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Indeed, “... the final and effective end of the sterling area came in 1972 when both the flow of British capital to South Africa was officially restricted and South Africa’s currency was pegged to the United States dollar.” (Henshaw, 1996, p 221).
Moreover, “... [following] the collapse of the Bretton Woods system of fixed but adjustable exchange rates, it became more important to opt for a domestic financial and economic order incorporating greater financial stability,” states Gidlow (1995, p 5).
The full effect of these two events materialised in the substantial weakening of the local currency. The South African press, in particular the Financial Mail (1975), was scathing in its assessment of the political and economic environment, more so on the heads of department and on institutions, including the SARB.
In an article titled ‘Where the blame lies’, the Financial Mail (1975) pointed the finger at nine men, including SARB Governor De Jongh.
“Nine men are primarily responsible for the disastrous weakening of the currency. In five short years they have succeeded in reducing its purchasing power to 41c and its value against the dollar by 21% despite a fourfold increase in the gold price.”
“They will put up all sorts of defences and will make up all sorts of excuses. They will try to blame the oil sheiks, the speculators, the IMF, William Simon, overseas inflation and local businessmen.” From 1972, De Jongh’s grave error was going ahead “... merrily providing money and credit to finance a level of overall domestic expenditure which he ought to have known we simply could not afford once the balance of payments went into deficit.”
According to the article: “In both 1973−74 and 1974−75 he [De Jongh] allowed the quantity of money and near-money to expand ... 19%, which meant that by this year [1975] costs and prices were rising faster than those of most of our trading partners. This eroded the value added to national income by gold mining and other export industries and blunted the competitive edge of many of our import-competing industries.”
Furthermore, the article observed: “[Owen] Horwood and De Jongh should ... be indicted for completely misinterpreting the effect of the recent gold decisions of the IMF and the US Treasury. They fell into the trap of believing their own propaganda.”
The article listed P W Botha, the then Minister of Defence; M C Botha, the Minister of Bantu Education; and Marais Viljoen, the Minister of Labour among the nine men who were to blame for the parlous state of the economy and the country.
The Minister of Defence’s contribution was saddling “... the country with an arms bill it could afford only by making immense sacrifices. Those sacrifices will not have to be made – not after open debate in Parliament of the higher taxes and cuts in living standards involved (which would be the politically honest way to have done it) but through inflation and devaluation which come like thieves in the night.”
Sign on a car in Cape Town during protests that followed the Soweto uprising against the apartheid system, 1976. /Getty Images