What happens now to investor confidence?

Position:South Africa

As South Africans prepare to go to the polls in the country's first-ever non-racial elections, investor confidence in the country has been growing fast. But how much will investors be deterred by the current wave of violence and by the lack of co-operation in the election process on the part of Chief Mangosuthu Buthelezi and his Inkatha Freedom Party?

According to figures released in March by the Investor Responsibility Ability Research Center Inc (IRRC) of the US, 22 more US companies have opened offices or subsidiaries or have placed employees in South Africa in the last 12 months.

The increase is the largest yearly jump since the IRRC began tracking US business in South Africa in 1984.

The findings are contained in the 1994 edition of the IRRC's US Business in South Africa. The report also finds that, although more and more companies may be taking the plunge, banks are significantly more hesitant. The IRRC's survey shows that not one of the top 100 US banks reported making new loans to South Africa.

The number of US companies present in South Africa has been growing since mid-1991, when then President George Bush lifted the 1986 ban on new US investment in South Africa. In the second half of that year, three US companies established new operations there. In 1992, 17 US companies opened offices, established subsidiaries or placed employees in South Africa, followed by another 16 companies in 1993, particularly after African National Congress President Nelson Mandela called for the lifting of sanctions against, and new investment in, South Africa in a 24 September 1993 speech at the United Nations in New York.

And now, with South Africa's first multiracial elections just a few days away as AB goes to press, the pace appears to be quickening. In the first two months of 1994, six US companies established new investments in South Africa. Many of the recent new entrants are, in fact, re-entrants - i. e., companies that had disinvested in the 1980s and are now returning. Among them are Eastman Kodak, Honeywell Inc, Procter & Gamble and Sara Lee Corporation.

In pronounced contrast to these leading corporations, though, the IRRC's survey found that the top 100 US commercial banks' holding companies regard South Africa with caution. Only nine of the banks told the IRRC that they have revised their South Africa lending policies in the past year, and another five indicated that their South Africa policies are under review.

Another 40 banks reported...

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