Congressional "Record United States of America proceedings and debates of the 99^ congress, first session Vol. 131 WASHINGTON, WEDNESDAY, JULY 10, 1985 No. 91 Senate Mr. HECHT. Mr. President, this week brings the opportunity for the Senate to finally "do something" about the morally repugnant institution of apartheid in South Africa. This opportunity, as we all know, is contained within S. 995. But while S. 995 will no doubt "do something" positive for its proponents in the United States, it is questionable whether this bill will "do something" for black South Africans. In most cases, it is economic development that has historically brought political reforms. This is certainly the case in this country, where industriali- ( zation led people to call for the rights of "referendum and recall" around the turn of the century. So this is also the case in South Africa. Recent reforms in South Africa, such as the legalization of black trade unions, can be directly attributed to the unceasing pressure of modernization on the tradition-bound South African Government. Skilled black workers, once a rarity, are becoming more common. In fact, half of all skilled positions are now held by blacks. All this is a result of the skilled labor shortage that South African economic development has created. To disinvest, and stop the impending political reformation of South Africa by economic development, would itself be morally questionable. Instead, the United States should take a more active position, encouraging, instead of halting the cleansing economic development of South Africa. U.S. firms can be models of desegregation: Through their economic, as well as cultural contributions, they may mold South African society into a morally acceptable form. Hopefully, by increasing U.S. investment in South Africa, we will "do something" for black South Africans, in contrast to "doing something" for only the supporters of S. 995. Mr. President, I should now like to read into the Record an article called "A Reagan Veto To Help South Africa's Blacks." The article was written by Dr. Stuart M. Butler, director of domestic policy studies at the Heritage Foundation. It echoes the reservations I voiced earlier about S. 995, and the disastrous effect it would have on desegregation in South Africa. A Reagan Veto To Help South Africa's Blacks Votes in the Congress this week to impose economic sanctions on South Africa may make good political sense to lawmakers under pressure to "do something" about apartheid. But they tragically will penalize the very victims of apartheid whom the lawmakers say they want to help. Noted the Washington Post in an editorial this week, "It is . . . the country's economy [that] is its most effective engine of social transformation, compelling whites to grant blacks precisely the training and education, the livelihood and personal rewards, the choices of where to live and work, the associations and organizations, the sense of their own power and community, that apartheid would deny them." By seeking to slow down this engine of change, Congress, unwittingly, will extend apartheid's life. Congress instead should foster the fundamental reforms that are being fueled by economic growth, rather than simply trying to register moral outrage in way that will hinder South Africa's slow but inevitable transformation. If Congress persists in this misguided approach, Ronald Reagan should veto the legislation?while remolding his own policy of constructive engagement into a more powerful strategy of "investment leverage." Many Americans have been discovering recently that the demands of an industrialized economy are forcing Pretoria grudgingly to make key concessions to black South Africans. Liberal columnist Richard Cohen declares the call for disinvestment to be "the moral equivalent of a free lunch," and black essayist William Raspberry scores divestiture?the selling of stock in companies doing business in South Africa?as "principally a ritual washing of hands." Other fair-minded Americans began having second thoughts when such moderate black leaders as Zulu Chief Gatsha Buthelezi, who speaks for than than one in four black South Africans. condemned disinvestment as "tactical madness." Some key organizations in America are also expressing grave doubts?recently the governing council of the American Jewish Congress turned back a proposal to support divestiture and disinvestment. The earlier consensus on sanctions is eroding because it is clear that economic growth in South Africa has wrought far more change than that achieved by external pressure. In 1979, for instance, black trade unions were recognized, sowing the seeds for the empowerment of organized black labor. 2 The policy of reserving skilled jobs only for whites is also collapsing, as labor shortages enable blacks to force their way through the "whites only" employment door. Half of all skilled positions are now held by blacks, and the figure is likely to reach over 70 percent within ten years. By setting an example of progressive labor relations and pay equity between their black and white employees, American companies have accelerated this black employment progress. And when an oppressed group obtains such criti-' cal positions in the oppressors' economy, it is not long before the social and political balance of power begins to shift in its J favor?witness recent agreements of the I Pretoria government to end the ban on1 interracial marriage and to accept the permanence of blacks in "white" urban South j Africa. Sanctions are unlikely to have much! effect in South Africa. There are plenty of 1 countries