PREVIEW: BANKNOTES 31 MAY & 1 JUNE

The Domino Effect proved to be the key factor in the establishment of the South African Reserve Bank (SARB) – an essential move to offset a rising gold crisis.

At the time, international finance was still suffering from the aftershock of the First World War, and this led to a situation that threatened to undermine South Africa’s commercial banking sector.

 

Commercial banknotes had to be backed by gold and when the price of gold in the United Kingdom rose sufficiently above that of South Africa it created an opportunity in London and a potential crisis in Pretoria.

The situation meant that commercial banks could make a profit by converting their banknotes into gold in South Africa and then selling the gold in London. This rendered buying gold for re-import in South Africa to back their notes a loss-making enterprise.

The banks in South Africa appealed to the British government, asking to be released from the commitment to back their notes with gold. Under the Currency and Banking Act of 1920, the solution was to establish a central bank in South Africa to hold the commercial banks’ gold reserves and issues notes.

By April 1922, the SARB had opened its doors with a view to returning to the gold standard rate of exchange that had been in place before the First World War.

Within ten years, South Africa had abandoned the gold standard, instead tying its currency to the pound sterling, and it was against this backdrop a year later that the SARB issued the £100 note on offer in this sale. With the serial number D/3 008592, and dated 8 September 1933, it carries the signature of Johannes Postmus, the bank’s second governor, who was in office from 1932 to 1945.

Catalogued as one of the finest known examples of this very rare note, the estimate is £12,000-15,000.