I follow two main objectives. On the one hand I want to show that the cooperation was very intense despite the effort of the international community to restrict it as an expression of its opposition to the South African racist regime.[2] To this end, I will demonstrate not only the dependence of the Union of South Africa (Republic of South Africa) on the aforementioned countries, but also the high dependence of Western powers and Western defence system on their cooperation with South Africa. On the other hand I will show that foreign investment flowing to South Africa contributed to the gradual erosion of the rigid apartheid policies, having been the major drive behind the development of the country‘s economic and military potential and modernisation, towards the end of the 1970s.

The official attitude of the international community towards South Africa was represented by the position of the UN towards South Africa in the high number of embargos and resolutions adopted against her. As a result, the UN was seen by the ruling South African National Party as a “typical source of evil”, as the “hydra conspiring against our existence”.[3]

Despite the fact that most countries officially followed the United Nations line, intense cooperation with the West was taking place. The traditionally anti-communist Republic of South Africa was seen as an ally of the Western Powers in their fight against the Soviet Union and its satellites. South Africa played an important role during the Suez Canal crisis, when the Soviet Union took it’s first steps to make it’s breakthrough on the African continent and then again in the second half of the seventies after the events in Angola and Mozambique that gave rise to communist regimes in these countries.

The major drive behind this cooperation was trade and financial investments, both by the state and the private sector. According to a memorandum of the South African mission to the European Economic Community in 1972, South Africa was the major market for EEC exports outside of the EEC and USA and more than 80% of foreign investments in South Africa were from the EEC.[4] Also, Great Britain, U.S.A., Germany, France, Japan and Italy were in 1975 declared by the United Nations General Assembly to be major business partners of South Africa.[5]

The dependence of the South African economy on foreign capital and international business was very high. Its exports and imports equalled up to 40% of its GDP.[6] In 1960 foreign investments in South Africa amounted to R3 billion, in 1970 this figure was raised to R5, 8 billion[7] and in 1976 the Reserve Bank in Johannesburg announced that the overall dependence of the South African economy on foreign capital had been growing.[8] The economic links with foreign countries according to The Guardian played ”a large part in sustaining apartheid” [9]and helped to make South Africa an “economic giant dominating the whole southern part of the African continent.”[10] The reason for growing international trade and capital in South Africa was undoubtedly the attractiveness of South Africa to foreign investors – its vast mineral resources (South Africa was often referred to as the Saudi Arabia of minerals and her coal was probably the cheapest in the world)[11], very cheap labour (produced by the system of apartheid), availability of capital and technology and a high standard of economic and business management.[12]

Relations with the United States

The relationship between South Africa and the United States was manifested in the attitude adopted by Washington towards South Africa from the times of Eisenhower’s to Carter’s presidency  during whose administration major changes started to take place in South Africa. The best relations were during Nixon’s administration, mainly due to Henry Kissinger, who held the position of State Secretary. Carter’s election to the presidency meant a rather dramatic turn in the relations between the two countries despite continuing cooperation.

It is important to note the contradiction in the United States’ official position towards South Africa, which paid lip service to the UN anti-apartheid resolutions, and the actual flow of the US investment into South Africa, which was at its highest during the Kennedy and Johnson administrations. During the Eisenhower administration the international position of South Africa was not fundamentally influenced by her policy of apartheid (the first serious impact was caused by the events of the early sixties). South Africa was seen as an ally of the United States and widespread collaboration with the Pentagon, CIA and NASA was taking place. South Africa, an important producer of uranium, became a member of the International Atomic Energy Board[13], backed by the US.

From the sixties onwards with the coming of Kennedy and then Johnson to office, the USA’s official line towards South Africa hardened. This was caused mainly by South Africa’s domestic policy and the response of the international community to it. It was the incident in Sharpeville[14] that prompted the international community to deal with the situation in South Africa critically and intensively. In 1963 a UN resolution declared South Africa a threat to world peace and security[15] and the US officially stopped the sale of arms as a result of a UN embargo. However, The Rand Daily Mail reported in October 1969 that the USA had supplied South Africa arms worth $45 million in the years 1962-1968.[16]

In 1967 the prohibition of naval visits and direct loans of the Export-Import Bank[17] was enacted and, above all the USA in that time (nor later) did not recognize the independence of so called Homelands.[18]

Despite all the initiatives at official level a very intense economic cooperation continued, which  I elaborate later.

