South Africa's new foreign debtagreement sparked a rally in local financial markets, but
bankers and economists said the pact removes only one source of
anxiety from a still depressed economy.
    "We have not gone from 'no confidence' to 'full confidence'
yet," commented one banker, who saw the agreement as having
marginal influence on fundamental economic problems.
    Money market analysts cited the debt renegotiation as the
main impetus behind increases today in both the commercial and
financial rand.
    The commercial rand, used for current account transactions,
rose 0.5 cts to 49 U.S. Cts while the financial rand jumped
nearly two cts to 33 U.S. Cts.
    All equity and fixed investment flows of foreigners take
place through the financial rand, which is considered the main
barometer of South Africa's attractiveness to overseas
investors.
    Analysts predicted the debt arrangement plus further gains
in the gold price could push the commercial rand over 50 U.S.
Cts and the financial rand to 35 cents in the next few weeks.
    They said the financial rand in particular was being driven
by a tentative provision in the new debt agreement that could
favorably affect the currency.
    Foreign creditors may get permission to convert loan
balances and short-term claims into equity investments in South
Africa.
    Finance Minister Barend du Plessis said the Reserve Bank
was "investigating the implications of such conversions in light
of terms and restrictions of the financial rand system."
    Du Plessis in disclosing the new agreement last night said
the recent sharp rise in the financial rand was an example that
"some foreign investors are again taking a more realistic view
of South Africa."
    Terms of the debt agreement call for South Africa to repay
1.42 billion dlrs of 13 billion dlrs of frozen debt over the
next three years. The agreement extends a standstill
arrangement, expiring June 30, that has been in place since
August, 1985.
    Bankers said the repayment amounts essentially confirmed
their private estimates and could be comfortably met by the
monetary authorities.
    "They (creditors) asked for the maximum amount and we
offered the minimum," said one banking source, reacting to
reports from London that creditors were hoping for larger
repayments.
    Reserve Bank governor Gerhard de Kock said South Africa
should have "no difficulty whatsoever" with the terms.
    Economists said the debt agreement would have no
significant impact on economic problems continuing to face
South Africa including high rates of inflation and
unemployment, labour unrest and political uncertainty.
    Johannesburg Stock Exchange president Tony Norton, speaking
yesterday before the debt agreement, said the economy was "in
bad shape" and there was "an awful lot of talk but little action"
to cure serious problems.
 REUTER
