2017 1967
F R A NCOIS
M A L A N
First published in South Africa in 2016 by Prestige Bullion for The South African Mint and Rand Refinery Old Johannesburg Road, Gateway, Centurion 0154 Copyright published edition © Prestige Bullion, The South African Mint and Rand Refinery Copyright text 2016 © Francois Malan Copyright photographs 2016 © as per individual caption The publisher and author made every effort to track the original copyright holders of the historic photographs. Apologies are made for any unintentional omissions. The publisher would be grateful to hear from any not acknowledged here and undertakes to include the appropriate references in any subsequent editions. ISBN 978-0-620-74116-3 Cover design, design, typesetting and layout project management by Breinstorm Brand Architects Original copy by Francois Malan; copy editing by Diane Coetzer; proofreading by Wendy McAllister Research and original book proposal by Francois Malan Original manuscript by Francois Malan; edited by Erica Napier While all efforts has been made to verify information in this book at the time of going to press, the publisher, author and their agents will not be held liable for any damages incurred through any inaccuracies. All rights reserved. The owner of a copyright has the exclusive right to reproduce the copyrighted work. No part of this publication may be reproduced, stored in a retrieval system, or transmitted by any means - electronic, mechanical including photocopy, recording or otherwise - without written permission from the publishers.
Gold! Fever! The Legend of the Kruger Millions
Foreword This book marks the 50th anniversary (1967-2017) of the Krugerrand, the world’s most traded bullion coin. Buyers of this iconic coin range from ordinary folk with just one precious coin, to larger-scale investors and members of numismatic communities across the globe. Professor Malan’s book traces the history of the Krugerrand, a history that predates the striking of the first coin in 1967. It is a history that is intertwined with wars, early coinage, legends, and the changing role of gold in the global economy. The strength of the Krugerrand is counted in the value that has endured over five decades and which has every indication of being sustained over the next five decades, and beyond. On behalf of the South African Reserve Bank and our partners in the creation and marketing of the Krugerrand, the South African Mint and Rand Refinery, I trust you will enjoy the mix of visuals and information that has been gathered into this unique book for your reading pleasure.
Lesetja Kganyago, Governor of the South African Reserve Bank
7
Gold! Fever! The Legend of the Kruger Millions
CONTENTS CHAPTER 1
Gold! Fever! The legend of the Kruger Millions
10
CHAPTER 2
Kruger Sovereigns: a bust, a shaft and an ox
40
CHAPTER 3
Here and then gone: The Gold Standard
66
CHAPTER 4
As good as gold
100
CHAPTER 5
An iconic coin is born
118
CHAPTER 6
From Trojan to Krugerrand: Whats in a name?
136
CHAPTER 7
An old gentlemen gets to shine
146
CHAPTER 8
Making and selling a "strange coin"
186
CHAPTER 9
A scramble for gold
212
CHAPTER 10
Smaller is better
222
CHAPTER 11
Pop went the proof-coin bubble
234
CHAPTER 12
Sanctions hit!
250
CHAPTER 13
Rising from the ashes
268
CHAPTER 14
Fifty years of the world's favourite bullion coin
278
9
01
Gold! Fever!
THE LEGEND OF THE KRUGER MILLIONS “My name is George Harrison and I come from the newly discovered goldfields of Kliprivier, especially from a farm owned by a certain Gert Oosthuizen. I have a long experience as an Australian gold-digger, and I think it a payable goldfield.” ¹ - George Harrison, Pretoria, 24 July 1886
Chapter 1
B
y 2016, 130 years after George Harrison wrote from the “newly discovered goldfields of Kliprivier”, South Africa had minted more than
60-million bullion Krugerrands of all sizes. More than 1558 tons of gold were used in the production of this huge number of coins, all of it mined from “payable goldfields” in South Africa, making the Krugerrand the most popular bullion coin in the world by far. The extraordinary success of the Krugerrand is all the more remarkable because the first coin was only struck in 1967. Over a period of 50 years, the coin has established itself as the most widely held and actively traded bullion coin in the world. It has also become the most accessible way for investors worldwide to own and trade gold. Although celebrating its 50th anniversary in 2017, the roots of the Krugerrand were planted more than a century ago. Its production in 1967 can be linked to a series of seminal events that require us to rewind to the opening year of the 20th century – and that tell of the inexorable pull of this most compelling of precious metals.
Krugerrands on the production line at the South African Mint. Photo by: Clive Hassal
12
Gold! Fever! The Legend of the Kruger Millions
13
Chapter 1
Monday, 4 June 1900 PRETO RIA
The British cannon could now be heard in the distance.
Joubert, when a burgher came gleefully to tell him that
Lord Roberts and his massive British infantry force had
a new gold reef had been discovered, have been fulfilled
reached Six Mile Spruit to the south of town and now only
in an astonishing fashion: ‘Instead of rejoicing,’ he said,
a low line of hills and some Boer fortifications separated
‘you would do better to weep; for this gold will cause our
him and the capital of the South African Republic (also
country to be soaked in blood.'”
known as the Transvaal Republic or the ZAR).
More than a century after Kruger wrote those
It had only been 14 years since the discovery of the
despairing words, Krugerrands bearing his effigy are
rich goldfields of the Witwatersrand. This gold brought
still being minted from gold mined in the Witwatersrand
brief prosperity to the ZAR, but now delivered the
Basin. But back to history.
horrors of war to its doorstep.
Hostilities between the British Empire and the two
President Paul Kruger was never enthusiastic
independent Boer Republics, the Transvaal and the
about the discovery of the gold. As he later wrote
Orange Free State, broke out in October 1899. A few early
in his memoirs in 1902, “The rich goldfields of the
successes had given the Boers hope but their fighting
Witwatersrand were discovered and brought about a
spirit was broken in May 1900, when Johannesburg fell.
complete revolution in the financial aspect of the affairs of
As Thomas Pakenham wrote in The Boer War, “If ever
the Republic. The history of the Republic entered upon a
Lord Roberts had victory there for the asking, it was
new phase of discovery. Can we possibly look upon it as
during the three awful days – 30 May to 1 June – of the
fortunate? As I have already said, gold and the embittered
retreat to Pretoria.” ³
feelings which were the outcome of the first annexation
Pretoria’s citizens were in a state of panic, a situation
are the causes of the present misery in South Africa.”
that had not been helped when President Kruger left
2
And furthermore: “The words uttered by the late General
the capital for Machadodorp on 29 May. Many felt that
14
Gold! Fever! The Legend of the Kruger Millions
“The words uttered by the late General Joubert ... have been fulfilled in an astonishing fashion: ‘Instead of rejoicing,’ he said, ‘you would do better to weep; for this gold will cause our country to be soaked in blood.” the Boer leader had deserted them, but the Executive
Minister of the Union of South Africa, was left with the
Council argued that should Kruger be captured, the war
difficult task of maintaining law and order in the town.
would be lost. In fact, this inner circle of government
As he wrote in his memoirs of the Boer War: “Another
viewed attempts to defend Pretoria as futile and of little
trouble was the absence of the regular police and police
benefit to the Boer cause. In the end, the only senior
officers, which compelled us to improvise a force for the
government officials who remained behind were the state
maintenance of order. Nor were we quite
attorney, Jan Smuts, and the Vice-President, General
successful in this, for although there was an unusual
Schalk Burger.
absence of crime, we could not prevent the Government
When Burger left soon afterwards to escort his family
stores from being broken into by the populace and looted
to safety, Smuts, who would go on to become Prime
in broad daylight.” 4
15
Chapter 1
16
Gold! Fever! The Legend of the Kruger Millions
A wartime photograph of the famous General Jan Smuts (seated in the middle with the large buckle). General Smuts removed the so-called Kruger millions from Pretoria during June 1900. Photo by: Museum Africa
17
Chapter 1
18
Gold! Fever! The Legend of the Kruger Millions
It was only when General Louis Botha, legendary
Removing the gold became a priority for Smuts. “I
commander of the Battle of Colenso and the Battle of
had been in friendly negotiation for some days with the
Spion Kop, arrived in town (accompanied by some Boer
directors of the bank in order to obtain peaceable
forces) that order was restored.
possession of the money and gold of the Government
Smuts was fully aware that the Government’s gold
which still remained in their custody to the value of be-
and ammunition stockpile was still stored in Pretoria.
tween 400,000 and 500,000 pounds sterling. When these
These commodities were vital to continue the war effort,
negotiations failed, nothing remained for me but to issue a
but had not been moved during the hurried departure of
warrant of arrest and to threaten them with criminal pro-
the ZAR government.
ceedings, which proved effectual. On the Monday morning
The hasty retreat had also been prompted by a report
the directors informed me that if I employed force they
that a British advance column planned to cut the railway
would consent to hand over the gold which was the prop-
east of Pretoria.
erty of the Government. I therefore got a special body of
The National Bank and the State Mint were located
about fifty police, entered the bank and obtained delivery
on the western side of Pretoria’s Church Square. It was in
of all the gold in question.” 5
these two buildings that the Republic government’s gold and coins were stored, including the coins carrying the effigy of Paul Kruger.
Opposite page: General Louis Botha’s army evacuated the last boxes of gold mined in Johannesburg to Pretoria during May 1901. Photo by: Museum Africa Above: A medallion of Botha by the die-sinker Tommy Sasseen, who also produced the dies for the Krugerrand. Photo by: F Malan
19
Chapter 1
In among the gold removed from the bank were a number
shells were exploding around the station and the British
of gold-coin blanks that had not yet been minted into
artillery were bombarding the railway at Sunnyside,
pounds. These blank discs eventually circulated among
moving east to Delagoa Bay. Nonetheless, the train
the burgers and acquired the nickname “kaalponde”
carrying the Government’s gold was able to get out of
(“bare pounds”).
Pretoria unscathed and headed towards Machadodorp.
Finally, the gold retrieved from the bank was placed on a train and put under police guard. Already howitzer
Jan Smuts during the time he was state attorney of the ZAR.