In the seventies a significant change was affected (mostly at the official level) by the 1972 election. Nixon, who won his first election in 1969 with the help of senators from the South, needed their support for his second term. He therefore approached the National Security Council with a request to formulate a new South African strategy. As a matter of fact, South Africa, along with Rhodesia was seen by the Southern conservatives as a bastion of democracy in the region, regardless of their domestic regimes. Henry Kissinger, the State Secretary at the time was an eager proponent of this view.[19]

From 1969, Nixon started to promote a revision of American international policy which naturally influenced the United States‘ relations with South Africa . The new NSC Strategy, as set out in the National Security Study Memorandum No. 39, was based on the following objectives:

1. To maintain public condemnation of apartheid, but at the same time relax political isolation and economic restrictions imposed on South Africa.

2. To encourage the change of political system in South Africa but only through whites.

3. As the government of blacks[20] would mean chaos and bring about rule of communism.[21]

There is evidence showing that this policy was actually followed. It can be summed up in six points:

1. The adoption of the Byrd Amendment (i.e. the violation of UN sanctions against Rhodesia) and the resumption of chromium supplies.

2. The 1971 Report by the State Department, which highlighted the crucial importance of South African mineral resources for USA. In 1969 the whole of the southern African region, i.e. South Africa, Namibia, Rhodesia, Lesotho, Botswana, Swaziland, Angola, Mozambique, Zambia and Madagascar produced 69% of world’s output of gold, 64% of industrial diamonds, 57% of cobalt, 32% of chromium, 29% of vanadium, 22% of copper, 14% of magnesium.[22] The United States, as much as Great Britain  had almost all of it’s demand for chromium met by import from South Africa. The other alternative was the Soviet Union. It was precisely South African mineral resources that highlighted the strategic importance of South Africa in the bipolar system of the Cold War again five years later. At a conference of Mining economists in 1976, which took place in Swaziland, South Africa’s strategic importance for the defence system of NATO as the world’s non-communist mineral resource was acknowledged.[23]

Three of the above mentioned minerals were of crucial importance – chromium, manganese and platinum. These were essential for production of high quality hardened/reinforced, heat-resistant steel, used for jet engines and the burning of rocket fuel.[24] According to The Daily Telegraph, the need for South African minerals was in the background of Kissinger’s and Vorster’s efforts to find a stable solution for South Africa.[25]

3. In 1971 the American Export-Import Bank granted South Africa long-term loans, International Bussiness Machines (IBM) and ITT  provided electrical devices for South Africa Defence Department and in 1967-1972 the USA sold to South Africa 1,376 airplanes.

4. In November 1974 Henry Kissinger dismissed his assistant D. Easum, who had expressed his opinion that the USA should put more pressure on South Africa in a bid to dismantle apartheid. He was replaced by N. Davis, which was interpreted as another concession to South Africa.[26]

5. In 1970 another UN resolution was issued demanding further intensification of the arms embargo towards South Africa. Both the United States and Great Britain voted against. In December of the same year the UN General Assembly issued another resolution condemning South Africa for its refusal to withdraw from South West Africa, the future Namibia. Again, the United States, and Great Britain voted against, together with France and Portugal.[27]

6. Henry Kissinger defended South Africa’s membership in the United Nations in front of the assembly of the Organisation of African Unity delegates (OAU, formed in 1963) in New York as late as 1975. He insisted that there was a considerable ‘wind of change’ in South Africa as well as arguing that it was impossible to expel members on account of their domestic policy.[28]

Another reason for cooperation at that time was related to the collapse of the Portuguese colonial system and establishment of Marxist governments in Angola and Mozambique in the second half of the seventies. In fact, in that area the United States were fully dependent on Portuguese intelligence (the local branch of CIA was closed down for ‘economic’ reasons in 1969)[29]. After the events in Mozambique and Angola the existing system was destroyed and it was South Africa who was supposed to fill in the vacuum.

