Case Studies in Sanctions and Terrorism

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Case 62-2
UN v. South Africa (1962-1994: Apartheid; Namibia)

Case 85-1
US, Commonwealth v. South Africa (1985-91: Apartheid)

| Chronology of Key Events | Goals of Sender Country | Response to Target Country |
Attitude of Other Countries | Economic Impact | Assessment | Author's Summary |
Bibliography |

Economic Impact

Observed Economic Statistics

"[A]s skill-intensive manufacturing grew, apartheid became an ever greater burden. The color bar kept white wages high by preventing blacks from competing for skilled jobs; apartheid retarded the development of the black consumer market, and depressed demand; international opposition began to restrict South African access to export markets, foreign capital, and technology; and after the 1976 Soweto riots apartheid was increasingly seen to threaten domestic stability, which also hampered growth. The economy was proving it could no longer sustain the contradictions of apartheid." (Waldmeir 26)

South African real GDP grows a total of 4.7 percent from 1981 to 1987; nonagricultural employment is stagnant, population grows by 2.5 percent annually during same period, leading to 10 percent drop in per capita income. (Lewis 27-28)

"South Africa has had a disappointing growth rate since the mid-1970s, and especially during the 1980s.... And, the record clearly shows that sanctions are only one of a number of external shocks that have adversely affected the South Africa economy since 1980s, and that they are by no means the most important factor.... Domestic factors also contributed to South Africa's economic problems, these included: one of the severest droughts of the century...; the widespread internal unrest that began in late 1984; and the burgeoning costs of the apartheid bureaucracy involved in the establishment of the tricameral system in 1984." (Lipton 1990, 18)

Greater part of increase in foreign direct investment in South Africa since 1950 has been reinvested earnings; since 1956, remittances of profits, dividends have substantially exceeded new capital inflows. "For the past 20-30 years, South Africa has financed virtually all its growth from domestic investment." Declining productivity of investment has more impact on growth than does level of investment, whether domestic or foreign. (Lewis 66-71)

As of 1979, total foreign investment in South Africa was $26.3 billion, of which 80 percent was held by US (20 percent), UK (40 percent), West Germany (10 percent), Switzerland (5 percent), France (5 percent). (Study Commission 134)

Wisconsin (1978), Nebraska (1980), Connecticut (1980) adopt legislation calling for divestment of shares held by public institutions in US companies with investments in South Africa. In the mid-1980s, Maryland, Massachusetts, Michigan, cities of Philadelphia, Washington, Boston, New York pass laws forbidding investment of municipal or state funds in companies operating in South Africa. In 1986, California announces it will gradually divest itself of holdings in companies with ties to South Africa; decision affects about $10 billion in investments. By end of 1988, 23 states, 19 counties, 79 cities adopt various economic measures to distance themselves from South Africa. (Chettle 106-08; New York Times, 28 October 1984, A18; Los Angeles Times, 25 December 1984, A1; Lipton 1988, 23-24; Baker 61)

Finance Minister Barend du Plessis estimates in 1985 that shortfall in foreign investment capital has reduced annual growth rate from possible 5.5 percent to 3.5 percent "in recent years." (Washington Post, 1 September 1985, A30)

UN Sanctions
In late 1970s, early 1980s, South Africa depends on oil for less than 20 percent of its total energy needs, but 80 percent of energy needs of transport sector. Moreover, South Africa has stockpiled at least one to two years' supply and is completing two nuclear power plants, a third Sasol coal-conversion plant. By one estimate, the stockpile would entail "tying up $1-$4 billion or more in capital, depending on acquisition price." In 1990 it is estimated that Sasol plants provide one-third of South Africa's oil consumption. Some estimates of total cost of oil embargo, including price premium on imports, costs of stockpiling, costs of construction and operation of Sasol plants, fall in range of $1 billion to $2 billion. Others question magnitude of these estimates, noting that some South Africans (e.g., dealers and shippers) have gained from embargo, and that South Africa might have pursued coal-conversion technology in any case after 1973-74 oil shock. (Chettle 82; Spandau 153-55; Lewis 60, 103; Lipton 1988, 86-87)

"Direct costs [of the oil embargo] have more than doubled South Africa's oil import bill… Direct costs of the oil embargo in the 1980's equaled South Africa's gross foreign debt, which by the end of the decade was estimated at between $15 to 20 billion. Indeed, had the oil embargo not been imposed, the 1985 South African debt crisis would probably not have emerged… In addition to these direct costs, economic activity in South Africa suffered from spillover effects to other markets and opportunity costs, while the country's long-term development was hurt… Economic activity in South Africa has also been hampered by the fact that fewer new technologies became available to the country during the implementation of sanctions."(Van Bergejik 343-344)

South Africa: Arms Transfers, 1963-90 (millions of US dollars)

Year	Imports	Year	Imports	Year	Imports	Year	Imports
1963 1964 1965 1966 1967 1968 1969 1970	32 15 55 52 14 12 23 39	1971 1972 1973 1974 1975 1976 1977 1978	30 130 80 100 130 180 130 120	1979 1980 1981 1982 1983 1984 1985 1986	20 0 0 10 20 10 20 20	1987 1988 1989 1990 1991 1992 1993 1994	220 200 350 260 350 260 260 290

Source: United States Arms Control and Disarmament Agency, World military expenditures and arms transfers, various issues.