20
Gold! Fever! The Legend of the Kruger Millions
Some of the buildings on Church Square in Pretoria during the late 1890s. The building of De Nationale Bank der Zuid-Afrikaansche Republiek is on the right. The State Mint, where the Kruger coins were minted, was located behind this building. It was from this location that General Smuts removed the gold of the so-called Kruger Millions.
21
Chapter 1
Coins from the South African Republic during the Boer War (1899 to 1902). During the early part of the war, large numbers of the Kruger sovereigns dated 1900 (top) were minted in Pretoria. The same bust of President Kruger is used on the Krugerrands. The coins below are the gold blanks (rimless blank left, rimmed blank right) removed by the Boer forces before the occupation of Pretoria by the British army. Many people still believe that large numbers of the coins similar to these in the photograph are buried somewhere in South Africa as part of the legendary “Kruger Millions�. Photo by: F Malan.
22
Gold! Fever! The Legend of the Kruger Millions
Some of the buildings at the train station in Pretoria during 1895. General Smuts transported the gold to this station for evacuation to Machadodorp. Photo by: Dr J Ploeger
23
Chapter 1
“Fuelling the legend of the Kruger Millions are contemporary accounts like a London Daily Mail report, dateline Johannesburg 1902, which stated that 80 000 ounces of gold were buried north of Pietersburg.” Smuts also located a further 25 000 pounds of gold in
closing days of May 1900, are also surrounded by mys-
the National Bank allocated to a special war fund. He
tery. Just how much gold was in those boxes is not known.
attempted to use this amount to pay the arrear salaries
Whether these boxes eventually found their way onto
of government officials, but could not find anyone to
the train that left Pretoria with the gold that Smuts sent
accept responsibility for this money. What is more, no
to the Government is also a mystery. What is known is
bank wanted to accept it as a deposit. Shortly before
that, more than a century after Smuts dispatched the
he left Pretoria, Smuts dispatched this sum to the
Government’s gold and the boxes were “dragged away
Government by train from Eerste Fabrieken, on the
from Johannesburg”, many individuals believe that some
eastern outskirts of Pretoria.
of this gold is still buried in South Africa.
But the gold removed by Smuts was not the only store
Fuelling the legend of the Kruger Millions are
moved ahead of the advancing British forces. Further
contemporary accounts like a London Daily Mail report,
boxes of gold had been removed from the mines in
dateline Johannesburg 1902, which stated that 80 000
Johannesburg by the retreating Boer army, days before
ounces of gold were buried north of Pietersburg (now
Smuts sent off the trains.
Polokwane). The German press also helped the story
As described by Pakenham, “All that day, Wednesday,
spread with its own reports. On 5 September 1902, Joseph Chamberlain
Louis Botha’s army trundled northwards to Pretoria in a vast cloud of dust and scenes of utter confusion. All the
(Secretary of State for the Colonies) met a number of
heavy guns, all the strategic supplies – including the last
Boer generals in the House of Commons in England.
boxes of gold mined on the Rand – were dragged safely
He expressed a willingness to use the Kruger gold
out of Johannesburg.” 6
for the benefit of the Boer widows and orphans
These last boxes of gold that headed out of
of the war, provided the generals help him lay his
Johannesburg towards Pretoria, in the chaos of the
24
Gold! Fever! The Legend of the Kruger Millions
One of the few known photographs showing President Kruger’s train at Machadodorp. The Government operated from this train. The person in the photograph is HC Bredell, the President’s secretary. Photo by: Krugerhof House Museum
hands on it. General Botha vehemently denied that
the morning on a cold June day, the train reached the
these funds existed.
Machadodorp station.
Nonetheless, the legend persisted.
The ZAR government was operating from President
In 1979, the writer DW Krüger attempted to
Kruger’s train, located at the station. After its arrival,
dispel the myth of the Kruger Millions in his book Die
Kruger requested that the gold be placed in the custody
Krugermiljoene.
of the Treasurer-General, NS Malherbe. Two wagons
7
Through extensive and meticulous research, Krüger
operated as the offices of the Treasurer-General
traced the journey of the gold that was moved in May
and the Auditor-General, JS Marais. Almost daily
and June 1900. He established that Eduard Meyer, an
merchants arrived at the wagons, claiming payment for
accountant at the State Mint, assisted Smuts with
goods delivered to the commandos or the Government.
the removal of the gold from the mint. The gold being
Payments were made partly in gold and partly in paper
transported consisted of bar gold, a large number of the
money. Over time, the amount of gold dwindled and the
blank discs ready for minting and about 100 000 Kruger
portion paid in paper money increased.
pounds, dated 1900. Meyer accompanied the gold on
After the Boers lost the battle at Dalmanutha near
the train, together with six to eight armed guards. The
Belfast, the Government was moved to Nelspruit. The
train consisted only of the locomotive, a passenger
decision was also made that President Kruger should
car and the guard car, and the gold was loaded into
depart for Europe.
the guard car. The trip was uneventful and, at two in
25
Chapter 1
26
Gold! Fever! The Legend of the Kruger Millions
Krüger’s research showed that the rest of the bar gold, allegedly 64 142 ounces, was sold for gold coin to the firm Wilcken and Ackermann in Lourenço Marques (now Maputo) in Mozambique. The price at the time was £3,10 per ounce. It is known that 62 cases of gold reached Lourenço Marques on 1 September 1900 and it is believed that some or all of this gold was shipped to Hamburg on the Bundesrath. The intended recipient was the firm Arndt and Cohn. According to Krüger, an amount of £50 000 was also given to the Government that remained in the Transvaal and smaller amounts were additionally handed to MT Steyn, President of what was then known as the Orange Free State, and General Louis Botha. What is undisputed is that by the end of the Second Boer War, gold coin had become so scarce that some crude “Veldponde” were struck at an improvised mint at the alluvial diggings of Pilgrim’s Rest. Smuts himself was very clear about the Kruger Millions. His memoirs state unequivocally that the gold removed from Pretoria was consumed by the war. “It has ever after been some consolation to me that this paltry sum of less than half a million in gold and coins which I succeeded in removing through shot and shell from Pretoria on that eventful occasion held its own for two years against something like 200 million sterling from the British Treasury. Nay more, after nobly done its work during the war and as the lawyers say 'usu consumtus', it continued thereafter to spook in the minds of great British statesmen and to conjure up visions of millions hidden away on the veld or secretly dispatched to Europe to supply the sinews of war in the future national campaigns of the Boers.” 8 Opposite page, left top: President Kruger in his railway carriage at Nelspruit during September 1900. Photo by: Krugerhof House Museum Opposite page, left bottom: The Proclamation stating that it is impossible for the aging President Kruger to travel with the Commandos and he is therefore given leave to depart for Europe to promote the Boer cause. Photo by: Krugerhof House Museum Left: Paul Kruger photographed at Waterval Onder after his departure from Pretoria in May 1900. He was 74 years old when this photograph was taken. Photo by: D. Thislewhite
27
Chapter 1
“Did these parties consume the entire £200 000? This is approximately 1,5 tons of gold and in today’s money it is worth approximately R935-million.” In spite of Smuts’s writings, the legend refuses to die.
the number of coins minted during this early phase of the
Even Krüger’s extensive research failed to provide a
war is subtracted from the gold mined in Johannesburg
full account of the approximately £400 000 - £500 000
during the same period, it leaves a balance of £1 099 408.
removed from Pretoria. Of this, £150 000 was shipped to
This is more than double the amount of gold apparently
Europe on the Bundesrath and £50 000 was given to the
evacuated out of Pretoria by Smuts. What happened to
Government remaining in the Transvaal. This leaves at
this gold? Was it used in bar form to pay for expenses
least £200 000 unaccounted for. No record is available
during the early part of the war? As described by R Milne9 , the issue of the Kruger
of how much was paid out to merchants and creditors at Machadodorp and Waterval-Boven (where the ZAR
Millions was raised during the build-up to the Union
government later moved to), nor are there exact details
of South Africa election of 1915. At a meeting on 29
of the “smaller amounts” given to President MT Steyn
September 1914 in Booysens, Johannesburg, incumbent
and General Louis Botha.
Prime Minister, Louis Botha, was challenged by the former State Mining Engineer, Jan Munnik, to account
Did these parties consume the entire £200 000? This
for the gold bars under his control. Munnik, a National
is approximately 1,5 tons of gold and in today’s money it is worth approximately R935-million. Further deepening
Party candidate for Booysens, stated: “I would ask
the mystery are records at the Chamber of Mines that
General Botha what has been done with the 134 gold bars,
indicate that the gold mined around Johannesburg from
worth roughly £750,000, which I had recovered from
November 1899 to May 1901 was worth £2 024 278.
the mines, and which, at President Kruger’s departure,
Against this background it is worth noting that
were left in the hands of the Commandant-General,
the State Mint in Pretoria only struck 788 000 Kruger
General Botha, and two other, by government resolution.
sovereigns using the 1900 date and 136 870 coins using
Thus far the gold has never been accounted for, and if
the 1898 date. Perhaps accounting for these different
General Botha can give a satisfactory explanation, and
numbers is that the dies for the 1899 coins were
if there is any gold left, I would say: ‘Hand it over to
intercepted by the British in Lourenço Marques and the
help the Empire.’”10
coins using the 1898 dies were probably struck in 1899. If
28
Gold! Fever! The Legend of the Kruger Millions
Chilvers produced a map in 1930 of the route Kruger's train took from Pretoria to Lourenรงo Marques. It was suggested that some of the gold was buried north of this line. Photo by: Octopus Publishing Group
29
Chapter 1
The modern Kruger Millions: A stack of 2016 Krugerrands. Photo by: Clive Hassal
When Rand Daily Mail reporter L van Gelder’s story
the Kruger Millions disappeared somewhere between
appeared the day after the meeting, Botha was livid and
Machadodorp and the border of Mozambique. This
instituted a libel legal action against Munnik. The judge
contradicts General Jan Smuts’s view that the gold was
presiding over the case was JC Juta and the case was
consumed by the war.