willing to take America's place' and to act as funnels for indirect trade. But I if sanctions do bite, they will impede i progress spurred by industrialization and I urbanization. To be sure. American companies can give little more than a small boast to the deep current of change. Stopping new investment, however, will weaken even this 1 influence. And if American companies are j forced to pull out, the resulting fire sale of J U.S. factories will simply provide a "golden-opportunity," in the words of a leading Jo-' hannesburg investment bank, for Afrikaner j firms to buy up their American competitors at a knock-down price. Observes The Econo-1 mist (of London): "It is hard to see how replacing an American personnel director with an Afrikaner one is an advance for anti-apartheid." Similarly, there is little reason to believe that Pretoria will be pressured by 1 sanctions into policy changes that would threaten its own existence. Extremist Afrikaner parties gain votes in droves when the j government seems to be giving in to pres-' sure. External threats therefore only make 1 it much harder for Pretoria to accommodate | the internal pressures arising from econom-' ic growth. ' Congress and the Administration should be seeking to turn up the pressure un-1 leashed by economic expansion, not choke it! off. The diplomatic approach of construc-1 tive engagement is not enough. Instead, the ; Administration should actively encourage1 U.S. firms to invest in South Africa. It1 should work with American trade unions to ' help promote black trade unionism, and it1 should help those firms, such as IBM, that' are fostering the creation of black businesses in South Africa. By expanding black economic power in South Africa, the U.S. can 1 build up black political power and hasten' change. If Congress places sanctions on j South Africa, or demands disinvestment, it will weaken black unions, erode the corrosive effects of economic growth, and help perpetuate apartheid. Stuart M. Butler, Ph.D., Director of Domestic Policy Studies. Mr. President, some say that the only way to end the brutal institution of apartheid in South Africa is to dis-invest. With this viewpoint has come a narrowing of minds. Many feel that to be against disinvestment is to be for apartheid. To illustrate, earlier this week, a colleague from the other side of the aisle stated: There seems to be, at the heart of the American ultra-right, an undercurrent of racism that rises to the surface every now and then. I strongly suspect?and gravely fear-^that that dirty undercurrent of racism is rising to the surface again in the tolerance of apartheid and the apparent lack of concern over the suffering of 23 million blacks. Unfortunately, the narrowminded-ness of this argument and obsession with disinvestment do not allow men of intellect to understand that disinvestment can only lead to more suffering by South Africa's oppressed non-whites. Disinvestment will erode both the political and economic gains made by nonwhites in South Africa. Disinvestment will end the influence U.S. nationals have had in installing more blacks in skilled employment. Colorblind practices of U.S. firms will be replaced by domestic policies?blacks previously employed by U.S.-run companies may find themselves on a oneway bus ride back to the homelands. Disinvestment will also ensure that hundreds of thousands of blacks, co-loureds, and Indians in South Africa will face unemployment due to economic hardships. It is important that we understand that the United States would be responsible for their hunger. Instead of disinvesting, instead of removing U.S. challenges to apartheid in South Africa, the United States should take a more active role in South Africa's economy. It is only through constructive economic leverage that change can be most quickly encouraged in South Africa. Those who raise the dogmatic cry of racist are the very individuals who are ingnoring the United States most effective tool toward abolishment of apartheid in South Africa. Mr. President, I would like to read an analysis authored by Dr. Stuart Butler, director of domestic policy studies at the Heritage Foundation. Dr. Butler outlines five actions that the U.S. Government should take in order to increase our positive influence for elimination of apartheid in South Africa. All of those involve encouraging, rather than retarding, the South African economy, thereby less-ing, not increasing, tensions within that country. Only by putting aside the dogmatic assertion that all who oppose economic harm to South Africa are racists who support apartheid can the American people hope to rationally analyze our ability to help nonwhites in South Africa. I hope that such dogma will not be put forth by men who know better in the future. At this point I would like to read into the Record a paper entitled "An Investment Strategy to Undermine Apartheid in South Africa," by Dr. Stuart Butler. Few Americans, if any, defend South Africa's brutalizing racial separation and discrimination policies that are called apartheid. Being for or against apartheid never has been an issue. This issue, rather, finding the best ways by which the U.S. can foster1 apartheid's disappearance. Two approaches are advocated for achiev-. ing this, as was clear during last week's House and Senate hearings on South Africa. One approach is called "disinvestment." It would put pressure on American companies with investments in South Africa to pull out of that country. The objective of this strategy is to so threaten the South African economy (already gripped by a severe recession) that the Afrikaner-dominated