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12 August 2002updated 24 Sep 2015 12:16pm

The business of apartheid

The role of multinational corporations and banks under South Africa's racist regime is finally comin

By Bryan Rostron

”Some call me the devil,” says Ed Fagan, delightedly. We are in a smart Cape Town waterfront hotel and Fagan, a consummate showman, is thoroughly enjoying himself as he details the multibillion-dollar class-action lawsuit he has launched against multinational corporations and banks, including Barclays Bank, accused of propping up apartheid. “I’m not the devil – but I can be,” he says. “The devil’s a guy who does a job and gets a bad rap.”

Judging by the fury this brash New Yorker stirs up, some clearly feel he is far, far worse than Beelzebub. But then Ed Fagan is the lawyer who successfully forced reluctant Swiss banks and German companies to pay a staggering $6.75bn in two famous Holocaust class-action cases.

Now he noisily fronts the Apartheid Claims Task Force, which has filed a class-action suit at a New York court against a raft of British, American, Swiss, German and French companies, from oil to electronics firms, that Fagan claims sustained and profited from apartheid. Among them are major blue-chip players such as Credit Suisse, UBS, Citicorp Inc (which owns Citibank), Morgan Guaranty, Deutsche Bank, DaimlerChrysler, Siemens and IBM. Other UK companies, including the information technology giant ICL, will soon join them in the dock.

Encouraged by Fagan, South African lawyers set up a hotline for victims of apartheid and have already received more than 2,000 calls. The plaintiffs demanding reparations for complicity with human rights abuses range from Veronica Sobukwe, the widow of Robert Sobukwe, founder of the Pan Africanist Congress, to Dorothy Molefi, the impoverished mother of Hector Pieterson, the student shot dead by police at the start of the 1976 Soweto riots.

The case is complex, and Fagan estimates that it may take anywhere between two and five years to resolve. But the accusation is simple. As he wrote to the chairman of Barclays late last month: “The financial institutions and industry groups that provided the funding and support for the apartheid system can and will be held accountable and liable for the profits earned because of their support of apartheid and for the related damages caused by or attributable to this support.”

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The reactions, however, have been eye-opening. The Swiss fury was predictable. Fagan, ever the canny publicist, took Dorothy Molefi to Zurich to announce the case against Swiss banks. As a posse of furious hecklers howled them down, Fagan hustled away the clearly bemused Soweto matron, eagerly followed by rolling television cameras. But South Africa’s ambassador to Switzerland rushed to distance the ANC from the case, announcing that her government “had never supported” such forms of action. Even more bizarrely, Penuell Maduna, the justice minister, who had been thoroughly briefed on the upcoming case, poured further official cold water on it by informing local German businessmen that it was absurdly simplistic to see all blacks here as victims of apartheid.

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The South African government, desperate to attract foreign capital, is clearly embarrassed by the prospect of an apartheid reparations class action. Predictably, some critics, including spokesmen for Swiss banks, have taken the line that this case may discourage investment in South Africa and “other developing countries”. Ironically, this echoes the justification for doing business here at the height of apartheid. After the Sharpeville massacre in 1960, for example, Chase Manhattan Bank lent South Africa $10m and joined a consortium to put up another $150m, its chairman, David Rockefeller, saying: “We believe it would endanger the free world if every large American bank deprived developing countries of the opportunity for economic growth.”

But this case also probably stirs up a more fundamental anxiety on the part of the ANC government, for it threatens to open up old wounds that have been temporarily bandaged over by such notions as “the miracle revolution” and “the rainbow nation”.

Ed Fagan publicly acknowledges that the reparations case is built largely upon research by Terry Bell, the former exile and Observer journalist, in his widely acclaimed book Unfinished Business: South Africa, apartheid and truth (to be published in Britain next May), written in collaboration with Dumisa Ntsebeza, the former head of the investigations unit of the Truth and Reconciliation Commission (TRC). “This book seeks to probe where – for whatever reason – the TRC failed or feared to tread,” explains Bell in his introduction. “With so much unfinished business still outstanding, one is entitled to ask how long South Africa’s ‘political miracle’ will last.”