heard in the old magistrate’s court in Johannesburg on
Typical of the stories perpetuating the legend
27 October 1915. Munnik was convicted of criminal libel
of the Kruger Millions is the one recorded by
and he also lost his appeal in front of Justice J de Villiers
Bruchner de Villiers. 11 As a young child, he was told the following story
on 17 December 1915. A number of prominent people
by Paul de Villiers, the last Treasurer-General of the
testified during the court case. These included General Schalk Burger, Vice-President of the ZAR during the
ZAR. De Villiers was on his way to Delagoa Bay with two
war, FW Reitz, former President of the Orange Free
servants and mules loaded with gold bars when they were
State, and the Boer general Christiaan de Wet. Dr FET
spotted by a number of British soldiers. The soldiers
Krause, who removed the gold from the mines and sent
gave chase and, realising that escape was impossible, De
it to Pretoria, stated that 120 000 ounces were recovered
Villiers diverted course to a range of nearby hills, where a
from the Robinson Mine. Milne’s work suggested that
number of caves were located.
the testimonies at the libel trial supported the fact that
30
Gold! Fever! The Legend of the Kruger Millions
According to the story told to Bruchner, the gold was
Boers, burn the wagons and hide the gold in the Cave of
hidden in one of the caves and De Villiers shot the ser-
Leopards. Is this story true? Does the "Cave of Leopards”
vants to “protect” the secret. When asked by those he
exist? Probably not. As Wikipedia puts it:
told the story to why he never returned to recover the
“It is not known which parts of his life were fiction and
gold, de Villiers’s reply was that the gold was government
which were fact, since Duquesne was a charismatic
property and that he would keep its whereabouts secret
master of self-promotion as well as a famous storyteller.”
as long as the Union Jack was raised over Parliament.
An early account of the Kruger Millions was
De Villiers died in 1953, eight years before South Africa
published by Hedley Chilvers in his book The Seven Lost
became a republic. There is, however, no evidence to
Trails of Africa.
corroborate this story and it is probably fiction.
“That such treasure existed is beyond question,” Chilvers stated in his 1930 book.12 One of the author’s
Fritz Joubert Duquesne, the leader of the infamous
key sources was President Kruger’s coachman, JPD
Duquesne Spy Ring active in the United States during the Second World War, told a story along similar lines.
Schwartz, whose narrative has it that gold was buried
Duquesne was born in the Cape Colony in South Africa
in various locations. However, Chilvers also quotes
and joined the Boer commandos during the Boer War.
Deneys Reitz, who, at a Cape Town Rotary Club meeting
He claimed that he was given command over a large
in 1929, denied the claims of buried gold. According to
shipment of gold that was sent by wagon to Lourenço
Reitz, Kruger had little more than £60 000 to £80 000
Marques to pay for arms and ammunition. En route, a
in bar gold with him. According to this account, the
fight broke out among the Boers, leaving only Duquesne,
gold was taken with Kruger when he sailed for Marseille
two wounded burgers and several black labourers alive.
in October 1900, where it was supposedly used to
Duquesne ordered the labourers to kill the wounded
support Boer refugees.
31
Chapter 1
Lord Roberts' army in Pretoria, Church Square, the day after the gold was evacuated by the Boers.
32
Gold! Fever! The Legend of the Kruger Millions
Navigating through all these different accounts of the
permission, the party proceeded and eventually found
gold that was pulled out of the Republic just ahead of the
the tree with seven nails hammered into its trunk and
advancing British has been no easy task for historians.
other clues that Denton had drawn on the map. With
Just as one story is dismissed as fanciful, others gain
great excitement, the distance to the trench containing
momentum. For instance, reports of several wagons
the gold was paced off. Members of the search expedition
with loads covered in tarpaulins being seen in various
faced disappointment when they found an open trench
locations under armed guard were used as “proof” of the
overgrown with weeds. Clearly, whatever might have
Kruger Millions by ordinary citizens. In fact, these loads
been in the trench had been removed years before. It
contained ammunitions and supplies being distributed
was reported that Major Hamilton was secretly relieved
by General Botha for the guerrilla phase of the war.
at this discovery, as it would prevent future treasure
Among the more remarkable – and compelling
hunters from rushing into the reserve.
– stories is that of MM van Niekerk’s 1920
On 7 November 1931, The Star newspaper in
search for the gold. A member of the wartime Boer forces, van Niekerk
Johannesburg published an article under the headline “A True Story of the Kruger Millions”. In the article, the
caught wind of a gold convoy that was traversing a
historian and writer Gustav Preller claimed that he had
remote part of the Sabie Game Reserve (now known as
played an important role in preventing the gold falling
the Kruger National Park) when a decision was taken
into the hands of the British forces.
to bury the gold to prevent it from being seized. After years of searching, van Niekerk found a survivor of
Writing in the style of a suspense novel, Preller stated: “There was not a soul abroad then. A waning moon cast
the party who allegedly buried this gold. Charlton
long creeping shadows across the overgrown grass and
Denton, a blacksmith from Randfontein, agreed to
the wheels of the trolley rattled noisily over the loose
assist with the search for gold on certain conditions,
stones. Not a light shone from any of the buildings in the
including obtaining a letter from the Government at the
Square, but as we turned the corner round the church
time stating that he would be paid fair compensation
fence a Mr S-, destined for great fame in the years ahead,
for revealing the hiding place. Denton subsequently
stepped quietly out of the shadows of the Post Office and
produced a rough sketch of the burial site, 40 miles from
briefly welcomed me. Together we took the trolley into
Rolle. The sketch – which contained the “Clue of Seven
the narrow street between the National Bank buildings,
Rusty Nails” – played a key role in the attempt to locate
which still exist, the old State Mint, and the Palace of
the buried gold. In August 1920, van Niekerk, Denton
Justice. On the western side of the Mint is to be seen a
and two other gentlemen reported to Major Hamilton,
small entrance and on the cement floor of one of its vaults,
the chief warden of the reserve. With the necessary
facing the Square, there ought to be visible today a long
33
Chapter 1
row of clear indentations in the cement, some of which
was. In the gloomy, badly lighted street our load looked
bear the names of the well-known mines and the numbers
insignificant enough, empty grain bags thrown over
of the gold bars that made those impressions on the
the glittering bar gold and only the strain of the mules
floor. They were piled one on top of the other. Mr S- had
would have revealed that they were pulling something
evidently arranged everything for us, for the vaults were
unusually heavy.”
lit and members of the staff were present to help us load
DW Krüger dismissed Preller’s version of the removal
the bars onto the trolley, which was done in quick time.
of the gold. Preller had written his first account of the
“It seemed a long way down Market Street. I stood on top
Kruger Millions as early as 1923 and some of the details
of the gold, just behind the driver. Far away I could see
of this earlier version differ from that published in 1931.13
the twinkling of lights of the railway station as we jolted
Eduard Meyer, the Mint accountant, also replied to
down the uneven street, the trolley bumping and creaking
and dismissed Preller’s version in The Star newspaper
over the potholes which marred what little surface there
34
Gold! Fever! The Legend of the Kruger Millions
“DW Krüger dismissed Preller’s version of the removal of the gold. Preller had written his first account of the Kruger Millions as early as 1923 and some of the details of this earlier version differ from that published in 1931. Eduard Meyer, the Mint accountant, also replied to and dismissed Preller’s version in The Star newspaper after being requested to do so by Dr C Beyers, the chief archivist of the Union of South Africa.” Opposite page: Die Kruger Miljoene book cover. Photo by: CTP Limited
35
Chapter 1
“A South African newspaper, The Citizen, reported that at least 4 000 gold coins (dated 1897) had been discovered by farm workers in the area since 1960.” after being requested to do so by Dr C Beyers, the chief
and transported it to Lydenburg. Various commandos in
archivist of the Union of South Africa. In 1975, Eric
the field were paid from this hoard. Schwartz remained
Rosenthal resuscitated Preller’s account of the Kruger
convinced that all the gold taken by the commandos had
Millions, using information from Chilvers’ book and
not been used and that a large quantity of gold never
adding his own juicy bits.
left South Africa.
Rosenthal described an eyewitness account of
The legend of the Kruger Millions has also entered
14
President Kruger’s arrival at the station at Eerste
popular entertainment.
Fabrieken on the outskirts of Pretoria, where the
In 1967, Kavalier Films produced Kruger Miljoene, a
President boarded the train on the day he left the capital.
war drama and musical. The movie had President Kruger
According to an eyewitness, “three iron boxes, made on
ordering the Boer commando to manufacture coins
the same principle as dynamite cases, each containing
from gold bars. When the British army cornered the
£30 000 in gold coin” were loaded on the train at the
Boers, a large number of the coins were dropped down
station. At Middelburg, a further load of gold arrived by
a steep cliff in the potholes of the Blyde River at the
train from Pretoria.
tourist destination of Bourke’s Luck Potholes in what is
So what happened to all this gold? In Rosenthal’s
now Mpumalanga. There is no doubt that more than a
account, the President’s coachman, JPD Schwartz,
few people must have tried their luck in the river after
stated in July 1922 that at Nelspruit: “Two ox-wagons
the movie’s release.
laden with unminted bar gold were dispatched to
As recently as 2001, treasure hunters flocked to the
Spitzkop in the Drakensberg.”
town of Ermelo in Mpumalanga after it was reported
Spitzkop was a defunct mining camp between Belfast
that farm workers had dug up some Kruger coins. A
and Pilgrim’s Rest. Schwartz claims to have witnessed a
South African newspaper, The Citizen, reported that at
further load of gold being buried in Swaziland between
least 4 000 gold coins (dated 1897) had been discovered
Zwart Pelose and Witte Pelose. When the Boers lost
by farm workers in the area since 1960. These coins had
the last set piece of the war at Dalmanutha, President
allegedly been sold piecewise to supplement the incomes
Kruger allegedly gave instructions for the gold still in
of the farm workers. It was also reported that Ermelo’s
their possession to be buried at Devil’s Knuckles near
town councillors had taken an oath of secrecy at an
Pilgrim’s Rest. Schwartz loaded the gold at Hectorspruit
emergency meeting and agreed to keep the whereabouts
36
Gold! Fever! The Legend of the Kruger Millions
Screenshots from the Kruger Miljoene Film, 1967. Photo by: M-Net Channels
of the Kruger Millions a secret. Nonetheless, the news
The Kruger coins, which would have formed part
was leaked and treasure hunters arrived in Ermelo,
of the Kruger Millions, were identical in weight and
determined to find their own coins.
specification to the British sovereign and therefore had
Whether any additional coins were discovered
a gold content of only 7,32g or 0,235 troy ounces per coin.
remains unclear. What is more, the original claim that
It was this that made the Krugerrand such an attractive
4 000 coins were unearthed is difficult to verify. Some
concept. When it was released in 1967 it became the very
of the statements in the press were also clearly
first gold coin to contain exactly one ounce of gold.
incorrect, for instance, “The one-ounce gold coins, with Kruger's head displayed, are worth about £200 each at today's prices”.15
37
Chapter 1
South Randfontein Mine 1899. Photo by: The Geological Society of South Africa
38
Gold! Fever! The Legend of the Kruger Millions
R E F E R E NCE S 1
Gray, L, Payable Gold, Central News Agency Ltd., 1937.