white government would recognize that apartheid is too costly to sustain and move swiftly to grant full political rights to all South Africans. The second approach calls for the opposite kind of strategy, described by the Reagan Administration as "constructive engagement." This involves extensive economic and diplomatic contact with South Africa to dissipate the siege mentality of Pretoria and to foster gradual change. Momentum is growing in Congress for legislation based on the disinvestment approach. Frustrated by what they interpret to be the inadequate success of the Administration's policy of constructive engagement, many legislators feel that persuasion never will achieve significant reform. The only language Pretoria will understand, they argue, is the threat of U.S. investment boycott. Disinvestment, however, would be a serious mistake, for it would penalize South Africa's blacks and actually make the dissolution of apartheid more difficult. Disinvestment is based on a misunderstanding of Afrikanerdom, a misreading of the process of change in South Africa, and a historically unjustified confidence in the effectiveness of boycotts. Disinvestment would have at most a marginal impact on South Africa's economy. It probably would prompt Pretoria to become more stubborn. And even if disinvestment did begin to bite, it simply would slow the workplace reforms pioneered by the progressive American companies in South Africa and weaken black unions, while strengthening the position of reactionary white workers. It would undercut the reformist English-speaking business community and the media it supports. Most important, disinvestment could blunt the economic forces that are slowly, but inexorably, undermining apartheid's foundations. It is the unstated premise of disinvestment that, in the political context of South Africa, this policy will achieve reform only if the country is polarized further, leading to violent and bloody revolution?out of which, perhaps, a peaceful and stable democratic state will emerge. The trouble is, post-colonial Africa offers no precedent for this. Nor is constructive engagement, albeit much sounder than disinvestment, a sufficient policy. Rather than relying only on the diplomacy of such an effort, the Administration should fashion a more activist strategy recognizing that it is economic growth, coupled with the color-blind employment practices of U.S. companies, that poses the greatest threat to apartheid. Over 300 U.S. companies currently have subsidiaries in South Africa, including IBM, Ford, General Motors, Mobil, and Xerox. The $2 billion in American assets in the country represents 20 percent of total foreign direct investment. American investment dominates such areas as oil and computers. Constructive engagement should be supplemented by a strategy of "investment leverage." Instead of disinvestment, increased American participation in the South African economy should be encouraged. The U.S. government, meanwhile, should provide special assistance through American companies to upgrade the educational and management skills of black South Africans and help them form businesses of their own. Assistance also should be given to American trade unionists to train black union organizers. Finally, technical assistance and encouragement should be given to speed the recent decision by the South African government to return to the private sector key segments of the nationalized economy, thus taking control from Afrikaner bureaucrats. why disinvestment will not work The disinvestment strategy forms the heart of recent congressional initiatives to pressure the government of South Africa. These efforts misread the economics and the politics of that country. the economics of disinvestment The theory of disinvestment is that, by threatening to block American investment in South Africa, the local economy would face such as crisis that Pretoria would be forced to make major political concessions to blacks?particularly as South Africa already suffers from a painful recession. While this sounds plausible in theory, there is little reason to believe that disinvestment would expose a South African economic Achilles heel. A recent major analysis of the South African economy by The Economist (of London) concludes that the economic effect of U.S. disinvestment would be small and could conceivably boost the country's economy.1 The journal points out that the South African recession already has hit investment hard for purely commercial reasons and that new American capital inflows have failed by 10 percent in just the last year. Total investment from outside South Africa has "slowed to a trickle," falling below $100 million a year. Consequently, "The disinvestment lobby is working on a tiny margin of the South African economy." Moreover, the disinvestment rationale ignores totally the possibility of South African retaliation. Three times greater than foreign investment going into South Africa are dividents sent abroad by firms in South Africa. Disinvestment thus could be countered by a dividend export freeze by Pretoria, which would improve South Africa's capital balance of payments and free more domestic funds for investment. 