Fluor Sells Unit in S. Africa but Draws Critics’ Fire for Not Pulling Out Completely

Fluor Corp., whose extensive strategic energy projects in South Africa had made it a key target of anti-apartheid activists, announced Friday that it has sold its operations there while it “can still dictate the terms” of its withdrawal.

But anti-apartheid activists immediately denounced the move by the Irvine-based engineering and construction company as inadequate because it enables Fluor to maintain significant ties to the racially segregated country.

Fluor said it will continue to directly employ 30 workers in South Africa--about one-third of its current full-time work force--and has allowed the new company to retain the Fluor name. Further, the company said it has an option to repurchase the business and “looks forward to the time when it can again assume an ownership position in South Africa.”

Although Fluor joins a growing list of American companies shrinking their involvement in South Africa, the form of the divestiture sets it apart from other companies, including General Motors, IBM, Coca-Cola and Kodak, that have recently announced divestiture moves.

The Fluor moves add a new dimension to the debate over what constitutes divestiture. Earlier actions have ranged from a complete refusal to do any business in the country to shutting down manufacturing operations to selling U.S. products through South African agents.

Still Ineligible for L.A. Contracts

Fluor’s steps did not satisfy critics of apartheid, who have made it a target of government contract bans and had placed its name on lists of South Africa-investing companies whose stock, they insist, should be divested by public institutions.

In Los Angeles, where Fluor recently lost a multimillion-dollar contract because of its South African ties, Mayor Tom Bradley quickly notified Fluor officials by letter that the company remains ineligible to do business with the city.

“The ordinance requires the total and complete end of business ties with South Africa before the company can again be eligible to receive city contracts,” Bradley wrote just hours after the company’s announcement.

“I don’t know of any company divesting itself of South African operations that is still using corporate employees there,” said Mark Fabiani, legal counsel to Bradley and one of the authors of the city’s strict anti-apartheid ordinance. “Keeping employees there is the most direct form of involvement any company can have.”

Jim Cason, a spokesman in New York for the American Committee on Africa, called Fluor’s action “a scam.” He added: “Fluor isn’t getting out of South Africa. They are just trying to relieve the heat from the divestment movement. It’s not going to work.”

A Fluor spokesman said the company, which had steadfastedly opposed divestiture calls from shareholders and anti-apartheid groups, sold the subsidiary because it is concerned about mounting pressures for further congressional sanctions that might force U.S. companies to shut down their operations altogether in that country.

“We are concerned about pressure in the future for sanctions and ordinances that could dictate how we divest,” a spokesman said. “We wanted to dictate the terms for ourselves.”

Disagrees With Sanctions

David S. Tappan Jr., Fluor’s chairman and chief executive, said the company still believes that sanctions and the departure of American companies “are not an effective way to hasten an end to apartheid.” But he added that Fluor had reached the point “where an orderly transfer of ownership is in the best interests of the corporation, its employees, shareholders and clients.”

Fluor would not say how much it received for its South African operations. The company’s South African revenue is less than $200 million a year, 0.5% of its total annual sales. It currently has just 100 full-time workers and another 1,400 part-time and contract workers in its South African subsidiary. However, over the last 25 years of operations in the country, the company’s operations have been extensive and often important to that country’s strategies.

For example, in the mid-1970s, Fluor received a $4.2-billion contract from the South African government to build the SASOL coal gasification plant, a project designed to reduce the country’s dependence on imported oil.

In addition, the company helped construct and currently helps maintain the Kolberg nuclear power plant outside Capetown.

It was Fluor’s direct involvement with the South African government that made it a favorite target of anti-apartheid groups.

“They are one of the 12 companies we have cited as a partner in apartheid,” said Timothy Smith, executive director of the Interfaith Center on Corporate Responsibility. “They are one American company that has provided special, concerted assistance to the white supremacist government of South Africa.”

Smith said that with Fluor’s assistance, South Africa was able to reduce its reliance on imported oil and thus circumvent an anti-apartheid-motivated export embargo by Arab countries.

In Kodak’s case, the most dramatic American business pullout yet from South Africa, the company is selling all of its South African assets, laying off its employes and withdrawing its products from the country.

IBM is selling its assets in the country but has said it will continue to do business there.