Ibm Will Sell Subsidiary In South Africa

Posted: October 22, 1986

ARMONK, N.Y. — IBM yesterday became the second major U.S. corporation in two days to pull out of South Africa, citing deteriorating political and economic conditions as the reason for selling its South African subsidiary.

International Business Machines Corp. followed General Motors Corp. in joining a growing list of American companies leaving the politically and economically battered nation. The world's biggest computer company said it would sell IBM South Africa to local interests.

"We consistently have said that IBM would remain in South Africa as long as we could maintain an economically sound business and contribute to peaceful change," chairman John F. Akers said in a statement. "Unfortunately, the deteriorating political and economic situation in South Africa, and between South Africa and its trading partners, makes our action necessary."

General Motors is the second-largest U.S.-based employer in South Africa after Mobil Corp. GM has about 2,800 South African workers, about 60 percent of whom are non-white.

IBM South Africa employs fewer than 1,500 people, 23 percent of them non- white, said Richard Coyle, an IBM spokesman.

ACTIVISTS HAIL MOVES

Both announcements were hailed by activists who oppose South Africa's apartheid policy of racial segregation. They said the withdrawals were evidence that the pressure they have been putting on U.S. corporations to divest South African holdings is succeeding.

But some anti-apartheid activists said IBM's action fell short because the company would still sell products in South Africa.

"It's a major step in the right direction," said Randall Robinson of

Trans Africa. "But it doesn't go far enough."

The Investor Responsibility Research Center of Washington, which keeps track of U.S. investments in South Africa, says that this year 29 American companies have left or announced plans to leave that nation.

IBM said it would sell its subsidiary, which it has operated for 34 years, by March 1, 1987, for an undisclosed price to a new company established "for the benefit of the employees of IBM South Africa." Jack Clarke, general manager of IBM South Africa, will head the new company.

The Commerce Department said computers topped the list of U.S. goods sold to South Africa last year, accounting for $80 million of the $1.21 billion in total exports.

'A POLITICAL MOVE'

Wall Street analysts said the effect of the divestiture on IBM would probably be small.

"I would guess it is more of a political move," said analyst Steve Milunovich of First Boston Corp. "Economically, they don't have a big stake in South Africa."

IBM South Africa markets and services information equipment and is not involved in manufacturing or product development, Coyle said. The subsidiary accounted for less than $250 million of the parent company's $50 billion in worldwide revenue last year, he said.

IBM will provide a loan to the new company, to be repaid from the company's revenue, and will continue to provide supplies and technical and training support for three years, Coyle said. IBM would deal with the company as with any other independent distributor, he said.

Loretta Williams, a board member of the Interfaith Center on Corporate Responsibility, said that although IBM had been active in social causes in South Africa, its equipment provided "the legs on which the apartheid system walks."

"IBM is very visible in all the state bureaucracies," she said.

Coyle said that as a condition of the sale the new company must continue IBM's policy of not selling products to the South African police, military or agencies that administer the apartheid system of racial separation.

IBM was one of the original signatories to the Sullivan Principles, a nine- year-old set of equal-employment guidelines for U.S. companies operating in South Africa, Coyle said. The principles were formulated by the Rev. Leon Sullivan, pastor of Zion Baptist Church in Philadelphia.

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