SOUTH AFRICA Government-owned industries include substantial portions of the energy sector, transportation, armaments, electric power, communications, aluminum, and chemicals. In early 1988, then State President P.W. Botha announced a program of widespread privatization of public enterprises to reduce the size of the state sector. A major step occurred in November 1989 when ISCOR, the state steel corporation, was privatized. Privatization, however, has attracted much political opposition, and few observers believe that there will be further privatizations under the present government. 2. Exchange Rate Policies Faced with the refusal of foreign banks to execute loan rollovers in 1985, the Reserve Bank reimposed comprehensive capital controls and re-introduced a dual exchange rate. (These measures had been eliminated in 1983). This latter mechanism maintains one exchange rate (the financial rand) for all foreign investment transactions, including both capital inflows and outflows, and another exchange rate (the commercial rand) for all other transactions. Thus the Bank effectively cushions the economy from the effects of international capital flows. Under South African exchange regulations, the Reserve Bank has substantial control of foreign currency for receipts. The Reserve Bank is the sole marketing agent for gold (which, at current prices and production levels, constitutes about 30 percent of export earnings.) This responsibility provides the Bank with wide latitude in influencing short term exchange rates. Except for a period in 1987 when the Bank followed an implicit policy of fixing the rand against the dollar, monetary authorities normally allow the rand to adjust periodically with the aim of stabilizing the external accounts. Since 1984, the rand has depreciated sharply against all the major western currencies, making imports more expensive, although since the fall of 1989 it has been relatively stable against the dollar. 3. Structural Policies Prices are market determined with a few exceptions including bread and petroleum products. In 1990 the Government moved against inflation by holding down prices of government-provided services such as electricity. Purchases by government agencies are by competitive tender for project or supply contracts. Bidders must pre-qualify, with some preferences allowed for local content. Parastatals and major private buyers such as mining houses follow similar practices, usually inviting only approved suppliers to bid. The primary tax in South Africa is the income tax. The maximum rate of 45 percent is reached at an income level of R80,000 for married and R54,000 for single taxpayers. Corporate income is taxed at a flat rate of 50 percent, although mining enterprises are taxed at over 56 percent. Significant revenues are also raised by the general sales tax which is currently at 13 percent. There are plans to replace the sales tax with a value-added tax in 1991. South Africa raises additional revenue through estate duties, transfer SOUTH AFRICA duties, and stamp duties. There are no export taxes, but import duties protect local industry, rising to 100 percent in the case of some luxury goods. South Africa's external debt at the end of 1989 is estimated to have stood at US$20.6 billion, with the private sector accounting for approximately US$13.5 billion of this total. The debt to GDP ratio in 1989 was 40 percent. Debt repayment obligations in 1990 are estimated to be roughly US$2 billion and interest payments are likely to be at a similar level. In 1985, faced with large scale capital outflows, intense pressure against the rand, and cut off of its access to foreign capital, the South African government declared a unilateral standstill on amortization payments. Interest payments were continued and amortization payments due to international organizations and foreign governments were not included in the standstill net, which obviated the need for a Paris Club rescheduling. The standstill was regularized in meetings with private creditors in 1986. In 1987, South Africa and its private creditors negotiated a three-year rescheduling agreement. This agreement was recently re-negotiated to run through 1993. South Africa is a member of the World Bank and the International Monetary Fund (IMF) and continues Article IV consultations with the latter organization on a regular basis. U.S. law requires the U.S. Executive Director at the IMF to actively oppose any extension of IMF credit to South Africa unless the Secretary of the Treasury certifies to the Congress that such credit would have a number of specified favorable effects. South Africa's Minister of Trade and Industry may, in the national interest, prohibit, ration, or regulate imports under the terms of the Import and Export Control Act of 1963. Current regulations require import permits for a wide variety of goods. Surcharges on imported goods, which range as high as 100 percent on some items, are the most significant South African barriers to U.S. exports. Local content requirements apply in certain industries, notably in the manufacture of motor vehicles. The Comprehensive Anti-Apartheid Act of 1986 (CAAA) and other U.S. laws ban the export of certain U.S. products to South Africa. The CAAA prohibits U.S. nationals from making any new investments in South Africa except in black-owned South African firms. 