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In early January 1986, Leutwiler, on behalf of the foreign banks, wrote to Stals informing the Chair of the Standstill Co-ordinating Committee that the overseas creditors had rejected the South Africans’ initial offer. This correspondence, and its timing, perhaps explains why Rupert felt compelled to write to Botha in January of the same year.
After communicating the foreign banks’ dissatisfaction with the South Africans’ proposals, Leutwiler suggested that he craft a solution to the problem. His confidence can be attributed to the fact that he had the backing of the Price Waterhouse Group, and therefore access to its resources.
On 10 February, Leutwiler sent communication containing his outline proposal. He gave a deadline of 20 February 1986 and insisted it was in “... everybody’s interest” that agreement was reached by that date. The Swiss banker had also arranged a press conference at the Savoy Hotel in London, and scheduled it for the afternoon of that day.
A major theme of the entire exercise was, as expressed in correspondence to Leutwiler by an American banker, that: “Banks, by virtue of lending to countries, neither approve nor disapprove of the policies or governments of those countries. However, as a banker put it at our previous meeting ‘social stability’ is part of the perception of ‘creditworthiness’.”
However, that was not the end of it. The first standstill interim arrangement lasted until 30 June 1987, and there were more agreements to follow. The second debt interim arrangement ran from 1 July 1987 to 30 June 1990. The third debt interim agreement was effective from 1 July 1990 to 31 December 1993.
“There was an initial one, which was for a short period. There were two longer ones. The last one ended in December 1993. The last of the rescheduled debt was repaid on the 15th of August 2001. That was the end of the debt standstill,” Cross said.
The debt standstills rendered South Africa a net exporter of capital, when the country had previously been a net importer of capital. As a result, South Africa had to run a current account surplus, and oversee the careful rationing of limited foreign exchange resources. That was done through strict exchange controls and the reintroduction of the financial rand.
The central bank was also instrumental in negotiating the terms of the foreign loans’ repayments, rollovers of the maturing debt into medium-term loans, interest rates (with ceilings imposed on interest charges), the substitution of South African debtors, and the cessation of creditors’ rights. The latter involved debt swaps for equity or investments in South Africa.
A unique aspect of the debt standstill agreements is that the South African government acted as a ‘debtor of last resort’. The apartheid government did this through special restricted accounts (SRAs) opened with the Public Investment Commissioners (now the Public Investment Corporation). The SRAs served as one of the key mechanisms through which South African debtors resolved their debts with foreign creditors, and the process was mediated by the SARB to ensure there were no foreign exchange leakages.
When the third interim debt arrangement expired in 1993, a total of US$5 billion in debt remained which still required repayment. The Standstill Co-ordinating Committee negotiated a final debt settlement agreement with the foreign banks. The agreement entailed rescheduling the remaining US$5 billion debt repayments over eight years. The Standstill Co-ordinating Committee received approval, and that is how the 1994 debt arrangements came into effect on 1 January of that year.
Anti-apartheid demonstration held in Hyde Park, London, June 1984. /Getty Images