Cash-flight from S.A. not seen as critical

Press, 9 August 1985, Page 6

Cash-flight from S.A. not seen as critical

NZPA-Reuter Johannesburg

A recent flight of capital from South Africa has still not reached proportions that would frighten the Government into putting up exchange barriers, economic analysts say. Increasing violence that had prompted the Government to impose a state of emergency on July 21 still looked far from forcing big foreign investors into an exodus, they said.

Brian Robinson, the chief executive of Syfrets Trust, a South African fund manager, says that 365 million rand ($349.52 million) were withdrawn from the country over the last 10 weeks, mainly by overseas investors dumping shares on the Johannesburg Stock Exchange.

Nine firms had left the

country so far this year, compared with 30 between 1980 and 1984, he said.

Scott Hawker, an analyst with Anderson Wilson and Partners Inc., said that the economy could cope with a business withdrawal on current levels without imposing exchange controls.

“But the withdrawal of investment, even on the present limited level, will certainly affect the economic recovery,” he said. So long as multinational giants such as International Business Machines and Volkswagen showed no signs of leaving the white minority Government would probably let economic factors discourage foreigners from withdrawing, he said.

The South African rand has weakened dramatically on foreign exchanges this

year and a foreign investor who set up a plant in the country five years ago would today be able to withdraw less than half his initial dollar investment. Turmoil that has claimed more than 500 lives during the last 17 months of black agitation has brought Pretoria closer than it has ever been to economic sanctions.

France has already announced a ban on fresh investments. The United States Congress is debating a freeze on, among other things, new bank loans.

Mr Robinson said that the simple threat of disinvestment from the republic could be detrimental to South Africa’s economy. “Firms are quietly reducing their South African ties by not increasing capital spending or employment, in

ect pulling out through attrition,” he said. Mr Hawker said that there were two ways for the foreigner to leave — to sell a publicly-traded company on the Johannesburg Stock Exchange or, in the case of a privately-held firm, look for a buyer.

He said that bargain-hunt-ing was the name of the game, local businessmen seeking companies at half their real value.

Analysts say that capital flight would hamper a fragile recovery from South Africa’s worst post-war recession.

Mr Hawker said that withdrawal of capital could lead to a vicious circle in which departing investments pushed the rand down, increased inflation, and reduced the money supply-