Abstract
In the event of total trade sanctions South Africa should have no difficulty in countering the ban on mineral exports, especially precious metals. Furthermore, earnings from precious metals are likely to increase in the short term followed by a gradual deterioration of these industries as cheaper substitutes are developed and producers from other countries make inroads into markets vacated by South African producers. In the manufacturing sector South Africa may benefit in the short term through import replacement and a drive towards self-sufficiency. However, in the long term factors such as scarcity of capital, technological obsolescence, disadvantages inherent in the lack of international co-operation and competition, and misallocation of resources would indicate that the cost of evading sanctions is too high. A disinvestment of portfolio investments is likely to cause a major decline in the prices of South African mining shares. A large scale disinvestment by multinational companies and foreign disinvestment of shares are likely to cause restructuring and increased economic concentration in the South African economy.
Highlights
In recent years there has been a growing campaign to withdraw foreign capital from South Africa
The argument of the advocates of disinvestment is that the withdrawal of foreign capital will force the South African government to speed up reform and provide a more equitable political dispensation
Critics of disinvestment argue that the South African government is more likely to advance political reform during periods of economic prosperity and the absence of a threat of economic sanctions
Summary
In recent years there has been a growing campaign to withdraw foreign capital from South Africa. As a result of this pressure several foreign governments have been obliged to impose some form of economic sanctions against South Africa. It was further reported that companies disinvesting South African holdings included many household names such as Coca-Cola, Apple Computers, Helena Rubenstein, International Harvester, and Metal Box. As a result of recent economic sanctions legislation in the United States and the European Economic Community (EEC), the list of foreign multinationals disinvesting from South Africa has increased substantially. Several large United Kingdom companies such as Barclays, Prudential, and Hill Samuel have decided to disinvest completely or reduce their stake in South Africa as a result of pressure from political activist groups. A major development in the disinvestment campaign against South Africa was the selective sanctions package signed by President Reagan in September 1985. It has been shown that recent disinvestments has resulted in direct United States investment in South Africa of about 2,6 billion dollars in 1984 to be reduced to approximately 1,3 billion dollars at the beginning of 19861
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