand parastatal sectors. Leasing rates were not controlled under the South AfricanFinance Charges Act, so banks charged rates two to three points above thecommerical banks' prime lending rates. The transnationals' larger size andinternational connex ions gave them an advantage over domestic banks in thislucrative field. _1/ Their purchases assisted their transnational clients to markettheir heavy equipment and machinery, in the apartheid nation, facilitating SouthAfrican firms' efforts to acquire the most advanced technologies.The South African rigime sought to encourage transnational corporateexpansion by providing a discount on rands provided by banks for investment,termed "financial rands." By March 1979, the estimatesOo/of the amount ofauthorized financial rands ranged from R75 million to R=00 million. The specifictransnational corporations receiving these discounted rands is unknown, but"market rumour" identified Volkswagen, Pilkington, BMIW, IBM, AECI,Siemens. The transnational banks play a key role in this business, for thetransnational firm uses foreign currency to buy financial rands from an overseasbank which, in turn, provides the rand amount to the firm's South African affiliatethrough its South African branch.1W For discussion of merchant banks in South Africa, see World Council ofChurches, Business as usual: international banking in South Africa,oM. cit. andFinancial Mail, (Johannesburg), 23 April 1976, 30 January 1976, 29 October1977. 1/inancial Mail, (Johannesburg), "Ranking the life assurers," 23 April 1976.1 Ibid.1 Ibid., 30 January 1976.1 Ibi--d., 23 April 1976.20/Ybd_., 16 March 1979.

Table 9 OWNERSHIP DISTRIBUTION OF DOMESTIC MARKETABLESTOCK OEBT OF CENTRAL GOVERNMENTR 11,-DBOFCNRLGVRMT. .. . .. . . R - ,io,, I tik . .. 1... . , . i.. P1dl; i79f 0 3 I 07 1 19 6 q 1 6 19 75 -033

9 4 3 169 7 1 , 6) 150 ,11 16 174 4 71 1 3 I7.59 1 70 30 41 6 27. 67 i 1777 00 99 5 - "I - -76 Is79390 9 3 1 3 25711 6 1 55 199 5 408 0 11 6311975 773 379 626 326 106 Z215 1563 60 37 1045 7 7319916 799 171 91 477 119 7I4 1111 71 50 7? 3119 24971977 3I3 797 1700 506 ins 301 3456 67 737 24 3271 30s41976 Jn 9 04 340 105 245 53 360,5 1 79 773 306 106 237 1730 57 46 7 39 -3 I1994Moo IMos I: I s 726 364 36 736 I ; 350 57 46 77 167 9Apr, 177 37e i60 375 11 46 I 703 57 46 | 1 61994MeIMey 10 372 600 342 177 763 1 720 57 46 I 17-3 1954J. 10: 372 "17 39 13 6 I 1 70 60 40 6 11 1 -27010Jul 8 7201J.5 7 05Jig5 10 246 71.4 57 36 :?I s 5 6 70Aug 775 3 8 2760 1 s 57 36 5 0 720so 248 III O09 3N 30 7 ; 7001 57 36 '5 70 0701Oki foci 190 31 260 353 101 7072 10771 57 30 60 751 776117 371 6 475 70 701 7020 69 40 7747D'S los, 190 3771 917 417 1 17 78 94 2 178 77 50 2 V771 2 71971 J 206 311 919 441 171 206 2130 71 55 23 716 . 59Jfeb 20 311 0 7 454 57 219 2 11? 66 71 22 28 30I 2536MlMA 206 317 t00 466 I1 l30 2767 59 61 22 34 -03536Ap, 1 766 3 1 1079 471 143 Z27 2736 597 01 3 300 7693MonlMv 366 310 1060 494 131 247 2246 57 75 27 78-4 2693

