South Africa

Abstract

The earliest bank to be established in South Africa was the Lombaard Bank in Cape Town, which opened its doors on April 23, 1793, when the city was still under the direct control of the Dutch East India Company. This was a state bank that was entrusted with issuing government notes, bringing additional money into circulation, and helping those with inadequate access to money. The oldest private bank in South Africa was the Cape of Good Hope Bank, which began its operations in 1837. When South Africa became nominally independent with the passage of the South Africa Act of 1909, most of its banks were British-owned and their headquarters and major stockholders based in London. After the Gold Conference held in Pretoria in 1919, the Currency and Banking Act was passed the following year and the South African Reserve Bank opened its doors on June 30, 1921. At the time of its establishment, South Africa was only the fourth country outside Europe to have a central bank. This lowered the dependence of the South African economy on the British, with the South African Reserve Bank assuming an increasing portion of what were hitherto the duties of the Bank of England, including the sole responsibility for issuing bank notes. The bank’s subsidiaries are the Corporation for Public Deposits, the South African Banknote Company and the South African Mint; all three are fully owned by the Reserve Bank. Under the inflation targeting framework, the South African Reserve Bank sets a specific target inflation rate and tailors its monetary policy to achieve that goal. Decisions regarding monetary policy are undertaken by the Monetary Policy Committee; these decisions are then implemented by the Financial Markets Department, which uses a classical cash reserve system, achieving desired liquidity levels by imposing a cash reserve requirement on banks.