Foreign Relations of the United States, 1952–1954, Africa and South Asia, Volume XI, Part 1

611.45A/9–1652

Memorandum by Armistead M. Lee and Musedorah Thoreson of the Office of British Commonwealth and Northern European Affairs¹

confidential

[Washington,] September 16, 1952.

Summary of Current United States-South African Problems

UN Problems

South West Africa. The question of the international status of South West Africa has been before the General Assembly since 1946.² South Africa has refused to submit the mandate to trusteeship, and in 1947, discontinued submitting reports on the territory after a report was the subject of much vituperative comment. We supported the GA request for an advisory opinion from the International Court of Justice. The ICJ advised that it was not obligatory for South Africa to submit South West Africa to trusteeship, but that it should continue to administer the territory in the spirit of the mandate, including the submission of reports to the GA.³ An Ad Hoc Committee was established to negotiate with South Africa on the question. The Union has not accepted the ICJ opinion, having taken the position that UN membership is much broader than the League of Nations and as such is not competent to pass judgment on its administration of the territory. It has offered to follow what it considers to be the spirit of the mandate by submitting reports to the three remaining Principal and Allied Powers. This has not been acceptable to the Ad Hoc Committee. The Ad Hoc Committee is now in session. Ambassador Jooste has been designated to negotiate with the Committee. He apparently believes that little constructive can be accomplished this year, in as much as this is election year in South Africa. He believes, however, that if the door is not shut, it may be possible subsequently to proceed toward a solution of the problem.

Our position on this question is that it would be desirable for South Africa to submit South West Africa to trusteeship, but that failing such action, it should carry out the ICJ opinion.

People of Indian Origin in South Africa. This item was placed on the agenda by India in 1946 and, except for 1947, has been on the agenda at every session.

The lack of franchise appears to be the underlying grievance of the South African Indians. There is reason to believe that the moderate Indian National Organization group would accept a limited franchise, but the larger Indian Congress would not accept less than complete franchise. In addition, the Group Areas Act, if put into effect, will mean that the Indians of Natal will be moved into an area reserved for them only and will cause severe hardship to those now operating businesses and professions in other areas. Indians are already subject to other apartheid laws.

The GA has passed resolutions each year urging the parties to negotiate their differences. South Africa has professed a willingness to negotiate directly, but not within the terms of reference of the UN resolutions, since they consider the entire problem, including the Group Areas Act,⁴ a domestic question. India and Pakistan are not willing to negotiate on this basis, and the matter remains deadlocked.

The U.S. position on this question has been to try to be a moderating influence to avoid the adoption of a severely condemnatory resolution.

The New Indian Item, Condemning Apartheid. Without first discussing their plan with the U.S. or the U.K., the Indian Government announced their intention of raising in the GA the general issue of apartheid in South Africa (as a separate item in addition to the pending question of the treatment of persons of Indian origin). They have gained the support of the Arab-Asian caucus and have now circulated an aide-mémoire announcing their intention to ask the Assembly to

• “(a) take note of the passive resistance movement as an effort on the part of the victims of apartheid to end a system which is a threat to peace;
• (b) express strong disapproval of the policies which have caused the movement to be launched; and
• (c) recommend to the South African Government that, in the interests of peace, their racial policies be revised, in accordance with the principles of the Charter.”

We have not yet reached agreement within the Department as to what position our delegation should take on this item.

Other Problems

Jet Aircraft for South African Squadron in Korea.⁵ Having been unable to obtain jets for the South African squadron (which has served in Korea since September 1950 as part of a U.S. fighter wing), the South African Government told us last February that they would have to withdraw the squadron. They yielded, however, to our urging that they delay this step, and we were finally able, this summer, to give them a firm commitment that the squadron would be converted to jets at the same time the U.S. squadrons still flying Mustangs were converted, during the last quarter. The South Africans thereupon decided not to withdraw their squadron.

Proposed Visit of Minister of Defense Erasmus⁶ to Korea. The Department was informed in August that Minister of Defense would like to go to Korea this fall to visit the South African squadron, now that arrangements were being made to supply it with jets, if such a visit would be convenient. The inquiry was transmitted to Defense, who sent a message to General Clark’s⁷ headquarters. A telegram was received from Tokyo by Defense on September 15 approving the visit.