6. Export Subsidies Policies Government incentives to export are divided into four categories: 1) compensation of a portion of import duties; 2) a proportion (10 percent) of value added during manufacture; SOUTH AFRICA 3) financial assistance for activities such as market research and trade fairs; and 4) income tax allowances. Other direct and indirect subsidies are available to local manufacturers, particularly for factories located in designated development areas. Subsidies include electricity and transport rebates, export finance and credit guarantees, and marketing allowances. These policies are now under review by the government. 7. Protection of U.S. Intellectual Property Rights The South Africa's attendance at meetings of the World Intellectual Property Organization (WIPO) has been barred by a resolution of that organization, but it remains a member. country also is a signatory of the Paris Convention for the Protection of Industrial Property and the Berne Convention for the Protection of Literary and Artistic Works. South Africa's intellectual property laws and practices are generally in conformity with those of the industrialized nations, including the United States. There is no discrimination between domestic and international holders of intellectual property rights. The basic objective of South African government policy with respect to foreign intellectual property rights holders is to maintain access to foreign technology and information. An effort in the 1989 parliamentary session to prohibit cancellation of license agreements by disinvesting companies was dropped after objections by South Africa's major trading partners. The U.S. motion picture industry claims that unauthorized public performance of their products is a major problem in hotels and apartment buildings in South Africa along with videotape piracy. The industry asserts that 20 percent of total videocassette sales in South Africa are of pirated material. Also, the unauthorized importation of their product from third countries is a source of concern. 8. Worker Rights * a. Right of Association South Africa's Labor Relations Act entitles all private sector workers to freely join labor unions, and those unions are independent of direct government control. However, amendments made to the Act in 1989 are generally seen as being anti-union. Particularly damaging is a section that makes unions liable for financial compensation to employers in the case of an illegal strike, with the burden of proof begin upon the unions. Discussions are underway between the De Klerk government, employers, and union leaders to amend the Act, and remedial legislation may be introduced in the 1991 parliament. In addition, in the past, as unions increasingly assumed the role of voicing black worker demands for political rights, the government imposed restrictions on their political activities. Government actions in that respect have included raiding union offices, restriction or banning union meetings, and detaining trade union leaders. In contrast, there have been no reports in 1990 of the government intervening directly in union activities, and it lifted its restrictions on trade union political activities on February 2, 1990. SOUTH AFRICA b. Right to Organize and Bargain Collectively The South African government does not interfere with union organizing in the private sector and has generally not intervened in the collective bargaining process. Collective bargaining is freely practiced throughout the country with the major exception of public servants, farm workers, and domestic servants who are not covered by the Labor Relations Act. C. Prohibition of Forced or Compulsory Labor South Africa does not constitutionally or statutorily prohibit forced labor; however, the common law legal system does not permit it. d. Minimum Age for Employment of Children South African law prohibits the employment of minors under age 15 in most industries, shops and offices. It prohibits minors under age 16 from working underground in mining. There is no minimum age requirement in the agricultural sector. e. Acceptable Conditions of Work There is no legal minimum wage in South Africa. The Labor Relations Act provides a mechanism for negotiations between labor and management to set minimum wage standards industry by industry. At present over 100 industries covering most nonagricultural workers come under the provisions of the Act. The Occupational Safety Act sets maximum standards for work conditions and employment, and those standards are enforced. f. Rights in Sectors with U.S. Investment The worker rights conditions described above do not differ between the sectors in which U.S. capital is invested and other sectors of the South African economy. (D)-Suppressed to avoid disclosing data of individual companies Source: U.S. Department of Commerce, Survey of Current Business August 1990, Vol. 70, No. 8, Table 13 SOUTH AFRICA * Section 8 is an abridged version of Section 6 of the South Africa country report included in the Department of State's Country Reports on Human Rights Practices for 1990, submitted to the Congress January 31, 1991. For a comprehensive discussion of worker rights, please refer to that report. |