Indeed, the USA took the South African’s side on the issue on withdrawal of  troops from Angola. The United States backed the demand that withdrawing of troops be accompanied by a reciprocal withdrawal of Cuban and Russian troops from the region. This, of course, provoked a bitter reaction from Cuba and the USSR.

After Carter’s coming to power in 1977 (often called by some British and American authors a ”black year” for South Africa) the US policy was revised. Human rights and in some cases cooperation with liberation movements started to be emphasised.[30] It was the year when the international pressure on South Africa peaked with the introduction of an arms embargo (for the first time in the history of the UN against one of its own members) and the economic situation in the country was alarming.

During Carter’s administration economic policy was seen as a „major means to achieving racial justice“ under the South African „system of repression“.[31] As Carter put it: „… I think, that the more we invest, the bigger influence we will have over South African government“.[32] On the whole, the level of investment had remained stable. However, a new pressure appeared via the Export-Import Bank that agreed to support only those companies wishing to do business in South Africa, that complied with the „Code of Conduct“ setting out the principles in dealing with black employees.[33]

Despite all the rhetoric, economic pressure remained the only means of fighting apartheid and not even Carter considered direct military intervention an option.[34]

Cooperation with Great Britain

Compared to other countries, the relations between South Africa and Great Britain were extensive due to the long-term contacts between these two countries dating back to the 18th century. In 1950 the relevant departments of the Foreign Office and the Colonial Office prepared a memorandum „Four Reasons“ setting out the reasons for preserving close relations with South Africa.

The first reason was that the Cape shipping route, South Africa’s industrial and military potential, and its possession of uranium were strategically important.

Secondly, South Africa was valuable as a market for British goods and capital; the utmost importance was attached to South Africa’s gold. Thirdly, South African’s co-operation was essential if Britain were to retain control of High Commission Territories (Basutoland, Swaziland and Bechuanaland). And finally, there was the desire to maintain the Commonwealth connection with South Africa.[35]

The 1952 Cabinet memorandum further stressed the nature of the „Four Reasons“ insisting that the British government must „do all it can to preserve and strengthen relations with South Africa“.[36]

From the sixties onwards although the situation started to change the special nature of the relations with South Africa continued to be emphasised officially, as apparent from Macmillan’s statement before his African tour in 1960: “Your affairs and ours have been and will continue to be mixed up intimately.”[37]

Until the seventies Great Britain was considered to be South Africa’s largest commercial partner. During the sixties £200 million worth of British exports were to South Africa, which was more than the total export to the remaining African members of the Commonwealth.[38] It meant that in the period between 1955 and 1966 thirty percent of South African imports were from Great Britain.[39] According to the Guardian, as late as 1974 Great Britain was the largest foreign investor in South Africa (direct British investment amount to £14m during 1961-66[40]) and at the same time its largest customer.[41] Correspondingly, South African exports to Great Britain represented a very important part of total British imports. South Africa was the main supplier of fruits, vegetables and diamonds, the second largest supplier of corn and ferromanganese ore, and the third largest supplier of animal oils and fats.[42] South African gold and chrome supplies also played an important role.

In 1975 the British government granted permission for the British Steel Corporation to invest

£3 million into the construction of a chrome-manufacturing factory in Transvaal. The supply of chromium was insufficient and given that the only other source was the Soviet Union, its availability was a strategic issue.[43]

The commentary of The Times is, it seems very symptomatic of the nature of the international affairs at the time: ”Mr. Varley (Industry Secretary) is probably right to buy inexpensive chrome from the friendly tyranny rather than expensive chrome from a hostile tyranny.”[44]

As much as two thirds of the British gold reserve was from South Africa.[45] As mentioned in the 1951 Cabinet Memorandum South African gold was seen as being of ”an utmost importance” for the viability of the sterling area.[46] Ten years later the Treasury had to admit that the departure of South Africa from the sterling area would be “a major crack” in its functioning.[47] The importance of South African gold was also highlighted during the Bretton-Wood crisis of the monetary system, which was based on the gold standard.

