CIC Brief — July, 1973 THE FRANKFURT DOCUMENTS Secret Bank Loans to the South African Government The Corporate Information Center tions of secret loans suggest the opposite. By selling participation in the vari- recently obtained confidential internal ous credit arrangements to American and documents known as the "Frankfurt Doc- With the documents' revelations, multinational banks, EABC tapped the uments " originating from sources within church agencies and other organizations U .S. money market, largely through the a U.S.-based multinational banking firm, concerned about South African issues offshore subsidiaries of these banks . It the European American Banking Corpora- have begun organizing protest of the then re-lent the money to the South Afri- tion. These materials reveal that a group loans. The following discussion provides can government . Three of the six credit of forty banks from the United States, an initial basis for action (see Item II) on transactions, each $50 million and made Europe, and Canada have been jointly in- the developing new bank campaign. from the bank's Nassau branch, were ar- volved in direct loans totaling over $210 ranged with the Ministry of Finance in million to The South African government Pretoria . The three other loans were made and its agencies since late 1970. with METKOR, ISCOR, and ESCOM, all EABC 's Role South African government agencies. Participants for two of the six Sources within EABC have indicated that loans, representing $70 million of the to- a further credit of approximately $50 tal, include 11 American banks. It is like- According to the secret documents, million has been negotiated with the Fi- ly that other American banks are involved the European-American Banking Corpora- nance Ministry within the last few in the additional loans. Representatives of tion (EABC) of New York was the chief months. It appears that $150 million has the European American Banking Corpora- organizer of substantial credits, making yet to be repaid to the bank. tion confirmed the veracity of the docu- six major transactions with the South The Ministry of Finance loan was ments in a meeting in New York with African government . These loans are far organized on favorable terms in Septem- Judge William Booth, president of the larger than any previously given to the ber 1970 with the stipulation that it be American Committee on Africa, Rev. South African government. repaid in two years . This transaction oc- Donald Morton, South African consultant curred shortly after the end of the Bank to the Council for Christian Social Ac- EABC is jointly owned by six of Campaign . At that time the South Afri- tion, United Church of Christ, and Profes- the largest banks in Europe — the can government publicly denied the ne- Deutsche Bank, West Germany sor Sean Gervasi, economic research of- ; the So- cessity for its receiving favorable credit. ciete Generale, France ficer at Oxford University. ; Midland Bank, Money drawn on the credit was held in U .K. ; Amsterdam-Rotterdam Bank N.V. the South African Reserve Bank, which of the Netherlands The fact that these transactions ; the Societe Generale suggests it was used for general balance- were carried out in complete secrecy has de Banque S .A. of Belgium ; and the Cred- of-payment purposes. extreme political significance. The banks itanstalt-Bankverein of Austria . EABC In June 1971 the bank approved involved obviously were seeking to avoid represents the link between these Euro- another $50-million credit, this time stip- public protest of subsidies to .the racially pean financial interests and the U .S. ulating repayment during the next three money market oppressive South African government. It also is one of the most years. EABC's management fee increased powerful banking groups in the world. 50 percent for this loan, from $100,000 From 1966 to 1969, American With combined deposits and loans to $150,000. For each of these two loans churches, community organizations, the of nearly $1 .1 billion, it is one of the top EABC contributed $5 million from its United Nations, and other groups con- 70 banking organizations in the U.S. Nassau branch . The names of the subpar- ducted a successful "Bank Campaign" EABC is also probably the most impor- ticipant banks in either loan are not yet against 10 American banks that were tant source of finance for the importers known. providing a $40 million revolving credit of diamonds in New York . The bank thus The most recent known credit to arrangement to the South African govern- has a unique connection with South the South African Finance Ministry was ment (see Item I). While the banks then Africa, where the bulk of the world's dia- approved in June 1972 . Again, it was or- denied that public pressure caused them monds are marketed through South ganized through a consortium of banks to cancel the credit, these latest revela- Africa's De Beers Corp . by the