2 Kruger, SJP, The Memoirs of Paul Kruger, Colonial Edition, London, T. Fisher Unwin, 1902. 3 Pakenham, T, The Boer War, Jonathan Ball Publishers, 1997. 4 Hancock, WK and Van der Poel, J., Selections from the Smuts Papers, Vol. 1, June 1886 – May 1902, Cambridge at the University Press, 1966. 5 Ibid 6 Pakenham, T, The Boer War, Jonathan Ball Publishers, 1997. 7 Kruger, DW, Die Krugermiljoene, Perskor Publishing, Johannesburg, 1979. 8 Hancock, WK and Van der Poel, J., Selections from the Smuts Papers, Vol. 1, June 1886 – May 1902, Cambridge at the University Press, 1966. 9 Milne, R, Anecdotes of the Anglo-Boer War, Second Edition, RJWM Publishers, 2012. 10 Ibid 11 Van Bart, M and Scholtz, L, Vir Vryheid en Vir Reg – Anglo-Boereoorlog gedenkboek, Tafelberg Publishers, 2003. 12 Chilvers, HA, The Seven Lost Trails of Africa – Being A record of Sundry Expeditions, New and Old, in Search of Buried Treasure, Cassel and Company Limited, 1930. 13 Preller, GS, Oorlogsoormag en ander Sketse en Verhale, Nationale Pers Bpk., 1923. 14 Rosenthal, E, The Best of Eric Rosenthal, Howard Timmins, Cape Town, 1975. 15 Munnion, C, Town Under Siege as Missing “Kruger gold” is Found on Farm, The Telegraph, 9 June 2001.
39
02
Kruger Sovereigns:
A BUST, A SHAFT AND AN OX
Chapter 2
I
n among the gold removed from Pretoria by Jan Smuts were Kruger sovereigns. These days, collectors around the world greatly
appreciate the value of these coins, with good specimens of the rare-date coins fetching thousands of dollars at auction. But the Kruger sovereigns were not always so treasured. In fact, the initial release of the coins caused a heated public outcry, as it took place during the hotly contested ZAR presidential election campaign of 1893. Before 1892, British coins had been used as currency in the Republic. But the discovery of the Witwatersrand goldfields changed that, making the minting of indigenous coinage feasible, and so a banking concession was granted to De Nationale Bank der Zuid-Afrikaansche Republiek in 1890. Part of the obligation of this concession was the establishment of a State Mint. The Volksraad (the 28-member government of the Republic) passed the Mint Act (No. 14 of 1891). It made provision for gold coins identical in standard to the British sovereign and half-sovereign. As prescribed in the Act, the Government was tasked with determining the images and inscriptions used on the coins and a decision was taken that the bust of President Kruger should appear on the obverse of the coins.š Facing an election against two tough opponents, Chief Justice Kotze and Commandant-General Piet
Joubert, President Kruger was understandably anxious to get the new coins in circulation as soon as possible. If he lost the election, somebody else’s effigy would appear on the new coins.
Opposite page: Inside the State Mint.
42
Kruger Sovereigns: A bust, a shaft and an ox
43
Chapter 2
Above: No photographs are readily available of the German engraver Otto Schultz. This tinted plaster model is an illustration of the engraver. Copyright: Münzkabinett der Staatlichen Museen zu Berlin, 18256094 Photo by: Reinhard Saczewski Opposite page: This is probably the original design of the bust of Paul Kruger modelled by the German engraver Otto Schultz when he designed the coins for the South African Republic in the early 1890s. This photograph of the model was supplied by the Berlin Coin Cabinet. Copyright: Münzkabinett der Staatlichen Museen zu Berlin, 18248699 Photo by: Reinhard Saczewski
Kruger describes the election race as particularly
concessions and of awarding all the offices of state to
acrimonious. “This time, there were three candidates in
the Hollanders.” 2
the field: myself, Joubert and Chief Justice Kotze; and it
With the State Mint still under construction,
proved the most violent electoral struggle through which
Kruger didn’t wait and placed an order at the Berlin
the Republic ever passed. I was accused by the opposition
Mint for the first batch of coins bearing his effigy. The
of being autocratic, of squandering the national money,
task of designing the Kruger bust that would be used to create the obverse of the coin fell to the German
of giving away all rights and privileges in the form of
engraver Otto Schultz.
44
Kruger Sovereigns: A bust, a shaft and an ox
45
Chapter 2
The 1892 double shaft Kruger sovereign. Note the design of the wagon and the initials O.S. on the bust of Kruger. Photo by: F Malan
When they arrived from Berlin, the first batch of Kruger
of arms). Instead of the single disselboom used with
coins was harshly criticised by the public because of
the traditional Boer wagon, the wagon was shown as
the depiction of the wagon on the reverse (on the coat
having two shafts.
46
Kruger Sovereigns: A bust, a shaft and an ox
“In total, 2 203 265 Kruger pounds and 362 985 half-pounds were minted, spanning the period 1892 to 1900.” The citizens of the Republic voiced their dissatisfaction
1902, when the ZAR was dissolved). And, in the end, the
with this. “Why can he have his own significant features
bust originally created by Schultz for the sovereigns was
so correctly reproduced on our coins, whilst the only
used for the Krugerrands, cementing an ongoing link
thing belonging to us that can come on them – our coat-
between the German Mint and the South African Mint.
of-arms – must be insulted by putting that ‘street thing’
The establishment of the State Mint was not
of Germany on it? It is not our own bullock-waggon [sic]
plain sailing. Between 1898 and 1899, activities at the
which our fathers prized, and honoured as we still do.
State Mint ceased as a direct result of coins having
We never had a wagon like that amongst us. Away with it
been minted in excess of requirements in previous
and Kruger!” 3
years. However, the outbreak of the Second Boer War
In the end, the coins also turned out to be a personal
necessitated the reopening of the State Mint in October
embarrassment for Kruger. Otto Schultz had placed
1899. When the State Mint returned to production,
his initials (O.S.) on the bust of the President, which
Kruger sovereigns (dated 1900) to the value of £925 000
in Afrikaans means ‘ox’. President Kruger’s election
were struck between October 1899 and May 1900 – and
opponents of course wasted no time ridiculing him about
it is believed that some of these were included in the gold
this inscription.
coins removed by Smuts from the State Mint.
Kruger nevertheless won the election by a small
In total, 2 203 265 Kruger pounds and 362 985
margin (Kruger, 7 854 votes; Joubert, 7 009 votes; Kotze,
half-pounds were minted, spanning the period 1892 to
81 votes). Future Kruger coins were then issued without
1900.4 Of these, 677 072 pounds and 95 half-pounds were
Otto Schultz’s initials and with the correct wagon.
officially melted by the new South African Mint in later years. This leaves an outstanding balance of 1, 889 083
It is incredible to think that, had Kruger lost the election, the most popular bullion coin in the world
gold coins, which, of course, begs the burning question:
would be very different. But not only did Kruger win the
are some of these still hidden as part of the legendary
election, he also remained in power until 10 September
Kruger Millions?
1900, when he left for Europe (and officially until 31 May
47
Chapter 2
The “Banket” Reefs and the extraordinary Witwatersrand Gold Basin Of course, the Kruger sovereigns, the Krugerrands and even the legend of the Kruger Millions would be nothing without an epic, once-in-a-lifetime discovery – the discovery of the main Witwatersrand gold reef just six years before Kruger raced to have his effigy minted on ZAR sovereigns. The 1886 discovery was not a total surprise. Over the period 1874 to 1885, a number of minor discoveries were made in the area just to the north of the outcrop of the main payable reef of the Witwatersrand. Known as the Blaauwbank and Kromdraai Gold Fields, they were joined by a further discovery in the form of Fred Struben’s “Confidence Reef” on the farm Wilgespruit, situated on the northern slopes of the Witwatersrand hills. None of these, however, provided a sustainable source of gold. All of that changed in 1886 with the discovery of the main Witwatersrand Reef. Although mired in some controversy, the discovery is attributed to two prospectors, George Harrison and George Walker.
