New York Times on Bank Loans to South Africa
The following article appeared in the New York Times. The article appeared shortly before the South African government was forced to declare a debt repayment standstill. More articles on bank loans to South Africa can be found at Campaign for Sanctions and Disinvestment.
The New York Times
August 3, 1985
U.S. Banks Cut Loans Sharply to South Africans
By Nicholas D. Kristof
After years of substantially increasing their lending to South Africa, American banks have begun to cut back sharply on such loans, according to figures released by the Federal Reserve Board.
In the first three months of the 1985, the period covered by the latest figures, the total owed by the borrowers in South Africa to American banks dropped by 10.8 percent, to less than $4.2 billion, from $4.7 billion.
"This is the exact reversal of what happened for years, with banks steadily increasing their loans," said Richard V. Knight, head of corporate research at the American Committee on Africa, a New York group that has put pressure on banks to stop all South Africa loans.
He added, "It's hard to say what's going to happen longer term, but I think bank loans will decrease."
Other organizations as well have put considerable pressure on American banks to halt their lending to borrowers in South Africa. Many big banks, beginning in about 1976 and culminating with a flurry this spring, adopted policies prohibiting new loans to the South African government and its agencies.
Private-Sector Loans Soared
However, while American bank lending to the South African public sector has been halved since 1982, to a total of $302.2 million as of March, loans to the private sector have soared. In particular, loans to South African banks skyrocketed to more than $3.5 billion as of September, from less than $500 million in 1979.
But this category, like the others, showed a sharp drop since the September peak in lending to South Africans. As of March, loans by American banks to South African banks were below $2.8 billion. Loans to the private sector, except for banks, totaled $1.1 billion.
Bar by Security Pacific
Some bankers say the totals are likely to continue to drop sharply, partly because over the last year several institutions have said they will no longer lend even to the private sector in South Africa. The Chase Manhattan Corporation is the best known of the companies to have taken such a stand. Others that have done so include Bank of Boston Corporation, the Seafirst Corporation, the Norwest Corporation, Harris Bankcorp Inc., Wells Fargo & Company and the Mellon Bank Corporation.
In addition, the Security Pacific Corporation said yesterday that it had in practice, though not as a matter of policy, not lent any money to South Africa for several months. "Based on daily economic and credit analyses, we are not currently making private-sector loans to South Africa," said Susan Taha, a senior vice president.
The bank exposure to South Africa could diminish quickly because the great bulk of the loans are short-term credits. The March figures show $3.5 billion maturing in one year or less, $600 million maturing in one to five years and just $58 million maturing over more than five years.
South Africa ranks 20th in the size of loans from American banks, with about a bit more than 1 percent of total loans to foreign borrowers. It ranks behind many developed countries, such as Australia and Spain, and also behind some large Latin American borrowers, such as Mexico and Brazil.