The Ambassador in the Union of South Africa ( Winship ) to the Secretary of State
Sir: I have the honor to refer to my despatch No. 87, dated June 29, 1949,1 from Cape Town, regarding the proposed visit of Finance Minister Havenga to the United States, and now to report on his return and his attitude on the South African loan negotiations. Other references in this connection are to the Embassy’s despatches Nos. 313 of September 28, 1949, and 329 of October 7, 1949.2
At my request Mr. Havenga received me yesterday morning and as usual was most friendly and cordial, but when the conversation turned to the Export-Import Bank and Washington loan negotiations he showed definite evidence of disappointment if not resentment.
He told me that upon his arrival in Washington he was optimistic, believing that the ground work had been done and that a loan of at least 50 million dollars would be extended. The Minister stated that it was agreed that the loan would be used for capital goods purchases in the United States for the South African Railroads and Harbours, Iscor and Escom.
His first discussions with Mr. Gaston3 appeared to be fairly satisfactory but on his return to Washington he was unable to see Mr. Gaston, and had to talk with another officer of the bank who seemed to know little or nothing of the previous conversations; Mr. Havenga [Page 1808] said he was annoyed and discouraged at having to begin at the beginning again.
He told me he had chided some of the officials he had met by pointing out that they apparently had no machinery for loans to sound countries, but excellent machinery for giving away millions!
He said that now all negotiations with the ExIm Bank had been suspended, that he would not approach the World Bank, and that he would not attempt to float a public loan in the United States.
He believes that he has made very valuable contacts in New York, and that future credits through private banks can be arranged to meet South Africa’s needs. He also feels that the way is open for an increase of American investment in Union industries.
There is little doubt that Messrs. Havenga and Holloway knew what the requirements of the ExIm Bank were before leaving Pretoria. On the other hand, they intimated to me that they believed they could by their presence in Washington find a way around these.
At my request the Counselor of the Embassy also called on Dr. de Kock, Governor of the South African Reserve Bank, yesterday morning to put various questions to him concerning the foregoing loan negotiations. …
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Dr. de Kock said that when Mr. Havenga left New York he had arranged no loan at all with private banking circles there. While Mr. Havenga was on the boat crossing to England, Dillon Read and Company renewed exploratory discussions with certain banking houses in New York and obtained their agreement to participate in the 10 million dollar revolving credit or “overdraft” which has now been announced here, whereupon a high official of Dillon Read flew to England and met Mr. Havenga on his arrival there. The arrangement was then completed. The interest rate on this credit is ½% for the credit itself plus 3% on any amount drawn. Thus, if the whole amount were immediately drawn the rate would total 3½%. Dr. de Kock said that when Messrs. Havenga and Holloway were having discussions with New York bankers, as nearly as he can judge there was misunderstanding on both sides with regard to what was being discussed. The South Africans seemed to think a fixed loan with bond issue was had in mind, whereas the New York bankers were actually thinking in terms of a “line of credit”, which is what has now emerged.
Dr. de Kock’s opinion is that Mr. Havenga really feels that his announcement was of signal importance inasmuch as this 10 million dollar credit represents the first trickle of money of this sort ever obtained from the United States. Mr. Havenga is pleased, according to Dr. de Kock, to have obtained it and they both feel as above indicated, that more on the same basis can be had without very much [Page 1809] difficulty. Dr. de Kock appears to expect to go to the United States toward the end of November or early in December and thinks that by approaching directly such banks as the Chase National Bank, the National City Bank, and the Bank of Manhattan, he may be able to obtain, as suggested, additional credits on similar terms from one or more of them without using an intermediary such as Dillon Bead. …
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Dr. de Kock said that he feels South Africa is now on top of its balance of payments position. The control measures which have been progressively applied are having their effect and it will have been noted that the gold and foreign exchange holdings of the Reserve Bank have moved upward slightly over the past six weeks. This, he feels, will strengthen his hand if and when he goes to New York and seeks further credits. Furthermore, if he can show that the issuance of import permits is based almost entirely on actual money in hand and not on hopes of money which may or may not be forthcoming, this should impress favorably the American financial community.