48
Kruger Sovereigns: A bust, a shaft and an ox
The 1999 commemorative tenth-ounce gold Protea coin. It depicts the horizontal shaft or addit of the Blaauwbank mine near Magaliesberg. The actual addit is shown in the photographs. Photo by: F Malan
49
Chapter 2
“In fact, new Krugerrands are still being minted from gold mined in this area today.” The two were allegedly on their way to the Barberton
gold rush (1848 to 1855) achieved peak production
goldfield when they crossed paths with Struben at
in 1853. Somehow, though, the Witwatersrand
Wilgespruit. Walker was offered the job of erecting a
Basin was different.
stamp mill, which had been bought to crush the ore of
In the early days of mining in the Basin, British
the Confidence Reef. Harrison, meanwhile, had been
geologist Charles Alfred noticed the “novel” features of
offered a job by Petronella Francina Oosthuizen, a widow
the goldfields. “The Transvaal goldfields present many
living on the farm Langlaagte. Located on the southern
striking and novel features. In older gold countries of the
slopes of the Witwatersrand hills, Langlaagte was not far
world, in Russia, America and Australia, at least half the
from Wilgespruit. Legend has it that on a fine Sunday in
gold has been found in great alluvial deposits and the
February 1886, Walker visited Harrison on Langlaagte
remainder in veins traversing the mountain ranges from
and while the two were strolling on the farm, Harrison
which the alluvial gold has been derived. The conditions
stumbled across an outcrop of rock. 5 He later testified
of the occurrence of gold in South Africa are very different.
that he crushed a sample and panned it to find a long
The amount of alluvial gold hitherto produced is hardly
“tail” of gold – a move that led to the discovery of what
deserving of mention; and yet, in so large an area so little
would come to be called the Main Reef.
explored it is impossible to say what mineral deposits may
The area was declared a public digging in the
not be met with in the future.” 7 Peak production of 1 000 tons per year was only
Government Gazette of 8 September 1886, but few of the early miners getting dusty and hot in the Witwatersrand
reached in 1970, more than three-quarters of a century
diggings would have believed that gold could still be
after the initial discovery of gold in the Basin. Since 1886, more than 50 000 tons of gold have been recovered from
mined in the same basin more than 130 years later.
this area. Indeed, it is this longevity of the goldfields and
Gold rushes tend to be short-lived affairs. The last great gold rush in 1896, the Klondike gold rush in
the artificial low gold price in the 1960s that eventually
Canada’s Yukon Territory, fizzled out after just three
contributed to the birth of the Krugerrand. But much
years and production peaked in 1903 after heavier
more on that later.
equipment was brought in.6 The famous Californian
Opposite page: The 1999 Protea set from the SA Mint depicts mining scenes from South Africa. The one-ounce coin illustrates a miner at the stope face and the silver R1 coin is a view of Johannesburg with the silhouette of a timber mine headgear. Photo by: F Malan
50
Kruger Sovereigns: A bust, a shaft and an ox
51
Chapter 2
What makes the Witwatersrand Basin so special? It is an immense basin stretching 320km in a
conglomerates (a mass of water-worn pebbles cemented
northeasterly direction and 160km in a northwesterly
by a siliceous matrix). Some of these conglomerates
direction.8 The name Witwatersrand (“White Waters
contain significant amounts of microscopic gold
Ridge�) is derived from the low range of hills with several
particles. (Visible gold is rare in the mines of the
small waterfalls just to the north of the area where
Witwatersrand Basin.) The source of the gold remains
the initial discovery was made. The Basin appears to
uncertain and a number of different theories exist.9
have been an ancient sea (2,7-billion years old) where
The entire sequence of different layers was eventually
rivers deposited sediment in the form of sand and
covered with a thick overburden consisting of lava
pebbles. These deposits occurred in several layers
outpourings and younger sedimentary rocks.
and the sequence consists of shales, quartzites and
52
Kruger Sovereigns: A bust, a shaft and an ox
The Witwatersrand (translated as “ridge of white water”) is named after the numerous waterfalls found on the northern slopes of the ridge. South Africa’s monetary unit, the Rand, is an abbreviation of Witwatersrand. Photo by: F Malan
53
Chapter 2
54
Kruger Sovereigns: A bust, a shaft and an ox
“All of this gold would have perhaps remained hidden forever if it were not for another incident that took place approximately two-billion years ago.” A massive asteroid or comet collided with earth,
caused devastating global change, including, according to
impacting near the town of Vredefort, 120km to the
some scientists, major evolutionary changes.” 10 The impact caused a series of concentric ridges –
southwest of Johannesburg. This is approximately at the centre of the Witwatersrand Basin. The impact of the
among these the Witwatersrand Ridges. Importantly,
space body resulted in the formation of what is known
the once horizontal layers of the Basin were tilted and
as the Vredefort Dome, which was declared a UNESCO
the gold reefs were positioned for eventual discovery and
World Heritage Site in 2005.
mining two-billion years later. The reef discovered by Harrison was one of these
UNESCO states that the impact created an event of huge significance. “The Vredefort Dome, approximately
tilted conglomerate bands exposed on the surface (an
120 kilometres southwest of Johannesburg, is a repre-
outcrop) at Langlaagte. The conglomerate contained
sentative part of a larger meteorite impact structure, or
quartz pebbles that were reminiscent of a type of
astrobleme. Dating back 2 023-million years, it is the
Dutch almond pudding called “banket”, and so the reef
oldest astrobleme found on earth so far. With a radius of
acquired its nickname. The “banket” reef was later
190 kilometres, it is also the largest and the most deeply
renamed the Main Reef and its exploitation was joined,
eroded. Vredefort Dome bears witness to the world’s
in later years, by other payable reefs in the geological
greatest-known, single energy-release event, which
succession, among them Leader Reef, South Reef, Vaal Reef, Carbon Leader Reef and Ventersdorp Contact Reef.
Opposite page: The sedimentary layers of the Witwatersrand Basin can be seen in the Walter Sisulu Botanical Gardens in Roodepoort, Johannesburg. This formation is the bottom part of this geological succession which is several kilometres thick. The white layers are Orange Grove quartzite and the darker rock is Parktown shale. Photo by: F Malan
55
Chapter 2
Above: The Vredefort Dome as viewed from space. Photo by: NASA Opposite page: The South African Mint produced a commemorative R2 gold coin in 2008 to celebrate the World Heritage Site status of the Vredefort Dome. Photo by: F Malan
56
Kruger Sovereigns: A bust, a shaft and an ox
Much like other major discoveries around the world, a
A stock exchange was opened soon after the Main
major gold rush followed the initial discovery. In 1887, the
Reef was discovered and, from February 1888, the
journalist Mathers wrote: “Johannesburg is scarcely nine
Witwatersrand began producing 10 000 ounces of gold
months old ... It already has regular broad streets, and
per month for the very first time.
the Market Square is the largest in South Africa. There
But the initial celebrations were short lived,
are considerably over 1,000 stands and about the same
primarily due to the increasing production of a
number in Marshalls Township, while another 1,000 for
“refractory” type of ore. Closer to the surface, this ore was weathered and
residential purposes have been sold by the government.” 11 Of some concern to the Republic was the large
it was easy to crush the rock and treat it with mercury
influx of the foreigners – from every part of the world
in the process of amalgamation. Mercury has a natural
– who were part of any gold rush. By 1895, a census
affinity for gold and, after amalgamation, the gold can
showed that the population in the town had reached
be recovered by heating it in a furnace. In the mines that
80 000 inhabitants. Some of the skills the foreigners
were deeper, a refractory type of ore, which contained
brought were crucial to the development of the mines
large amounts of sulphides, was mined. The recovery
and American mining engineers apparently played
of gold using the amalgamation process dropped
a dominant role.
from the typical ounce per ton of rock to less than 10
As the general manager of De Beers, Alpheus
pennyweights. The stock market slumped and even Cecil
Williams, recalled: “With America still by far the largest
Rhodes’s famous Gold Fields of South Africa, which had
gold producer in the world, it was only natural that
a peak value of $28 per share, dropped to $7 per share.13
the Rand opened up with a predominance of American
Like other gold rushes, the Witwatersrand seemed to be
mining engineers. Many were merely practical miners,
doomed to an early demise.
but the majority were graduates of American and foreign universities.” 12
57
Chapter 2
“In the 1930s yet another discovery finally confirmed the Witwatersrand as the greatest gold discovery in history.” What saved Johannesburg (and, ultimately, the
throughout the world and the judges deliberated for
Krugerrand) was the patented MacArthur-Forrest pro-
eight months before a verdict was given.
cess of using potassium cyanide to treat the gold ore.
The judgment of Chief Justice Kotze (who incidentally
John MacArthur and his financiers, the brothers
was one of Kruger’s opponents in the 1893 presidential
Forrester, developed the process in Glasgow in 1887. It
election) stated: “I have arrived at the conclusion that
was not an entirely new process, having already been
the claim under Patent No. 74 as well as under Patent
discovered by chemists in the 1840s and demonstrated
no. 47 is bad and cannot stand, on the ground of lack
by Michael Faraday, the famous English scientist, at
of novelty, and also that it had been anticipated. The
the Royal Institution in London. The MacArthur
Plaintiff is, in my opinion, entitled to the cancellation of
invention, however, turned it into a practical process
both patents, and judgment must accordingly be against
for the first time.
the Defendant, with costs.” 14 None of the inventors derived further gains from
In South Africa, the African Gold Recovery Syndicate was established to exploit the MacArthur-Forrest
the MacArthur-Forrest process, although they surely
process and the mines paid the company a royalty
saved the mines from an untimely death. As frequently
on the gold produced. As the success of the process
happens with famous inventors, MacArthur died a
became evident, “greed” became an ingredient and
poor man in 1920. In the 1930s yet another discovery finally
the African Gold Recovery Syndicate increased its royalty to 10% of gold recovered. The cyanide monopoly
confirmed the Witwatersrand as the greatest gold
had played its cards and a showdown with the mine
discovery in history. Until that point, the mines had only expanded to the
owners was inevitable.
immediate east and west of Johannesburg, although it
The mines took a decision to challenge the MacArthur-Forrest patents No 47 and 74 issued in
had been proven that the reefs continued up to a depth
Pretoria, setting into motion one of the costliest lawsuits
of 3 000m and beyond. Approximately 30km west of
in the history of South Africa. Information was collected
Johannesburg, near the town of Randfontein, the reefs seemed to disappear underneath a thick layer of lava.
