811.05145A/G–2253: Airgram
The Acting Secretary of State to the Embassy in the Union of South Africa, at Pretoria
Subject:
- Program to Stimulate Private Investment in South Africa.
A–31. The Department has given careful consideration to the points raised in the Embassy’s despatch No. 573 of June 22, 1953,1 regarding the advisability of undertaking at this time a program to stimulate private investment in South Africa. The objective analysis of the exceptional situation in the Union is most helpful.
The problem as a whole has been studied in the Department at length and has been discussed also with other interested agencies. While the consensus is that it is in the national interest for the United States Government to move ahead in the direction of lending encouragement and assistance to the development of Africa as a whole, it is believed that the trend of repressive racial policies, and their explosive political and social implications, makes it unwise for this Government to sponsor any accelerated program directed toward American private investment in South Africa at this time. Any additional measures the United States Government might propose to the South African Government, to be carried out jointly with that Government, might well be unproductive economically and, more importantly, could effectively be utilized by the South African Government for political purposes as an indication of United States confidence in South African policies, thus contributing to the defeat of our objective of fostering a change to more liberal racial policies.
For the present, therefore, the function of the United States Government with regard to private investment in South Africa would appear properly to be limited to (a) encouraging the creation of conditions favorable to an inflow of foreign private capital; (b) negotiation of [Page 1028] the FCN treaty; (c) continuing the program of assistance to business as outlined in the second paragraph of Embassy despatch No. 573.
It is believed that the greatest service the Embassy can render to present and potential American investors in the Union is to continue to make every effort to bring influence to bear on the South African Government to moderate the policies which, among other effects, now causing reluctance on the part of United States investors.
The Department has noted with approval the Embassy’s preliminary discussions with South African officials regarding the negotiation of an FCN treaty (despatch No. 75, November 2, 1953).2 Further discussions with regard to the treaty may, in the Ambassador’s discretion, provide the opportunity for obtaining information as to the extent of the desire of the Union Government for American private investment. If the foreign capital inflow continues to diminish, the possibility exists that South Africa may make overtures to the Embassy regarding the stimulation of American private investment or, specifically, as to the application to South Africa of the world-wide investment program. In such event, the Embassy would be in a position to discuss possible ways and means of stimulating investment so as to complement, rather than defeat, the broad objectives of the policy now being followed by the Embassy.
Any steps taken by the United States Government to stimulate American interest in investment possibilities in the Union would have to be preceded by a constructive policy by the Union of dealing with the root causes of unrest among the Natives, mentioned by the Embassy as of fundamental importance to the objective of promoting political stability. Were this to occur, the United States would then be able to suggest to the South Africans the following procedure:
- 1)
- In cooperation with appropriate members of the Union Government and of the South African business community, and with the participation of the Foreign Service establishments in the Union, implementation of a program to identify sound and practicable investment opportunities in South Africa.
- 2)
- The provision and dissemination in the United States on a continuing basis of background information which will keep the American investing community currently abreast of economic developments and of specific opportunities in the Union.
- 3)
- The FOA Guaranty Program.
- 4)
- The FOA Contract Clearing House System for identifying and disseminating investment opportunities.
Should occasion arise when the judicious advancement of the above program or certain phases of it appears to the Ambassador to be feasible as being possibly consistent with or helpful to our fundamental objective in the Union, the Department would appreciate being informed [Page 1029] and more detailed information on the development of the various steps of the program will be forwarded.
- Not printed. The referenced despatch was written in response to the Department’s circular airgram CA–183 (Mar. 20, 1953; 811.05100/3–2053) which encouraged recipient posts to intensify programs to stimulate the flow of private American capital into the economic development of overseas areas. The Embassy in Pretoria’s response described its current program within the Union of South Africa as follows: “to provide available economic data to visiting United States businessmen when requested, to assist them in making appointments with Government officials and other interested parties, and to express our views discreetly as to political trends and basic problems confronting the Union in the long term. We have neither directly encouraged nor discouraged new investment.” Given the tensions arising from the country’s racial situation, the Embassy cautioned against an accelerated program which stimulated American investment and thereby indirectly encouraged industrialization in the Union of South Africa. “Experience would suggest,” it noted. “that increasing industrialization will aggravate prevailing tensions between White and non-White unless, and we feel that this is of fundamental importance, it is accompanied by a constructive policy of dealing with the root causes of unrest among the Native people.” (811.05145/6–2253)↩
- Not printed. (611.45A4/11–253)↩