The uneasiness all this creates can be seen in the response to the reparations claim from F W de Klerk, the former president, who objected that it would “open the way to chaos” and discourage foreign investment. “Although the case has little substance and is unlikely to succeed,” commented de Klerk, “it does have the potential to cause real harm.”

One person whose reputation stands to be harmed is F W de Klerk. For one of the plaintiffs is Sigqibo Mpendulo, the father of twin boys who were killed while asleep, along with three teenage friends, in a botched death-squad raid in the nominally independent Transkei “bantustan”. The foray had been approved by de Klerk, who later mistakenly announced its success. That was in October 1993. Two months later, de Klerk travelled to Oslo to receive, jointly with Nelson Mandela, the Nobel Peace Prize. It was a fraught period leading up to South Africa’s first democratic elections and the whole matter – as so much else – was buried diplomatically.

“Mandela intervened and persuaded the families of the murdered students to drop the case and accept an out-of-court settlement,” Bell writes in Unfinished Business. “De Klerk ordered the payment of a large sum of state money in compensation, and a convenient blanket of silence fell over the massacre.”

The former president is not the only politician concerned to sweep away old passions. President Thabo Mbeki and the present government are widely believed to be about to grant a general amnesty to nearly all perpetrators of human rights abuses during the apartheid era. This has caused anguish and outrage – particularly among members of the TRC, because the commission had only allowed for amnesty in cases where perpetrators came forward and made full disclosure of their crimes. As most apartheid generals and politicians did not deign to appear before the TRC, they are still technically liable to prosecution. A general amnesty would finally close that chapter.

There is also the hugely embarrassing matter of financial reparation for the victims of apartheid. So far the government has baulked at making any payment. Mbeki said the “people were not in the struggle for money”. And Trevor Manuel, the finance minister, notoriously observed of claimants: “Some of our comrades should get an Oscar [for their acting].”

The government has been at loggerheads with Archbishop Desmond Tutu and his TRC commissioners over this question. It would clearly be awkward for the ANC to see victims of apartheid having to petition a New York court while their own liberation government simply declined to cough up, as promised.

Another thorny question that neither the old nor the new regime wishes reopened is the role of business during apartheid. The TRC found that some firms (notably the mining industry) helped to design and implement apartheid policies; others benefited by co-operating with the security forces – and, crucially, most gained from operating within a racially structured context. “The huge and widening gap between the rich and poor is a disturbing legacy of the past, which has not been reduced by the democratic process,” concluded the TRC. “It is morally reprehensible, politically dangerous and economically unsound to allow this to continue. Business has a particularly significant role to play in this regard.”

Instead, across the board, local corporations have ignored suggestions that they might help to fund a restitution process. Comments to the TRC included objections that this would only encourage “a sense of entitlement and victimhood”.

Ed Fagan is an unlikely and uncomfortable figurehead to lead the countercharge. He appears to have only a sketchy grasp of South African politics. His maverick showmanship has already infuriated many South African colleagues, used to the disciplined, democratic accountability of the anti-apartheid struggle. He is manic and driven. It would be a good role for the Hollywood star he looks like, Kevin Kline.

Born in Texas, Fagan was an ultra-Orthodox Jew who went to Israel to take part in the Yom Kippur war of 1973. He alternately entertained the troops in a stage show and buried their dead colleagues with Orthodox rites. More recently, he has represented not only Holocaust victims, but also relatives of people killed in two European disasters – the train tunnel fire near the ski resort of Kaprun, Austria, and the Concorde crash in Paris. Human rights, he says, is his “niche market”. To those who accuse him of chasing ambulances, Fagan replies nonchalantly: “Ambulances come to me.”

An investment in Fagan, so far, is a blue-chip risk. Even on a “no win, no fee” basis, he has no shortage of backers. In the Holocaust case, according to the magazine European Legal Business, his financiers made a 200 per cent profit. There’s money in horror. It is perhaps the ultimate grotesque irony that the victims of apartheid may only finally get any recompense from the corporations that exploited their suffering thanks to the heartless logic of the free enterprise system. It’s a devil’s pact.