Jiln 29 31 1 050 514 133 753 2 269 57 79 7 35 302 777Jill 791 314 1 143 544 117 254 7312 54 113 25 3330 7"71Au9 79; 319 141 540 106 300 7314 56 739 33 316 3 9l1Seoi 79 33 114 584 96 275 2 396 67 113 21 375 2921Okil c' 311 330 1 17 539 708 279 7373 67 774 71 319 3941l4e i 31 3 193 1247 50 05 227 3444 67 126 2 26 2366Os 10es 323 791 1740 516 705 307 7456 67 137 24 3331 30547970 Joe 323 797 :766 504 0 25 2413 65 113 24 3125 3054feb 373 31 17 537 106 393 2569 66 11v 24 31 73125M,,.. I 349 311 1314 570 1 1 207 2549 64 131 74 324 3153APOi 347 30? 1 137 579 105 29 7552 63 712 23 3274 3153Me7Me" 430 52 1401 e74 115 111 7 613 65 132 2t 6535 3369Jim 495 29 1466 566 016 297 2671 73 776 79 9136 3579Jul 40 703 7464 578 08 307 2 515 74 7123 77 55 093 4,13Aug 400 77 75" 537 777 307 25 67 74 2 7 07 aI"Ssip 46 3 519 59 773 27 606 60 720 2 6300303, 11,7 ions /OecSource: South African Reseve Bank, Quarterly ulletin, December. 1978Raoislio, o79~5ey eDna75117.0 Osbo Osesne teesesinisi ObOes 7~o7Ceessis I 6050 bask,ai~7004 602 639 06; 017 633741 703385 1453 547 1653897 1373494 143

3437 1533500 7533, " 1'53 3534 7 533415I 1653 473. 1(5 74737 1653531 1653 513 16535471 1653553 165350 1653561 1593623 1593653 1413690 143 750 144 3 769 7 533 769 1563803 1553657 1403697 1373 972 7 763999 1254041 1044096 1174 196 I54 370 1344449 6114 i 464.. . . . . . . . .. . ..;hi 6111I 191137.0 57 , i t774530 ill7 734635 S 145 7374433 759 1755816 A312 1976 6923 9916 1971559 7377 7376 lae550 7547 i015605 7539 M1, 705075 663 Apil7605 7649 Me,/Moy571 777 ,hi756 7 773 li0, /i,) 76f53 f"m5 58n 7 /3/77 '5055 0056 lii Iii5053 0759 7,5816 0317 Ih'

5 847 8363 1973 lo, 5007 8473 1i.h5089 8475 6i 0.6 60 67161 :,,76 154 047 Mio oM6 200 0976 .hii6476 93476 587 9509 Anl6066 9567 5'w6 706 9649 o /Ori6055 9778 Nr16973 1976 , 7(6963 07017 1976 Jon111 I9 24? feb7767 31034 M,l 'M ,7 386 10533 Ail7601 1050 W.nVu,7079 17350 Je7 9 71 404 Jil6043 77406 AiN.40 ,,Q14.5 s 1ss llIOil tilt1I e w11 h 0 hIe dnOno P- 0isin I'leed, 11n-ec7 ecl'tdisooeawlbeo~,aooco if Isi.s and l i,,ii, ,,.~tn~iohii111f1* nn I A,I,, 1743 !., fcfoi~in~eie I. S5

A further recommendation that the Reserve Bank turn over to the private bankingsector the foreign currency proceeds from krugerrand and diamond sales, as wellas public corporation and municipal borrowings (totalling about R3 billion ayear), seemed to be delayed. 20/Apparently the Reserve Bank feared the potentialfor enhanced power of Barclays and Standard, with which the Chamber of Mines(krugerrand sales) and DeBeers (diamond sales) do the bulk of their business.Seftral of the smaller South African banks had apparently asked Pretoria not to letgo of the krugerrand and diamond receipts because they "fear they may be at themercy of Barclays and Standard whenever they need to buy dollars." 202/Transnational banks as wholesalers for credit to South AfricaWhen in the late 1960's, other transnational banks expanded their South Africanconnexions, they operated primarily on a wholesale basis, carrying on their SouthAfrican business through existing British and South African banks, rather thanestablishing their own local branch networks.The "Grossbanken" of the Federal Republic of Germany, the Deutsche Bank,Dresdner Bank and Commerz Bank -- became increasingly involved in SouthAfrica as transnational corporations based in the Federal Republic of Germanyexpanded their investments there. More than any other transnationalbanks,"Grossbanken" of the Federal Rdpublic of Germany, were directly involvedwith transnationals based in their homeland which invested in South

