major significance. It financed its entire stock through overdrafts
with the National Bank of Commerce (N.B.C.). From 1968 to
1971 that overdraft grew by 800 per cent although the Cor-
poration’s turnover only increased by 1]2 per cent.

Until the introduction of the first Financial Plan in fiscal
1971/72, S.T.C. simply went to N.B.C. for extensions of its over-
draft facilities whenever it used up its funds. Owing to the
seemingly critical importance of S.T.C. in the economy and public
eye, N.B.C. continually granted extensions, although with a great
deal of scepticism as to the financial soundness of the loans. A fter
the financial Plan was issued, however, N.B.C. informed S.T.C.
that it was now Government policy that the Corporation reduce
its overdraft within six months, i.e. by the end of calendar year
1971, by nearly Shs. 60/ = million. Bending to the pressure,
S.T.C. management introduced constrants on ordering. However,
because of the overstocked position of many items, primarily
slow-moving products, the curtailments were made in fast-moving
and often high-profit goods. This had the consequence of reducing
the cash receipts of the Corporation and decreasing its ability to
pay outstanding creditors, let alone reduce its overdraft with
N.B.C. Thus, ultimately it was necessary to increase S.T.C.’s over-
draft, and other sectors of the economy, primarily large borrowing
parastatals and private firms, were forced to take a much lower
volume of loanable funds than was required to meet their produc-
tion plans. Finally, there is some substantial indication that the
foreign exchange losses, experienced by the country from June
1970 through the end of June 1972 were partly attributable to the
lack of stock and financial control in S.T.C.

S.T.C.’s impact on the amount of credit available and its struc-
ture (i.e. to whom it was made available) is not known but all in-
dications are that the effects were widespread. At one point, for
example, owing to the credit squeeze in the economy, it was
decided (again without consultation with policy bodies) that all
S.T.C. customers would have to pay cash, rather than receiving
the customary 30-90 day commercial credit. The exact con-
sequence of this decision are unknown but it is certain that it shor-
tened the credit cycle and thereby increased the demand for
loanable funds (at a time of scarcity) and for cash balances. Some
small African business, that depended upon credit to hold any
stocks, were forced out of business, and cassual observation

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