 

"...informed estimates are that markups for arms purchased on the international black market range between 20 and 100 percent." (Washington Post, 24 February 1985, A26)

Reports suggest that price premium on military goods, licensing arrangements doubled when UN arms embargo was made mandatory in 1977. (Lewis 102)

"The economic development program ... calls for reduced reliance on foreign capital. This reflects concern that South Africa has been overly dependent on foreign investment in the past, making the economy vulnerable to the effects of domestic political and social unrest on outside investors. For example, the drop in foreign investment following the Sharpeville shootings in 1960 prolonged and deepened the recession of 1959-63, while the reaction of foreign investors to the Soweto riots of 1976 had a similar impact on the 1974-78 downturn." (Study Commission 134)

Financial crisis
Despite decrease in lending to public sector from about $500 million in 1979 to $200 million in 1985, US bank lending to nonbank private sector in South Africa doubles to over $1 billion, while lending to South African banks increases fivefold to more than $3 billion in 1984. By 1985, short-term debt is 40 percent of total South African liabilities to foreigners. (Financial Times, 18 February 1985, 10; New York Times, 29 April 1985, D8; Lewis 65; Lipton 1988, 60)

American banks reportedly withdraw $1 billion in first half of 1985. "It was their refusal to extend new credit, primarily on political grounds, that touched off the short-term debt crisis [in August]. British banks, which are owed more than a quarter of the $12 billion debt falling due in the next 12 months, are also unwilling to make new loans…" (Washington Post, 1 September 1985, A1)

On the decision not to rollover South Africa's loans at the end of July 1985, a Chase Manhattan Bank executive said, "'We felt that the risk attached to political unrest and economic instability became too high for our investors. We decided to withdraw. It was never the intention to facilitate change in South Africa, the decision was taken purely on account of what was in the interest of Chase and its assets.'

"Probably other unspoken factors also influenced Chase: the feelings of black board members; the threat of depositor or shareholder resistance; the impact of nightly television footage of South African police brutality. But the move was primarily an economic response to economic conditions. South Africa was unstable, and small; small, unstable countries (unlike large ones) do not borrow money." (Waldmeir 56)

At end of August, rand falls from 54 cents to 34 cents before South Africa closes exchange. "It is widely acknowledged that the collapse of the rand...was not justified by the economic fundamentals...politics intervened in the dual form of domestic unrest and the threat of economic sanctions which between them precipitated the currency crisis." (Financial Times, 29 August 1985, 10; 30 August 1985, 10)

September 1985 debt repayment moratorium affects $13.6 billion in debt "inside the net." South Africa continues regular repayments on the 40 percent of its debt that is "outside the net," including "public bonds, debts guaranteed by governments and outstanding debts to international financial institutions (mainly the IMF)." Pending rescheduling agreement, South Africa unilaterally sets interest rate for servicing of debt inside net at 1/4 percent over London interbank offer rate (LIBOR). "In nominating a 1/4% loading over LIBOR, the South African government was effectively conceding to lenders some compensation for the moratorium." (Ovenden 85)

Financial rand, reintroduced during liquidity crisis in August-September 1985, trades at discount relative to commercial rand, must be used for investments in South Africa by nonresidents; capital imported by immigrants; proceeds from sale of South African securities, other equities if repatriated abroad; investments abroad by South African residents (these transactions must first be approved by authorities); capital exports by emigrants. Other transactions, goods trade, payments of investment income, royalties, use commercial rand. In period 1985-88, financial rand trades at average discount to commercial rand of 40 percent. Because financial, commercial rand accounts must be kept separate, dual exchange rate, primarily intended to discourage disinvestment, also limits impact on balance of payments of any disinvestment that occurs. (Ovenden 113)

GAO estimates that $10.8 billion flowed out of South Africa from January 1985 through June 1989, including $3.7 billion in loan repayments to banks, $7.1 billion in other debt repayments, capital flight. GAO report also notes that most US banks appear to have stopped providing even short-term trade credits to South Africa; reasons cited include "the absence of Export-Import Bank guarantees, the combined economic and political risks in South Africa, the increase in laws at the state and local level in the United States directing government business and pension plan investments away from companies and banks dealing with South Africa, and the growth in public sensitivity on the apartheid issue." (GAO 12, 17)

