Banks squeeze South Africa

Press, 30 August 1985, Page 8

Banks squeeze South Africa

NZPA-Reuter Johannesburg

Foreign banks are demanding the repayment of more loans than South Africa’s, gold and foreign exchange reserves can cover. Reporting this today, the country’s largest bank, Barclays National Bank, said this was a result of the present unrest. On Wednesday, South Africa stopped all foreign currency and stock exchange trading. South Africa owed about SUSI 9 billion (SNZ36.I billion) to foreign banks at the end of last year and about SUSI2 billion (SNZ22.B billion) of that had to be repaid in one year or less, Standard Bank calculated. Economists said that Pretoria, trying to avoid exchange controls, was locked in crisis talks in a bid to persuade foreign banks to stretch out their demands for loan repayments. The Reserve Bank governor, Mr Gerhard de Kock, speaking before the unex-

pected curbs, said it would be unfortunate if Pretoria were forced to restrict capital outflows, which would hit economic growth in southern Africa.

He disclosed, however, that about 5.6 billion rand (SNZ3.B billion) of shortterm capital had left the country in the 18 months to the end of June. A burst of selling by foreigners of South African shares rose to 200 million rand (SNZI33 million) in July as the rioting spread.

Some economists said that if the talks with foreign banks in the next few days failed, South Africa might be forced to reschedule its debts as Latin American countries had done. The “New York Times” reports that the City of London has responded anxiously to South Africa’s freeze on currency and stock dealing. Shares of leading British companies heavily involved in South Africa fell and

banks quoted huge spreads between the price at which they would buy and sell the South African rand.

Analysts and industrialists in London’s financial centre said that the financial crisis that led to the freeze would reinforce the trend among British companies to reduce their involvement in South Africa gradually. Britain has the greatest exposure to South Africa of all Western industrial nations. Direct and indirect investment is estimated at $l5 billion, about 7 per cent of Britain’s total overseas investment. Direct investment by British concerns represents about 40 per cent of all overseas investment in South Africa. London Banks said that the rand opened slightly firmer on Wednesday, but that posted prices were largely to allow transactions with travellers.

Spreads, which are normally calculated in the hun-

dredths of a cent for major currencies, ranged from 8c to 10c for the rand. Barclays, for instance, was selling rand to travellers at 45c, but was willing to pay only 37c.

In Wellington yesterday, the New Zealand dollar slowly firmed to $U50.5350/ 65 on the foreign exchange market near the end of the quietest week’s trading in two months. It opened at $U50.5310/25 and was wellbid throughout the day but the market, over-all, was trendless. Yesterday the New Zealand dollar was worth 53.5 c U.S., 76.1 c Aust., 38.1 p, 126.7 yen and 1.48 Deutschmarks.

The United States dollar was at 2.7692 Deutschmarks in late trading, compared with its 2.7720/35 opening.

The Australian dollar was unchanged from its opening at $U50.7027/34, while sterling was at $U51.4043/50 against $U51.4030/40 in the morning.