In Hock to the U.S. Banks

Reprint of article in the December 11, 1976 issue of The Nation by Reed Kramer of Africa News Service. At a time of unprecedented political turmoil in South Africa, major U.S. financial institutions have participated in more than $700 million of loans to the South African government, state-owned corporations, and private projects. U.S. indirect investment (mostly bank loans) in South Africa now has surpassed the direct stake held there by some 300 American corporations. The latest major agreement was signed in late October - a $110 million loan to the government from a syndicate led by Citibank and co-managed by Morgan Guaranty Trust. Lending to South Africa by U.S. banks and their overseas subsidiaries now surpasses $2 billion, nearly double what it was one year ago. By comparison, direct U.S. investment, which totals about $1.6 billion, has slowed and may even show a decline for 1976. The South African government expected the price of gold to be higher than it has been; income from this number-one export earner will fall far short of what is needed. In a "gold swap" in April with Swiss banks, Pretoria borrowed more than $500 million. It also has borrowed at least $200 million directly from British and French banks (not via the Euromarket), and the International Monetary Fund loaned the government $357 million in recent months. The article says South Africa's biggest borrowers are the government and the state-owned enterprises; this year for the first time, more capital inflow has gone to the public sector than the private sector. The U.S. Export-Import Bank recently reversed itself and decided not to provide some $200 million in loan guarantees for a $2 billion coal gasification project, SASOL II, which is to be built by the California-based Fluor Corporation. In 1973, the National Council of Churches released secret bank documents which disclosed a series of loans to South Africa worth $210 million. U.S. political and economic involvement in southern Africa today amounts to a new kind of interventionist strategy that relies more heavily on financial capital than on covert agents to influence political developments. For Rhodesia, it includes a $2 billion trust fund designed to preserve the present economic infrastructure by encouraging the whites who control it to remain in the country after independence. The article mentions defense expenditure, Eurocurrency loans, Eurobonds, the London Interbank Offer Rate (Libor), Dillon Read, the Private Export Funding Corporation (PEFCO), Stephen Minikes, Foskor (the state-owned Phosphate Development Corporation), the New York-based European American Banking Corporation, the American Committee on Africa (ACOA), Chase Manhattan, diamonds, racial policies, Executive Vice President George Vojta, Secretary of State Henry Kissinger, majority rule, Harry Oppenheimer, Anglo American Corporation, the State Department, the Agency for International Development (AID), U.S. aid, Prime Minister Vorster, Morgan Guaranty Trust Vice Chairman Lewis Preston, the Interfaith Center on Corporate Responsibility, and Tim Smith.