The mutual dependence of South Africa and Great Britain is apparent when considering the consequences of the sanctions (or any kind of restriction on the relations between the two countries) imposed on South Africa. The interdependence between the British and the South African economy was stated openly by the British Foreign Secretary, Dr. Owen, in his interview in the Financial Gazette in October 1977: „Our economic links with South Africa could not disappear overnight without causing dislocation to the domestic economy and severe repercussions to the level of employment.“ According to the British Association of Industries the sanctions would mean a rise in the unemployment level in Great Britain by around 70,000 jobs[48] and a decrease of external trade by one twentieth as well as deterioration in the balance of payments by £300 million.[49] Two years later his successor took a different line when announcing that „the government has taken into consideration the danger stemming from our economic dependence and has decided to reduce the cooperation with South Africa“. In reality no significant changes had taken place.[50]

With regard to security cooperation, there was a “special relationship” between the two countries dating back to the time of the government of the two generals, Botha and Smuts, when both countries were allies in both world wars. At that time, South African army, naval and air forces were built with considerable British support.[51] After the Second World War the relationship intensified, when South Africa’s position became strategic in the ensuing Cold War. South Africa unreservedly took the side of the West. In the fifties South African troops were sent to Korea.[52] And South Africa manifested a hard-line anti-communist and anti-Soviet orientation. In 1950 the “Suppression of Communism Act” was enacted and the South African Communist Party made illegal. Those suspected of supporting communism were forbidden to join any organisation, publish and could have been placed under house arrest.[53] In the fifties large amounts of money were spent on the installation of anti-Russian bomber radars.[54] Diplomatic connections with the Soviet Union were severed in 1956 and the Soviet Embassy in Pretoria closed down. Economic cooperation ceased after 1960. It took 15 years for any relations to resume and these were mainly in academic circles.[55]

What was the root cause of South Africa’s strategic importance and why was its position relevant to the Western defence interests? The strategic dimension was a result of both South Africa’s geographical location and its vast supply of mineral resources. This is borne out by a report produced by the US State Department in 1971 and by the conclusions of the mining conference in Swaziland in 1976 referred to in the paragraphs dealing with the South Africa’s relations with the United States. The strategic position was crucial for installation of space satellites and missiles bases (used mainly by the US). The rights to fly over its territory granted to the western allies granted by South Africa also strengthened its strategic advantage.[56]

Therefore South Africa played a valuable role in the defence plans of the West. One look at a map shows that the Cape of Good Hope shipping route was the only alternative route to Asia and Australia if the Suez Canal was closed. A clear sign of the acknowledgement of the importance of the southern Atlantic for the defence plans of the West was the Simonstown naval agreement in 1955. (It was terminated 20 years later, when according to the British government the political disadvantages of such an agreement outweighed its military advantages[57]). The agreement had two main clauses: one concerned arms supplies to South Africa provided as late as 1964 and the other stipulated the use of Simonstown base by Great Britain (which has been de facto the case since the 19th century) and by the Western allies.  Shortly after the agreement was signed, six anti-submarine frigates, ten costal minesweepers and four seaward defence boats were delivered to South Africa. Training of the South African military and naval staff was to be provided by Great Britain according to the agreement.[58]

While discussing the security aspect of Great Britain’s cooperation with South Africa the nuclear dimension cannot be ignored. It is possible to say without exaggeration that without the cooperation of the Western powers, the United States, Great Britain and also Germany and France, South Africa would have not developed its nuclear industry.

