Our country’s monetary affairs
WHY ARE YOU, Finweek and our monetrary authorities, concerned about interest rates? Why are you trying to keep interest rates artificially low? Do you know – do you remember – there was a time when you kept inter- est rates artificially high? Have you forgotten the disgrace and the great embarrassment you brought on South Africa with those artificially high interest rates?
That was in 1985. It was announced on the radio and on TV on a Sunday evening and immediately after that the banks received instructions from the SA Reserve Bank: the debt standstill. Nobody was allowed to repay foreign debt, except for new transactions. SA’s good name suffered. The disgrace was caused by artificially high interest rates while the monetary authorities ordered the banks to encourage their clients to borrow overseas at lower interest rates.
That was done for the sake of the balance of payments. It was a short-term benefit but wasn’t sustainable. And it wasn’t sensible. You must have realised SA’s high inflation was weakening the exchange rate and that those loans would have to be repaid one day. You can’t say you didn’t understand that. Nor did you do anything for the people who, complying with your instructions, had to pay their debt back double. You brought disgrace and chaos to us with artificially high interest rates. It’s better for interest rates to be determined by the market and the banks. A measure of control over banks is important and fair, because the State has a duty to all its citizens.
Please realise that the sale of export products is good business; but if you live on the selling of inherited goods it’s not. A young farmer who inherited his father’s farm is now selling off portions of it. A large part of Standard Bank already belongs to foreigners. The Waterfront in Cape Town has been sold to foreigners. Absa was the loss of a crown jewel. Despite warnings, it was done.
Do those who govern us – that is, the monetary authorities and the press – think with foreign brains? A large portion of the JSE already belongs to foreigners. And then Government and the press celebrate the inflow of foreign money as a result of the sale of things that shouldn’t be sold.
And another danger: foreign financing must be regarded as flight capital. It can be withdrawn – with catastrophic results for the BOP. The disgrace could be worse than the debt standstill that started in 1985. SA’s cheques were returned unpaid – and it could happen again.
Gouritsmond * Letter shortened