The governor of South Africa's Reserve Bank, Gerhard de Kock, flew to London today in a bid to ease his country's economic crisis by negotiating a rescheduling of loan repayments that foreign banks are calling in because of the country's continuing racial unrest.
At the same time four major business organizations, representing most of South Africa's commerce and industry, urged the white minority government to end the economic and political crisis by beginning negotiations with accepted black leaders, including those in prison.
In a statement displaying an unprecedented political response by South Africa's business community to economic pressure, the four organizations called for a lifting of the state of emergency declared five weeks ago. One of the organizations, the National African Chamber of Commerce, joined the call for the release of imprisoned black underground leader Nelson Mandela.
De Kock's trip, which sources here said might also take in Zurich, Hamburg, New York and Washington, is aimed at stemming a call for loan repayments that bankers said was "like a classical bank run."
The call-in has drained foreign exchange reserves, causing the country's currency, the rand, to plunge 35 percent in 13 days. The rand hit an all-time low of 36 U.S. cents Tuesday, when Finance Minister Barend du Plessis suspended trading on Johannesburg's foreign exchange market and stock exchange while his central bank chief flew off on his rescue mission.
Banking sources here said the run began in the United States when New York's Chase Manhattan Bank announced Aug. 1, in response to political pressure for withdrawal of U.S. investment in South Africa, that it would not make or renew short-term loans to the South African private sector. Chase had stopped making loans to the South African government eight years ago.
"Banks are like lemmings," the head of the local branch of a leading foreign bank who did not want to be named said in an interview today. "Once Chase made that move, other American banks began to get the wind up."
The Chase announcement came 10 days after the Botha government declared a state of emergency in 36 towns and cities. Two weeks later there were major race riots in Durban, followed by President Pieter W. Botha's Aug. 15 speech, which disappointed foreign observers who had been told that it would announce new political reforms.
"In an atmosphere like that it becomes difficult for a bank chairman to make a decision different from one taken by another major bank," the bank chief said.
Other U.S. banks also began refusing to roll over short-term loans to South Africa. This alarmed European banks, which also began calling for due-date repayment of their short-term loans.
So began a run that threw South Africa and its currency into crisis. The country's total net foreign debts are $16.5 billion, but a disproportionate 67 percent of these debts must be repaid within a year. This, says Howard Preece, a leading Johannesburg financial commentator, is because foreign banks long ago stopped making medium and long-term loans to South Africa because of political uncertainty stemming from black opposition to the country's apartheid system of white minority rule.
Press speculation here is that De Kock will try to arrange a rescheduling of these loans by Monday, when the foreign and stock markets reopen. The negotiating is expected to be tough but, as one Johannesburg economist remarked, "in the last resort South Africa has every debtor's unanswerable argument -- we can't pay."
De Kock is also expected to try to negotiate standby credit packages. "I imagine he will try to persuade some of the European banks to fill the credit gap being left by the American banks," said Simon Steward, vice president of Chase Manhattan's South African operation. "The Europeans tend to take a more pragmatic line on South Africa and they are under less political pressure than the U.S. banks."
Financial sources suggested that de Kock may also try to arrange a gold swap involving some of South Africa's monetary gold reserves, currently worth about $2.2 billion.
Finally, it is being widely predicted here that the government will impose exchange control measures, blocking foreign investment capital in the country and reintroducing a two-tier exchange rate for the rand such as existed until last year. That, economists warned, would mean moving toward a "siege economy."
"It may solve the problem of the declining rand in the short term," Preece said, "but in the long term it must mean that South Africa will have to budget for massive surpluses to provide the development capital that will not be coming from abroad. It will mean depressed living standards for the whites, slower growth and increased black unemployment -- which means more unrest."
"One would expect such a prospect to lead to increased pressure on the government to make political changes," said Steward. "That would be logical. The trouble is the South African government doesn't like responding to that kind of pressure."
Today's joint statement by the business organizations -- the Association of Chambers of Commerce, Federated Chamber of Industries, National African Chamber of Commerce and a business-financed organization for improving conditions in the black townships called the Urban Foundation -- seemed to be an attempt to apply such pressure.
"Organized business would seriously warn against the danger of the country entering a state of siege in response to the threat of local boycotts, trade union strikes and international sanctions and disinvestment," the organizations said.
Urging "structural changes to uphold the political, social and economic values of our major trading partners," the businessmen warned that if this were not done, "investors and traders will increasingly shy away from South Africa without any formal laws forcing them to do so."
[In London, Britain's Barclays Bank announced that it would continue to maintain its credit lines to its South African subsidiary, Barclay's National Bank. Barclays is not a creditor of the South African government, Washington Post staff writer Lionel Barber reported.]