"Of the approximately 350-400 US companies with direct investments in South Africa in January 1984, the IRRC (Investor Responsibility Research Center) estimated that seven withdrew in 1984 and 39 in 1985. During 1986 the pace quickened: 40 left and 13 announced their intention of leaving, including some of the biggest—Eastman Kodak, Coca-Cola, Exxon, General Motors and IBM. By June 1987 a further 39 had left or announced their intention of leaving, including Ford Motor Co., Citicorp and ITT." By mid-1988, only 136 US companies remain in South Africa. (Lipton 1988, 64; Baker 59)

"[G]reat majority of disinvestment sales have occurred at prices below both the capital value of the assets and the quoted stock exchange price of the companies' shares. Mobil, for instance, is believed to have sold its four South African subsidiaries to Trek ... for half the book value of the assets. Anglo-American ... acquired another 18% of the shares in Samcor, the vehicle-assembly business that was previously owned by the Ford Motor Company, for what Ford described as a 'nominal' sum." (Ovenden 153)

"Bell & Howell was so anxious to get out that in April [1986] it sold the entire subsidiary—with an estimated book value of $5 million—to a South American conglomerate for $1." (Washington Post, 17 November 1986, A1)

"While the disinvestment program has mostly benefited white-owned businesses, which have often acquired assets at fire-sale prices, few businessmen believe it is in the long-term interests of the country. They regret losing the guaranteed access to know-how that a multinational connection brings, and they fear the loss of positive U.S. involvement in the economy. And...large amounts of investment capital are absorbed in buy-outs instead of being applied to new investment." (Journal of Commerce, 27 February 1989, 1A)

"[B]ecause of exchange controls, the selling of equity stakes in South African subsidiaries [does not have consequences as serious as the drying up of new loans]. Barclays, for example, has to repatriate the proceeds of its sale of Barnat ... through the financial rand. This means that it has to find other foreign investors to purchase the rands from it. But the sale also ends the outflow of fairly generous dividends from Barnat in South Africa to a foreign owner. Dividends can be paid at the higher commercial rand rate....As a result, the Barclay's disinvestment may even have a favourable effect on South Africa's balance of payments." (Financial Times, 6 August 1987, 16)

"Assuming that, in the absence of politics, money might have flowed into the country at the rate it did before 1985, economists at Trust Bank, a South African commercial bank, calculate that South Africa has forgone some R32 billion ($14 billion) in loans and direct investment over the past five years. They add to that an estimated R8 billion of exports lost as a result of trade sanctions (most notably on coal, iron and steel, and fruit), bringing the total amount of foreign exchange lost to R40 billion." (The Economist, 10 February 1990, 69)

Trade Sanctions
"Protectionist lobbies within the USA—coal, textiles and agriculture (including tobacco, until it was realised that the USA is a net exporter to South Africa)—were active in shaping the items selected for the 1986 CAA Act. Clearly, the selection of items worldwide reflects these interests and pressures and not simply their possible effectiveness in inflicting costs on the South African government, while avoiding costs which hit the victims of apartheid. Coal, iron and steel, sugar, wine and fruit are labour intensive industries, heavily geared to export production." (Lipton 1988, 52)

South African Chamber of Mines says embargoes imposed by Denmark, France, "reluctance by other countries" to buy South African coal have cut expected 1986 exports by 17 percent, threatening 40,000 jobs in mining industry. To maintain exports, South Africa has also had to sell its coal at 10 percent discount below world price of $25 to $26 per metric ton for that grade of coal. (Washington Post, 25 July 1986, A27; Lipton 1988, 46)

"By September 1987 average prices for South African coal exports were only R50.78/t, far lower than in 1986, and with higher transport costs. Some coal mines were not even covering costs. This was undoubtedly the low point for South African coal exporters. France, Denmark, and the USA had just embargoed imports of some 10mtpa [million tonnes per annum], the world market price dipping towards the $20/t level, and domestic rail charges had just shot up." (ILO 1992a, 3)

"South African coal exports continued to grow in the late 1980's and earned vital foreign exchange well in excess of R3bn in 1989 and 1990, placing coal second behind gold in terms of contribution to the balance of payments. This export growth in the face of sanctions was all well the more remarkable because the world market was well supplied with coal, and new competitors were entering the market all the time… The continued upward trend in South African coal exports during this period [1987-1989, the period in which sanctions pressures were greatest] suggest rather strongly that the efficacy of the coal embargo was rather limited." (ILO 1992a, 1-12)

South Africa: coal exports (millions of tons)

1985	1986	1987	1988	1989	1990
44.9	45.5	42.4	42.6	47	49.4

Source: ILO 1992, 9.