Africa. The Commerzbank and the Deutsche Bank, together with the BayerischeLandesbank Girozentrale, for example, owned substantial shares in Daimler Benz,both directly and through holding companies. The Dresdner Bank owned over 25per cent of Metalgesellschaft, which had become especially active in Namibia,and also had acquired a sizeable share of Degussa. The Berliner Handels undFrankfurter Bank held over 10 per cent of Deutsche Babcock. ?_/ TheDeutschebank, the largest holder of industrial shares among the banks, of theFederal Republic of Germany, was founded by Georg von Siemens in 1870, andstill had close contacts with that company. A Siemens representativestill sat on the bank's board.204/ For the most part, the banks of the FederalRepublic of Germany operated on a wholesale basis through affiliates orrepresentative offices. The Dresdner Bank set up its own representative office inJohannesburg which it later shared with the European Banking Consortium(EBIC). The Commerzbank shared its office with Banco di Roma and CreditLyonnaise205/ Commerzbank also set up an agency, Koller and Bauhaus TrustCo. in Namibia.201/ Financial Mail, (Johannesburg), 2 February 1979.202/ Ibid.M/ Commerzbank, Wer gehort zu Wem, (10In, 1976) g24/ European Review, p.242 ff.20-5/ See annual reports of these banks, 1976.- 53 -

- 54 -Three Swiss banks, the Swiss Bank, the Union Bank, and the Swiss Credit Bank,became increasingly important in arranging finance for the South Africaneconomy through the Zurich Gold Pool. Credit Suisse set up its ownrepresentative office in Johannesburg. Credit Suisse is the largest singleshareholder in White Weld, a British merchant bank that became active inunderwriting loans to South Africa in the seventies. ?The Japanese Government prohibited direct loans as well as investments in SouthAfrica. gQj/ It halted efforts by Japanese banks and business houses to lendJapanese funds to South Africa through the Japanese International Bank, aLondon-based subsidiary. Japanese firms were permitted, however, to borrowfrom their domestic banks to finance exports to South Africa. 208/ The Bank ofTokyo established a representative office in Johannesburg to service the growingJapanese commercial interests there. Loans by Japanese banks to assembly plantsin South Africa in return for South African goods were considered "trade" andtherefore not contrary to the Government's policy of "non-investment". 20/Several Japanese banks acquired minority shares in consortium merchant bankswhich had already become deeply involved in South Africa. This type ofconsortium bank was established by Sumitomo and Cr6dit Suisse-White Weld;Mitsui Bank and Hambros; and the Japanese Industrial Bank and Deutsche Bank.These consortia aimed at "advancing securities underwriting business overseas."10/ It is possible that these banks contributed to consortia loans mobilized by theEuropean lead banks for South Africa.

International banking consortiaInternational banking consortia emerged as an important feature of internationalbanking relations with South Africa in the late 1960s and 1970s. These consortiaestablished representative offices in Johannesburg to enable their member banksto service their transnational corporate clients' South African investments. Amongthose represented in South Africa by the 1970s were the Associated Bank ofEurope (ABECOR) and European Banks International Consortium (EBIC), aswell as two Commerzbank-Cr~dit Lyonnaise-Banco di Roma group, and theBerliner Handels-und Frankfurter Bank. Each in turn had affiliated subgroups.The largest European group, ABECOR, was formed in 1974. It took over theSouth African office of the Dresdner Bank of the Federal Republic of Germany.U1 ABECOR member banks included: Algemene Bank Nederland, Netherlands;Banca Nazionale del Lavoro, Italy; Banque Bruxelles Lamber,g The New York Times, 18 November 1977.?Q11 Yoko Kitizawa, From Tokyo to Johannesburg, (New York: Interfaith Centerfor Corporate Responsibility, 1975). gO8/ Financial Mail, (Johannesburg), 12November 1976./ Ibd.g Oriental Economist, November 1976, P.7.g/ Barclays Bank, Ltd., Report and Accounts, 1976.