4 Concludes The Economist: Disinvestment would be once-for-all Marshall aid. It is hard to comprehend the widely held view in the anti-apartheid lobby that this would traumatize the South African economy: in \ the short term, it would probably boost it.2 The British journal also points out that, if U.S. companies were forced to withdraw from South Africa, the action would threaten the employment of 120,000 blacks, many of whom have learned new skills and earned promotions in progressive, desegregated American companies. If these firms closed, many of their black employees would be liable for deportation to the tribal homelands. More likely, the South African government would nationalize the companies or allow local firms to take them over. Notes The Economist, "It is hard to see how re-, placing an American personnel director with an Afrikaner one is an advance for anti-apartheid." 3 The principal effect of disinvestment would be to erode the economic leverage of blacks. Black South Africans comprise about three-quarters of the country's workforce and half its skilled labor. As the economy has grown, shortages of white labor have allowed blacks to force themselves into occupations once reserved for whites. Black trade unionism also has grown rapidly with the expanding economy. Membership has reached almost half a million. After Pretoria recognized the inevitable and legalized black unions in 1979, black wages doubled over the next three years, and black trade unionists began to flex their political muscles. the politics of disinvestment Disinvestment may be favored by black organizations and liberals in the U.S., but polls reveal that it is opposed by urban blacks in South Africa by about three to one. It should be no mystery why South African blacks strongly support the presence of foreign firms that have done so much to improve the economic and social status of their nonwhite workers. South Africa's black National African Chamber of Commerce and Industry, for instance, sent a memorandum to Senator Edward Kennedy during his recent visit to South Africa, attacking disinvestment as inhibiting economic growth, "which is a powerful catalyst in the process of peaceful social and political reform in the country." The same view was expressed by Chief Gatsha Buthelezi of the Zulu tribe, a fierce opponent of apartheid. He called disinvestment "tactical madness" during a February visit to the United States. Those South African blacks who oppose disinvestment are denounced by South Africa's militant black leaders and their American allies for two reasons. First, to be successful politically they must seek to persuade Congress and the American people that the choice is simple and stark?either one supports "the blacks" in South Africa, who are supposedly unanimous in their support of disinvestment, or one supports white racism. To recognize the deep disagreement 1 "The All-American Leverage Game," The Economist, March 30, 1985, pp. 31-32. a Ibid., p. 32. 3 Ibid. among South African blacks regarding strategy would make it easier for Americans to oppose disinvestment. Second, some advocates of disinvestment seem to favor revolutionary change in South Africa. For them, there is sense to the old revolutionary dictum: the worse, the better. As such, the fact that disinvestment would hit blacks harder than whites is a virtue, since it would drive black into economic despair and militancy. Thus well-meaning supporters of disinvestment must come to see that this policy would make conditions worse for blacks, not better, and that the process of change it envisions is based on confrontation and violence, not peaceful reform. The efforts of back and white moderates in South Africa would be weakened by disinvestment. In particular, it would reduce the corrosive effects on apartheid of black advancement within U.S. companies. And it likely would reduce the financial support given by the English-speaking business community to the opposition media. Recently the Rand Daily Mail, one of the strongest critics of apartheid, was forced to close for economic reasons. Disinvestment threatens other English-speaking opposition newspapers by forcing a cutback in their business support. The net effect of disinvestment, therefore, would be not to force Pretoria to the negotiating table, but to undermine those in South Africa who support peaceful change?leaving violence as the only available option. The politics of Afrikanerdom reinforces the argument that disinvestment will fail. The history of South Africa has been characterized by Afrikaners seeking to retain their ethnic and social identity against outside threats?from the English, from the nonwhites, and even from erosion by industrialization. Apartheid uses the crude approach of partition. Within the white business community, extensive regulation and nationalization has been used by the bureaucracy?dominated by Afrikaners?to try to hold back what they see as the corrupting power and influence of the English-dominated business class. But the Afrikaner community is not mon-othlitic. There are those known as "ver-ligtes" (who favor sharing power with the blacks and see reform as both inevitable and desirable) an the "verkramptes" (who support the traditional Afrikaner commitment to apartheid with no concessions). And though the reforms of South Africa's President Pieter W. Botha seem minimal to many American observers, they indicate strong verligte influence and have led to a wrenching split in Afrikaner politics. To be sure, the Botha government is extremely cautious and as stubborn as any Afrikaner in the face of outsider pressure. Yet Pretoria is slowly adapting the law to accommodate economic and social pressures within the country. It is now widely accepted the the blacks are not temporary workers but permanent urban residents. The new constitution, bitterly denounced by verkramptes, accepts that some nonwhites must have a say in national decisions?a slide toward democracy that may be very hard to reverse. Most recently, Pretoria made