Page 132 - SARB: 100-Year Journey

Another peculiarity of that era was the SARB’s practice of providing forward cover to South African public corporations at favourable rates.
According to Van Zyl: “It seems, to me, it was accepted for central banks to provide forward cover directly to institutions that were important for a country’s development. It appears, to me, the central bank provided forward cover at attractive rates to Eskom, in particular. I am very sure that Eskom was not the only government enterprise that benefited from it, and I don’t want to point a finger at Eskom but Eskom loomed large in the forward book in those days.”
“In about 1987, around there, it was stopped. The existing contracts were, of course, honoured but for many years Eskom benefited from the forward cover,” Van Zyl said.
The issue with the forward cover was that, according to Gidlow: “The cheapness and stability of the official charge of 1% per annum for forward dollar facilities enabled traders to cover the exchange risk at rates which did not reflect the full magnitude of the risk faced by the Bank. This, together with the net forward commitments of the latter to sell dollars, meant that substantial losses were incurred in the wake of any large devaluation.” (1995, p 144).
As such, “... [the] forward cover facilities granted by the Bank to public corporations and government bodies had for some time been a focal point of attention, and these facilities were withdrawn at the beginning of 1987.” (Gidlow, 1995, p 160).
Bertus van Zyl. / SARB
In 1987, when the first interim agreement was up for renewal, US companies relented to criticism within the US and pulled out of South Africa. In an unexpected about-turn covered by The New York Times (7 June 1987), Rev. Leon Sullivan, who had supported continued investment in South Africa, called for US companies to divest from South Africa.
In the previous year, when the interim agreement was being negotiated, General Motors had exited South Africa, citing mounting losses and the South African Government’s refusal to dismantle apartheid. Barclays Plc made a similar move the same year. Initially, Barclays Plc had highlighted ‘commercial reasons’ but eventually conceded the international sanctions against South Africa had influenced the bank’s decision. (Los Angeles Times, 21 October 1986) (New York Times, 25 November 1986).
This set the stage for a difficult transition period, during which Stals, upon the sudden death of Dr Gerhard de Kock, was called upon to lead the SARB.
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The Reverend Dr Leon Sullivan, a US civil rights figure. /Dave Buresh/The Denver Post via Getty Images