- 55-Belgium; Banque Nationale de Paris, France; Barclays Bank, United Kingdom;Bayerische Hypothek~n-und Wechsel-Bank, Federal Republic of Germany;Dresdner Bank, Federal Republic of Germany. Associated members were BanqueInternationale, Luxembourg and Osterreischische Landerbank, Austria. Banque dela Soci~t6 Financi~re Europ~enne, Paris, was a special associate.The second big consortium, EBIC, had established its representative office inJohannesburg several years earlier in 1969 to provide a South African connexionfor its member banks: Amsterdam Rotterdam Bank, Netherlands; CreditanstaltBankverein, Austria; Deutsche Bank, Federal Republic of Germany; MidlandBank, United Kingdom; Soci6t4 Gnrale, France; and Soci 4t Gn4rale de Banque,Belgium. ?/The managing director of the Dresdner Bank explained that an internationalconsortium of this kind "acts as an information center, to pull in other business forthe group, and to liaise with local correspondent banks and customers." In SouthAfrica, he added, "European banking consortia and banks represented here...(aim) primarily at raising foreign capital and a variety of medium-term bankfacilities for Government, local authorities, public utilities and largecorporations." gTransnational banks' role in mobilizing foreign creditWhether or not they had direct holdings in South Africa itself, the majortransnational banks mobilized the foreign capital required to finance SouthAfrica's pressing financial needs in the political economic crisis that shook thenation in the mid 19706. South Africa was forced to borrow heavily overseas tocover the rising costs of its continued oil imports, expanded military purchases,

and the economic development programmes designed to make its minorityGovernment more self-sufficient. By the end of 1977, South Africa's overallforeign debt was almost R13 billion ($14.8 billion).In all, thirty six banking groups participated in the business of mobilizing knownEuro-currency credits for South Africa from 1972 to 1976. g These includedmost of the major financial institutions inthe international capital market. Banks from six countries - United Kingdom, theFederal Republic of Germany, France, the United States, Switzerland andLuxembourg - were the most active bond sale managers or lenders. The banksfrequently organized consortia for particular loans.? Deutsche Bank, Annual Report. 1976.g Financial Mail (Johannesburg), 24 November 1972. 2L4/ The informationregarding publicly issued bonds and credits has been collected and published in"United States Corporate Interests in South Africa" Subcommittee on AfricanAffairs, Committee on Foreign Relationa, United States Senate. (WashingronD.C.: Government Printing Office, 1977).

- 56 -Total South African foreign liabilities, 1973-19771973Central GovernmentLong-termShort-termPublic Corporations andLocal authoritiesLong-termShort-term Private SectorLong-termOrdinary and other shares(nominal value)Share Premiums, reserves,undistributed profitsBranch and partnership balances Debentures loan stock and similarsecuritiesRm %1263 12.2 7774861015 9.7945 70 8140 690710784524 2061121974Rm %1654 12.91077

5771532 12.01431101 78.1 95897784 11125111247 1231975Rm %2945 17.9 1684 12612442 14.82299143 75.1 110768776 11755478298149Mortgage and long-term loans 873 1078 1555Other 114 113 121Short-term 1241 1805 2300TOTAL 10476 100% 12775 100% 16463Source: South African Reserve Bank, quarterly Bulletin, December 1978.1976Ru 4087 2008 207932333056177 67.3 125101000112871977% RM %20.6 4610 21.62698 191716.3 3054 1/ '2714340 63.1 136681095713126398 2731391764 140 2509 100% 19830100z'6898194 1352290 128 2711Z1332

64.1IUTable 10.100%

- 57Table 11 . Foreign financial institutions with major commitments to South AfricaInstitutionsNumber of Commitments in which they participateFederal Republic of German7yUnited KingdomFranceItalyBelgium NetherlandsLuxembourg Switzerland United StatesWestdeutsche Landerbank Girozentrale 10Commerzbank A.G. 13Dresdner Bank A.G. 9(Deutsche Bank) 11Berlmar Hendels und Frankfurter Bank(BHF) 6 White Weld Securities10Hill Samuel 9Strauss Turnbull and Co 7Delta Trade Co. Ltd., 5Barclay Bank International Ltd., 5Habros Bank Ltd., 4Credit Commerciale de France** 15Cr6dit Lyonnais 9(Soci~t6 G6n6rale)* 5Paribas 4Banco Commerciale Italiana 4Banco di Roma 4Kredeitbank N.V. 8Bondtrade 7Algemene Bank Nederland N.V. 7Kreideitbank Luxembourgaise SA 12Union Bank of Switzerland 10Citibank 10Manufacturers Hanover 8Kidder Peabody 8Chase Manhattan 3*Information Tables do not identify this as Soci6tg G6n6ral (Belgium) or(France) o Cr6dit Commerciale is owned 4 per cent each by: Continental IllinoisCorp: Canadian Imperial Bank of Comerce: Schweizerische Bankverein;Schweizerische RlckerversicherungsGe8ellschaft; Banco Espanol de Cr6dito(Janes)

