Sanctioning Apartheid - KORA

Snncfions and Financing South Africa's Foreign Trade 213
must be borne by some one, and the cost of the goods during
Wer processing and/or distribution may also be included in
this trade hce. Finally, when a large installation or plant is being built, long
term financing is needed until the plant begins to earn revenue
This may include finandng to the supplier of gods since there
are large produdion costs which may not be covered by current
revenue. Major capital projects typically require finance extending
for 5 to 10 years.
When South Afcica had a good credit rating in the first half
of the 1980s, trade h c e for capital projects could often be
raised through general pqose borrowing on the capital markets
of Landon, Fhddwt, and Zurich. That is, bonds were issued and
large loans horn syndicates were available.
Now capital purchases must be finmced by trade credits
tied to the specific items being purchased. For exampIe, in 1987,
the offidal German export promotion bank Kredi-t fuer
Wideraufbart provided a credit of DM33 million ($18 million)
for a telephone system for the South African Post and Telecommunicatiofls
Adminkbation.'
In the discussion below, the rather broad time ranges for the
tams of bade finance reflect the variations in trade hancing
mgements. Some trade credits only cover the period of
transport Others include financing for manlrfachuing before
shipment and some include finance for manufacturing and/or
&&iblltion after shipment. The latter processes may be
rehaneed locally instead of being part of the trade finance. If
the export promotion banks in the OECD countries sbp guaranteeing
trade credits for exports to South Africa, banks and
suppliers will be less wihg to give generous terms, and lod
finandng will become essential. The choice of the type of trade
fbmce depends on various factors including differences between
domestic and international interest rates.
The length of tern of bade credits varies according to the
type of merchandise being sold. Standard items are:
A. Consumabk, d manufactured items, spare parts,
raw materials, farm products: 30 to 180 days
B. Industrial and agricultural equipment, general aviation
aircraft: 180 days to five years