The South African rand plunged nearly 5 cents against the dollar in early trading today, prompting swift state intervention to end what one banker called a “frightening” situation.
The rand fell despite the government’s four-month suspension of foreign debt payments and tightened exchange controls. Those moves were intended to halt the flight of foreign capital caused by investors worried by the past year of rioting against apartheid, South Africa’s system of racial segregation.
The white-minority government was faced with a renewed run on the currency today as the rand dropped to 37 cents against the dollar after it closed Tuesday at 41.5 cents.
Scarce Dollars Sold
The rand recovered to 38.8 cents after the Reserve Bank intervened by selling some of its scarce dollars.
“The euphoric situation which developed on Monday, when the rand strengthened, has evaporated totally,” said one foreign exchange dealer. Trading resumed Monday after the suspension.
“It’s frightening,” said the dealer, who demanded anonymity. “We can’t stop the drain.”
A drop in the value of the rand means South Africa’s foreign debts, which are figured in dollars, become more expensive to pay off.
Meanwhile, the head of the South African central bank completed a round of talks with U.S. financial officials and told reporters today that South Africa needs no new loans to meet its debt payments, only time to straighten out its finances due to the reluctance of some American banks to roll over their previous loans to South Africa.
Gerhard de Kock, governor of South Africa’s Reserve Bank, told a news conference in New York that “no American bank will have problems with non-performing loans” to South Africa. Non-performing loans are those on which payments are overdue.
Rioting erupted overnight around Cape Town, Johannesburg and in the Eastern Cape, police reported. A black man, the second killed in violence in 24 hours, was found burned to death, and two white soldiers died in a vehicle crash while on riot patrol in Grahamstown in the Eastern Cape, police said.
Meanwhile, Gold Fields of South Africa, which fired 5,000 of 7,000 black miners at its Deelkraal mine during a strike for higher wages, withdrew the dismissals. The company said 90% of all workers had returned to work after the black National Union of Mineworkers suspended the crumbling two-day walkout. (Story, Page 12.)