Rebuffs for South Africa

Citibank stops its loans; Olin is indicted for rifle sales

South Africa has long presented a dilemma to U.S. companies: profits on loans, sales and investments in the land of apartheid can be high, but so can the costs in bad publicity. Last week the spotlight fell on two companies that had reacted to the dilemma in widely contrasting ways. In New York, Citicorp, holding company for the U.S.'s second largest bank. Citibank, let out the word that it had stopped all lending to the South African government and government-owned companies. In New Haven. Conn., Olin Corp., the owner of the Winchester Group, which is one of the largest U.S. firearms makers, was indicted on a charge of conspiring to ship weapons to South Africa illegally.

The Olin indictment reads a bit like a spy thriller. For almost 15 years, Washington has embargoed all sales of arms to South Africa. But, say federal prosecutors, a South African buyer, with Winchester's connivance, arranged for orders to be placed by agents in Spain, Greece, Austria and Mozambique. Prosecutors allege that some 3,200 Winchester rifles and 20 million rounds of ammunition were shipped under false invoices to South Africa between 1971 and 1975.

The company concedes that sales took place but contends the chicanery was the work of three low-level employees who acted without the knowledge of senior executives. Disagreeing, a federal prosecutor accuses Olin of conspiring to "subvert the foreign policy of the U.S." If found guilty. Olin could be fined up to $510,000 and, far more important, lose its license to manufacture arms.

Bizarre as the Olin case is, the Citibank no-loan decision probably is more significant. A Senate report identifies Citibank as one of eleven U.S. banks that have made most of the $2.2 billion in U.S. loans now outstanding to South Africa. Citibank did not trumpet its decision; it broke the news in a proxy statement to shareholders, quietly adding that it is continuing to lend "selectively, to constructive private sector activities that create jobs and which benefit all South Africans." It did not say what guidelines it would follow to make sure its loans achieved a multiracial purpose. Nonetheless, activist groups that have been pushing U.S. companies to get out of South Africa were happy that such a major bank had actually cut off credit to the government. Says Woody Connette, lawyer for the United Church of Christ Board for World Ministries: "We can use it [the Citibank decision] as leverage in approaching other large lenders."

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