With  the assistance the western countries (which provided more then two thirds of all investments) nuclear reactors Safari I, Safari II, and the Koeberg power station were built. Additionally, thanks to Great Britain South Africa was able to open its own uranium-enriching factory in Valindaba in 1975 and later also a uranium-hexafluoride producing factory in Pelindaba.[59]

The South African nuclear expertise had been developed entirely because of the Western support and the issue of nuclear weapons is closely related to it. It is debatable whether South Africa could have possessed a nuclear bomb before the mid-seventies but after the western nuclear cooperation it was clear that it could. The period of the southern African area as a “nuclear free zone” was over.[60] It is known that the South African strategic defence programme was based on the ability to produce the atom bomb.[61] This, however, required production of “delivery systems” capable of deploying a nuclear device. Again, the West came to South Africa’s assistance.

Great Britain provided a Boeing 707 (which despite being a passenger aircraft can be modified for delivery of an atom bomb), Canberra B12 and Buccaneer S-50 bombers, France Mirage III and 100 Mirage F-1 fighters, [62] and the USA equipped South Africa with 155-mm cannons capable of using nuclear ammunition and with 300,000 bomb shells capable of delivering 2-3 kilotons of nuclear  filling.[63]

Having shown that western influence and investment in South Africa continued throughout the apartheid period, I will now examine the impact of western investment on the apartheid system. The study by Mrs E. Feit and R.G. Stokes in the Journal of Modern African Studies pointed out the functioning of apartheid in the private sector. They dealt with the problem of the extent to which the social stratification reflected a company hierarchy. One of their conclusions was that the private sector was to a large degree capable of promoting a social transformation in the country.[64]

I will examine the validity of this statement and demonstrate how foreign private, and public capital, affected South Africa’s white establishment and in the end forced it to reconsider the basis of the apartheid policy.

The first impetus for change came mainly from US corporations and I shall briefly elaborate the US business and private investments in South Africa. The breakthrough in US investment came in 1957 when American Minerals and Chemicals Corporation joined the South African Anglo-American Corporation in the take-over of the Central Mining Company. In 1958 the American-South African Investment Corporation was founded and in a couple of years it reached investments of $40 million. First National City Bank of New York opened a branch in the same year and so did Chase Manhattan Bank a year later.

In 1956 the direct investment from the US amounted to $288 millions. By 1968 this figure increased by 250% to $692 millions. In 1971 the number of US companies operating in South Africa reached 260. This represented a growth of direct investment five times the investment from Great Britain. Although shortly after Sharpeville foreign investment had started to shrink  the US government released a loan of $30 million for the Anglo-American Corporation, despite its close links with the South African government. Towards the end of the sixties the corporation had assets worth $2 billion with about 150 subsidiaries[65] and by 1983 it owned 56% of all shares on the Johannesburg stock market.[66] In 1965 General Motors opened an engine factory in Port Elizabeth, followed by Ford and Chrysler in 1967.[67]

To reduce South Africa’s dependence on oil the government started the SASOL project in 1951, with the objective of producing oil from coal. As result of the project, that by the end of the seventies was producing up to a third of South African oil supplies[68] and thanks to a supply of oil from Iran, South Africa was not seriously affected by the oil embargo imposed in 1973 by OPEC countries. The capital for the SASOL project was another demonstration of US support as it was loaned by the American Export-Import Bank at the beginning of the sixties to open three SASOL factories.[69] The first ever oil refinery in South Africa was in Durban built by American Standard Vacuum in 1954. Two US (Mobil and Caltex) and two British companies (BP and Shell) controlled 73% of oil distribution in South Africa. In 1969 US Steel invested massively in Africa Triangle, a company engaged in mining  practically all South African minerals.

British Imperial Chemical Industries and the American Rand Mines Ltd had massive shares in the most important arms and ammunition producing company – African Explosives and Chemical Industries Ltd. To make the list of US investments complete, I must mention the US shares in South-West Africa (present Namibia), which was under mandatory administration of South Africa and as such was virtually part of its economy. The biggest mining company in South West Africa, Tsumeb Corporation, was controlled by American Metals Climax and Neumont Mining; meanwhile Tidewateer Oil Company had dominant shares in Diamond Mining and Utility Co.[70]

How could the foreign companies investing in South Africa have played a role in dismantling apartheid? It was in their interaction with the native labour force and the legal framework for employment.  In order to appreciate the full impact of foreign influence on the apartheid regime via investment, we need to examine one more factor that had to come into play – the radical structural changes in the South African economy during the 1960s – and look at one of its backbones in the form of the employment laws and policies. After exploring the nature of the labour market in the 1960s we can then move on to the initiatives of American corporations at the beginning of the 1970s.

