Pretoria Welcomes Sanctions Move

THE 12-nation European Community's decision to lift trade sanctions on South Africa could boost the nation's ailing economy and create new political space for President Frederik de Klerk. "It is an important symbolic move which will yield fruit in the long term," says Rudolph Gouws, chief economist of Rand Merchant Bank.

The EC decision on April 8 to lift trade embargoes on South African iron, steel, and Krugerrands came on the eve of a trade-boosting visit by Mr. de Klerk to Britain, Ireland, and Denmark next week. It is the most important international move yet to roll back economic sanctions imposed on South Africa in a bid to force an end to apartheid, Western diplomats said.

The country was also given a boost by the International Olympic Committee's announcement Monday that South Africa's presence at the 1992 Olympic Games in Barcelona was "virtually certain" if apartheid laws were scrapped before the IOC meets in Switzerland, in July.

The first breakthrough on sanctions came last September when President Bush, following a meeting with De Klerk, said the process of political change in South Africa was "irreversible."

African National Congress Deputy President Nelson Mandela has balked at that description. The EC acted despite an ANC ultimatum two weeks ago that it would suspend further talks with the government unless Pretoria moved to end the violence in South Africa by May 9.

Officials say the EC move will help De Klerk pave the way for a renewal of trade with Europe and should encourage Japan and the United States to do the same.

South Africa's export volumes have doubled since 1983, despite the sanctions. And exports to the rest of Africa soared to $2.1 billion last year.

"Once South Africa is perceived as the conduit for trade with Africa, the trend toward disinvestment will be rapidly reversed," says Mr. Gouws.

US Congress demands

The EC decision, which came before conditions laid down by the US Congress for the lifting of sanctions have been met, is a victory for De Klerk, who began a program of reform to end white minority rule 15 months ago.

But it was a setback for the ANC, which urged that sanctions not be eased until black South Africans have been politically empowered. The ANC and most anti-apartheid groups criticized the move, particularly because it preceded the repeal of remaining apartheid laws set for June.

But Chief Mangosuthu Buthelezi, leader of the Inkatha Freedom Party, joined the South African business community in welcoming the EC decision.

The ANC's position on sanctions is showing signs of ambivalence, as the organization simultaneously calls for foreign investment to avert an economic crisis and chides the international community for lifting sanctions. Behind the scenes, it has begun preparing its rank and file to accept the lifting of sanctions.

The conditions laid down by the US Congress in the Comprehensive Anti-Apartheid Act (CAAA) of 1986 for the lifting of US sanctions demand that all political prisoners be freed, outlawed political groups be legalized, the nationwide emergency lifted, apartheid laws scrapped, and negotiations with black leaders initiated.

If all five conditions are met, Mr. Bush may unilaterally lift or ease the sanctions contained in the Act. That would still leave in place several measures imposed by executive order and contained in other US laws.

Harry Schwarz, South Africa's new ambassador to the US, assured Bush when he presented his diplomatic credentials last week that all five conditions would be met by the third week in June. According to US diplomats, Bush told Mr. Schwarz that he would match such action by lifting the CAAA sanctions in their entirety. "I am immensely impressed with the dramatic progress achieved in the past year," Bush said after the meeting.

The Pretoria government has undertaken to free political prisoners by April 30, but there is disagreement over the number of political prisoners still to be freed.

Government officials reacted with restrained elation to the EC decision, but warned that South Africa still faced a formidable task in trying to achieve economic growth in a climate of escalating political violence.

South African Reserve Bank Governor Chris Stals warned at a conference in Italy, last week that, without economic growth, South Africa could soon become ungovernable.

Economists say the country needs a growth rate of around 5 percent to redress severe racial imbalances in education, housing, and health services.

The economy shrunk last year by 1 percent, but economists have predicted a mild economic upswing by the end of the year.

Finance officials are banking on an export-led recovery, despite a severe crisis in the foreign- revenue-producing gold industry and a global economic recession.

Timing is 'not great'

"The timing of the EC move is not great," conceded Gouws. He said it would take a combination of export growth, a recovery in the world economy, increased productivity, and renewed foreign investment to return to economic growth.

Business Day, a financial daily, said Wednesday that the US Rockefeller Foundation had appointed a committee to investigate creating a $2 billion development bank in South Africa.

In the third quarter of last year, South Africa recorded a net inflow of short-term foreign capital for the first time since international banks refused to refinance loans to South Africa in September 1985.

"South Africa is locked into a race against time," says a Western diplomat. "It is poised precariously between and export-led economic recovery and economic disaster."