Announcement of a Twenty-Five Million Dollar Issue of Union of South Africa Bonds on U.S. Market Simultaneously with Nine Million Pound Sterling Loan on November 28, 1955

~\lNTERNATIONAL BANK FOR 4fECONSTRUCTION AND DEVELOPMENT (WORLD BANK> , 1818 H STREET, N.W., WASHINGTON 2!5, D.C. TIIJttHON&: EXl:CUTIV& S-8380 J'olloving ADnoullcement Being Made ill lie¥ York POR IIPORMATIOR OF PRESS CIILY Press Release Bo. 429 FOR RELEASE SUBJECT: $25 million issue um.on ot 5:00 P.M. E.S.T. South Africa Bonds on U.S. (10:00 P.M. G.M.T. Midnight Pretoria) market simultaneously ,nth Monday, November 28, 1955 :E-9 million World Bank 4pan. Dillon, Read & co., Inc. as representatives for an investment b'anking group, and the World Bank have today {November 28) entered into agreements with the Union of South Atriea whereby tt.e Um.on is borroving a total equivalent to $50.2 million. The trans- action consists ot $25 million External Loan Bonds of December 1, 1955, to be' offered to the public b7 ,the 1Dve1tanent benJd ng group, and a W.orld Bank loan of nine million pounds sterling ( equivalent to $25 .2 million) • The bond issue will be the f'irst public offering ot. the UD.ion ot South ~ica in tbe Ull1ted States. The proceeds of the bond issuie and the World.~ loan will help finance the cost ot the current expanaion prograa being carried out by the South African Railways and • 1 Harbours AcJm1D1atn.tion. Improved and expanded transport, particularly rail transport, ia esaential to meet the demenda ot the Union's growing econom;y. Subject to final clearance by the Securities and Exchange Comm:1.ssion, the bond~ will be offered to the public on· Wedne1dq, November 30, and will consist of': ·· $3 million ot Three-Year 3-7/&/, Bonds due Dec. 1, 1958, priced at 1001, $3 million ot Four-Year~ Bonda due Dec. 1, 1959, priced. at 1~ $2 million of Five-Year 4-1/&/, Bonds due Dec~ 1 1 196<>, priced at 1001, $17 million ot Ten-Year 4-1/41, Banda due Dec. 1, 1965, priced at 98-1/'2/, The Bonda will not be redeemable, except 1n connection with the s1nk1ng turid tor the Ten-Year Bonds. The Um.on ot South Africa will make semi-annual s1nJdng fund pq- ments (or will surrender bonds at their principal amouDt) su:tticient to redeem on each June 1 and December 1, ccamencing June 1., 1958, $1,o62,ooo principal amount ot the. Ten- Year Bonds. Cash received tor the s1nk1ng tund ie to be applied to the redemption, by lot, of such Bonds at l ~ plus accrued interest. At the option ot the holder any payment ot interest or principal. on the Bonds may, if unrestricted SW1ss :rrancs are available, be collected in SV1tzerlan4 in Swiss francs at the fixed rate ot 4.30 Swis a francs per $1. 1 . Bank Loan The J:.9 million World Bank loan to the Union of South Atrica being made cODCurrent- ly with the bond issue, is tor a term of 10 years and bears interest ot 4-1/'c!',,, including the 1% statutory ccmnission charged by the Bank. Amortization will begin on July 1 1 1958. • The United Kingdom bas released the pounds sterling tor this loan tran its capital sub- scription to the Bank. (Over)  - 2 - Signatories of Agreements The Purchase Agreement between the underwriting group and the Union of South Africa was signed 1n N:~.w York City on November 28, 1955 by the K1ngman Douglass., Vice • President of Dillon, R~ad & Co. Inc., on behalf of the underwriters., and Dr. J.E. HGlloway, South African Ambassador in the United States, on behalt ot the union Govern- ment. Eugene R. Black., ~~ir-esident, signed the Loan Agreement on behalf of the World Ballk and Dr. Holloway signed bn behalf of the Union ot· South Africa. . 0 0 Supplementary Statement by the World Bank regarding the 1;9 million loan · ·Railway Expans~1on Program The South African Railways and Harbours Administration, a government department, has been carrying out a large program of expansion since 194-7 to enable it to meet a continuing pressure of the railway system. The South African economy has been growing steadily since the end of the war and most of the growth has been in Uldustries. which involve large a.mounts of railroad freight. The iron and steel industry., building con- struction, base metals extraction, the develo:pment · of new gold fields, and increased out- put of wool and agricultural products have raised freight traffic on the railways by sane 551a since 1945, to a present annual volume of 63 million tons of revenue-earning freight. The World Bank has already made two loans, one of $20 million in 1951 and another of $30 million in 1953, to assist in financing earl~¢r phases of the program. Two-thirds of the tot.al amount, or !ti33 million, war; used to pay for imported locanotivee, freight cars, passenbrer coaches and spare parts; the remainder was used for port and road trans- port services. All the equipment financed under these loans is 1n service and has helped the ~~~lroads to. move an increasine volume, of traffic with improved etf'iciency. Faciliti~ are still lacking, however, to enable the :railroads to move all potential traffic. In • particular, e:rports of coal and ores would be materially larger if' the railroads could clear the increased production. I\ \.~ To increase the carrying capacity of the railways, the Administration is now xoak1ng extensive improvements of the permanent way. Sections of the main line f'ran Johamlesburg to Cape Town are.being doubled-tracked; signaling and train control facilities are being further modernized; the Rand, Cape and Natal networks are being further electrified; more lines are being built to by-pass congested industrial areas; grades and curves are being improved; and the main marshaline; yards are being enlarged and modernized. ·::1t"1-ao., ad- ditional locomotives, freight cars and passenger coaches are being purchased.· Financ;pg 'th~ Progr8.:-1 0 The South.African Railways and Harbours Administration controls and operates all rail transport., lll!l.jor harbors., local cartage to and fran railway depots, national air transport, and a large part of the country's road transport. The Administration, a government department, bas its own management and is operated on business principles. It receives the bulk of its capital from the Government in the f'orm of perpetual interest- bearing loans, but it finances its ~.newals and sane ot its new investment from its own revenues • It is estir.aated that the Administration I s groee capital expenditure on the progrrun over the three years tran April_l955 to March 1958'¥111.be close to iJ.90 million (equivalent to about $530 million); of this approximately f.J6 million (a.bout $100 million) will be spent overseas. The bond issue and the Bank loan vill be applied to this three- · ogram. . The Union Government and the Administi-ation will provide the remailli.Dg year pt,1 • J~funds !required. () y Total Bank Loans in South Africa The World Bank has now made <five loans totaling the equivalent of $.135 miliion in the Union of South Afi-ica. In addition to the two previous loans totaling $50 million for railway expansion., it made two 1()8DS of $30 million each for the development of electric power.