Page 33 - SARB: 100-Year Journey

Smuts was a global statesman even prior to becoming Prime Minister of the Union. Together with General Botha, Smuts had been part of the British war cabinet during World War I. After the war, Smuts met and befriended British economist John Maynard Keynes at the peace negotiations in Versailles, France (Bordiss and Padayachee, 2011) (Parsons, 1983).
It is worth noting that at the 1919 Gold Conference, “... [the] Conference ... passed a resolution to the effect that it had been impressed with the necessity for one uniform Bank Act for the whole Union and would impress upon the Government the urgency of the introduction of such a measure in the next Session of Parliament, which should provide, inter alia, stringent provisions against the inflation of currency,” writes De Kock (1954, p 13).
At the beginning of 1920, Smuts approached his friend to visit the Union to assist with the formulation of currency policy. But, owing to other commitments, Keynes recommended Henry Strakosch, “a London expert on foreign exchange” (De Kock, 1954, p 14). Strakosch was instrumental in the Select Committee process deliberating on the three Bills which would culminate in a single piece of banking legislation for the Union: the Currency and Banking Act 31 of 1920.
During the first nine days of the Select Committee hearings, Strakosch was the main witness to appear and give testimony. “Mr. Strakosch ... played a very important part not only in the original drafting of the Currency and Banking Bills, which were submitted to the Committee, but also
before the Committee itself as the main witness who was, moreover, privileged to listen and reply to the evidence of others,” writes De Kock (1954, p 16).
The Select Committee was chaired by the Minister of Finance Henry Burton (De Kock, 1954, p 16). The Committee began hearings on 20 April 1920, had 21 witnesses appear before it, and concluded its work on 22 June 1920, recommending to the Union government that a central bank be founded (De Kock, 1954, pp 16−19).
During the Select Committee hearings, “... [the] only witnesses who expressed themselves strongly in favour of the early establishment of a central bank in South Africa were Mr. Strakosch, the Secretary and the Under-Secretary for Finance, Mr. Postmus, Mr (later Sir) Ernest Chappell, and the President of the South African Agricultural Union,” observes De Kock (1954, p 18).
On 10 August 1920, the Senate passed the Currency and Banking Act 31 of 1920, paving the way for a central bank.
Smuts sought Keynes’s counsel about the appointment of the central bank’s first Governor. William Henry Clegg, the Chief Accountant at the Bank of England, was recommended as the fitting candidate for the task. Clegg was born in Bloemfontein in 1867, the Union’s judicial capital after its founding. At the age of two, Clegg left South Africa with his parents for England, where he was raised and began his career in banking. On 8 January 1921, Clegg came back to South Africa to serve as the central bank’s first Governor.
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