Country

Some known credits to South African private corporations, 1974-1975InterestliboMaturity lender:Tnited States Bank of Subsidiary-4. 4. 4 I 4. I1974 1974 1974 1975 19751975 1975 1975 19761976 1976 19761.7521.5South Africa Breweries General Mining and Finance South Africa Marine Corp.Triomf Fertiliser Jtberg Consolidated Investments AE and CI Anglo-AlphaCement Associated Blds. South Africa BreweriesMaedem Anglo-American Rand MinesManufacturers Hanover Ltd. Manufacturers Hanover Ltd.Citicorp International Bank Ltd Manufacturers Hanover Ltd., CiticorpInternational Bank LtdMorgan Guaranty Trust Co.Bank borrowing loansOther - NationalityMorgan Grenfell and Co. Ltd.Wardley Ltd.Anthony Gibbs Holding Co.,Ltd.Barclays Bank International Banque WormsMorgan Grenfell and Col,Ltd., Baring Brothers London Multinational Bank(Chemical Bank and Northern Trust of Chicago particpated)Baring BrothersYearBorrowerAmount1.75 1.871.560$ 10$4.5% 30$7$ 100$ 15$Table 12:

- 59 -While there was usually a lead bank from one country, banks from severalcountries often took part in major loans.The distinction between loans to the private and public sectors

was not always clear in South Africa. The South African Government parastatal,the Industrial Development Corporation (IDC), for example, obtainedtransnational bank assistance to float foreign loans for private businesses. On theother hand, information about loans to private borrowers by transnational bankswas seldom publicized. The South African Reserve Bank put the total foreigncredit extended to the private sector at R5.8 billion in 1975 216/more than that tothe public sector that year. But no details were revealed to what bank orborrowing firms were involved.In 1977, the Bank of America, which admitted outstanding credit to South Africaworth $188 million, explained that over half represented short-term loans tocommercial banks, while over a quarter of the rest consituted loans to public andprivate corporations for "trade-related purposes or financing of industrialdevelopment projects". The largest receipient of the remainder was the SouthAfrican Government which borrowed short-term funds to ease pressure on thebalance of payments. g If thisbreakdown was typical of that for all lenders, the total loans reported for theprivate sector for the South African Reserve Bank - which did not include loansmade to commercial banks - was probably significantly understated.In the late 1970s, several factors combined to change the pattern of bank loans toSouth Africa.First, the Soweto uprising and heightened repression against blacks, as theyintensified their struggle for liberation, led international bankers to raise seriousquestions as to the political stability of the minority regime. Secondly, overseasanti-apartheid critics forcused on a growing campaign against continued bankloans, pointing out that they provided an essential prop for the whole apartheidsystem. Thirdly, South Africa's balance of payments, negatively effected in themid 1970s by the rising price of oil and armaments, and the falling price of hercrude exports as recession gripped the capitalistic world, began to improve as theinternational monetary crisis pushed up the price of gold.215/ Financial Mail (Johannesburg), 27 August 1976. 216/ South African ReserveBank, Quarterly Bulletin, December 1976, pp. 364-5.?1/ Letter from Mark C. Hennessey, Research Officer-International, Bank ofAmerica, San Francisco Headquarters (Social Policy h5761) to Tim Smith,Interfaith Center on Corporate Responsibility, New York8 August 1977).