European-American Banking Cor- This section, the "CIC BRIEF," appears in each edition of the Corporate Examiner . Its purpose is to inform investors, organizations and individuals concerned about corporate social impact of given issue areas . Each "CIC BRIEF" highlights a particular social area – foreign investment, environ- ment, labor and minority policies, military contracting, or consumerism, and focuses on one or more corporations . It also includes reference to groups, individuals, and studies involved in each given issue. Copies of this separate insert may be obtained from the Corporate Information Center, Room 846, 475 Riverside Drive, N .Y., N. Y. 10027; Tel: (212) 870-2295. Price : 1-10 copies, $.60 each, 11-19 copies, $ .40 each, 20-50 copies, $ .35 each, 50 copies and above, $.15 each, 01973 Corporate Information Center, National Council of Churches. 3A poration . This loan is due to be repaid by European $(Mil) It presently supplies 75 percent of South July 1975 . EABC has contributed $3 .5 Africa's steel requirements . As Barclays million, the other banks $46 .5 million. Banque Europeanne de Credit Bank's economic survey states, "ISCOR Again, the funds are probably being used a Moyen Terme S .A., Brussels 3.0 plays a vital and increasingly important for general balance-of-payment purposes. role in the nation's economy ." The names of these bank partici- Midland and International pants in the most recent agreements were Banks Ltd ., London 3 .0 Foreign companies have also sup- this time revealed in the secret docu- plied ISCOR with equipment necessary ments . Included are four American banks Midland Bank Ltd., London 3 .0 for operations . For example, General that sought to have their participation Electric recently provided $25 .7 million remain "undisclosed" — Wells Fargo, Societe Generale de Banque of automation control equipment and Central National Bank of Chicago, S.A., Brussels 3 .0 motors as well as $3 million of com- Merchants National Bank and Trust Co. puters. of Indianapolis, and City National Bank Amsterdam-Rotterdam Bank of Detroit. An EABC official confirmed N.V. Amsterdam 2 .0 The ISCOR loan is to be repaid by that at least one of these banks admitted the end of 1976 . Though its use is un- it wished to remain anonymous because Compagnie Financiere de specified, this loan is probably for the im- of the political sensitivity of its loan. la Deutsche Bank A .G., portation of machinery and other equip- Luxembourg 2 .0 ment for industrial expansion. EABC con- tributed $ 3 million from its Nassau The banks and their dollar partici- Creditanstalt-Bankverein, branch. The other participating American pation are: Vienna 2 .0 bank, which sought to participate anony- mously, is the Wachovia Bank and Trust Societe Generale, Paris 2 .0 Co ., Winston-Salem, contributing $2 mil- U.S. $(Mil) lion. The other banks participating are: Canadian $(Mil) Wells Fargo Bank (N .A.), Luxembourg branch 2.0 Canadian Imperial Bank of Commerce, New York Agency 3.0 Standard Bank Limited, Central National Bank in London 4 .0 Chicago 1 .0 The Toronto Dominion Bank, Toronto 3.0 Bank of Montreal, Montreal 3.0 Merchants National Bank and Trust Co. of Indianapolis, Bank of Montreal, Montreal 2.0 Canadian Imperial Bank of Nassau branch 1 .0 Commerce 3.0 City National Bank of Detroit, Toronto Dominion Bank, Japanese London branch .5 Toronto 3.0 Japan International Bank Republic National Bank of Compagnie Financiere de la Limited, London 2 .0 Dallas, London branch 3.0 Deutsche Bank A.G., Luxembourg 1 .0 First Israel Bank and Trust Co. of New York, Nassau World Banking Corporation 1 .0 branch 2.0 ISCOR First National Bank of Louisville 2.0 In October 1970 EABC organized METKOR bank participation in a $20-million credit Maryland National Bank, for the South African Iron and Steel Cor- Nassau branch 2.0 poration (ISCOR), which is wholly In October 1970 EABC organized a owned by the government . ISCOR was two-year $8 .5-million credit for Metkor United Virginia Bank, created by act of the white parliament. Investments Limited, a 79 .8 percent Nassau branch 2.0 This strategic industry is white-dominated owned subsidiary of ISCOR . In late 1971, and firmly controlled by the government . Metkor requested and received an in- 3B crease to $10 million and an extension of $(Mil) repayment to 1975 . The loan's original ITEM I purpose was the expansion of Wire In- dustries Steel Products and Engineering A Brief History of the Bank Campaign Midland Bank Limited, 1966–69 Co., in which Metkor holds an interest. London 5 .0 Funds have also apparently been used for In 1966 ten American banks, general financing . Participating in the Samuel Montagu and Co. including Chase Manhattan and First loan's extension are four banks, including Ltd., London 5 .0 National City banks, were involved in a consortium loan of $40 million to the EABC, which contributed $2 .5 million South African government .