It is estimated in March 1989 that "almost 8% of South Africa's current gold production was, at the then price, being produced at a loss.... A further reduction in the world price to say a band between US$330 and $360 would mean that" 22 of 43 mines would be operating at a loss and "could only continue to maintain production with a further, drastic, devaluation of the Rand." (Ovenden 173)

"The international trade in Kruggerrands [sic], which by the early 1980s absorbed about 100 tonnes of South African gold, has been virtually eliminated by the international embargo." (Ovenden 175)

It is estimated that krugerrand ban cost South Africa only about 3 percent of value of gold exports, as loss is limited to value of coin's premium over value of gold it contains. Anglo-American owns 29 percent of corporation manufacturing American Gold Eagle, gold coin created to replace krugerrand. (Hayes 30; Lipton 1988, 47)

Only "distinctive" South African exports—gold, strategic minerals—have been nearly untouched by sanctions. "Beyond these products, shifts of international markets could have been expected to absorb the relatively small amounts of South African exports [affected by sanctions] with relatively low price discounts." Major exception has been coal, which is easily traceable, reportedly resulting in reduced shipments, relatively steep price discounting. "It is difficult to read any significant effect of the trade sanctions at the aggregate economic level, even though in certain cases trade clearly had decreased, apparently in direct response to sanctions. Examples include the total volume and value of coal exports and the level of trade in specific commodities between South Africa and the United States." (Lewis 105-06)

Because CAAA does not clearly define when a product is South African, administration interpretations of law allow products shipped from South Africa under varying circumstances to legally enter US. For example, tuna shipped from Cape Town is allowed as long as it is caught in international waters by non-South African fishermen; lobster tails caught by South African fishermen in South African waters are allowed if they are processed on non-South African-flagged vessel; fabricated iron and steel of various types, including 11 million tons for suspension bridge in Houston, are permitted because those shapes were not banned by EC (interpretation based on legislative history of CAAA). Also, narrow definition of petroleum products allows certain petroleum-based products to continue being shipped to South Africa despite ban on exports of petroleum and products. (Journal of Commerce, 15 May 1990, 1A)

"The sanctions passed by Congress have scarcely put a dent in the volume of trade between the United States and South Africa.... Why did the sanctions turn out to be a paper tiger? First, the law was compromised from the start by the vague language in which it was cast. And, second, neither the Reagan nor the Bush administration aggressively enforced it." (Journal of Commerce, 15 May 1990, 1A)

Economist Stephen Lewis estimates that oil embargo, other trade sanctions impose cost on South Africa of $2 billion a year, primarily in terms-of-trade effects. He predicts that end of sanctions, political and economic reforms in South Africa might also result in increase in capital flows of $2 billion to $3 billion per year. His estimate does not include economic effects of distortions from import substitution, government policies designed to counteract effects of sanctions (e.g., promotion of oil-from-coal plants, indigenous arms production). (Washington Post, 18 February 1990, B1; Lewis 114, 147)

"Unemployment was a serious and escalating problem before the sanctions screw was tightened in the mid-1980s. The causes were primarily structural, related to the decreasing returns on investment.[…] The restriction or severing of economic links with South Africa has directly caused the loss of large number of jobs in relatively few industries. Most affected have been workers in agricultural activities dependent on export markets, notably sugar and deciduous fruit. To the extent that coal exporters have been disadvantaged by having certain markets closed to them, sanctions can be considered to have caused job losses in this industry too." (ILO 1991, 668)

The main products affected by sanctions were iron and steel, uranium, coal, fruit and textiles. Most of these found alternative markets, affecting prices, not volumes. About 65 percent of South Africa's exports are precious and strategic metals—gold, diamonds, platinum, chrome and vanadium—which were virtually sanctions proof. Gold exports in 1991 were R19.7 billion, or 26 percent of the total. (Financial Times, 14 July 1992, 7)

South Africa: Foreign Trade, 1982-1992^a (millions of dollars)

	Worldb
Year	As reported by South Africa	As reported by partners	US	Japan	Germany	Italy	UK	Nordicsc
Imports from
1982	17,026	12,345	2,368	1,652	2,536	545	2,090	344
1983	14,544	11,071	2,129	1,741	1,946	470	1,676	353
1984	14,963	12,084	2,265	1,837	2,343	520	1,612	432
1985	10,338	7,872	1,205	1,029	1,690	330	1,300	283
1986	11,762	8,423	1,158	1,249	1,941	352	1,247	206
1987	14,111	10,714	1,281	1,882	2,548	456	1,557	128
1988	17,353	13,276	1,691	2,047	3,332	501	1,912	22
1989	17,570	12,149	1,659	1,737	3,263	637	1,699	19
1990	17,435	12,169	1,732	1,491	3,044	694	1,983	27
1991	17,664	13,259	2,113	1,639	2,839	627	1,807	33
1992	18,980	14,114	2,425	1,728	2,787	611	1,752	135
Exports to
1982	17,647	13,049	2,048	1,870	1,269	1,593	1,313	308
1983	18,612	11,174	2,099	1,618	1,078	1,288	1,167	237
1984	17,377	12,410	2,577	1,635	1,049	1,708	979	234
1985	16,405	12.040	2,180	1,878	1,085	1,845	1,262	256
1986	18,485	13,394	2,476	2,266	1,376	1,916	1,218	148
1987	23,541	12,340	1,399	2,455	1,248	1,788	1,073	34
1988	21,549	14,485	1,575	1,955	1,727	2,163	1,434	27
1989	22,161	15,205	1,586	2,047	1,553	2,621	1,447	34
1990	24,753	15,280	1,752	1,858	1,822	2,546	1,915	22
1991	27,837	15,690	1,779	1,832	1,918	2,464	1,696	38
1992	30,416	16,969	1,795	1,909	1,999	2,529	1,427	93