Whites versus blacks in the labour market.

From the beginning of the Segregation era there had been in South Africa  specific conditions in the labour market designed to favour white employees over black ones. The most important ones were stipulated in the following Acts:

·         1911 Bantu Labour Regulations Act forcing African workers to get employed under the threat of disciplinary sanctions

·         1927 Mines and Works Amendment Act (Colour Bar Act), reserving jobs for whites only

·         1944 Apprenticeship Act No.37 reserving technical training for whites only

·         1953 Native Labour Act No.48 making black Trade Unions and strikes illegal

·         ministerial and executive regulations, reserving segregated areas for blacks in workplaces[71]

The point of this legislation, among other things, was to prevent the black population from employment in skilled jobs and to “reserve” for them only jobs that did not require any qualifications. This created a huge supply of unqualified black labour, which benefited  two sectors of the South African economy: mining and agriculture. A flow of cheap unskilled labour, so successfully produced by the system of apartheid, was exactly what was required. As long as these two sectors were the backbone of the South African economy[72], there was no motivation to change. This was confirmed by a sharp GDP growth in that period from R1,751 million in 1946 to R7,879 million in 1965.[73]

In the 1960s, a radical shift had begun to take place. Economic growth started to depend on two different sectors: manufacturing and services, which required the opposite of what mining and agriculture did, that is a large pool of skilled workers. There was, however, due to apartheid employment laws a very limited (and therefore very expensive) supply of skilled labour. I agree with Lipton’s opinion that „… the increasing need for skilled labour was the most compelling reason for the change in the interests of businesses and for the pressures they applied for changes in labour policy. …They needed a free, mobile and competitive labour market, with large numbers of blacks entering skilled and semi-skilled jobs“.[74] This is a significant development since labour policy was one of the backbones of the apartheid.

But apartheid got into a blind alley – if economic growth were to be maintained, one of its fundamental principles would have to be reformed. As the social historian C.  Adam put it “… it’s on the labour front the South African government is threatened most”.[75] The discontent with the situation and the voices calling for a reform came also from the two largest manufacturing unions – the Federated Chamber of Industries and the Afrikaanse Handelsinstitut.[76] Statistical evidence from the mid-seventies showed, that in order to maintain 5% economic growth 90 000 black workers would be needed by 1979.[77] Moreover, it was not only the private sector that was affected, the public services such as transport, namely the bus services in Johannesburg were brought to a standstill for the same reason. The Post Office and the Railways were short of almost 30% of qualified staff respectively. The Armed Forces had to recruit blacks and the Air Force opened its ranks to them at the beginning of the 1970s. In 1969, a report by a parliamentary select committee revealed that the Treasury’s financial institutions division had started to collapse simply because there were no people to fill the jobs.[78]

The study’s main argument was the threat of a severe shortage of skilled labour. The question was whether it was possible for the industrial and managerial establishment to affect a social change at the highest/political level. It was argued that this was highly unlikely, if the demand for skilled labour is satisfied. However, it might be possible given the unmet demand from within the dominant social class (i.e. Afrikaaners).[79]

Another challenge for the private sector was a growing pressure on South Africa from the international community, which increased after the Second World War and peaked after the events in Sharpeville. Such international political pressure had negative impact on foreign investment and markets, especially in Africa (as acknowledged by Reynders report in 1972) and the flow of foreign capital and technology. The overall domestic stability suffered[80] and increased the pressure by the private sector on the system of apartheid.

