Doing Business in South Africa

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Table of Contents

Introduction
Main text
Summary
Reference

Introduction

Caltex was a major investment in the economy of South Africa. It had provided employment opportunities by employing 742 black workers in refinery jobs. The company had also kept its wages well above the averages. The presence of foreign corporations in South Africa had helped to improve the real earnings of black industrial workers. Between 1970 and 1975, black incomes in Johannesburg rose to 118 percent, while between 1975 and 1980 black per capita income was expected to rise 30 percent. However, Texaco and SoCal were perpetrators of apartheid albeit indirectly. Timothy Smith 1971.

Main text

Sarcastically, the management of both Texaco and SoCal claimed that they fully adhered to the 1997 ‘Sullivan principles’. They argued that they were committed to improving the economic working conditions of its black employees and their continued presence in South Africa did not constitute an endorsement of South Africa’s apartheid policies. The management had only accepted the principles since they were to operate within the existing South African working conditions which were within South African laws. The management clearly knew such principles could only exist in writings since South African laws did not permit that. To some extent Sullivan’s principles like ‘equal pay for all employees doing equal or comparable work for the same period of time, had no meaning at all since the blacks and the whites did not have equal work at all.

Caltex indirectly supported apartheid by providing economic support to the South Africa government. It provided about 7 percent of its oil sales to the South Africa government. Timothy Smith 1971.

Apartheid is a social evil. As a stockholder of Chevron, I ought to vote for the resolution demanding Caltex to terminate its operations in South Africa. Their apartheid government legalized racial discrimination in all aspects of life and deprived the black population of their most basic human rights. The Apartheid government brutality was heightened when the blacks opposed apartheid and demanded full political, legal and social rights. The blacks were widely killed, arrested, and repressed. The Prime minister openly declared his intention to maintain apartheid and deny political rights to South Africa. Herman Nickel 1968.

I would also have voted for the resolution asking Caltex not to sell to the military or police in South Africa. Military and police forces were used by the South Africa government to force the blacks adhere to the oppressive and discriminatory laws. The police force was used to implement repressive laws like the ‘influx control laws’ and the segregation of the blacks and the immorality act which made interracial sexual intercourse a criminal offense. They were also used to massively kill the blacks. Timothy Smith 1977.

As a shareholder, I would ask Caltex to implement the Tutu principles in totality. These principles were formulated to release the yolks of apartheid and the evils associated with it. The principles outlined several conditions of investments that would enable firms to make a positive contribution to improving economic and social opportunities for blacks. Tutu’s principles addressed the human rights issues. They demanded the workforce to be housed in family-type accommodations as family units near the place of work of the laborer, recognize black trade unions as long as they are representative of their members, recognize the rights of the workers to sell labor wherever the best price can be obtained, calling for labor mobility, and opposing any ultimate implementation of influx control, and enforcing fair labor practices and investing massively in black education and training. Herman Nickel 1968.

The management could first assess the role the firm played in promoting the apartheid regime vis-à-vis the benefits the shareholders derived from the firm’s operations in South Africa. On the first resolution, the managers of Texaco and SoCal could not accept the resolution. In 1975, Caltex was planning to expand its refinery plant in Milnerton, South Africa. This investment promised a good annual return of 20 percent on the original investment. The management was committed to expanding investment of its shareholders at all costs. Timothy Smith 1977.

Concerning the solution not to sell to the military or police of South Africa, the management could not accept the resolution because South African law required oil refineries in South Africa to set aside a percentage of their oil for government purchase. South Africa’s National Supplies Procurement Act had earlier directed Caltex to refrain from imposing any conditions or reservations of whatever nature in respect to the use, resale, or further distribution of petroleum products and, from refusing to sell except subject to such conditions. It would be a crime under South Africa’s law was Caltex-South Africa to undertake a commitment not to supply petroleum products for use by the South African military or any other branch of the South African government. Herman Nickel 1968.

Concerning Tutu’s principles, the managers would have voted for it because these four principles were agitating for the black’s rights that were suppressed. They would have accepted to Implement and/or increase activity on each of the four Tutu conditions and report to shareholders annually how the Company’s presence is, on balance, a positive influence for improving the quality of life for non-white South Africans. If the South African Government does not within 24 months take steps to rescind the Group Areas Act and the influx control laws as steps toward the dismantling of apartheid, begin the process of withdrawal from South Africa. Herman Nickel 1968.

Summary

The cardinal role of any company management is to provide the highest level of returns on shareholders’ capital. However, by doing so, the management is supposed to do that within the rules of the law. The management must ensure that the company meets its social responsibility to its workers, the government and to the public. The management should ensure that the needs of its internal environment, as well as external environment, are properly catered for. Concerning the criteria for deciding what investments a firm should make, it should not look primarily to the law and to the rate of return on its investments as there are many factors that can hider a type of investment. The management should consider availability of such important inputs such as appropriate and skilled labor and raw materials. It should also consider the effect of such an investment on the environment. If its production activities can negatively affect the environment in both long run and short run, such an investment is not worthy. Jack Magarrell, 1979.

Reference

Jack Magarrell, “U.S. Adopts Stand on Apartheid: Backed on Many Campuses,” The Chronicle of Higher Education, 1979.

Herman Nickel, “The Case for Doing Business in South Africa,” Fortune, 1968, p. 72.

Investor Responsibility Research Center, Analysis E Supplement No. 9, 1977, p. E 114.

Nickel, “Doing Business in South Africa,” p. 64.

Timothy Smith, “Whitewash for Apartheid from Twelve U.S. Firms,” Business and Society Review, Summer 1977, pp. 59, 60.

Timothy Smith, “South Africa: The Churches vs. the Corporations,” Business and Society Review, 1971, pp. 54, 55, 56.

Investor Responsibility Research Center, Inc., Corporate Activity in South Africa, 1984, Analysis G, supplement no. 2, 1984.

Investor Responsibility Research Center, Inc., U.S. Corporate Activity in South Africa, 1986 Analysis B, 1986.

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Doing Business in South Africa

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