De Beers Moves to Fight Nationalization
DE BEERS, the South African-based diamond conglomerate, moved last week to put most of its assets beyond the reach of nationalization by a future black government. Last Tuesday De Beers cited purely financial reasons for the reorganization of its assets and made no reference to recent statements by ANC leader Nelson Mandela advocating nationalization as a formula for black advancement.
But financial analysts say that, whatever the motives for the move, it provides an almost watertight protection against the threat of future state control.
``Big business had decided even before sanctions that the declining South African economy, tainted as it is by apartheid, was not an appropriate base from which to conduct international business,'' says Stephen Gelb, a Durban-based economist. ``But the move does have direct and serious implications for anyone thinking about nationalizing big companies,'' he said.
De Beers, the diamond arm of the giant Anglo American Corporation, announced Tuesday that it was transferring its foreign assets into De Beers Centenary AG, a new Swiss-based company. Centenary will be twinned with De Beers as ``stapled units'' which will trade together on international markets. Shareholders will hold the South African and foreign assets separately.
Should the need ever arise - the threat of nationalization is one example - it would be a simple process to ``unstaple'' the two companies and allow them to trade as two separate entities.
Some four-fifths of De Beers earnings are derived from outside South Africa, mainly from its diamond-selling cartel and from mines in neighboring Botswana and Namibia. Namibia's SWAPO government, which has taken a pragmatic line on nationalization, has vowed to renegotiate the terms under which De Beers operates in Namibia after it takes power next week.
But Mr. Mandela affirms that nationalization of mines and banks remains ANC policy. And on Friday, ANC veteran Walter Sisulu told 500-odd businessmen and bankers that the ANC would not budge on nationalization. ``Sometimes one must go to war to secure peace,'' he said. ``We realize that in the short term, nationalization may discourage foreign investment, but in the long term it is the only solution.''
Anglo American officials have warned that the day the first mine shaft is nationalized, the corporation will suspend new investment estimated at $4 billion over the next four years.
But anti-apartheid critics contend that the conglomerate is shifting abroad its assets when they are most needed for black advancement in a new political order.
``I think that part of our attraction to nationalization is because we know that some industrialists will refuse to accept the social obligations of industry,'' said Chris Hani, chief of staff of the ANC's military wing, in a recent interview.
Since major international banks withdrew loan facilities to South Africa in 1985 the country has suffered a net capital outflow of $12 billion. ``In the mid-1980s the government made the mistake of regarding the outflow of capital for political reasons as temporary,'' said South African Reserve Bank Governor Chris Stals.
In announcing the complex restructuring arrangement Tuesday, De Beers chairman Julian Ogilvie Thomson insisted that ``The rearrangement in no way reflects any particular view any of us may have on current developments in South Africa.''
Although President Frederik de Klerk's political initiatives have been praised internationally, foreign investors are being cautious, and none of the 350 US companies which disinvested have indicated they will return.
However, the De Beers move was well received by foreign investors as its share price surged this week. ``I think we are going to have a political settlement sooner rather than later,'' said a Johannesburg stockbroker. ``But I fear we could also have an economic wasteland sooner than we thought.''