- 60 -Reflecting growing concern over South Africa's political stability, its creditratings in international capital markets declined. This was reflected in theshortened term of loans and higher interest rates.The anti-apartheid campaign against banks in the major lending countries also hadan impact. Some United States banks, which had been among the leading banksmobilizing funds for South Africa, including the two Rockefeller banks, ChaseManhattan and Citicorp, asserted they would no longer lend funds directly to theSouth African Government. Q18 Both declared, however, that they wouldcontinue to lend funds to the private sector, arguing that continued economic

expansion would ultimately help to end apartheid. The Bank of America insistedit would continue to lend money to both the private and Government sectors. 92/The chairman of the European American Banking Corporation assured the WorldCouncil of Churches in late 1977 that it would only facilitate loans to financetrade transactions to South Africa. This appeared to reflect both the politicalsituation, and' the fact that the corporation had already become heavily committedto South Africa. ?2/Given the close interlinkage between parastatal and private sectors (indeed, inSouth African Government statistics, the parastatals are included in the privatesector'), it was not clear whether or to whatextent a bank policy of limiting loans to the private sector would significantlyreduce funds for critical South African development projects. Loans directed tofinancing international trade, furthermore, inevitably contributed to strengtheningthe South African r6gime; money is fungible. Funnelled into one part of thesystem, it could easily be transferred to others. Foreign loans to any part of theapartheid economy helped to finance and strengthen the entire military-industrialcomplex.The domestically-based transnational affiliates, especially those of Standard andBarclays, provided an important conduit for transnational bank funds that was lessvisible than publicized Eurodollar credits. In 1977 alone, they advanced morethan a billion dollars (R920) g22/ to finance the purchase of machinery andequipment which they then leased to parastatal and private corporations. SouthAfrican affiliates of transnational banks found it increasingly lucrative to use theirforeign ties to finance both imports and exports by obtaining international credit.They profited from the daily differences in the floating exchange rates of majorcurrencies. g/218! Financial Mail (Johannesburg), 17 March 1978. g Sylvan H. Kline of theBank of America Investment Management Corporation,at Board of Global Ministries, United Methodist Church, "Consultation onBanking and Investment Policies", 18-19 May 1978. g2/_ Financial Mail(Johannesburg), 7 October 1977. 21/ Financial Mail (Johannesburg),31 March1978. k Financial Mail, (Johannesburg), 31 May 1978.

-61 -When, in 1978, the South African Government kept interest rates high to combatinflation, borrowers used international bank contacts to obtain funds through linesof credit overseas at lower rates. Eurodollar credit was 1 to 2 per cent cheaperthan local rates for six month to a year loans. The larger banks and firms hadaccess to acceptance credit in New York at still lower rates. g The SouthAfrican Minister of Finance used tax powers toencourage this use of foreign credit for domestic productive activities. 2L4/ It wasestimated that South African importers borrowed a total of some R2 billion forthese purposes in 1978. The South African Financial Mail characterized thesefunds as so important that a small decline might "knock the foreign exchangereserves clear out of the window." 225/

The boom in gold prices in 1978, did somewhat reduce South Africa's need toborrow long-term funds. At the same time, the resulting improvement in thebalance of payments convinced some European and United States bankers that itscredit worthiness was improving.That the South African r~gime still eagerly seeks foreign credit and recognizes itsessential role in sustaining its military-industrial complex is illustrated by theacclaim with which the South African press welcomed the news that banks ofSwitzerland and the Federal Republic of Germany had loaned $280 million,allegedly for the black townships. As the South African Broadcasting Companydeclared, these funds "will bolster our foreign exchange reserves and help tosupport the recovery momentum at a juncture when it has shown signs offlagging." ? One reason South Africa needs further foreign loans is to repay thepast loans with high interestcharged by transnational banks. a_8/Home Government insurances and guarantee programmesHome Government guarantees of export credit, designed to foster expandedexport sales, became an important factor reducing transnational bank risks onshort-term credits to South Africa in the 1970s. Much of this credit wasguaranteed, insured, or in some cases even discounted by home- countryGovernments through a variety of export promotion programmes. The importanceof export credit is underscored by the South African Government's use of it tofinance SASOL (oil-from-coal) expansion, since direct foreign loans did notappear forthcoming for the proJect.22/_/ Financial Mail, (Johannesburg), 3 February 1978.2_j/ Financial Mail. (Johannesburg), 31 March 1978. 2_ / Financial Mail,(Johannesburg), 3 February 1978.~ Financial Mail, (Johannesburg), 23 June 1978. ?27/ South Africa Digest, 24January 1978. &L8/ South Africa Digest, 3 November 1978. 2/ South AfricaDigest,2 March 1979.

