Banking and Currency Development in South Africa (1652-1927), with an Appendix on the Rise of Savings Banking in South Africa¶
E. H. D. Arndt (1928). Banking and Currency Development in South Africa (1652-1927), with an Appendix on the Rise of Savings Banking in South Africa. Juta & Co., Ltd., Cape Town and Johannesburg.
| Type | book |
| Scope | Wider apartheid literature |
| Method | archival narrative |
| Period studied | 1652–1927 |
| Regions | Cape Colony, Natal, Orange Free State, Transvaal / South African Republic, Union of South Africa |
| Themes | origins segregation, macro fiscal finance debt, business and state, methods data sources |
| Citation key | arndt1928 |
Argument¶
Arndt offers a source-book history of currency (Part I) and commercial banking (Part II) in South Africa from the Dutch East India Company to 1927. He argues that South Africa's monetary past shows the typical path from barter to credit economy, the dangers of government banking and inconvertible paper money, and above all the absence of any defined national banking policy, only drift and 'muddle through' legislation. This produced a unique, concentrated and delicate banking system. He opposes a State Bank, supports the Reserve Bank (though criticising the haste of its creation), and calls for consolidated banking law, bank inspection, and control of mergers. The evidence is a very large mass of archival documents (Cape, Free State, Transvaal and London), parliamentary papers and bank records.
Evidence and method¶
Archives at Cape Town, Bloemfontein, Pretoria and the Public Record Office, London (Colonial Office and Treasury correspondence, Volksraad resolutions, Staats Courant, Placaat Books); British Parliamentary Papers; Union select committee and commission reports (S.C. 2-'20, Kemmerer-Vissering, Low Grade Mines Commission); bank deeds of settlement and annual reports; the Official Year Book; contemporary press, periodicals and secondary works (Theal, de Mist, Chalmers, Roos, Willis).
Place in the debates¶
- State Bank versus private/central banking (see Finance, capital flight, the 1985 debt crisis and banking). Opposes a State Bank (citing the failed Lombard Bank, Free State and Transvaal paper-money experiments and the Vissering report) and favours a privately owned but regulated Reserve Bank; recommends that labour use People's Banks and labour-bank self-help instead.
- Cause of Cape rixdollar depreciation: over-issue versus adverse balance of payments (see Finance, capital flight, the 1985 debt crisis and banking). Endorses Grant's analysis that over-issue of paper money, not the exchange balance, caused the depreciation, and judges his reasoning 'sound'.
- Post-war inflation, gold embargo and the Strakosch / 'practical men' policy (see Finance, capital flight, the 1985 debt crisis and banking). Critical: sides with Dr. Samuel Evans that bank-led credit inflation after 1914 and the abandonment of the Pretoria Gold Conference policy delayed the return to gold; argues the Reserve Bank was adopted too hastily without study of other systems.
- Banking concentration and regulation (see Finance, capital flight, the 1985 debt crisis and banking). Argues South African banking has become a potential monopoly of two overseas-headquartered banks through unregulated mergers, and urges Canadian-style consolidated legislation, an Inspector-General of Banks and prior government approval of mergers.
Findings¶
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Arndt's central diagnosis is the absence of any banking policy, ascribed to legislative ignorance. (p. 12)
The only conclusion to which this study leads is the absence of any defined banking policy whatever, which can only be ascribed to the ignorance of legislature as to the vital significance of banking to the community.
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Grant's argument that over-issue, not the trade balance, drove depreciation is endorsed. (p. 43)
There can be no doubt that his reasoning is sound and his analyis a most valuable scientific contribution to this intricate problem, on which so little reliable information is available.
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Free State bluebacks recovered to par once issues were scrupulously destroyed and diamond revenue arrived. (p. 86)
The Bluebacks are now literally as good as gold, in fact for some purposes even better.
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The Transvaal mint concession was granted jointly with the National Bank concession after six years of wrangling, ignoring Pierson's advice. (p. 140)
Thus in August 1890, after six years of wrangling, a mint concession was finally granted in conjunction with the National Bank Concession. Pierson's counsel was ignored
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Bank-led credit expansion in the Great War roughly doubled the money supply while halving the reserve ratio, and gold cover collapsed. (p. 422)
Percentage of gold to notes and deposits 17.5 7.4 42
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The Reserve Bank's design was borrowed hastily from Java, the Netherlands and the Federal Reserve rather than studied. (p. 432)
Central reserve banking took South Africa by storm ; we did not evolve the system ; it swallowed us .
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By 1927 South African banking was concentrated in a few banks with London headquarters and a regulatory vacuum. (p. 479)
But the fact remains that South African banking is a potential monopoly in the hands of two institutions.
