South Africa Reserve Bank’s 100th anniversary

What a time to be a student of money and banking. Along with discussions on future of money, there are so many anniversaries taking us back to history.

On 30 June 1921, South Africa Reserve Bank was established. The year 2021 marks its 100th anniversary.  SARB was the first major central bank outside of Europe and US.

Today, 30 June 2021, the South African Reserve Bank (SARB) marks a significant milestone as it celebrates its centenary birthday. This makes South Africa’s central bank the oldest central bank in Africa. To mark its centenary, the SARB will issue a commemorative circulation R5 coin.

Over the past 100 years, the SARB has navigated through the tail end of the Spanish flu as well as the Great Depression, the Second World War, the abandonment of the gold standard, the introduction of the rand, the oil crisis, the end of the Cold War, the end of apartheid, and several financial and economic crises.

The SARB was established in 1921 as the central bank of South Africa in terms of a special Act of Parliament. The SARB was mainly set up because of the need to issue uniform banknotes and to prevent the over-issuance of banknotes. Before the SARB was established, banknotes from several different commercial banks were in circulation in South Africa. With the formation of the SARB, it obtained the sole right to issue banknotes in South Africa.

When the SARB was established, the government gave banks shares in the SARB to compensate them for taking away their right to print money. Furthermore, government did not have the money to capitalise the central bank and so it relied on private finance for its initial capital. The financial and policy influence of shareholders on the SARB diminished gradually over the years. Today, shareholders play no role in policy-setting or regulation; the Governor, deputy governors and the majority of the members of the Board of Directors (Board) of the SARB are appointed by government and dividends are capped at just R200 000 a year in total. While there are still foreigners who hold shares, their voting rights are severely limited.

On the occasion, Lesetja Kganyago, Governor of the South African Reserve Bank gave a speech discussing the history, present and future of the central bank.

On this day, 100 years ago, at Church Street east, the first Governor of the South African Reserve Bank (SARB), Mr William Henry Clegg, and 14 other men opened the doors of the SARB to the public. The world had just emerged from World War I, leading to unusual financial and monetary conditions. In establishing the SARB, the primary objective was simple: to restore and maintain order in the issue and circulation of domestic currency, and restore the gold standard to the pre-World War I rate of exchange. From the archives, the first Board meeting minutes, dated 29 July 1921 at 10:00, disclose that the first order of business entailed “the purchase of property in Pretoria for £7 000 and the first orders of banknotes”. The former was finalised in the late 1920s, while the first batch of banknotes ordered from England was issued to the public on 19 April 1922.

Hope SARB releases more material like a monograph on its history.

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