It became increasingly apparent that apartheid had become an obstacle to the functioning of the free market in the country: ”Racial discrimination and free enterprise are basically incompatible …The only economic situation compatible with apartheid is one of stagnation. Our present constitution no longer corresponds to the underlying reality of power in the country…The crux of the political debate is: are blacks to be recognised and treated as South Africans?” These are the words of Oppenheimer, the chairman of the largest South African corporation Anglo-American Company. He warned, that African and Western states, which initially “… welcomed our cooperation and help, are publicly ashamed to be seen in our company”.[81]

Reynders Report pointed out in 1972 that in the period between 1946 and1971 South Africa had an  almost continuous deficit on the current account of the balance of payments. In 1971, it was R1,117 million.[82] From 1968 the balance of payments had become a serious constraint on growth. What were the reasons for this situation?

As argued above it was due to the fundamental contradiction between the major economic sectors in South Africa and the social system. The manufacturing industry became the leading growth sector accounting for 24% of GDP[83], that is, larger than mining and agriculture together. According to Reynders Report, the basic reason for the worsening state of South Africa’s economy was ”… the increasingly poor competitive performance of the manufacturing sector in foreign markets”.[84]

There were two main reasons for the lack of competitiveness in the manufacturing, both originating from the policy of apartheid. First, the protectionist policy, which on one hand helped to solve the problems of manufacturing industry at home, but made its production uncompetitive in foreign markets in the long term. The damage caused by the protectionist policy became clear towards the end of the 1960s, when the average annual growth in manufacturing declined from long-term 7% to 2.6% and became negative by 1977.[85]

The second reason was the shortage of skilled labour caused by the ‘colour barrier’, that is, apartheid in employment laws. Until the 1960s mining of gold and other minerals provided a sufficiently strong basis for government revenue and foreign exchange to finance economic growth. Thanks to this, the South African government was benefiting from two thirds of the total amount of foreign exchange transactions[86], which was sufficient to keep the balance of payments. Later, however, the gold mines were no longer able to generate a surplus on the previous scale and the burden of keeping the balance of payments shifted onto manufacturing as the leading growth sector.[87]

To finance the balance of payments deficit, it was necessary to improve the performance and competitiveness of the manufacturing industry. This required structural changes in access, training and incentives for black workers, according to the Reynard’s Commission and important business leaders at the time.[88] It was then that the first steps towards relaxation of employment and training restrictions and towards gradual emancipation of black workers were taken.

The role of foreign corporations in the demise of apartheid

The most influential foreign corporations, such as Polaroid, Ford, GM, Chrysler and Metal Climax, significantly contributed to the improvement in the status of black employees in the early 1970s. In 1971 Polaroid was the first company to raise salaries of its non-white employees and to provide them with specialist training as well as more attractive employment contracts. [89] It was the first instance of the black labourers being treated as equals and not as ”slave labour” . As early as 1973, the unionised black employees started to strike in support of their demands for better wages and work conditions. They targeted international companies that were more vulnerable to adverse publicity.[90] At the same time, under Nixon’s administration, Washington was increasingly sceptical about such initiatives. It refused to force other international companies to comply with the same code  of conduct towards black employees as Polaroid. They accepted the legality of the existing employment laws and saw their breach as a potential threat to stability of foreign investment in South Africa.[91]

In 1977 two important initiatives took place, this time on both sides of the Atlantic Ocean. Eleven leading American corporations, including heavyweights such as General Motors, IBM, American Cyanamid, Mobil Oil, Union Carbid and others, submitted a six point programme promoting the civil rights of black employees to the South African government. The declaration, known as the Sullivan Code demanded:

I.  Competitive, mobile labour markets.

II. Elimination of work discrimination.

III. Improvement of living standards (higher wages, improvement of education and health-care system).

IV. Extension of worker’s rights including Trade Unionisation.

V. End to restrictions regarding property rights.

VI. End to apartheid.[92]

Later that year, it was agreed at a meeting of EEC Foreign Ministers to establish a commission to assess the extent to which foreign investment in South Africa could influence social change in the country. This exercise resulted in the Code of Conduct and all European businesses with a presence in South Africa had to follow its rules. [93] It was based on the same principles as the Sullivan Code applicable to American corporations, the difference being the Code of Conduct was a government initiative and the Sullivan Code a private sector one. As a result, the mid-70s, saw the international community starting to pay close attention to the working conditions of black employees in foreign companies and this started to affect the investment policy for South Africa on a larger scale.