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Arndt rejects a State Bank and recommends People's Banks for wage earners. (p. 458)
The salvation of the wage earning class lies not in a State Bank but in institutions of this nature .
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Banking law remained fragmentary and uncoordinated in the Union, with no supervisory powers. (p. 471)
The Treasury has no power whatsoever in case it should discover any bad symptoms in any particular statement.
Evidence ledger¶
Sources used¶
| Source | Kind | Period | How used |
|---|---|---|---|
| Cape Town (Government) Archives: Original Placaat Books 1652-1786; Commissioners-General Publicatie vols., Kaapse Argiewe Inv. Nos. 74, 696; Resolutions Part 5, 1793 | state archives | 1652-1795 | Establishes early coin tariffs, the first 1782 note issue, and the founding and rules of the Lombard Bank. |
| Theal, Records of the Cape Colony (36 vols., Oct 1793-Apr 1831), Rec. | commission or official report | 1793-1831 | Main documentary source for proclamations, dispatches, note issues, protests and Lombard Bank history 1795-1830s. |
| Colonial Office records C.O. 414/7 (G.2, G.3, G.30), C.O. 414/8, C.O. 49/16-31, C.O. 48/162-184, C.O. 58/170, T. 28/54-59 (Public Record Office, London) | state archives | 1795-1840 | Supplies note-issue tables, Caledon's Committee report of 18/1/1808, and the Treasury/Colonial Office correspondence on the 1825 sterling change and new notes. |
| British Parliamentary Papers 1826 vol. 23 No. 438, Papers respecting a British Metallic Circulation at the Cape | commission or official report | 1825-1826 | Documents the Treasury Minute, the Order in Council, the Commissioners of Inquiry letter and rixdollar rates. |
| Cape Blue Books of Statistics / Statistical Register of the Cape Colony 1821-1909 | official statistical series | 1821-1909 | Source for notes withdrawn, the 1853 account of paper money destroyed, and branch/bank figures. |
| Grant, Considerations on the State of the Colonial Currency at the Cape of Good Hope (1825) | secondary literature compilation | 1806-1825 | Supplies rate-of-exchange premium series and the quantity-theory argument that over-issue caused rixdollar depreciation. |
| Volksraad Resolutions (V.R.R.), Notulen, Aanspraken, Stukken, Gouvernements Courant (Orange Free State), Bloemfontein Archives P.R. series | parliamentary debates | 1854-1899 | Documents the 1865-66 blueback issues, memorials, Good Fors debates, destruction of notes and revenue figures. |
| Transvaal (SAR) Volksraad Resolutions (V.R.R., E.V.R.R.), Uitvoerende Raad Resolutions, Staats Courant, Gouvernements Kennisgeving, Pretoria Archives S.S. and R. files | state archives | 1849-1900 | Documents Mandaten, Government note issues, bank and mint concession negotiations (Albracht, Lippert, Oyens, Deutsche Bank) and Mint law. |
| Transvaal Concessions Commission Report, Evidence and Appendix (Cd. 623-625, 1901) | commission or official report | 1890-1900 | Source for Transvaal Mint coinage output, mint assets and profits, and the bank concessions. |
| Munt Conferentie: Officieele Bescheiden omtrent de Munt Conferentie te Pretoria, February 1893 | commission or official report | 1893 | Source for the proceedings and draft conventions of the 1893 Mint Conference and gold coin import data. |
| Vertrouwelyke Financieele Stukken meegedeeld door de Deputatie (Amsterdam, 1884) | commission or official report | 1884 | Supplies the Pierson committee's advice and the Concept Regelment for a Transvaal national bank. |
| Cape Parliamentary Votes and Proceedings, Parliamentary Debates, Legislative Council minutes and Government Gazette (1854-1870) | parliamentary debates | 1854-1870 | Source for debates on small notes, bank statements, note duty and State Bank/Government note proposals. |
| Union and colonial banking statutes (Cape Acts 1861-1891, Natal Laws 1864/1881, O.F.S. Ordinances, Transvaal Laws 1892-93, Union Acts 1914, 1917, 1920, 1923) | legislation gazette | 1861-1923 | Traces the content of banking and note-issue legislation by province and the Union Acts. |
| Select Committee on Embargo on Export of Specie (S.C. 2-'20); Gold Conference Report (U.G. 18-'20); Currency Conference Report (U.G. 9-'22); S.C. 1A-'23; Low Grade Mines Commission reports; S.C. 4-'26 (Usury Bill) | commission or official report | 1919-1926 | Evidence on inflation, the embargo, desirability and origins of the Reserve Bank, and reasons for the 1923 amendments. |
| Kemmerer-Vissering Commission, Report on Resumption of Gold Payments (U.G. 13-'25) and Vissering's report on State Bank | commission or official report | 1925 | Source for the gold-parity finding, the case against a State Bank and recommendations for amending the Reserve Bank's powers. |