Opposite page: Dr Rudolf Krahmann was instrumental in discovering the West Wits Line of the Witwatersrand gold fields using a magnetometer. Photo by: Gold Fields
58
Kruger Sovereigns: A bust, a shaft and an ox
59
Chapter 2
It was here, in the midst of the Great Depression, that Dr Rudolf Krahmann made a discovery. A German geologist who prospected in the area using a torsion balance, Krahmann found signs that the reefs likely continued in this area. Boreholes verified their existence at depth and the Witwatersrand goldfield suddenly became much larger in extent. The same techniques were used to discover the new mining areas of Klerksdorp and in 1938 Oscar Weiss, a colleague of Krahmann’s, discovered the Free State Goldfields (250km southwest of Johannesburg) using geophysical techniques. The opening of all the various mines in these new areas led directly to a peak gold production of 1 000 tons in 1970, with many production records being broken in the process. Driefontein Mine, for example, produced more than 100-million ounces over a period of 50 years and it is still in operation today (now owned by Sibanye Gold). Krahmann’s discovery led to the provision of a huge supply of gold for the minting of the Krugerrand. The sheer numbers minted out of this discovery led to the well-known South African numismatist, Eli Levine, refer to the coins as “The New Kruger Millions”. But politics, a gold-standard crisis and efforts to maintain the strength of the US dollar at all costs had to set the scene first.
Opposite page top: The commemorative R2 gold coin of 2014 is a fitting tribue to the contribution of the gold mining industry to the economy of South Africa. Photo by: F Malan Opposite page bottom: (right and left) The famous West Driefontein No 5 Shaft. West Driefontein Gold Mine produced 1 500 tons of gold from 1952 to 1981 when it was amalgamated with East Driefontein. Left photo by: Gold Fields Right photo by: F Malan
60
Kruger Sovereigns: A bust, a shaft and an ox
61
Chapter 2
Above and opposite page: An alloy medallion with a 24 ct gold inlay designed for the 2014 Discovery of Gold launch set. Photo by: Breinstorm Brand Architects
62
Kruger Sovereigns: A bust, a shaft and an ox
63
Chapter 2
Mining activities in Johannesburg during 1889. Photo by: Museum Africa
64
Kruger Sovereigns: A bust, a shaft and an ox
R E F E R E NCE S 1
Arndt, EHD, Banking and Currency Development in South Africa (1652 1927), Juta & Co., Ltd, Cape Town/ Johannesburg, 1928.
2 Kruger, SJP, The Memoirs of Paul Kruger, Colonial Edition, London, T. Fisher Unwin, 1902. 3 The Coinage of the South African Republic, Reprinted from the “Numismatic Chronicle,” Third Series, Vol. XX, Pages 252 – 263, London, 1900. 4 Van Rensburg, C, The South African Coin and Banknote Catalogue 2002 – 2003, Published by the author, 2002. 5 Cairncross, B and Dixon, R., Minerals of South Africa, The Geographical Society of South Africa, 1995. 6 Sutherland, CHV, Gold, Thames and Hudson, London, 1959. 7 Rosenthal, E, Gold! Gold! Gold! The Johannesburg Gold Rush, Collier-Macmillan Ltd, London, 1970. 8 Coetzee, CB, Mineral Resources of the Republic of South Africa, Fifth Edition, Geological Survey, 1976. 9 Cairncross, B and Dixon, R., Minerals of South Africa, The Geographical Society of South Africa, 1995. 10 Fleminger, D, Vredefort Dome, Southbound Pocket Guides To South Africa’s World Heritage Sites, 2004. 11 Rosenthal, E, Gold! Gold! Gold! The Johannesburg Gold Rush, Collier-Macmillan Ltd, London, 1970. 12 Ibid 13 Ibid 14 Ibid
65
03
Here and then Gone:
THE GOLD STANDARD
“In truth, the gold standard is already a barbarous relic.” - John Maynard Keynes, 1924 1
Chapter 3
T
he use of gold as a store of wealth is an ancient
rather difficult – indeed, impossible – to create gold out
relic. In contrast, the gold standard as we know
of thin air. A far easier task is to get the printing presses
it is a more recent invention. And Lord Liverpool
going or to give bank clients larger credit facilities. Gold
the British Prime Minister who proposed it to King
is limited, difficult to mine and far too restrictive, these
George III, would probably have been offended if his
people argue. So how did the gold standard come about
proposal had been characterised as “barbarian” 100 or
and what made it disappear?
so years later.2
The first gold coins were issued by King Croesus of
Keynes’s viewpoint, in all likelihood, has
Lydia (who reigned from about 560 – 546 BC) and for the
sympathisers in modern bankers who strongly dislike
next 2 500 years, gold remained a universally accepted
the use of gold in monetary systems and have no
means of payment.3 The rarity of gold forced the Greeks
hesitation in referring to it as a “barbarous relic”. Who
to mint their coins mostly in silver (510 –146 BC). Gold
can blame them, with modern fiat monetary systems
was also scarce during the period of the Roman Republic
having survived and seemingly flourished over the
(290 –27 BC) and the famous silver Denarius coin
last 40 years without the backing of gold? The Weimar
(weighing between 3,9 and 4,5g ) dominated trade in the
hyperinflation is long forgotten and the likes of
civilised world for a period of four centuries.4 One of the most important coins during this period
Zimbabwe’s collapsed currency does not seem probable
was the Roman Empire’s gold aureus coin. It only became
in developed-world countries.
a regular issue around 4 BC and, during the time of
Perhaps the reluctance of certain sectors of society
Caesar Augustus, it was worth 25 denarii.5
to put gold at the heart of monetary systems is also because the ancient alchemists discovered that it is
68
Here and then gone: the Gold Standard
Examples of silver denarii coin from Roman times. This small silver coin dominated trade for four centuries. The coin on top is from the Roman Republic (133 BC) and the bottom coin is from the time of Caesar Augustus. Photo by: F Malan.
69
Chapter 3
“Later the aureus effectively became coined bullion with its value unfixed in monetary terms, making it, in essence, the ancient forerunner of the Krugerrand.” Initially the aureus was a coin 7,5 to 8g in weight during
that survive from that time testify to the worthlessness
the reign of Caesar Augustus (31 BC – 14 AD), but
of this money.
this dropped to under 4g during the reign of Trajan
The gold aureus was never debased in the same
Decius (249 AD – 251 AD). Inflation, and attacks by the
fashion (although its weight was reduced) and, in the
barbarians, severely weakened the Roman Empire.6
third century, it became rare. Constantine the Great
In fact, inflation during Emperor Gallienus’s reign
revalued the gold coin in 312 AD and called it the
(260 – 268 AD) has been compared to that of Germany
solidus (4,8 g weight). This coin survived until the fall of
during 1923.7 The huge numbers of antoninianus coins (a
the Roman Empire.
debased silver coin that contained only 2,5 to 5% silver)
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Here and then gone: the Gold Standard
Examples of antoninianus coins during the period of military emperors in Rome from 235 AD to 270 AD. The top is Philippus I (244 AD) and the below is Cairinus (283 AD). The coin was continuously debased during this period and eventually only contained 2.5% silver. Photo by: F Malan.
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“Roman gold coins are rare and expensive for collectors. In contrast, the debased silver coins are very common and cheap owing to the sheer volume minted. This is, to my mind, a powerful ancient testimony to the enduring value of gold coins.� Above: A Venetion Ducat or "Zecchino" from the period 1365-1386. The design of this coin remained unchanged for 500 years. The left depicts Christ and, the right, the Doge of Venice, Marco Corner, kneeling in front of St. Marcus. Photo by: F. Malan
72
Here and then gone: the Gold Standard
In spite of the collapse of the Roman Empire, the solidus
of European products and so received the bulk of
survived during the Byzantine Empire for another 500
Hungarian gold production as payment.
years. The coin survived essentially unchanged in the
Florence also issued a gold florin of approximately
Byzantine Empire (fifth to 10th century) and was only
similar weight. Until the end of the 15th century, the
debased during the reign of Michael IV (1034 – 1041 AD).
ducat and florin dominated European commerce. France
The Arab conquest of Egypt and North Africa resulted
and England also experimented unsuccessfully with gold
in a change of commerce patterns and the solidus was
coins during this period and Henry III issued his gold
gradually replaced by the Islamic dinar as the main
penny in 1257. However, this failed experiment was seen
trading currency. This process was accelerated in the
as merely an “act of kingly rivalry”.10 Firstly, there was
11th century when Byzantium came under pressure from
not a sufficient store of gold in England at the time and,
the advancing armies of the Seljuks. Emperor Michael IV
secondly, the economic activity in England was of such a
debased the fineness of solidus to 1,6g of gold to finance
nature that it did not require gold coins. In 1489, Henry
the war effort.
VII was the first King of England to strike a gold coin,
8
In ancient times, those in power were not able to
issuing instructions that the 20-shilling coin be named
crank up the printing press to finance a costly war.
a “sovereign”. This marked the first time that the pound
Debasing the physical coinage was the only option,
sterling, which has come to form the basis of the British
but the inflationary effect was brutal and society lost
monetary system, was represented by a physical coin.11 The voyages of Prince Henry the Navigator heralded
confidence in the coinage. Alexius I (1081 – 1118 AD)
the Age of Discovery, and gave the Portuguese access to
attempted to restore the monetary stability by issuing the saucer-shaped gold hyperpyron (which contained 4g
the gold region of Senegal and, later, Guinea in 1481. The
of gold). The Fourth Crusade finally broke the stability of
gold coinage of Portugal became plentiful and in 1457
the Byzantium financial system and the conquerors only
Alfonso V of Portugal introduced the cruzado gold coin,
issued degenerate base metal coins. The Arab traveller
weighing 3,6g.12 After Vasco da Gama rounded the Cape
Ibn Battuta described the death of the solidus in 1332
of Good Hope in 1498, the Portuguese monopolised the
by stating, quite unequivocally, that “The gold of that
trade with the East. As gold, but not silver, was plentiful
country is no good”.
in India, the Portuguese brought African gold to Europe
9
When the Byzantine hyperpyron collapsed, the city
and coined it to buy silver on the European market
of Venice found it necessary to strike its own gold coins,
for trade with the East. An active bullion-exchange
resulting in the ducat. It weighed 3,56g and was first
market was established in Antwerp in the Netherlands
minted in 1284.
for this purpose.
