Protest Divestment and the End of Apartheid

Protest divestment is a form of dissent in which stockholders intentionally sell their assets from a corporation to enact social change. Protesters hope to influence corporations against performing some aspects of their business by selling off stocks.

Nelson Mandela, the anti-apartheid activist, was democratically elected president of South Africa on May 9, 1994. He had been released from prison only four years prior. Mandela’s historic presidency would never have been possible during the time of apartheid, the end of which was achieved in part through protest divestment. Those opposed to apartheid wanted to prevent companies from doing business in South Africa.

Protest divestment in South Africa demonstrates how the simple act of selling a stock can affect real social change.

Key Takeaways

• American colleges and universities began protesting apartheid in the 1960s by encouraging divestment.
• Nelson Mandela’s historic presidency in South Africa helped to bring protest divestment into the spotlight.
• South Africa’s economy would have taken a turn for the worse if enough corporations had stopped doing business there.
• Over 200 U.S. companies cut ties with South Africa from 1985 to 1990.
• Divestment has gained a foothold as a way for protesters to influence financial and economic situations to achieve their political goals.

Understanding Divestment

Anti-apartheid protests took hold in the 1960s, particularly on the campuses of American colleges and universities. Protesters initially wanted to end apartheid but there weren’t many ways to influence the South African government using traditional forms of protest such as picketing or demonstrations.

Members of the college-based anti-apartheid movement eventually thought of a more practical way to enact change. They began pressuring their universities to divest stocks of companies doing business in the country. Many students brought attention to their cause by building shanties on their campuses to represent the living conditions that many oppressed South Africans faced daily.

Important

Schools use a certain percentage of their endowment funds as an investment tool and many schools have quite a large endowment fund. More than 107 US schools had endowments of more than $1 billion by 2021, giving them an incredible amount of purchasing power.

It’s easy to see the influence that colleges and universities had on businesses operating in South Africa. Universities selling stocks of companies with businesses there may not have had a large impact on a firm’s share price or market capitalization but they were certainly able to raise attention to corporate interests in South Africa and no CEO in the world wants to suffer from bad public relations.

South Africa’s economy would have taken a turn for the worse if enough corporations had stopped doing business there and that would have put the South African government in a major bind. Its choices came down to reforming its politics or risking complete and total economic isolation.

Complications and Concerns

South Africa was still home to 30 to 40 million people despite its myriad of political, racist, and economic problems. It had a plethora of natural resources including most of the world’s gold during the 1980s. This made it an attractive marketplace.

Note

South Africa held 62.49 billion in total reserves including gold as of 2023 compared to Brazil’s approximate 355 million at that time. This was up from 1.9 billion in 1985.

Between one-half and one-third of the S&P 500 did business in South Africa at one point in the ’80s, placing these companies among the best investments at the time. These were blue-chip stocks and steady earners that were key to the success of endowment funds.

Universities have to pay the same fees that other investors face when selling assets. It was understandably tough for college financial officers to sell those assets with huge amounts of money at stake, money that was used to continue and promote the operations of a school.

A valid argument was made that putting pressure on companies to stop doing business in South Africa would only further punish the people protesters were trying to help. Corporations provide jobs and income and any jobs help in a country suffering from high unemployment and low wages.

Many American-owned companies had policies in place ensuring that South Africans of all races would work under fair employment conditions and receive equal pay. How could the poor and oppressed hope to improve their lives if these companies pulled out of the country?

Many decision-makers at colleges and universities additionally felt that the purpose of a school was to educate students, not to take a stand on corporate responsibility or to engage in political issues, even one as well-meaning as the abolishment of apartheid.

The Success of the Movement

There were strong arguments against divestment but many students continued their protests and college administrators eventually saw it the students’ way. Hampshire College was the first school to agree to divest its portfolio of companies doing business in South Africa. A total of 155 colleges had at least partially divested by 1988.

Other large entities also soon sold their stocks as the roots of the divestment movement took hold on America’s college campuses. Ninety cities, 22 counties, and 26 states had taken some form of economic stance against the South African government by the end of the decade. Many public pension funds were required to sell South African-related assets as a result. Divestment movements were gaining ground in other countries as well.

The college-based divestment efforts may or may not have played a role in immediately affecting the South African economy but they did raise awareness about the problem of apartheid. U.S. Congress was moved to pass a series of economic sanctions against the South African government after the divestment movement gained worldwide notoriety.

Over 200 U.S. companies cut all ties with South Africa from 1985 to 1990, resulting in a loss of $1 billion in direct American investment. South Africa was ravaged by capital flight as businesses, investors, and money left the country. South Africa’s currency, the rand, was significantly devalued and inflation reached double digits. The economic situation and the resistance efforts of those suffering under apartheid meant that South Africa’s system had to come to an end.

The various apartheid codes that segregated the races were dropped. Black people and other people of color then gained the right to vote. The country elected Nelson Mandela as its president in 1994. The divestment movement wasn’t the only reason apartheid ended but it was a major contributing factor.

Divestment Beyond South Africa

Divestment has been used and suggested as a tool to effect change in other areas since its success in ending South African apartheid. A huge campaign was launched to have universities, investment groups, pension funds, and various bodies of government divest any stocks that did business with Sudan whose government is connected with brutal human rights violations in Darfur.

Other groups like Harvard University and other colleges have waged divestment campaigns against the tobacco industry in the 1990s and have targeted Israel for divestment. The socially responsible investing movement is calling on money managers to review their selection criteria and divest in companies that violate the ESG rules or other causes that their investors care about.

What Was Apartheid?

The term apartheid translates to “apartness” in the African language. The apartheid regime involved the practice and enforcement of racial segregation in South Africa, dictating where citizens could work, where they could live, and whether they could vote based on their race.

What Does It Mean for a University to Divest Stocks?

Divestment or divestiture occurs when a college, university, or any investor effectively unloads or sells a designated portion of its stocks. They’re getting rid of them and withdrawing their financial support from the companies that issue them.

What Is Capital Flight?

Capital flight involves a large number of countries withdrawing their financial assets from one or more others. This can include both domestic and foreign capital and it typically takes place quickly.

The Bottom Line

These campaigns have had varying levels of success but protest divestment has certainly gained a foothold as a way for protesters to influence financial and economic situations to achieve their political goals.