a. Except as indicated, trade flows are as reported by partner country.
b. World export figures are c.i.f. (cost plus insurance and freight), because partner-country imports are reported in that manner.
c. Denmark, Finland, Norway, Sweden.
Source: IMF, Direction of Trade Statistics, various issues.

  

South Africa: selected exports, 1982-92 (millions of dollars)

	To US			To other OECD
Year	Coal	Iron and Steel		Coal	Iron and Steel
1982	22	292		1,146	451
1983	30	259		914	410
1984	27	329		1,060	538
1985	43	294		1,275	647
1986	52	330		1,111	765
1987	-	151		873	772
1988	-	212		1,062	907
1989	-	257		1,229	1,077
1990	-	192		1,450	807
1991	-	170		1,152	747
1992	-	240		1,629	737

  - = negligible.

Source: Organization for Economic Cooperation and Development, Foreign Trade by Commodities, various issues.

  

South Africa: Net Capital Flows, 1980-91^a (millions of dollars)

Year	Long-term	Short-term
1980	-897	-465
1981	162	1,797
1982	2,366	850
1983	-261	942
1984	1,839	317
1985	-636	-1,344
1986	-1,303	-1,221
1987	-1,038	-316
1988	-387	-1,252
1989	-490	-627
1990	-34	383
1991	-636	1,111

a. Negative numbers represent capital outflows
Source: International Monetary Fund

  

Calculated Economic Impact (annual cost to target country)

UN-led Sanctions
Phase I, 1963-78:
Increased cost of arms imports resulting from diversion of purchases from US, UK suppliers; welfare loss estimated at 10 percent of average annual imports, 1963-78.	$7 million
Economic security cost of holding large oil stockpiles 1974-78; welfare loss estimated at 10 percent of estimated value of stockpile.	$100 million
Reduction in Eximbank loans to South Africa; welfare loss estimated at 10 percent of reduced transfers.	$1 million
Phase I total, 1963-78	$108 million
Phase II, 1979-85:
Mandatory UN arms embargo; welfare loss estimated at 30 percent of average annual recorded imports, 1979-85.	$3 million
Economic cost of holding large oil stockpile, 1979-85; welfare loss estimated at 10 percent of estimated value of stockpile.	$300 million
Price premium on imports of oil after Iranian revolution in 1979; welfare loss estimated as 10 percent of average annual value of crude oil imports, 1979-85.	$220 million
Phase II total, 1979-85	$523 million
Average annual total, 1963-85	$234 million
UN and US-led sanctions, 1985-94
Mandatory UN arms embargo; welfare loss estimated at 30 percent of average annual recorded imports, 1986-94.	$74 million
Economic cost of holding large oil stockpile, 1986-94; welfare loss estimated at 10 percent of estimated value of stockpile.	$200 million
Price premium on imports of oil after Iranian revolution in 1979; welfare loss estimated as 10 percent of average annual value of crude oil imports, 1986-94.	$120 million
Impact of US trade sanctions (excluding coal, see below); welfare loss estimated at 30 percent of reduction in trade from average annual value in 1982-85.	$210 million
Impact of US, French, Nordic, Commonwealth ban on South African coal imports; welfare loss estimated at 40 percent (because of significant discounting) of reduction in trade from average annual value in 1982-85.	$103 million
Impact of krugerrand ban; welfare loss estimated at 3 percent of value of gold used in coins (calculated as 100 metric tons of 1982-84 average annual price of $386 per ounce).	$41 million
Reduction in access to international capital due to federal, state, local government measures; welfare loss calculated at 10 percent of average annual change in net flows, 1986-90 compared to 1980-84.	$260 million
Total	$1008 million

NB: The estimated costs of the oil embargo are based on the $1b-$4b range for the cost of stockpiling in Lewis (p. 103) and Lewis' estimate (p. 60) of imports for daily consumption of 70m barrels annually and annual average prices of $31/bbl in 1979-85 and $18/bbl in 1986-94.

