Page 65 - SARB: 100-Year Journey

On 22 February 1932, the Select Committee on the Gold Standard was appointed. The Select Committee concluded its work in May 1932, when a report of its work was released. Two commercial banks gave evidence to the Committee to the effect that an estimated amount of between £13 million and £14 million had left the Union between September 1931 and February 1932. Initial speculation had set the projections between £20 million and £30 million. The Committee’s own estimate, based on the “examination of bank deposits and exchange transactions”, was between £9 million and £10 million. (De Kock, 1954, p 147).
The Select Committee recommended South Africa remain on the gold standard. The Union government adhered to this advice for much of the year until the Roos announcement of 21 December 1932. It set in motion the course of events that took place on the three days to Christmas of that year, starting on 23 December 1932.
On 23 December 1932, Postmus wrote to the Minister of Finance: “I am extremely sorry that I have to report to you that the latest developments in the political world have caused such an increase in demand for exchange that the banks, who together with the Secretary of Finance met this morning in my office, have decided for their own protection to revert back to the restrictive policy of a year ago, and are very anxious to place their position before you.”
Days later, on 27 December 1932, Postmus, Barclays Bank, the Netherlands Bank of South Africa and Standard Bank addressed a letter to the Minister of Finance, in which they appealed “respectfully” that “your prerogative be ... exercised to cause Section 18 of the Currency and Banking Act to be suspended to relieve the Reserve Bank of its obligation of paying its notes in legal coin and making the note legal tender of payment by the Reserve Bank”.
The plea was made “to avoid a crisis of the first magnitude”.
On 28 December 1932, “... [the] Government issued a proclamation under the Finance Emergency Regulations Act of 1931, relieving the Bank of its obligation to pay its notes in gold coin on demand and making such notes legal tender for any payment by the Bank as from that day,” writes De Kock (1954, p 163).
On 29 December 1932, the Minister of Finance clarified that the Union had fully cut the link with the gold standard, and the banks would be left free to determine the level of the South African pound in accordance with their exchange resources (De Kock, 1954, p 163).
General Smuts was not impressed. In an interview granted to the Rand Daily Mail which was published on 30 December 1932, the General “expressed his amazement that the Government, in abandoning the gold standard, should have continued its ‘bewildering blundering’ by omitting to follow sterling”.
General Smuts called for the government’s resignation.
On 31 December 1932, Prime Minister J B M Hertzog issued a rebuttal: “The enemies of our people and our country are for the moment triumphant. Organised finance, assisted by Afrikaner treason, has forced South Africa off the gold standard,” reads an excerpt published in the Rand Daily Mail (31 December 1932).
J B M Hertzog. /Getty Images
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