Paying the Price for Apartheid

By PRINCETON N. LYMANPublished: January 5, 2010

Early this year, an appeals court in the United States will decide whether a suit against three companies — two of them American — can go forward charging them with contributing to the crimes of apartheid in South Africa. The plaintiffs are seeking class action status that would allow them, depending on the exact definition accepted, to represent tens of thousands, or even tens of millions, of black South Africans who suffered under the apartheid regime.

There are complex legal questions raised by this suit, brought under the Alien Torts Statute. But perhaps the most fundamental moral and practical question is how the victims of the deep wrongs of apartheid should be compensated. Unfortunately, for these victims, this is not the way.

The issue of reparations has a long and often bitter history. Shortly after the liberation of South Africa and the election of Nelson Mandela as president, South Africa initiated a Truth and Reconciliation Commission. The commission had a mandate to expose the truth of the apartheid crimes, offer amnesty to those who confessed their crimes, and to recommend reparations for the victims. The commission recommended specific cash reparations for those who had suffered most directly, a number that ranged from 20,000 upwards, depending on family members and survivors.

The commission recommended approximately $3,000 per year for six years for each such family. However, the government under Mr. Mandela’s successor, Thabo Mbeki, citing budget difficulties, proposed reparations of approximately $400 per victim. Private and foreign donations to a special fund created for this purpose brought the total to no more than $3,000 each, paid to just over 3,500 victims.

Because of the suit in the United States and a broader predecessor one, companies have been wary of contributing to this fund lest it demonstrate liability. The issue has never been fully resolved and has stoked bitterness not only because some perpetrators of apartheid-era crimes won amnesty, but because many others chose not to testify and were never prosecuted.

Now the question has turned to whether foreign businesses should take on the responsibility of compensation. The truth commission did determine that business in general — both South African and foreign — contributed to the capabilities of the apartheid regime. But no specific taxes on businesses for reparations were ever instituted.

The South African government urged businesses to set up a trust fund for training those disadvantaged by apartheid and for other social programs, and this was done. Meanwhile, the government sought to encourage both domestic and foreign private investment through lower taxes, sound fiscal policy, and reduced debt and inflation, a set of policies resulting in average growth rates of around 5 percent over the past 15 years.

To address the legacies of apartheid more directly, the South African government dedicated major expenditures for education, housing, water and health, and instituted a wide-ranging affirmative action program. The results are impressive. Millions of houses have been built, clean water and electricity have been provided to millions of people, health services for children and pregnant women were made free, and a combination of pensions, grants and other benefits constitutes a social safety net of $10 billion a year that reaches nearly one quarter of the population.

Nevertheless, 15 years after the end of apartheid, the majority of black South Africans remain poor. Unemployment is officially near 26 percent but is probably much higher among the black population. Foreign investment, once eagerly anticipated, has been limited. Of the more than 200 American companies that divested from South Africa in the 1980s, few returned, seeing the South African market as small and poor at a time when the emerging markets of Asia were beckoning.

Ironically, two of the firms being sued, Ford and Daimler-Benz, are among the few that did return and are now among South Africa’s chief manufacturing exporters.

There is no question that apartheid victims deserve more. The crimes were horrific and leave deep scars.

But whether three non-South African companies can be used to help right this wrong is questionable. It would take billions to make South Africa whole, more than can be obtained under this suit or any other aimed solely at foreign businesses. The only way to make South Africa whole is for the country to break through the barriers of poverty. Multinational corporations can play an important role in this fight.

This suit may have helped publicize the country’s unmet needs and delayed justice, and it may spur the outside world to do more. But it cannot address South Africa’s real needs, and if it results in yet another token payment to a few thousand people, it will make the aftertaste of apartheid even more bitter.

*Posted in NY Times