Relative Magnitudes

Gross indicators of South African economy
South African GNP (1964)	$9.8 billion
South African population (1964)	18.1 million
South African GNP (1979)	$43.8 billion
South African population (1979)	27 million
South African GNP (1985)	$52.6 billion
South African population (1985)	33 million
Annual effect of sanctions related to gross indicators
Percentage of GNP (1964-base)	1.1
Per capita (1964-base)	$5.97
Percentage of GNP (1979-base)	1.2
Per capita (1979-base)	$19.37
Percentage of GNP (1985-base)	1.9
Per capita (1985-base)	$30.55
South African trade with OECD as percentage of total trade
Exports (1964)	71
Imports (1964)	83
Exports (1979)	50
Imports (1979)	89
Exports (1985)	43
Imports (1985)	74
Ratio of OECD GNP (1964: $1,276 billion) to South African GNP	130
Ratio of OECD GNP (1979: $4,532 billion) to South African GNP	103
Ratio of OECD GNP (1985: $8,817 billion) to South African GNP	168

Source: IMF, International Financial Statistics, 1998; IMF, Direction of Trade Statistics, various issues.

 

Assessment

Assessment of UN-led Sanctions

Study Commission on US Policy Toward Southern Africa, 1981
"The available evidence indicates that South Africa's vulnerability to even an effective oil embargo is decreasing with time. The combination of stockpiles, rationing, conservation, and alternative fuels should be able to keep vital South African industries and essential security and administrative machinery functioning for years. An embargo implemented after the mid-1980s would probably have little chance of significantly damaging the country's economy." (Study Commission 143)

Stephen R. Lewis, Jr.
On the arms embargo: "In the short term, the embargo increased the prices South Africa paid for arms imports and made some items unavailable.... There was period of rapid growth of the domestic industry and some success in bringing down costs to internationally competitive levels as shown by export sales.... But the country faces potentially serious problems in the longer run without access to some items that cannot be produced economically at home.... A quarter-century after the initial voluntary embargo, and more than a decade since the mandatory embargo began, the South African Defense Force is still considered the most effective in Sub-Saharan Africa." (Lewis 102-03)

On the oil embargo: "The oil embargo has probably been the costliest international action against South Africa to date.... However, the decisions forced on South Africa by the oil boycott have resulted not only in higher costs. The SASOL projects, for example, have pushed South Africa into international leadership in coal conversion technology.... Policy actions by the government effectively mitigated both the economic costs and the disruption of the oil embargo, and South Africa is in a better position today to meet short-term cutoffs in oil than it was a decade or two ago." (Lewis 103-04)

Washington Post
On the UN arms embargo: "It has cost large sums of money and has denied South Africa access to the most sophisticated hardware...South Africa has mastered the manufacture of artillery, small arms, missiles, electronics and communications equipment, but it has lagged behind in such key fields as aircraft, tanks and other armored vehicles.... The seriousness of these deficiencies was made clear during last year's (1984) successful military foray into southern Angola when South African soldiers faced Angolan troops using Soviet-built T55 tanks, MiG23 jets and SA8 and A9 antiaircraft missiles." (Washington Post, 24 February 1985, A1)

Newell M. Stulz
"To date the 1977 arms embargo has clearly provided the high water mark in the United-Nations on-going international campaign against apartheid. In spite of the undoubtedly symbolic value of this decision to the global anti-apartheid movement, however, its practical consequence …may actually have undermined the movement's goals. In response to this embargo, the Republic accelerated development of its domestic arms-making industry and has now become one of the foremost suppliers of military armaments in the world. Indeed as early as 1984, the Security Council found it necessary to urge all states 'to refrain from importing arms, ammunition of all types and military vehicles produced in South Africa.'" (Stulz 21-22)

Assessment of US-led Sanctions

Financial Times
"It is clear from everything [Mandela] has done since he was released from prison ... that he regards international pressure on the South African Government as the principal weapon available to the ANC. Without it, Mr. Mandela would probably still be a prisoner and militant black nationalist organisations would still be illegal.... From the black point of view, the overthrow of apartheid has come to depend more than ever on a single factor: the desire of white South Africans to rejoin the world community and see both economic sanctions and constant expressions of opprobrium brought to an end." (Financial Times, 18 April 1990, 20)

Helen Suzman, member of South African Progressive Federal Party
"Many far-reaching noncosmetic changes took place before the U.S. Anti-Apartheid Act of October 1986 was passed, such as legal recognition of black trade unions and the repeal of the laws that severely restricted the mobility of South Africans. The main impetus to reform has been the escalating black resistance in South Africa to apartheid ... the growing impossibility of implementing apartheid laws in the teeth of the irresistible tide of urbanization, and the astronomical cost of administering a system designed to maintain racial segregation in a country where de facto economic integration has been proceeding apace." (Washington Post, 27 June 1990, A19)

Stephen R. Lewis, Jr.
"It is not entirely clear how the economic costs of apartheid and international pressure have affected the nature and pace of political change in South Africa. It is clear, however, that economic pressures have played a major role in forcing the South African government to change its policies on a wide range of issues from labor reform to the release of political prisoners; and that in the absence of fundamental political change, the prospects for economic growth in South Africa are bleak." (Lewis 167)

