21 October 1986 – IBM re-forms in South Africa

On this day in South Africa’s history:
21 October 1986

IBM logo

When U.S. lawmakers approved economic sanctions against South Africa over President Reagan’s veto, several high profile companies divested in name only. IBM calmly announced that it had sold its South African subsidiary to a new company established for the benefit of IBM South Africa employees. This was done, said company spokespersons, so that the newly independent company could fulfill IBM South Africa’s existing contractual responsibilities. IBM itself would no longer have assets, capital or employees in the country and would thus comply with the letter of the law.

In actual fact, the new company signed multi year contracts to import and sell IBM products, services, and technologies. IBM would also profit from interest on loans it makes to the South African buyers of the subsidiary.  Coca-Cola struck a similar deal whereby Coca-Cola would supply coke syrup to its new South African owners under an exclusive licensing agreement.

IBM responded to criticisms that it was continuing to profit from apartheid by saying it was proud of its role in South Africa, saying that their recent decision to sell its South African subsidiary to an employee trust would provide workers, many of whom were non-white, with job security and ownership-participation rights.  Furthermore, he pointed out that supporters of sanctions fail to understand that the vast majority of workers in South Africa are black and would most surely be adversely affected.

To be sure, economic sanctions are at best a blunt instrument of international diplomacy. They don’t always work, and the poorest are often affected the most.  In the case of South Africa however, it is widely recognized that sanctions, including the international divestment campaign, helped pressure the Apartheid government to embark on negotiations that ultimately led to the dismantling of the apartheid system.