| Official Year Book of the Union of South Africa Nos. 5-8 | official statistical series | 1910-1926 | Source for bank balance sheets, reserve ratios, savings bank and imports statistics. |
| Journal of the Institute of Bankers in South Africa (B.J.) and Star, Friend, Economist and other newspapers/periodicals | newspapers periodicals | 1895-1928 | Used for bank mergers, the Kaffir boom, Boer War banking, Mint debates and speeches. |
| Bank deed-of-settlement papers, memoranda and annual reports (Bibliography B) | company records or reports | 1836-1925 | Source for bank constitutions, note-issue provisions and statements of individual banks. |
| Crown Mines Reports (1918) and Dr Samuel Evans' statements on Mint charges | company records or reports | 1909-1926 | Used to estimate gold producers' savings from a local mint and refinery. |
| Assembled branch and balance statistics (C. W. Pearsall, Statistical Bureau), Government Gazette bank returns June 1927 | official statistical series | 1914-1927 | Provides branch counts and bank liabilities/assets underpinning the account of consolidation and concentration. |
| Secondary compilations on Orange Free State/Transvaal: Collins Free Statia, Fichardt, Theal histories, Leyds, Oordt, Hist. of the Standard Bank (Amphlett) | secondary literature compilation | 1850-1900 | Reminiscences and histories used for note depreciation, Good Fors, revenue/expenditure tables and Boer War banking. |
New data¶
The author compiled revenue/expenditure, bank branch, consolidation and failure tables and time series (note issues, exchange premia, reserve ratios, banking figures 1913-1927) from archival and published sources; he also built a roster of bank mergers and failures to 1927. No separate dataset is released.
Inference¶
Quantification: Descriptive tables.
Chronological institutional narrative built from archival documents, proclamations, legislative debates and official reports; claims about depreciation and inflation are supported by tables of note issues, exchange premia and bank reserve ratios, plus comparison with Canada, the US and Britain. No formal statistical testing.
Key claims¶
| Claim | Basis | Strength |
|---|---|---|
| Over-issue of Cape paper rixdollars, not just adverse trade balances, caused their depreciation from 4s. to about 1s. 6d. (p. 38-43) | Series of note issues from CO 414/7 and Records of the Cape Colony; exchange-premium table drawn from Grant and Rec. xxi; Grant's argument; Commissioners of Inquiry report. | Partial data |
| Government banking and fiat note issues in the Cape, OFS and Transvaal repeatedly led to depreciation, barter and distress, so state interference in currency is dangerous. (p. 72-78, 99-113) | Volksraad resolutions, Staats Courant notices, memorials, Cape Lombard Bank records; note totals and values. | Partial data |
| Colonial banking legislation was reactive, piecemeal and lax, with Cape laws passed only after bank failures and no national banking policy. (p. 442-456, 471) | Cape debates and Acts 1854-1891, Natal, OFS and Transvaal laws, bank failure lists. | Partial data |
| The Reserve Bank was adopted hastily under Strakosch's influence with little study of other central banking systems. (p. 430-433) | Select Committee evidence (S.C. 2-'20), Middleton's testimony, and Bruwer's and Evans' statements. | Partial data |
| By the 1920s South African banking was a potential monopoly of two or three London-controlled banks after waves of mergers, with overextended branch networks. (p. 388-396, 477-479) | Branch and balance-sheet tables 1914-27, merger and failure lists, June 1927 Gazette statements. | Systematic data |
| The Pretoria Mint and Rand Refinery saved producers money and made a net profit for the Union Government by 1925. (p. 161-162) | Deputy-Master's 1925 report on Mint revenue and expenditure and Dr. Evans' estimates. | Partial data |
The author's caveats¶
Acknowledges that indexing and cataloguing of the South African archives is inadequate, that significant documents were missing, that prior literature is lacking, and that war and post-war periods are treated briefly. States that 'no claim to finality is made' and that the book is a source book rather than a popular narrative.
Gaps in the evidence¶
Claims about inflation and bank behaviour rely on aggregate bank returns and testimony, without price indices, money-supply estimates or bank-level ledgers that would test causal links. Comparisons with Canada, the US and Britain are asserted rather than systematically evidenced. Bank archives (head-office minutes, loan books) and Treasury files exist and could test claims about lending and merger policy.
Replicability: Data described but not public.