Sour Test

When the Union of South Africa wanted to borrow $50 million to buy U.S. industrial equipment last September, Finance Minister Nicolaas Christiaan Havenga came to the likeliest spot--the U.S. Export-Import Bank. The bank agreed to discuss a loan, provided that South Africa would meet the usual requirements, i.e., tell exactly how the money was to be spent, and let the bank supervise the loan agreement. Unsmiling old (67) Minister Havenga balked at the "intolerable" terms as a reflection on his country's credit rating, huffily said he had never had any trouble borrowing money on the London market.

But last week, when South Africa floated a -L-10 million bond issue in London, Havenga got a shock. At week's end, only 16% of the issue had been subscribed. The failure was blamed on1) the tight money market, partly caused by heavy taxation of Britain's middle-class investors, and 2) the low (3 1/2%) interest rate. Because of a lack of confidence in South Africa's government, investors thought that they should get at least 1/2% more. Worried South Africans hoped that the failure would not queer a second -L-10 million issue and a $10 million credit now under negotiation with a group of U.S. banks.

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