South Africa - Fifth Transportation Project

R E STR I CTE D Report No. P- 180 This report was prepared for use within the Bank. In making it available to others, the Bank assumes no responsibility to them for the accuracy or completeness of the information contained herein. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATIONS OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE UNION OF SOUTH AFRICA November 24, 1958   REPORT AND RECO2ENDATIONS OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE UNION OF SOUTH AFRICA 1. Further to my preliminary report (R58-111), I submit the following supplemental report and recommendations on a proposed loan in various curren- cies equivalent to $25 million to the Union of South Africa. PART I - THE PUBLIC ISSUE 2. Following the meeting of the Executive Directors on November 13, 1958, I assured Dillon, Read and Co., Inc. that in the absence of some major adverse development there was no reason to believe that the proposed loan would not be approved by the Executive Directors in time for the proposed public issue. Except for the determination of price and interest, arrangements have been practically concluded to make the public offering on December 3. The pattern of maturities has been changed somewhat so as to increase the amount of Three-, Four-, and Five-Year Bonds and reduce the amount of Ten-Year Sinking Fund Bonds. The distribution of the respective maturities will be as follows: $5 million Three-Year Bonds, due December 1, 1961 $5 million Four-Year Bonds, due December 1, 1962 $5 million Five-Year Bonds, due December 1, 1963 $10 million Ten-Year Sinking Fund Bonds, due December 1, 1968 In all other important aspects the issue remains as described in my previous report. PART II - THE BANK LOAN Terms 3. Interest (including commission) would be 5-3/4%. The other terms would be unchanged. Legal Instruments and Authority 4. A draft Loan Agreement between the Union of South Africa and the Bank, incorporating Loan Regulations No. 3, dated June 15, 1956, is attached (No. 1). The draft Loan Agreement follows the normal pattern and is similar to previous transport loan agreements with the Union. It would not become effective until the Borrower had delivered and received payment for the bonds issued under the public bond issue (Section 7.01). 5. The report of the committee provided for in Article III, Section h (iii) of the Articles of Agreement of the Bank is attached (No. 2).  -2- The Economy 6. A report on the current economic position and prospects of the Union of South Africa is attached (No. 3). The Project 7. A technical report on the railway project is attached (No. 4). Compliance with Articles of Agreement 8. I am satisfied that the proposed loan will comply with the require- ments of the Articles of Agreement of the Bank. PART III - RECOiENDATIONS 9. I recommend that the Bank at this time make a loan to the Union of South Africa in an amount in various currencies equivalent to $25 million for a total term of ten years, with interest (including commission) at 5-3/4%, and on such other terms as are specified in the attached draft Loan Agreement, and that the Executive Directors adopt a Resolution to that effect in the form attached (No. 5). Eugene R. Black Washington, D.C. November 24, 1958