LOAN FOR SOUTH AFRICA

New Zealand Herald, Volume LXIX, Issue 21328, 1 November 1932, Page 8

LOAN FOR SOUTH AFRICA

The Union of South Africa has sue- j ceeded in floating an £5,000,000 loan ! in London as an exceedingly cheap | rate. The terms or issue, Z\ per cent \ at £O6 10a, mean a yield of £■', 12s id > at the flat rate. The period ia a long j one, 1 £>s2-73, meaning that the j earliest redemption date ia 20 years • hence, the full terra 40 years, i The interest, including redemption. [ amounts to approximately £Z 15a per cent to the earliest optional date j of repayment, and £3 \:m 4d for the j 40-year term. Because of the aubatan- j tially longer period these are better ! terms than Australia secured at the j beginning of the month. The Corn- •: monwealth issue was at Zk per cent j at £'o7 10s, but it was only for five | years. The yield, with redemption, ia j just over £> la per cent. The pur-; poses for which the Union Govern- ' merit wants the £4,000.000 have not been stated in the cable messages: which record the raising of the loan, j However, South African papers some; months ago forecasted the flotation i and stated that the rnonev would be j used to meet, interest and other pay- | merits due in London. It happens that borrowing for this purpose pro-j duces one result diametrically oppo- j <(ite to that secured at present by f Australia and New Zealand if they j use London loan money to save re- j rnittance of funds required to meet j obligations. South Africa is still on the gold standard. In consequence, j the exchange rate favours the South African pound as against sterling. In the last Budget it was estimated that £1,600,000 would be saved in the ! year because of the favourable ex-j change. Use of loan proceeds will, of course, reduce the amount of the saving; and incidentally that part of the money which is transferred to ! South Africa will suffer a shrinkage j when converted into the domestic; currency. In the circumstances, bor- ; rowing is not a simple nor an especi- ( ally cheap business for the Union of j South Africa. The favourable terms for the loan just floated will there- < fore be doubly welcome to the j Government, which will doubtless j also claim the success as evidence that efforts being made to balance the Budget are recognised and appreciated in London.