- 62 -The Export Import Bank (Eximbank) of the United States, despite aban on direct Eximbank loans to South Africa in 1964, insured or guaranteedabout three fourths of a billion dollars ($691 million) worth of trade with SouthAfrica fron 1972 to 1976. Additional export credits were insured in 1977 and1978. Another United States Government agent, the Commodity CreditCorporation, financed $46.2 million worth of United States agricultural exports toSouth Africa in the same period. 910In late 1970, anti-apartheid critics persuaded Congress to pass an amendmentprohibiting the continuation of Export Import guarantees and insurance - but theSouth African lobby successfully convinced the Congress to add a rider that if theUnited States concerns involved had adopted the Sullivan Principles theprohibition would be lifted. Since the United States Chamber of Commerce hadalready thwarted Congressional efforts to create a commission to monitor theimplementation of the Sullivan Principles in South Africa this prohibition wasessentially rendered meaningless.

The Federal Republic of Germany's export insurance system, administered by twoprivate insurance companies, Hermes Creditversicherungs-AG and DeutscheRevisions und Treuhand-AG g_ /, increased their guarantees of loans to SouthAfrica by 36 per cent from 1970 to 1975. gl/ In 1976, Hermes guarantees ofexport loans to South Africa almost tripled, reaching DM2.3 billion by the end ofthe year. They rose another DM475 million in the first quarter of 1977. 2D/World-wide, the value of these guarantees grew only 42 per cent. The share of"developed" countries in which South Africa was included, actually declined by 7per cent. ?These guarantees primarily facilitated the finance of export of capital equipmentby major companies of the Federal Republic of Germany operating in SouthAfrica for use of South African Government-owned utilities. They included oneworth $210 million (DM515 million) to Deutsche Babcock to provide steamgenerating equipment for SASOL II. Since an interministerial committeerepresenting the Departments of Economics, Finance, foreign Affairs andEconomic Co-operation, had to agree to guarantees of loans exceeding DMmillion, it was evident that these loans had been approved by the Government ofthe Federal Republic of Germany.?2/ United States Congress,House of Representatives, Committee on InternationalRelations, Resource Development in South Africa, Hearings, 94th Congress, 2ndSession (Washington, D.C.: United States Government Printing Office, 1976) p.383, table 11, p. 1384, table 12.Q11 Business International Corp.,Financing Foreign Operations, 1976.2 Infomationstelle SUdliches Afrika, E.V., Press Release, 26 June 1977./ Ibid.?/ Bundesminister ftr Wirtschaft LP, "Ausfuhrgarantien und Ausfuhrburgschaftender BRD," 1976 BMWI Dokumentation (Bonn, 1977); other BMWI, unpublisheddocuments; and Informationstelle SUdliches Afrika, Bonn, Jaly-August 1977.

- 63 -In late 1977, the Federal Republic of Germany, under heavy antiapartheidcriticism, appeared likely to require that firms with plants in South Africa mustacquiesce to the European Economic Community (EEC) labor code for blackworkers to qualify for further export guarantees, andto pledge that goods would not be transshipped to Rhodesia.?2/ However, thelimit on loans to be guaranteed was R18 million per transaction. The president ofthe South African branch of the Federal Republic of Germany's Chamber of Tradeand Industry declared, "R18 million (is) a lot of money. Besides, I understandBonn will be prepared to allow exceptions."26/Transnational banks located in South Africa's other overseas major tradingpartners have access to a variety of Government supported export programmes.g/Information about the amounts of credit insured, guaranteed or financed by theseagencies is not as complete as that for the United States Eximbank or the Hermesprogramme. The loans made for exports under the United Kingdom programme(Export Credit Guarantees Department, ECGD) are covered by an unconditionalguarantee covering all risks. Bank loans may be subsidized.