U.S. Manganese Requirements from South Africa. The U.S. urgently needs increased supplies of manganese from South Africa to compensate for supplies formerly received from the USSR. South African Exports have been decreasing for the past year because of transportation difficulties and the desire of the South Africans to conserve supplies for its own steel industry. Ambassador Gallman made representations to the Prime Minister, following unsuccessful attempts to obtain commitments from other Cabinet Ministers, to obtain assurances of a continued flow of manganese at an annual rate of 500,000 tons at least through 1953. A commitment has been received that South Africa will endeavor to export up to 500,000 tons to the U.S. but it was pointed out that the U.K. is pressing for an increse in manganese supplies also. We are endeavoring to work out a joint approach to the problem with the British but no solution has yet been reached.

Manganese is essential to all steel production, and South Africa is our second most important supplier. We have stressed to South Africa the importance to the defense effort of the free world of our obtaining our essential requirements.

South African Discrimination Against Hard Currency Countries.⁸ South Africa has maintained exchange and import controls for balance of payments reasons since 1948. The controls have been applied with varying degrees of intensity against hard currency areas in order to ensure the accrual to the U.K. of a certain amount of South African gold in return for the U.K.’s assurance that capital exports to the Union would not be restricted, and that the U.K. will continue to purchase such non-essentials as wine and fruit. South Africa is not a member of the sterling area dollar pool.

Under both the IMF and GATT, exceptions are made for discrimination only for balance of payments reasons, except in certain specified circumstances which do not apply in this case. The U.S. view has been that although South Africa’s balance of payments position may justify over-all restrictions, there is considerable doubt as to the justifiability of discriminatory restrictions in view of South Africa’s gold production of approximately £140,000,000 annually. This point has been made clear to the South Africans but has not been pressed because it was felt that the last few years have not been appropriate to challenge various sterling area arrangements.

South Africa has announced that it will be necessary to intensify restrictions against hard currency countries in 1952 further to assist the sterling area during the present financial crisis. This brings into prominence questions of policy regarding our position with regard to the sterling area, e.g., (1) is discrimination justified as a means of maintaining or encouraging a flow of capital? (2) should sterling area countries be required to justify their actions on the basis of the balance of payments position of each individual country, or should the balance of payments position of the sterling area as a whole be the determining factor? (3) is the Union of South Africa justified in discriminating in favor of members of the European Payments Union, as against the dollar area, when it is meeting a substantial percentage of that deficit in gold or dollars.

When consultations on the South African restrictions came before the IMF in August, the U.S. position was that this is not a propitious time to raise these questions even though they involve principles to which we are firmly committed. The U.S. Executive Director on the Fund, therefore, requested an indefinite postponement of the South African case. The Canadians supported the request, which was agreed to. It is doubtful, however, that the issue can be postponed for long.

Uranium Production Commencing This Month.

The first of several extraction plants, designed to obtain uranium oxide from the residue of gold mines, is coming into production this month at the West Rand Consolidated Mine at Krugersdorp. These plants have been erected with the assistance of a $35,000,000 Export-Import Bank loan guaranteed by the U.S. Atomic Energy Commission, which was granted last year to six South African Gold mines. Although the uranium content of the gold-bearing ores is relatively low, the vast quantity of ore treated at the gold mines makes the extraction of uranium oxide from the mine tailings a feasible proposition, and South Africa is expected to be one of our major sources of supply. An additional $20,000,000 has just been authorized by the Ex-Im Bank to the Electricity Supply Commission of South Africa, for the construction of power plants needed to supply the requirements of the uranium extraction plants.

[Annex]

Memorandum by Musedorah Thoreson of the Office of British Commonwealth and Northern European Affairs

secret

Capital Investment in South Africa⁹

South Africa’s capital requirements during the last decade have increased sharply and will continue to be heavy for years to come. South Africa relies strongly on external capital, and it is estimated that approximately £70,000,000 annually will be required from overseas during the next few years. The South African Government has already resorted to extensive borrowings, not only in its traditional market, the United Kingdom, but also, for the first time in its history, in the United States and Switzerland. Private investments also have attempted to attract foreign capital participation either in equity or portfolio form.