the dramatic announcement?to the horror of the verkramptes? that it will repeal the laws forbidding interracial marriage and sexual relations. "Like it or not," said an editorial in the Cape Town Argus, "their removal must of necessity affect the entire edifice [or apartheid] in time to come." Days later, Botha announced not only that blacks would be permitted to buy houses in the black townships of "white" South Africa, but that they would not necessarily lose their South African citizenship if their nominal homeland were granted independence?implying an acceptable that blacks are a permanent part of South African society. The political Irony of disinvestment is that, by forcing a political confrontation within the Afrikaner community, it could slow down, and even reverse, the growing realization in white South Africa that the economic and social changes underway should be codified by law. The Botha government is said by many South Africans to be reforming "stealth." Each legislative retreat is shrouded in vague and evasive statements, so that the Afrikaner community is not excessively alarmed. To the outside observer, of course, this seems like a lack of commitment, but it may be the only strategy that will avoid a verkrampte backlash. For Pretoria's dilemma is that, to satisfy the demands of the disinvestment lobby in Washington, the Botha government would have to make its actions so clear that Afrikaner reaction would eliminate any chance of effecting the intended reforms. the measures before congress To date, 21 bills concerning South Africa have been introduced in Congress. The majority of pending bills contain a common theme: legislative sanctions to restrict or halt private U.S. economic activity in South Africa. Examples: Bill introduced April 24 by Senator Richard Lugar. This bill incorporates an earlier bill Introduced by Senator Charles Mathias (R-MD) and approved by the Foreign Relations Committee. It has the support of the Administration. The measure would require the President to report by March 1987 on whether South Africa has made "significant progress" towards ending apartheid, including: steps to end the pass laws restricting the movement of blacks, increasing labor union rights, ending the migrant labor system, and improving housing for blacks. If the President determines that significant progress has not been made, he would have to recommend to Congress which of four sanctions should be applied against South Africa: bans on new commercial investment, bank loans, the importation of Krugerrand gold coins, or the sale of computers to the Pretoria government. In addition, the bill would create a $15 million scholarship fund for blacks, require all U.S. companies operating in South Africa to abide by the Sullivan Principles. The Sullivan Principles are a voluntary code of business conduct that commits signatories to desegregate the workplace, remove racial distinctions in pay scales, and step up training and promotion for blacks. Companies abiding by the code employ approximately 70 percent of all workers in American firms located in South Africa. The bill also would provide assistance through American agencies to black-owned businesses in the country, and increase to $1.5 million the Kassebaum Human Rights Fund for victims of apartheid. S. 147, introduced by Senator William Proxmire and H.R. 632, introduced by Representative Buddy Roemer. This bill would prohibit new U.S. investment in South Africa, require compliance with specific employment practices by U.S. firms in South Africa, block U.S. bank loans, outlaw Krugerrand imports, reimpose Carter Administration trade restrictions, and prohibit exports to South Africa of U.S. nuclear-related technology. H.R. 1460, introduced by Representative William Gray and S. 635, introduced by Senator Edward Kennedy. This bill would prohibit U.S. bank loans to the Pretoria government and to U.S. firms operating in South Africa, ban new U.S. investment In South Africa, block Krugerrand imports and block computer sales to the South African government. Waivers on these restrictions could be obtained for twelve months, if the President and Congress determined that adequate progress had been made in one or more of the following areas: housing for black workers, easing of employment restrictions on blacks, eliminating the homelands and the policy of denying South African citizenship to blacks, ending residence restrictions, negotiating political participation for all races, and the freeing of political prisoners. H.R. 1595, introduced by Representative Robert Walker. This measure applies to all countries, not just South Africa. Its far-reaching provisions would prohibit the import of goods produced by slave labor, direct the U.S. to oppose International Monetary Fund loans to countries allowing the trafficking of illegal drugs, deny U.S. most-favored-nation status to countries that prevent a free press, direct the U.S. to demand Soviet compliance with the Helsinki Accords, require the U.S. to seek a full accounting of international prisoners of conscience, prohibit U.S. economic aid to states that vote against the U.S. in the U.N. more than 85 percent of the time, stipulate that U.S. foreign assistance promote private sector initiatives, while blocking U.S. economic and military assistance to any state that denies free press access or promotes international drug trafficking or terrorism. I see my colleague from Alabama has come to the floor and wishes to speak. While I have a great deal more to say on this issue, I welcome the Senator's participation and yield the floor to the Senator from Alabama.