The ducat was made possible by the discovery of gold in Hungary. The Venetians were chief exporters
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Chapter 3
A key development was the discovery of the Americas
struck in Peru and shipped to the East and Spain. These
by Christopher Columbus in 1492. This opened the door
were the coins intercepted by the infamous pirates of
for the conquest of Mexico and Peru by the Spanish in
the Caribbean and are now immortalised in movies and
the 16th century. The instruction of King Ferdinand
novels such as Robert Louis Stevenson’s Treasure Island.
was simple: “Get gold, humanely if you can, but at all
But the party could not last forever and a flood
hazards get gold.” 13
of easy money contributed directly to the downfall
The conquerors Hernán Cortés and Francisco
of Spain. The large influx of both gold and silver into
Pizarro did not disappoint the king. The gold amassed
the country caused inflation and Spanish industry
by the Aztecs and the Incas exceeded all expectations
became uncompetitive in the European market. After
and the resulting flow of gold from the Americas to Spain
the reign of Philip II, shipments of gold and silver from
was enormous, leading to the Spanish doubloon (double
the Americas gradually declined. Spain rapidly lost its
escudo) becoming the most common gold coin in Europe.
position as a world power with its dependence on easy
As a further bonanza, in 1545 a huge silver deposit
gold and silver turning out to be its Achilles heel. This
was discovered at Potosí in modern-day Bolivia. Large
decline of a once powerful country opened the door for
numbers of the famous “pieces of eight” reales were
the rise of the Netherlands, France and England.
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Here and then gone: the Gold Standard
Above and opposite page: Examples of the famous Spanish 8 Reales or “Pieces of Eight” that dominated world trade for two centuries before the gold standard was implemented. On the opposite page, the crude coin on the left is an example of a “Cob” coin struck and trimmed by hand in the various Spanish mints in the Americas. Cobs were accepted as good currency throughout the world. Photo by: F Malan.
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Chapter 3
Top: A Dutch ducat of 1761. Bottom: A gold guinea of 1785. Photo by: F Malan.
76
Here and then gone: the Gold Standard
“Until 1816 bimetallism, in which both gold and silver were minted and enjoyed similar legal rights as money, was universally accepted in the world economy.” During the 17th century, the ducat held the position of
guinea was so powerful that, as recently as the 1960s, it
the most important gold coin in Europe. It was a key
was still used in South Africa as a unit of accounting and
coin in Germany, Scandinavia, the Netherlands and Italy,
works of art were typically priced in “guineas”.
where it was known as the zecchino.
The year after the famous Battle of Waterloo proved
In Britain, the first gold guinea (worth 20 shillings)
to be a landmark year for British coins and also heralded
was struck in 1663 by King Charles II, taking its name
the onset of the gold standard. Until 1816 bimetallism,
from the African kingdom from where some of the gold
in which both gold and silver were minted and enjoyed
used for the coins originated. With Britain being the
similar legal rights as money, was universally accepted
dominant world power in the 18th century, the guinea
in the world economy. After facing severe shortages of
quickly became one of the most important gold coins
first silver and then gold, Britain took the decision that
in world trade. Money again became scarce during
monetary stability could best be achieved by valuing its
the Napoleonic Wars and the minting of guineas was
currency in gold only.14
discontinued from 1797 to 1813. But the impact of the
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Chapter 3
Above and opposite page: The first British sovereign was minted in 1817. A modern version of this coin is still struck by the British Mint and it will celebrate its 200th anniversary in 2017. Photo by: F Malan.
The Currency Committee of the Privy Council
lower than their face value. The first official token
recommended the acceptance of Lord Liverpool’s
coinage was born. The old guinea was replaced in 1817
original gold-standard proposal, which he had made a
with a sovereign of 20 shillings value and a standard
decade earlier to King George III.15 The Coinage Act of
fineness of 22 carat. The gold content of this coin
1816 (Act No. 56, George III) was promulgated and silver
was 7,32g or 0,235 troy ounces and equivalent to one
coins were produced with an intrinsic value significantly
pound sterling.
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Here and then gone: the Gold Standard
As described in the Act: “And whereas at various times
coin made according to the indentures of the Mint should
heretofore the coins of this realm of gold and silver have
henceforth be the sole standard measure of value and
been usually a legal tender payments to any amount, and
legal tender payment, without any limitation of amount,
great inconvenience has arisen from both these precious
and that the silver coin should be legal tender to a limited
metals being concurrently the standard measure of value
amount only, for the facility of exchange and commerce.� 16
and equivalent of property, it is expedient that the gold
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Chapter 3
“The discovery of the Witwatersrand goldfields played no small role in helping to sustain this standard by the end of the 19th century and also meant that supporters of a bimetallic standard were finally silenced.� Full redemption of paper money in gold coin at par
London positioned itself as the central bullion
nevertheless took a few years, as the banknotes had
market of the world and new gold discoveries in
depreciated against gold during the war years. The
Russia, California and Australia supplied the gold to
premium on gold gradually decreased and, on 1 May
maintain the gold standard. From 1871 to 1890 there was
1821, the convertibility of sterling into gold was fully
nevertheless a marked drop in the supply of newly mined
implemented.
gold and a frantic search for the metal was undertaken
Although 1816 can be considered to be the birth of the
throughout the world.
gold standard, a de facto standard already existed after
These were also years when the world economy
Isaac Newton, Master of the Royal Mint from 1699 to 1727,
underwent an unprecedented expansion and the gold
set the price of an ounce of gold at 77s 10.5d. 17
standard would not have been sustainable without
Gradually, the major economic powers in the world
significant growth in the available gold stocks. For a long
also accepted the gold standard. America was the
time, a principal objection to the gold standard was that
exception for a long time and tried unsuccessfully to
there was not enough gold in the world to support the
maintain a bimetallic standard for the dollar until 1893.
growth of the world economy.
During this time, a relative value of gold versus silver of
The Witwatersrand production rapidly increased
16:1 was imposed.
from just 1,2 tons in 1887 to 120 tons in 1898, or 25% of the
The British Empire reached its peak late in the 19th
world’s newly mined gold, over a period of just 13 years. 18 With gold being such a dominant component of
century, assisting the Bank of England to become the
the world economy, it was inevitable that friction
heart of the international gold standard and the sterling to be used as international currency on a par with gold.
80
Here and then gone: the Gold Standard
Rand gold being shipped to London from Cape Town docks. Photo by: The South African Mining & Engineering Journal, 1923
would eventually arise between the South African
flow to London, the British Empire felt uneasy about the
Republic and Britain.
emergence of an independent and wealthy South African
From the start, the South African gold producers
Republic and recognised the dangers this might pose to
dealt mainly with the London gold market. Not only
their interests in the region.
was it the world’s dominant gold market, it also had
Predictably, the British Empire behaved the way all
refining capabilities and the shipping route between
empires have in the past, and so it set out to conquer.
Cape Town and London was well established at the time.
The mine owners’ frustrations with Paul Kruger’s
Typically, the South African mines would deliver their
regime and the denial of voting rights for foreigners
gold directly to the two largest local banks, the National
provided the excuse. As stated by Russell Ally in Gold
Bank of South Africa and the Standard Bank of South
& Empire: “...in the final analysis, the conflict between
Africa. These banks arranged for weekly shipments of
Boer and Briton turned around gold and the vital place
gold from Cape Town to London, where the refiner and
the Witwatersrand’s gold mining industry had come to
broker NM Rothschild & Sons dealt with the bulk of the
occupy in the world economy. In the words of De Kiewiet,
South African gold. Although all the gold continued to
the crisis ‘was brought by gold’.”
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Chapter 3
This page and opposite page: South African banknotes before and after South Africa finally abandoned the gold standard. The Five Pounds on this page is dated 17 April 1931 and could still be exchanged for gold sovereigns in 1931. The Twenty Pounds on the opposite page is dated 4 September 1933. This was after the gold standard was abandoned and the banks would not exchange it for gold coins. It is interesting that the note still stated “I promise to pay the bearer on demand at Pretoria Twenty Pounds�. It is not clear what exactly the Governor would have paid the person if the note was presented. Photo by: F Malan
War broke out on 11 October 1899. Paul Kruger and his
By the end of the war, gold production had resumed
Volksraad had been the first to declare war after the
in South Africa and, during 1903, a total of 2 971 427
demands they had sent to the British High Commissioner
ounces were produced. This steadily increased to 9 108
in the Cape were refused. A small country with a
792 ounces by 1912.19 The gold standard was on a solid
population of only 245 000 and virtually no regular army
footing. Or was it? War equates to deficit spending and in the end it was
was preparing to take on the industrial and military might of the British Empire. For some commentators,
not a supply shortage of gold that led to the demise of
even taking into account contributing factors of igno-
the gold standard, but the outbreak of the First World
rance and the desire for independence, the courage
War. The gold standard effectively died with Archduke
displayed by Kruger in the face of Britain’s might is note-
Franz Ferdinand on the streets of Sarajevo. The warring
worthy and makes a re-examination of that effigy on the
countries had to finance the mobilisation of their armies
Krugerrand worthwhile.
through the creation of paper money that was not backed by gold. This did not mean that they stopped protecting
82
Here and then gone: the Gold Standard
their gold reserves. In Britain, for example, it became
a corresponding decline in the value of the South African
illegal to export gold and the melting of gold coins was
pound. It was estimated that gold coins to the value of
prohibited. The Bank of England recalled all gold coins
£2 945 435 left South Africa between April 1918 and
in circulation and replaced the coins with banknotes.
