South African officials today held their first face-to-face meeting with private bank creditors since early last month, when Pretoria imposed a unilateral four-month moratorium on debt repayment.
According to banking sources here, an anticipated South African request for extended suspension of payments on loan principal along with the rescheduling of its $14 billion short-term debt was not substantively addressed at the session, which was described as the first in a series of meetings with a group representing 29 U.S. and Western European banks.
Sources here said a presentation by South African officials consisted of a restatement of the positive assessment of the South African economy and optimism over the negotiations expressed in recent published interviews with Reserve Bank Gov. Gerhard de Kock, who has predicted a 3 percent growth rate next year.
The South Africans, said one financial analyst, seek to persuade the bankers that they are suffering from a "political debt problem, nothing like the LDCs," or less developed countries, whose growth and potential for repayment are minimal.
But although South Africa has endeavored to move the problem off the political plane, and the bankers are uncomfortable with making financial decisions based on political assessments, the escalating violence and social chaos in South Africa have become increasingly difficult for even the most sanguine bankers to ignore.
The crash of South Africa's currency, the rand, this summer abruptly brought home to South Africans, particularly in the business community, the dimensions of the economy's vulnerability to political currents.
The worsening political climate has been reflected by a further decline in the rand, which was split into a two-tier system of internal, or commercial, rands and external, or financial, rands when the moratorium was imposed.
At that time, the commercial rand traded at 44.7 U.S. cents and the financial rand at 37.7. Today, the commercial rand was trading at 39 cents and the financial rand at 28.5 cents.
Swiss banker Fritz Leutwiler, who is acting as independent mediator between the South Africans and the group representing the banks, said in a statement that he regarded today's talks as part of the "soundings" that he would be taking while collecting data before negotiations.
Leutwiler said he would be writing to all banks known to have outstanding South African debt, believed to number at least 300, to solicit their views on rescheduling.
A small group of demonstrators against South Africa's system of racial separation, or apartheid, gathered outside the London headquarters of Price Waterhouse, the accounting firm that set up the meeting for Pretoria. But the session was held in secret at a smaller Price Waterhouse branch office in London's West End.
Much louder protests were heard today at a major debate on South Africa in the House of Commons, where opposition leaders criticized the British government's continuing efforts to avoid economic sanctions against Pretoria.
During the meeting in the Bahamas of Commonwealth heads of government that ended Monday, Prime Minister Margaret Thatcher took credit for resisting calls by other Commonwealth members for mandatory sanctions. After days of negotiations, she said, she gave in "just a little bit" in agreeing to a consensus document calling for relatively mild measures -- most of which already were enforced by the Commonwealth governments.
In response, South African President Pieter W. Botha threatened to withhold exports of chromium to the United States and Western Europe.
In Parliament today, Foreign Secretary Geoffrey Howe rejected demands by the opposition Labor Party that the government meet with leaders of South Africa's banned African National Congress, and instead called on the ANC to reject violence and "give peace a chance." He repeated Thatcher's belief that Britain, which holds $5.55 billion of South Africa's total debt, about half of it in short-term loans due within six months, does not consider sanctions effective in promoting political change.
Today's talks were convened by South Africa, with bank representatives present by invitation only. The South African team was headed by Chris Stals, the government's director general for finance and chief of a moratorium coordinating committee, and by Deputy Reserve Bank Gov. Joop de Loor. The bank representatives were not identified publicly.
"What the bankers want to know is something firmly authoritative as to what the regime is going to do," said an economist here tonight. "The bankers want to know if they will get their money back if they agreed to a postponement for one or two years. But they also know that, just as in the case of Iran, when things go bad, they could go down very quickly indeed."
U.S. banks, owed about $4 billion, have taken a much harder line against the South Africans, in response to heavier political pressure in the United States. The level of pressure is far lower in Europe, which has been to South Africa's advantage here.
But public and political pressure is increasing on this side of the Atlantic as well. One indication of South Africa's awareness of the problem was the recruitment of Leutwiler, the respected former head of the Swiss Central Bank.
"The South Africans had to find somebody other than themselves who would talk sensibly to the creditor banks," the banking source said. "They lit on him as an honest broker, . . . their front man. I imagine some of the banks would not be happy being in the same room with South Africa."