The South African Reserve Bank celebrated its centenary on the 30th of June, 2021. With this momentous milestone in mind, let’s reflect on 100 years of SARB, as well as the history of South African money.
History of SARB
The South African Reserve Bank (SARB) is the central bank of SA, established in 1921 by the Currency and Bank Act of 1920 to counter abnormal fiscal conditions post World War I.
- SARB is the oldest central bank in Africa, and it opened for business on 30 June 1921, issuing its first notes to the public on 19 April 1922.
- At the time, banknotes issued to the public by commercial banks needed to be backed by gold, but when the price of gold in the UK climbed, a profit could be turned by converting banknotes into gold in SA and then selling it in London.
- This meant that commercial banks in SA had to buy gold in London for re-import at a higher price than the price at which they converted their banknotes into gold, which resulted in a trading loss.
- In an attempt to regain financial viability, the banks requested the government to release them from the obligation to convert their banknotes into gold on demand.
The SARB was established with two main fiscal objectives: to restore and maintain order in the issue and circulation of currency domestically and to restore the gold standard to the pre-WW1 exchange rate.
The SARB is the fourth central bank in the world established beyond the UK and Europe, the others being founded in the USA, Japan, and Java.
In 1932, South Africa abandoned the gold standard, linking currency value to the pound sterling, instead.
- In 1944, the South African Reserve Bank Act replaced the Currency and Banking Act of 1920. The SARB’s initial 25-year period of issuing banknotes was extended indefinitely.
- SA continued to use the British coin system until 1961 when SA gained independence and became a Republic
The Rand was introduced on 14 February 1961, three months before SA left the Commonwealth to become a Republic.
- SA has a long history of currency usage, formalised with the introduction of coin in 1652. Since then we’ve used different currencies and coins which were made from copper, silver and gold.
- In 1961 when the Republic was proclaimed, we formally adopted a decimal system with coins being converted to their decimal equivalent, which resulted in the one pound becoming a two-rand coin, the one shilling a ten cent coin and the three pence a two-and-a-half cent coin. This system remained in place until 1964.
- The second decimal coin series ran from 1965 to 1988, after which the third decimal coin series came into play. Today, South Africa has six coin denominations in circulation, namely, the 10c, 20c, 50c, R1, R2 and the R5.
Unlike the Bank of England on which the SARB was modeled, South Africa’s central bank is privately owned.
- SARB shares are traded on an over-the-counter share transfer facility (OTCSTF) market coordinated within the Bank.
- In February 2020, SARB had around two million shares outstanding with 783 shareholders, each of whom can hold a maximum of 10,000 shares.
The majority of SARB shareholders are South Africans; with just over 8% of shares being foreign-held.
- By analysing the Shareholders Index Report published monthly, the M&G Data Desk found that the highest number of shares belong to Capetonians at 114 320, followed by Germans who own 91 850 shares and then people who reside in Pretoria who own 52 186.
- Of the 783 shareholders, 58 (8.2%) are foreigners, residing in countries such as Germany, Norway, Australia and the United Kingdom. Both Germany and the United Kingdom include the largest number of foreign shareholders with 16 residing in each. Shareholders listed in Germany own 4.6% of shares while those in England own 0.7%.
The South African Bank has had ten Governors in its time.
- SARB is overseen by a board of directors made up of a Governor, three Deputy Governors, and eleven Directors.
- The Governor, and Deputy governors are appointed by the President, in consultation with the Minister of Finance for five-year terms, while four of the eleven directors are also appointed by the President for terms of three years.
- The remaining seven directors are appointed by the Shareholders of the Bank, also for three-year terms.
- The most well known Governor is without a doubt Tito Mboweni, who is much beloved on Twitter for his culinary adventures.
The other nine Governors include:
- William Henry Clegg – December 1920 – December 1931
- Johannes Postmus – January 1932 – June 1945
- Michiel Hendrik de Kock – July 1945 – June 1962
- Gerhard Rissik – July 1962 – June 1967
- Theunis Willem de Jongh – July 1967 – December 1980
- Gerhard de Kock – January 1981 – August 1989
- Chris Stals – August 1989 – August 1999
- Tito Mboweni – August 1999 – November 2009
- Gill Marcus – November 2009 – November 2014
- Lesetja Kganyago – November 2014 – present
The Reserve Bank plays an important role in our economy, fulfilling the following functions:
- Crafting and implementing monetary policy
- Issuing banknotes and coin to the public
- Supervising South Africa’s banking system
- Ensuring the effective working of a national payment system (NPS)
- Managing our official gold and foreign exchange reserves
- Acting as banker to the government, without being owned by the government
- Administering the country’s remaining exchange controls
- Acting as lender of last resort in exceptional circumstances.
The mission statement adopted by the SARB 1990 stated that its aim was to protect the domestic and international value of the rand.
- This goal is now outlined in the Constitution of the Republic of South Africa, 1996. Between 2000 and 2004 the SARB’s mission statement described its primary goal as “the achievement and maintenance of financial stability”.
- In 2005, this was revised to “the achievement and maintenance of price stability”.
- To this end, in 2000 SA became the 13th country in the world to implement an inflation-targeting monetary policy framework.
- The SARB now targets an inflation band of between 3% and 6% for consumer inflation.
- The SARB played a critical role in seeing SA through the 2008 global financial crisis, cutting the repurchase rate by 650 basis points between November 2008 and 2010, which renewed the SARB’s focus on its financial stability objectives.
- In 2020, the COVID-19 pandemic caused untold global financial stress with SARB once again playing an instrumental crisis response role, cutting the repurchase rate by 225 basis points in the first quarter while introducing liquidity measures to ensure continuity of the financial system.
The SARB has had a number of homes, and its architecture spans a number of styles and eras, from neoclassical to a modern skyscraper.
In July 1931, the SARB moved into its new home on Church Street in Pretoria. The Old Reserve Bank Building is a shining example of Neo-Classical institutional architecture in Johannesburg, built in by prestigious South African Architect Gordon Leith along with sought-after English architect Sir Herbert Baker. Today this building is occupied by the National Treasury and the building’s facades and interiors survive in largely original condition.
Today, the business of the SARB is carried out in a skyscraper built in 1988. With 38 floors and a glass curtain facade system, this building is sheer modernist architecture and a height of 150m, making it the tallest building in Pretoria.
Did you know? FinGlobal is authorised to act as a Treasury Outsourcing Company by the South African Reserve Bank (SARB), which means we are authorised to facilitate foreign exchange transactions on behalf of clients via an Authorised Dealer (i.e., a local commercial bank). To discuss your cross-border financial requirements, please get in touch.