Page 60 - SARB: 100-Year Journey

The end of the gold standard and the Great Depression era
During the three days leading up to Christmas of 1932, an extraordinary set of events precipitated the Union of South Africa’s sudden, and shocking, departure from the gold standard in all its forms – both in terms of specie and the gold exchange. Starting on 23 December 1932, a run on the banks amounting to between 2.5 mllion and 3 million Union of South Africa pounds forced the hand of the SARB and those of three commercial banks to seek relief from the Minister of Finance, Nicolaas Havenga.
Politics and power had converged to create a monetary policy dilemma and crisis which threatened to collapse the Union of South Africa’s financial system.
Upon reflection about what had unfolded in the final days of 1932, Deputy Governor Michiel Hendrik de Kock, standing in for Governor Johannes Postmus who had accompanied a Union government delegation to the World Economic Conference, informed stockholders on 28 June 1933 that it was a “political bombshell” which had led to the swift shift on, and abandonment of, the gold standard on 28 December 1932 (South African Reserve Bank, Reports of Ordinary General Meetings, 1930–1936).
In the 15 or so months leading up to the 28 December 1932 proclamation to drop the gold standard, the Union government, in the person of the Minister of Finance, and in concurrence with the SARB, had gone to great lengths, including supporting a parliamentary process, to keep South Africa on the gold standard.
But a singular political incident put paid to the official resistance effort overnight, and reversed the position of the Bank and the Minister of Finance. The historical record reflects that Tielman Roos’s re-entry into politics on 21 December 1932, with the aim of patching together a coalition of gold standard dissenters, is what swung the momentum. Two days after Roos’s announcement, panic ensued, and history was made.
The Union of South Africa’s exit from the gold standard is a three-part saga, whose final act was written on 28 December 1932. It dates back to the Great War years and the early 1920s, when the authorities implemented temporary measures, including the suspension of the gold standard. This was done in response to the unique set of challenges and circumstances that had arisen during the war years and those immediately thereafter.
The topic was revisited during the Currency Conference of 1921. But it was the Kemmerer-Vissering Commission, which investigated, among other things, the feasibility of South Africa returning to the gold standard independent of Britain that swayed the Union government to reinstate the gold standard. In its 8 January 1925 report, the Commission recommended South Africa return to the gold standard “on a date not later than 1st July 1925.” (South African Reserve Bank, 1971, p 27).
Tielman Roos. /Alamy
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