On numerous occasions both Government and private interests have stressed the desirability of expanded capital inflow for investment from the United States. The Government has given assurances that remittances of earned profits, dividends, or interest or the repatriation of the original capital investment will be freely permitted. The value of American owned assets in the Union increased from $86,600,000 to $150,000,000 in 1950. Since 1950 there has been substantial investment from the United States; e.g., the Export Import Bank has made loans totaling approximately $55,000,000 during the past two years in connection with erection of uranium production plants; Socony-Vacuum in 1951 began construction of a refinery at Durban, Natal, which will cost around $14,000,000; Kennecott Copper has invested over $11,000,000 in gold mining operations in the new Orange Free State development. General Motors, Ford, Chrysler, Nash, Studebaker, and other American automobile firms have established assembly plants in South Africa; Firestone, Goodyear, and General Tire and Rubber Company have plants in South Africa; and other American firms have manufacturing or assembly plants. Among a number of American firms planning to begin manufacturing in South Africa are International Business Machines, Frigidaire and Nash–Kelvinator. Bethlehem Steel has established an exploration company with a view to the erection of a steel mill in Southwest Africa if conditions warrant. The expanding economy of South Africa and the nearness to other African markets offer encouraging prospects for American investment.

During the last six months, however, reports of tension in the Union emanating from the white-black conflict and from the division in the ranks of the white population over the constitutional issue have resulted in a diminution of the enthusiasm of U.S. firms for South Africa. The Department has had several inquiries from important investors in the Union (Caterpillar Tractor, Socony Vacuum, and also the Atomic Energy Commission) for comment on the political situation in the Union as it might affect present or potential investment. The Department was also informed by an official of the Export Import Bank that, upon inquiring in New York as to possible private participation in loans under consideration to South Africa, the Bank was informed by several New York banks that they would not “touch” South Africa now.

Basically the South African economy is sound and, given a stable political situation, it seems likely that U.S. capital would flow freely to South Africa. This would be desirable not only commercially but from an international financial standpoint in that it would relieve South Africa’s dependency upon dwindling United Kingdom capital and thereby contribute to the over-all sterling area balance of payments deficit.

Moderation of South African policies which would provide a more healthy social climate would do much to relieve present tension and would thus promote a more favorable climate for potential investment. South Africa’s plans for continued expansion of mining, secondary industry, transport, soil conservation and irrigation, and agriculture will require enormous amounts of capital of which only a part can be raised in the Union. Thus, if economic development is to progress, it is imperative for the Union to be able to continue to obtain substantial capital from overseas. If the South African Government can be made to understand that there is a genuine hesitancy on the part of business to invest in a country in which political stability is being undermined by racial tensions are growing daily as the result of acts of the Government, it may be that this hard economic fact may have a sobering influence.

It may be that Mr. Havenga will point out that non-sterling capital inflow was the largest during the first six months of 1952 than it has ever been. (Swiss loans, £7 million; U.S. £11.6 million.) This represents drawings on loans previously made to the Government except for a £2 million made by Kennecott Copper to the Virginia Gold Mining Company in which Kennecott is already heavily interested.

1. This memorandum was prepared to brief Secretary Acheson prior to the visit of Deputy Prime Minister Havenga. A note attached to the memorandum, from Jeffrey C. Kitchens, Assistant Chief, Policy Reports Staff read: “Mr. Secretary, This is additional background for conversations with Havenga. Not necessary before 2:30 meeting, but probably useful before dinner.” Both the note and attached memorandum are marked “Sec. Saw.”
2. South West Africa, once a German colony, was placed under the administration of the Union of South Africa as a League of Nations mandate following World War I. In 1946, 1947, 1948, 1949, 1950, and 1951, the UN General Assembly adopted resolutions stating the opinion that South West Africa should be placed under the International Trusteeship System, and that a Trusteeship Agreement should be submitted concerning the Territory.
3. The International Court of Justice (ICJ) issued this advisory opinion on July 11, 1950.
4. The Group Areas Act, adopted by the Union Parliament in June 1950, established machinery for the segregation of the races by residence, occupation, and trade.
5. Documentation on this subject is located in file 745A.5622.
6. Francois Christiaan Erasmus, Minister of Defense.
7. Gen. Mark W. Clark, U.S. Army, Commander in Chief United Nations Command, Far East.
8. Documentation on this subject can be found in files 445A.116 and 845A.10.
9. Documentation on this subject is located in file 811.05145A.