David Rotberg, president of Lafayette College
"I don't know if De Klerk would have moved so quickly, if ever, without sanctions. Coupled with increasing unrest, sanctions made perpetual apartheid impossible." (Quoted by: Christian Science Monitor, 2 July 1991, 7)

Keith Ovenden and Tony Cole
"Of all the many measures that have been proposed, and in some cases implemented over the years to bring about the abolition of apartheid, the financial sanction that has been in place since August 1985 has undoubtedly placed more pressure on the regime than any other.... South Africa is being excluded from the world stock of savings not because bankers and financiers are ideologically united in their detestation of apartheid ... but because most of them now see South Africa as a bad risk.... Many commercial banks in the Western world, with some notable exceptions in Europe, have also been profoundly influenced by public opinion. The threat of the loss of substantial domestic business as a consequence of engaging in South African lending has been an important deterrent. So too, though more latterly, has been government intervention....The effect of this combination of forces is to ensure that the financial sanction is almost ideal, because although in some cases backed up by governments, it is by and large a sanction that market forces work to encourage." (Ovenden 187, 189-90)

Jennifer Davis
"Although I worked for sanctions since my arrival in the United States in 1966, and believe they were a potent force in the South African liberation struggle, I cannot claim for them either swiftness or overwhelming effectiveness. But I want to be clear. In the South African case, the fault lies not in the weapon but in the reluctance of those who controlled the weapon to use it.... "It is vital to recognize the South African context within which sanctions were proposed. Never did serious sanctions supporters believe that sanctions by themselves could achieve the desired end of bringing human equality and political democracy to South Africa. Rather, economic coercion was seen as a strategy to provide direct support for an ongoing and very active liberation struggle. Cutting South Africa's supply lines from the outside world could weaken the regime, limit its physical capacity for survival, and ultimately undermine its psychological base." (Davis 173-74)

Merle Lipton
"[T]he claim that the current ferment and fluidity in white politics is due to sanctions is based on an oversimplified and reductionist view, which overlooks the significant socio-economic transformation that has been taking place over the last two decades and which is now culminating in the current dramatic political developments." (Lipton 1990, 39)

Lucy Komisar, journalist and author
"International sanctions alone aren't causing apartheid's end. That wouldn't have happened without a strong, internal black movement and a new, moderate, white political leadership that cared about economic development. But sanctions played a critical role." (Journal of Commerce, 24 September 1991, 8A)

Audie Klotz
"In response to conservative criticism, de Klerk called for a whites-only referendum on his reforms…. Sanctions, particularly the implicit threat of renewed economic and cultural isolation should the reform effort be repudiated figured prominently in the debates leading up to the March 17, 1992 vote. Many whites feared the renewal of economic sanctions; they predicted increased unemployment and a general decline in prosperity should de Klerk's referendum fail. Businesses went so far as to launch an expensive advertising campaign advocating a yes vote. Sport enthusiasts, furthermore, dreaded a return to isolation just as South Africa entered its first world cricket match in years and hoped for an Olympic appearance in Barcelona. Thus international economic and social sanctions offered prospects of benefits if reforms should be implemented and increased costs if they were not." (Klotz 1995, 79-80)

Kenneth Rodman
"According to most observers... the combination of economic pressure and international ostracism ultimately convinced white South Africans that change was less risky than the continuation of status quo. Yet what is striking...is how the actions of governments were overshadowed by those of non-governmental economic and political actors. First, multinational banks inflicted the greatest damage on the South African economy when they called in their South African loans as they came due in July 1985.... Second, non-governmental anti-apartheid organizations compounded the costs and risks of normal business relations with South Africa by forcing corporations to incorporate political criteria into their economic calculations ... [by] confronting the corporation with boycotts, stock divestments, shareholder activism, and through persuading state and local governments to link municipal contracts to withdrawal from South Africa." (Rodman 1994, 314)

Neta C. Crawford
"[T]he impact of sanctions on political change was complex. The many sanctions imposed from outside were only one of several forces at work in getting South Africa to end its international aggression, forcing a negotiated end to apartheid and creating the conditions for the construction of a democratic government. The determined resistance of those who fought South African aggression in South West Africa/Namibia and elsewhere in the region and the resistance of those who fought for a nonracial democratic society inside, along with long-term structural changes in the economy and society, probably had much more to do with the character and timing of the transition than sanctions. Still, sanctions played an important role. They directly helped to pressure the regime by increasing the costs of maintaining apartheid, and sanctions also helped to promote economic changes that undermined the economic structures of apartheid. In other words, rather than simply hurting the South African economy, which they certainly did, sanctions paradoxically also promoted economic growth in some sectors and nourished antiapartheid resistance." (Crawford 58)

