S. Africa, Banks Agree on Interim Plan to End Debt Payment Freeze

South Africa and its major U.S. and European creditor banks agreed here Thursday to an interim plan calling for repayment of $500 million of its multibillion-dollar foreign debt, bringing a technical end to the payment freeze that Pretoria imposed last September.

South African Finance Director Chris Stals, who headed the government team negotiating with representatives of 30 banks, hailed the agreement as “a major step” on “the very long road to normality” for South Africa.

The accord was reached despite last-minute appeals by three leading South African churchmen, including Anglican Bishop Desmond Tutu, that the banks refuse to deal with Pretoria and continue to use financial pressure to help push for the dismantling of apartheid.

Last August, in response to growing anti-apartheid activism at home and violent racial clashes in South Africa, major creditors led by Chase Manhattan and other U.S. banks refused to renew maturing short-term loans or to advance South Africa any new money. With its currency, the rand, depreciating rapidly on world money markets, Pretoria responded by declaring a moratorium on repayment of all maturing loans.

South Africa’s total foreign debt is estimated at $24 billion, of which $10 billion is owed to non-commercial sources like the International Monetary Fund and government-to-government export credits. Of the $14-billion commercial debt total, most of it short-term, British banks have the largest exposure of about $5.5 billion, with $4.5 billion in the United States and $4 billion in Switzerland, West Germany and France.

Down Payment

Under the new agreement, South Africa will make a down payment of 5%, or about $500 million, in four phased payments beginning April 1 on the $10 billion in loans maturing between the beginning of the freeze and March 31, 1987.

Interest rates will be increased by 1% on unpaid principal due during the same period. The banks agreed to roll over the unpaid balance for the one-year period of the agreement.

Next February, South Africa and the banks will meet again to discuss further arrangements to deal with the remainder owed, plus an additional $4 billion in longer-term debt falling due after the March, 1987, expiration of the agreement.