Page 62 - SARB: 100-Year Journey

Clegg was a proponent of the gold standard to the last. During his farewell address to stockholders on 7 July 1931, Clegg admitted: “The storing-up, and the sterilisation for international purposes, of gold in the United States and France has caused and is causing much harm.”
“So much for the accumulation of gold in America and its part in provoking a world depression. The accumulation of gold in France has been an accessory to this provocation,” Clegg added.
Clegg also made observations about “world conditions and ... the intensity of the depression and the length of time it has lasted”.
In the same address, Clegg struck a somewhat optimistic note, stating: “The recent action of President [Herbert] Hoover may be the beginning of the end of this economic nightmare.” (South African Reserve Bank, Reports of Ordinary General Meetings, 1930–1936).
In the months that followed, however, the situation took a turn for the worse. This prompted Clegg to seek assistance from the Minister of Finance because the Bank anticipated substantial losses, which would wipe out the value of the institution’s reserves and place a dent on its capital, as a result of Great Britain going off the gold standard.
On 29 October 1931, the Minister of Finance provided assurance to the SARB.
Postmus took over as Governor in January 1932, and supported the Hertzog administration’s stance on the gold standard. Indeed, on 13 January 1932, the Bank issued a press statement affirming its position on the matter. Later, Postmus would submit a memorandum to the Select Committee on the Gold Standard, in which the Bank lent its support to the official position.
“The gold standard is admittedly not a perfect monetary standard, but it is the best yet devised by man,” reads a section of the memorandum.
However, the South African Party’s General Jan Smuts and other segments of the Union society, including some economists, opposed the maintenance of the gold standard. The political divisions were drawn, and would later prove pivotal as 1932 progressed.
“The country is rapidly bleeding to death from the gold standard, but the Government means to do nothing. ... That is why the South African Party washes its hands of the Select Committee – it is a mere cloak for the nakedness of the Government, and an excuse for inaction and drifting. ... The gold standard means the lowest standard that the wage earner has known in a generation,” charged General Smuts during a heated debate on the subject held on 23 February 1932 in the House of Assembly (Rand Daily Mail, 23 February 1932).
The gold standard debate seized all corners of the Union, none more so than the farming community, whose “desperate plight” took centre stage (Rand Daily Mail, 23 February 1932). The source of this plight could be traced back to the “... serious disequilibrium between export prices (excluding gold), on the one hand, and import prices and the prices of South African goods and services, on the other,” notes De Kock (1954, p 146).
The Hertzog administration’s supposed obduracy on the gold standard may be explained by the fact that: “Economic conditions in South Africa were, nevertheless, relatively favourable compared with those in many other countries. This was due to the peculiar role played by gold mining in the economic structure of the Union,” according to De Kock (1954, p 146).
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Nicolaas Havenga (left), Minister of Finance of the Union of South Africa, 1929–1934, with Johannes Strydom in front. /Getty Images