BANKS: S. Africa at Crisis Point : S. African Ties to U.S. Banks at Crisis Point

South Africa’s relationship with U.S. banks, which provide nearly one-fourth of the strife-torn nation’s total foreign borrowings, has reached a crisis point that many experts say cannot be fully resolved unless major reforms are undertaken to end apartheid.

Gerhard de Kock, governor of South Africa’s central bank, met with British central bank officials Thursday and is expected to confer with U.S. officials today to explore ways to calm a mounting financial crisis. It has been precipitated in part by the increasing refusal of U.S. and other Western banks to renew loans to South African firms.

Those refusals, sparked by South Africa’s rising racial violence, have raised questions about whether the nation could repay the more than $12 billion that would come due over the next year to Western banks. That, in turn, has triggered an outflow of capital from South Africa, a sharp fall in South Africa’s currency and the government’s suspension Tuesday of stock market and foreign-exchange trading.

Financial experts say De Kock and other South African officials may be considering a number of short-term relief measures, such as stretching out debt payments or obtaining short-term loans from Western central banks to pay back private loans.

The Pretoria regime is also thought to be considering other tactics, such as exchange and import controls, two-tier currency rates and the sale of gold in exchange for dollars to repay debts. The government may announce such actions this weekend, according to industry officials in South Africa.

Strong Commitment Needed

But many bankers, business leaders and economists in and out of South Africa say these moves could be futile unless accompanied by a strong commitment to true political reforms to dismantle the apartheid system of racial segregation and discrimination.

“What is needed for the short-, medium- and long-term health of the country is an acceleration of the reform program,” Gavin Relly, chairman of the powerful Anglo-American Corp., the South African mining and mineral-marketing house, said in a statement.

“To solve their liquidity crisis, they have to reinstate confidence and to do that, they need progress on the political front,” said a spokesman for a major U.S. bank, who asked that he not be identified. “Until that is addressed, anything else is a Band-Aid.”

And any drastic moves designed to discourage capital outflows--such as two-tier currency rates to discriminate against foreign investors trying to move funds out of the nation--could backfire and erode, instead of enhance, confidence in the South African economy.

“These actions add fuel to the fire of uncertainty,” said Jeffrey Schott, research associate at the Institute for International Economics in Washington. “No business wants to come in and face this kind of uncertainty again.”

Bank Refuses Comment

The Bank of England, Britain’s central bank, refused to comment on reports that De Kock met with his British counterpart, Robin Leigh-Pemberton. And neither the Federal Reserve Board nor the South African Embassy would comment immediately on the proposed discussions between De Kock and Paul A. Volcker, chairman of the Federal Reserve Board.

But there was little doubt that De Kock is seeking help to slow the fall in the rand--the South African currency, which has lost 30% of its value in the last two weeks--and avoid a debt crisis similar to that besetting Latin American nations such as Brazil and Argentina.

Although bankers agree that the South African economy is basically sound, despite its worst recession in five decades and a 17% inflation rate, the growing racial unrest has helped make it an increasingly poorer credit risk, they say.

Consequently, foreign bank lending there has been falling. South African government and private firms had $17 billion in foreign debt last month, down from $19 billion in January. Federal Reserve Board data show that U.S. bank lending to South Africa fell 12% to $4.2 billion in March from $4.7 billion in December, 1984. More recent numbers are not yet available, but U.S. and South African bankers agree that the decline has continued and even accelerated.

Debt Difficult to Pay

The debt could be difficult to repay because about $12 billion of it is short-term debt, mostly trade financing, due within a year. That high proportion of short-term debt is blamed in part on the unwillingness of South African firms to pay commitment fees for longer-term loans.

If many of the loans are not renewed, South Africa may have to pay out more for loan repayment than it has in foreign reserves and gold holdings, estimated at about $5.1 billion.

Payment will be made even more difficult if the rand continues to fall, because much of its debt is payable only in dollars, and declines in the rand mean the country will need more rands to make payments. The rand has fallen to a record low of 35.5 cents this week from $1 in March, 1982.

The list of U.S. banks publicly acknowledging a halt in new lending to South African private firms has grown. (Most major banks already have banned new loans to the Pretoria government or its agencies.)

Chase Manhattan Bank confirmed a month ago that it will make no new private loans to South Africa, joining Bank of Boston, which made a similar determination earlier this year.

Banks Reduce Exposure

Other banks, while not ruling out new loans to South African private firms, nonetheless have reduced their exposure. Latest to join this list is Bank of America, the nation’s largest bank.

“We have reduced our exposure,” spokesman Peter Magnani said, added that “in light of current circumstances, we are looking very carefully at each of our credits there as they come due.”

Citibank, the nation’s second-largest bank, also appears to be reducing its exposure. Spokesman Wilfred Koplowitz said the firm has “for some time been making an adjustment in our private sector portfolio in South Africa.”

Other major banks previously acknowledging that loans were not being renewed include Security Pacific, First Interstate Bank of California, First National Bank of Chicago and Mellon Bank.