Philip I. Levy
"[The] international economic actions against South Africa that were most damaging were taken by private actors, and …actions taken by governments were not especially damaging economically. Instead, to some extent they caused the Nationalist party government to stiffen its repression. [T]he demise of apartheid, which followed sanctions with a substantial lag can be attributed to three different factors: the effectiveness of the political opposition of the black majority; the inefficiency and growing economic costs of the apartheid system; and the fall of the Soviet Union." (Levy 415)

Author's Summary

UN v. South Africa

Overall assessment
Policy result, scaled from 1 (failed) to 4 (success)	4
Sanctions contribution, scaled from 1 (none) to 4 (significant)	2
Success score (policy result times sanctions contribution) scaled from 1 (outright failure) to 16 (significant success)	8
Political and economic variables
Companion policies J (covert), Q (quasi-military), R (regular military)	—
International cooperation with sender	3
International assistance to target A (if present)	A
Cooperating international organizations	OAU
Sanction period (years)	32
Economic health and political stability of target, scaled from 1 (distressed) to 3 (strong)	3
Presanction relations between sender and target, scaled from 1 (antagonistic) to 3 (cordial)	2
Regime type of target, scaled from 1 (authoritarian) to 3 (democratic)	2
Type of sanction X (export), M (import), F (financial)	X
Cost to sender, scaled from 1 (net gain) to 4 (major loss)	2
US v. South Africa
Overall assessment
Policy result, scaled from 1 (failed) to 4 (success)	4
Sanctions contribution, scaled from 1 (none) to 4 (significant)	3
Success score (policy result times sanctions contribution) scaled from 1 (outright failure) to 16 (significant success)	12
Political and economic variables
Companion policies J (covert), Q (quasi-military), R (regular military)	—
International cooperation with sender	3
International assistance to target A (if present)	—
Cooperating international organizations	UN, EC
Sanction period (years)	6
Economic health and political stability of target, scaled from 1 (distressed) to 3 (strong)	2
Presanction relations between sender and target, scaled from 1 (antagonistic) to 3 (cordial)	3
Regime type of target, scaled from 1 (authoritarian) to 3 (democratic)	2
Type of sanction X (export), M (import), F (financial)	X, M, F
Cost to sender, scaled from 1 (net gain) to 4 (major loss)	3

Authors' Comments

South Africa demonstrated remarkable skill over three decades in circumventing and defying economic sanctions aimed at changing its system of apartheid. For much of this period, sanctions were relatively mild and enforced only loosely. The most potentially damaging economic weapon, the oil embargo by the Arab members of OPEC, was undercut until 1979 by Iran's willingness to sell oil to South Africa. In addition, at significant cost, South Africa has reduced its reliance on imported oil through stockpiling, promotion of nuclear energy, and synthetic fuels programs. However, the arms embargo did prevent South Africa from obtaining highly sophisticated weapons systems, particularly fighter planes, and seems to have contributed to South Africa's willingness to withdraw from Namibia. For that reason we attributed to the UN sanctions a modest role (score of 3) in a potentially positive outcome (score of 2) in the second edition.

Since that edition came out in 1990, the broader objective of ending apartheid has been achieved and the policy result is now clearly a success. How large a role economic sanctions played in that outcome is more difficult to assess, however. To the extent sanctions were important to the outcome, it appears that the ad hoc sanctions imposed by the US, EC, and Commonwealth countries were relatively more important than the ongoing UN sanctions, the impact of which declined over time as a result of adaptive measures adopted by the South African government. Thus we score the contribution of the UN sanctions overall as minor (score of 2).

In the 1980s, the economic "sanction" that had the most impact on South Africa was the withdrawal of short-term capital, beginning with Chase Manhattan's decision not to roll over its outstanding loans at the end of July 1985. There was no government role in this action and, although it may have been in part motivated by a desire to avoid consumer and shareholder activism, it was primarily a reaction to political instability and increased risk in the South African market. Similarly, the increased pace of disinvestments by US and other foreign firms operating in South Africa had more to do with bleaker profit opportunities than with government-mandated sanctions.

The increasing opposition to apartheid and unrest in South Africa were also far more important reasons for the de Klerk government to undertake reforms than the impact of sanctions. In addition, the end of the Cold War and the fading of the communist threat removed an important disincentive to negotiations for the Afrikaners.

Overall, economic and political conditions inside South Africa were clearly the most important factors influencing the outcome in this case and economic sanctions can be credited with, at best, a modest contribution. The sanctions were obviously useful to the opposition, both as symbolic support and as a lever that the ANC could use in its negotiations with the government. In terms of economic impact, while the initial capital outflow was largely due to private assessments of risk in the market, the CAAA, Rangel amendment, and other restrictions imposed subsequently prevented a return to "normalcy" even if things settled down and raised serious questions about South Africa's ability to generate growth in the long run.

In sum, the sanctions added to the already mounting costs of maintaining apartheid. Sanctions clearly did not cause the National Party to decide to abandon apartheid but they accelerated the inevitable.

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