Debt Crisis May Force S. African Gold Pledge
The governor of South Africa’s central bank said Wednesday that his nation might have to pledge its gold reserves to contend with a debt crisis that was touched off when several U.S. banks refused to renew maturing loans.
“We could well swap gold in the near future if necessary,” Reserve Bank Governor Gerhard de Kock said after meeting with U.S. bankers in Manhattan. “We are aware of the fact we could swap all of our gold.”
South Africa has an estimated $5.1 billion in gold holdings and foreign reserves.
The loans backed by gold would be used to sustain South Africa during negotiations to reschedule the nation’s $17-billion foreign debt. Payments of an estimated $12 billion of that debt are due to Western banks over the next year.
Debt payments were suspended last Sunday. De Kock has been in the United States conferring with bankers and Federal Reserve Board Chairman Paul A. Volcker, explaining details of the four-month freeze on repaying principal.
Stretched Out Payment
“If American banks decide to withdraw completely from South Africa, we will pay back all loans but not in three months, but over a stretched out payment,” de Kock said at a press conference. “The purpose of my mission has been to do the decent thing and explain to banks and the International Monetary Fund what is going on.”
The central banker said the debt freeze was precipitated by two or three U.S. banks that “intimated that their exposure in South Africa was too large.”
The position of these banks sparked fears that other financial institutions also would demand repayment.
Among the U.S. banks that generally have refused to renew loans are Security Pacific, Bank of America, First Interstate, Bank of Boston and First Chicago.
Banking sources also said that Chase Manhattan has not rolled over loans to South Africa’s private firms.
The bank actions have been prompted by the growing violence in South Africa, and many experts say the debt crisis cannot be fully resolved unless major reforms are made in the country’s system of apartheid.
De Kock said the government in Pretoria decided Aug. 27 to suspend payments and continue interest on the loans, but no announcement was made until five days later.
De Kock described his government’s action as a “standstill,” declining to use the word “moratorium.” He said: “Moratorium sounds like crematorium.”
Unlike U.S. banks, De Kock said, European banks had given no indication that they would not continue to roll over South African loans.
The central banker said he plans to travel to Europe to discuss establishment of a group that would devise a loan rescheduling program.
But he said the position of several U.S. banks clearly posed a problem.
“These threats of disinvestment have an adverse effect on international confidence in South Africa and domestic confidence in South Africa,” de Kock continued.
“We are meeting all the interest payments. It’s not like South America’s problem, which is economic. Our problem is political.”
The strict financial measures in South Africa came in a nation that long has depicted itself as one of the most creditworthy countries in the world.
A sense of crisis deepened after violence increased in black townships and after the nation’s currency, the rand, came under intense pressure in international exchange markets.
Racial Unrest Key
Asked if South Africa would stop exports of strategic materials if the Western banks refused to cooperate with a debt rescheduling, de Kock said, “We don’t believe in sanctions or the threat of sanctions.”
The central banker acknowledged that political dissatisfaction over Pretoria’s handling of racial unrest was at the root of the decision by U.S. banks not to extend new credit.
But he declined to say whether bankers in the United States had linked fresh loans with political reform.
“I hope wise counsels will prevail and we’ll be able to work out economic and political solutions,” he said.
De Kock said he had been courteously received by the U.S. bankers. He said the bankers were very aware of the need to handle South Africa’s debt difficulties in a manner that did not further exacerbate international monetary problems and disrupt the system of international payments.