Canada’s code on South Africa could take cue from U.S. model

The Canadian Government might resolve the difficulties it has with its voluntary code of conduct for Canadian companies in South Africa if it were to revamp it along the lines of the Sullivan Code in the United States.

The Sullivan Code has the dual advantage of being at arm’s length from government while at the same time being compulsory for companies that have agreed to become its signatories.

The major flaw with Ottawa’s code is that it has no mechanism for enforcement, either by law or by moral suasion. Moreover, it is inclined to be stronger on noble rhetoric – however well-meaning – than on the presentation of specific, informed recommendations to Canadian employers operating in the apartheid state.

The Canadian code, first published by the Department of External Affairs in April, 1978, has received attention recently because of reports in The Globe and Mail that the giant Canadian multinational Bata Shoe Co. is in violation of it.

Bata is by far the largest direct Canadian employer in South Africa, with 3,500 workers. The Globe articles focused on its two footwear manufacturing factories in the black bantustan of KwaZulu, about 200 kilometres from Durban.

Questions have been raised in Parliament. External Affairs Minister Joe Clark has promised to personally review the code’s provisions and mechanisms.

The code’s intent was that Canadian employers in South Africa, on their shop floors and in their communities, should strive to dismantle the structures of apartheid that keep black workers and their families on the bottom of the economic and social heap.

To this end, it said Canadian employers should report annually to Ottawa on what progress they were making in meeting the code’s goals.

Unfortunately, External Affairs never spelled out how this was to be done, although its then-minister, Don Jamieson, now Canadian High Commissioner to London, assured Canadians his department intended to follow “developments” closely.

As the problems with mechanism became more apparent (and as no Canadian company ever made the kind of annual report the Government expected), Ottawa fell silent.

The U.S. Sullivan Code has the same intent as Ottawa’s code. But rather than being the responsibility of Washington, it is solely in the hands of the man who gave it its name – black Baptist pastor Leon Sullivan – the companies which are its signatories and the consulting firm of Arthur D. Little, which monitors corporate behavior according to the code’s principles.

Its enforcement provision could not be more simple: publicity.

The names are made public of U.S. companies operating in South Africa which are not signatories or which are dropped from the signatory group.

Companies are dropped if they do not report annually.

The Little firm grades the reports – and makes its grades public – not only on the basis of what companies have done to comply with the code’s provisions but on how much improvement they have made in the course of a year (thus a company could be given a good grade for initial compliance, but the grade would be lowered if it failed to improve on its own record).

The problem with trying to enforce a government code is that it places Ottawa in the position of more or less applying Canadian law extraterritorially to South Africa. The principle is anathema to Ottawa, which consistently has opposed the extraterritorial application of U.S. law to U.S. companies operating in Canada.

Ottawa would avoid this difficulty if it turned its code over to the approximately 30 Canadian companies operating in South Africa and perhaps invited an organization such as the Toronto-based Task Force on the Churches and Corporate Reponsibility to monitor it.

The code’s language, in addition, is in need of review – given Bata’s reaction to some of its provisions.

For example, the code says employers should pay their workers at least 50 per cent above the “poverty line”. Bata says its two KwaZulu plants already operate at a loss and the profitability of its entire South African operations would be wiped out if it complied with Ottawa.

The code is silent on such a situation, making neither allowances for it nor moral judgment nor provision for examining a company’s financial health. Would Ottawa prefer Bata not to be in South Africa – presumably putting 3,500 employees out of work – rather than violate its stipulation on pay? The code says Canadian companies should provide adequate assistance to their employees and their families for such things as housing and education.

Bata says its employees live in their own houses. It believes that Ottawa had in mind merely migrant workers in hostels. It is difficult, from reading the code, to be clear on what Ottawa did mean.

However, it is instructive to examine the poverty datum line – called the Household Sufficiency Level (HSL) – which Bata and many other employers use to determine wages.

Like many things in South Africa, the HSL is applied with racial distinction: for example, the HSL’s minimum monthly housing allowance for blacks in the Durban area is about $12; for coloreds, $31. There is no HSL for whites.

Ottawa’s code talks about ending economic disparity. What “poverty line”, therefore, is it talking about – the poverty line for blacks which Bata uses and which would appear to keep blacks in an economic class of their own? Or some kind of universal poverty line which officially does not exist? Bata asks why it should contribute to education when education is provided free by the state.

State per capita expenditure on education in South Africa is about one- seventh for blacks what it is for whites (this week’s South African budget is reported to have substantially increased black education spending, but a large gap remains).

If Ottawa specifically had intended that Canadian employers should give financial assistance to bridge the gap between white and black expenditure on education, it would have been helpful to employers if its code said so.

Bata is also somewhat of an exception. Most Canadian companies involved with South Africa are either minority partners in South African concerns or are Canadian banks lending money into South Africa. The Canadian code makes no recommendations on their behavior.

Finally, under proposed Sullivan Code revisions – being worked out between the companies and Rev. Sullivan – U.S. corporate signatories will be obliged to publicly condemn apartheid and lobby the South African Government for change.

The Canadian code has never made that specific requirement.