France encourages exports by providinglow-cost medium and longterm exportcredits with a special (4.5 per cent) discount rate for exports to countries outsidethe European Common Market. All major French banks provide credits of varyingduration for French exporters. A specialized bank, Banque Franqaise duCommerce Exferieur (BECE) facilitates exports through acceptances, discountsand guarantees. About 30 per cent of all French exports are supported byprovision of these credits, but no breakdown by country is available.The Japanese Government permits its banking community to finance the growingtrade of Japanese firms with South Africa. The ministry of International Tradeand Industry (MITI) funds a variety of export insurance programmes. In 1976,MITI spent Y13,610 billion on these programmes, but again the data on specificcountries involved was not available.South African aoldTransnational banks had always played an important role in the sale of SouthAfrican gold, which constitutes a major source of foreign exchange earnings forthe minority r~gime. By the 1970s, about 80 per cent of South Africa's gold wassold on the ZWrich Gold Pool established by three Swiss Banks, the Swiss Bank,the Union Bank and the Swiss Credit Bank. The Swiss banks purchased on theirown account all the gold the South African Reserve Bank offered them. Theyadded some of the gold to their own stocks for their investment requirements, andsold the rest.SFinancial Mail, (Johannesburg), 2 December 1977. g36 Financial Mail,(Johannesburg), 11 November 1977. g See Business International Corporation,Financing Foreign Operations, (New York, 1976) reports on the kinds ofinstruments available in each country for Government support of exports, but doesnot provide data on the actual amounts of credit provided, guaranteed or insured.The Pnnlowini information relating to export credit is from this source.

- 64 -The South AfricanGovernment could thus unload large quantities of gold without fear of depressingthe world price. It could also insist on payment in the currency of its choice. Inthis way, the Swiss banks had come to provide a major: source of financeassistance to South Africa. M8/Of the five brokers who handled buying and selling of the rest ofSouth Africa's gold in London, four were owned by transnational banks: tandardand Chartered Group purchased the oldest, Mocatta and Goldsmith in 1973.Samuel Montagu was wholly taken over by Midlands Bank. Rothschild and ox,Sons became linked to the National Westminister through the WestministerInternational and Johnson Matthey and Co., and carried on its bullion tradethrough its Johnson Matthey subsidiary.In the crisis of the mid-7Os, the transnational banks enabled South Africa toborrow funds using gold as a security through "gold swaps." The first of these in1976, reportedly arranged by the ZUrich Gold Pool members, WJ was for about$500 million at about a 5 per cent interest rate for three months. The secondinvolved about $390 million. 2401 Since the amounts involved consituted a large

percentage of the Swiss banks' total assets, it appeared probable that the syndicatehad tapped the wider transnational market.Transnational banks also provided the channels through which South Africa soldits krugerrands, one ounce gold pieces, abroad. This enabled South Africa to sellgold outside of traditional markets, thus avoiding depressing the world gold price.In 1975, Intergold, the marketing arm of South Africa's Chamber of Mines,reported the sale of about 21 per cent of the nationa's total gold production in thisform, most of it to .ritish buyers, before the British Government banned goldinvestments. In 1976, Intergold hired the United States advertising firm, DoyleDan Bornback, to increase sales in the United States, hopefully to reach a third ofSouth Africa's annual output. A number of United States transnational banks stillhandle the actual sales through their local branches. 241/ The 1978 krugerrandsales brought almost $1.2 billion in foreign exchangeto South Africa.8J World Council of Churches, op. cit. W/ Financial Mai, (Johannesburg), 26March 1976.240/ Financial Mail, (Johannesburg), 8 March 1977. g Financial Mail,(Johannesburg), 22 October 1978.2 South Africa Digest, 19 January 1979.

- 65 -The United States had become the largest market in 1977, followed by the FederalRepublic of Germany. American citizens doubledtheir purchases of South African gold in 1978, with krugerrands the most popularform of purchase. 24//Africa News, (Durham, North Carolina),9 February 1979.

-66IV. ConclusionTransnational corporations play a key role in providing the hardwaze and financefor South Africa's military-industrial complex. Their investments in advancedmachinery and equipment in South Africa itself creates the industrialinfrastructure to enablethe South African regime to produce about 75 per cent of its own military needs.In addition, their investments facilitate the import of the parts and materialsrequired to make that production possible. Their international linkages provide thechannels through which South Africa continues to import the military machineryand equipment which its own industry cannot produce. Transnational corporatebanks provide the essential financial contacts to enable the South African r~gimeto finance its growing domestic and international military purchases.