In 1973 there was a general uproar in Great Britain, shared by the government, when it was revealed that only three British firms operating in South Africa, namely Shell, ICI and Unilever, were paying their black employees market value wages.[94]  This was two years after domestic pressure in the US forced Polaroid to increase wages for black employees.[95] After the protests in Great Britain, the German Chancellor, Willy Brandt, announced that the German Government would also initiate investigation into remuneration of black workers by German firms.[96]

Towards the late 1970s such changes accelerated further. In November 1977, the West German government for the first time decided to use the government-backed guarantees for South African exports to force companies to comply with the Code of Conduct  A week earlier the British Chancellor of the Exchequer for the first time argued for a restriction on investment to South Africa in a parliamentary discussion.[97] In the same year, Polaroid announced that it had stopped direct sales to South Africa as a result of a local distributor selling the products to the South African government.[98]

The pressure by the international community and the economic ostracism of South Africa resulted in the Industrial Conciliation Act enacted by the government in 1979, extending the definition of ”employee” to black workers and recognising the right to Trade Unions and strikes.[99]

Initiatives such as the Sullivan Code or the Code of Conduct were not always fully accepted and their purpose and force were doubted. Many of the firms considered them an intrusion of their privacy. Those criticising the codes often point out that their purpose was to forestall a more drastic international action against South Africa, rather than to help to bring about a real change and end of apartheid. Black unions blamed them for not addressing the fundamental problems of the black workers.[100]

This criticism is relevant – legally, their force left a lot to be desired, leaving the implementation to the good will of a corporation. However,  this had been taken into consideration at their conception and there were no unrealistic expectations. The objective was a piecemeal erosion of the legalised prejudices against the black using the market and economic forces. The objections of black unions were, I think, less poignant. It must have been obvious that enactment of the codes could not have changed their situation radically, the outcome took decades of development. Yet, under the given conditions, they represented a considerable effort on the part of the international community and undoubtedly assisted South Africa’s progress toward the abolition of apartheid in disclosing its unsustainability. I agree with Davenport’s statement that the codes „… helped to promote the integration of facilities, the opening up of new employment avenues for blacks and… [in the long run] black trade unionism“.[101]

There are very important conclusions to be drawn concerning the factors driving the first serious changes in the system of apartheid. The structural change in the South African economy forced the government to reconsider the fundamental nature of the country’s social system. To improve the economy changes had to be made. At the most basic level there was the change in status for black employees, which was a radical tampering with the nature of apartheid.

I cannot over-emphasise the role of the South African economy in undermining the apartheid regime. The effect of the poor state of the economy on the foreign companies in South Africa put added pressure on the South African government and made it’s improvement a national priority. As demonstrated, it was the foreign companies with a presence in South Africa that not only highlighted the problem, but also took concrete steps to solve it. The changes in wage policy for black employees introduced by Polaroid in the early 1970s and the subsequent adoption of the Sullivan Code by eleven leading American companies signalled the first serious and successful attempts to reform apartheid. These initiatives were not the outcome of reform promises or ambitions from within. More importantly, they did not happen as a reaction to never-ending attempts to restrict investment in South Africa, or to numerous arms embargos and economic sanctions by the international community.

The initial impetus for a reform and the first practical changes originated with private corporations whose functioning gradually made apartheid a dysfunctional system for its own survival, thus making it ‘reform’ out of existence. This leads us to a logical conclusion (and a paradoxical one for those who believe that the international community can exercise efficient pressure on countries with inhumane and unsavoury practices) that the restriction of investment in South Africa should be seen as having been not only ineffective, but also counter-productive. This is because the most effective pressure was applied by investment and trading with the pressure of public opinion forcing the private corporations to operate within the framework of human rights and racial equality. This accomplished what Carter was calling for whilst attempting to limit investment in South Africa to „… racial justice under the South African system of repression“.