March 1920.21 In spite of an embargo on the export of
Having ended the convertibility between sterling and
gold, smuggling was lucrative, as the sovereign was still
gold, the gold standard was effectively dead. Instead,
worth only 20s in South Africa. In other countries, it
Britain attempted to keep the gold standard legally
could fetch as much as 38s 9d. The South African banks struggled with the situation
intact by making sterling directly exchangeable with the
of still being legally obliged to exchange their banknotes
American dollar.20 In the year after the war, Britain found it impossible
for sovereigns at par. Their appeal to the Government
to maintain the pre-war parity of sterling with the dollar
for assistance resulted in the Gold Conference of
and the official exchange ratio was lifted. With this act,
October 1919. Premier Jan Smuts famously declared at
it admitted that sterling could no longer play the role of
the conference: “South Africa was the only country in
the world’s dominant currency. The British government,
the world where one could go into a bank and get gold in
nevertheless, aimed to return to the gold standard. By
exchange for notes and cheques.” 22 The conference ended in a stalemate between the
that time, America was the only leading economic power to have restored a full gold standard for its currency.
politicians, who wanted to restore the gold standard, and
The abandonment of the British gold standard also had
the bankers, who wanted their banknotes to be made
an effect on the major gold-producing country, South
inconvertible. Ernest Oppenheimer of Anglo American
Africa. Prior to the war, the South African pound was
Corporation was requested to break the stalemate. His
tied to sterling, but the latter’s decline against the dollar
proposals won a majority of votes and had far-reaching
after the abandonment of the gold standard resulted in
consequences for the country’s future economy.
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Chapter 3
“Oppenheimer’s proposals included the establishment of a mint and a refinery, as well as a request to gold producers to modify their selling agreement with the Bank of England to allow termination at short notice. The embargo of gold-coin exports was also to be lifted after the establishment of the Mint.” Amazingly, even though the conference rejected an
would build a closer relationship with the United
inconvertible currency outright, Jan Smuts announced
States, which was seeking to replace Britain as the
barely three months later, in February 1920, that all gold
premier international financial centre.23 As evidence
coin in circulation would be withdrawn and replaced
of this, JP Morgan had already invested a significant
with inconvertible paper money. Opposition politicians
amount in Anglo American. Strakosch presented very
from the National Party were outraged and launched a
strong arguments and assisted the Treasury with the
heated campaign against the banks. Senior politicians
drafting of three bills based on his recommendations.
demanded to be allowed to withdraw their bank
These provided for the establishment of a Central
balances in gold.
Reserve Bank and a bill to conserve the gold-coin supply by issuing Gold Certificates. All gold coin would be
The person who changed Smuts’s mind was the influential Henry Strakosch, the managing director of
withdrawn and replaced with Gold Certificates. These
the Union Corporation mining house. Strakosch’s long
could be redeemed in gold, but only once parity between
association with the City of London ensured that his
gold and the pound had been re-established. Strakosch’s
main objective was to keep South Africa firmly in the
proposals were eventually consolidated into one bill and
imperial economic system. If South Africa remained
were passed into law in August 1920 as the Currency
on the gold standard, it was probable that the country
and Banking Act (Act No. 31 of 1920). In fact, the South
84
Here and then gone: the Gold Standard
African gold mines welcomed the inconvertibility of the
Right from the start, it became clear that Vissering
pound, as the premium on the sterling price for gold
and Kemmerer were in favour of a return to the gold
assisted the marginal mines to survive.
standard. A key argument was that it would lead to
In June 1924, the Pact Government (a coalition
greater stability in the value of the South African
between the National and Labour Parties) with General
pound and this would be beneficial to both importers
JBM Hertzog as Premier came into power in South
and exporters. They recommended South Africa’s
Africa. The new government strived to be less dependent
unconditional return to the gold standard on 1 July
on Britain, particularly when it came to domestic
1925 – a recommendation that was accepted by
political decisions. One of the coalition’s election
Hertzog’s government.
promises was to re-establish the South African pound
Meanwhile, the debate on whether to return to the
based on the gold standard. The financial advisers
gold standard or not was still raging in Britain. Faced
who were approached to assist with this task were EW
with the pressure of both South Africa and Australia
Kemmerer, a professor at Princeton University in the
back on the gold standard, it was considered prudent
United States, and G Vissering, the President of the
to reinstate the gold standard and the British Gold
Bank of Netherlands. Kemmerer and Vissering were
Standard Act of 1925 introduced the gold-bullion
carefully chosen by Hertzog, as neither was connected
standard. This did not make provision for the circulation
to any of Britain’s financial institutions.24 The strength
of gold coins, but the authorities would sell gold bullion in
of the anti-imperialist feelings meant that even H Clegg,
the form of 400 troy ounces on demand.
the Governor of the South African Reserve Bank, was excluded from this Commission’s deliberations.
Above: JBM Hertzog accepted the proposal that South Africa return to the gold standard in 1925. Photo by: US Library of Congress
85
Chapter 3
“Ordinary folk could no longer receive gold coins in exchange for notes, as the gold remained in the Central Bank vaults. This effectively put gold ownership beyond the reach of individuals with modest incomes.” In contrast, the resumption of the full gold standard
the first day, 17 December 1920, the mines ensured that
in South Africa was accompanied by the return of gold
at least 20 shillings of each wage were paid in silver.26
coins as payment in everyday transactions. As described
Contrary to the earlier fears, the workforce accepted the
by Breckenridge: “With few exceptions, between May
new money and two months later the provision of at least
1925 and September 1931 the mines paid the wages of
20 shillings in silver payment was dropped.
both their white and black workers in gold. Of the large
But the workers’ preference for gold did not subside.
mines, only Anglo’s Springs and Rand Mines’ E.R.P.M.
Migrant workers objected to the paper money as “it
paid their workers partially in notes or cheques. The
could not withstand burial under the floor of a hut and
massive Boksburg mine would have preferred to pay in
when hidden in the thatch it was easily destroyed by
gold but the local banks were unable to meet the demands.
fire”.27 There were other reasons too: the workers also
Crown Mines, Evans’ Fiefdom, paid out more than 12,000
had no means of saving the money except for carrying
sovereigns every week. Rand Mines, which in the 1920s
it on their person and in the harsh mining environment,
owned and operated by far the largest group of gold mines,
notes quickly became dilapidated and soaked with water.
paid out no less than 3.1 million sovereigns in weekly
As a result, the workers were delighted when the gold
wages during 1927.” 25
coins returned to circulation in 1925 and they refused
Salaries received in gold were recirculated by the
paper money thereafter.
workers, making gold coins quite common in South
On 19 September 1931, Britain abandoned the revised
Africa during the period from 1925 to 1931. When South
gold standard when speculative attacks on the pound
Africa temporarily suspended the gold standard in
resulted in large outflows of gold from the country.
1920, the mines were rightfully concerned that paying
Britain clearly benefited from this step, as it could
the workforce in paper money would lead to unrest. On
now use lower interest rates to stimulate the country’s
86
Here and then gone: the Gold Standard
economy. It was also in South Africa’s interests to leave
withdrawn from the banks in a three-day period.28 On
the gold standard at this stage, but Hertzog refused to
27 December the Reserve Bank and other banks wrote
do so. This led to an immediate appreciation in the value
a letter to the Minister stating: “… in consequence of
of the South African pound and South Africa’s export
the political situation which has developed, the public …
industry and the mines suffered as a result. The Great
are purchasing exchange and withdrawing gold coin so
Depression and one of the worst droughts in South
heavily that is reasonably certain that the position will
Africa’s history wreaked further havoc in the country.
become untenable within a few days.”
It was no surprise when a heated debate about
Finally, on 29 December 1932, it was announced that
the gold standard followed in 1932. Ex-National Party
South Africa had officially abandoned the gold standard.
politician Tielman Roos even re-entered politics
Although South Africa strengthened its position as
and campaigned against this “restrictive” standard.
a dominant gold producer in the following decades,
Further pressure was applied to the Government by the
the generations of South Africans that followed 1932
banks, a media campaign and deteriorating foreign-
never had the opportunity to use gold coins as money
exchange conditions. After 23 December there was a
again. Those who were able to had to wait until the
rush by the public to convert banknotes into gold coin
Krugerrand came onto the market to build those hoards
at the Reserve Bank. Between £2,5 and £3-million was
of gold coins again.
Above: British sovereigns struck at the Pretoria Branch of the Royal Mint. Note the small “S.A.” below the hooves of the horse. Photo by: F Malan
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Chapter 3
The South African Mint: Beginnings In the years following the Anglo-Boer War, no coins were
with the Royal Mint was considered important, as it
struck in South Africa and the demand for specie (money
allowed for the minting of gold sovereigns identical to
in coins) was met by imports from the United Kingdom.
those coined in the London Mint. The design on the
Several investigations were conducted to determine
obverse was the famous St George and the Dragon by
the viability of establishing a mint in South Africa.29
G Pistrucci, first used on the British sovereign piece of
This eventually led to the passing of the Pretoria
1817. The sovereigns minted in South African could be
Mint Act in 1919 and Coinage Act in 1922. The Pretoria
distinguished from those minted in Britain, Australia,
Mint Proclamation, dated 14 December 1922, finally
Canada or India by the small letters S.A. below the
authorised the establishment of a Branch Mint in terms
hooves of the horse.
of the British Coinage Act of 1870.30 The association
88
Here and then gone: the Gold Standard
Above: A photograph of the Pretoria Branch of the Royal Mint in the 1930s. Photo by: SA Mint.
This historic Pretoria branch of the Royal Mint was
two buildings of the South African Mint should not be
located in the block bounded by Minnaar, Visagie and
confused with the Mint of the South African Republic,
Schubart Streets. Sadly, the original building was
which was located a few kilometres away on Church
demolished to make way for the new building of the
Square in Pretoria.
South African Mint at the same location. 31 These first
89
Chapter 3
In its first two years of existence, 1923 and 1924, the Mint
in the period from 1925 to 1933 was four times the
produced only a handful of sovereigns. These coins are
combined totals of all the other British sovereigns struck
rare today and have become expensive collector’s items.
at the London, Sydney, Melbourne, Perth, Ottawa and
This all changed with South Africa’s return to the
Bombay branches of the Royal Mint. Of the total mintage
gold standard in 1925. In February of that year, gold was
figure of 84 290 575 sovereigns minted in South Africa,
received from the Reserve Bank, the National Bank and
82 021 000 were exported to other countries. Of these,
the Chamber of Mines. By the end of the year, 6 521 000
46% went to Britain, where the gold-bullion standard
sovereigns were struck. This increased to 11 809 407 in
prevailed and no gold coins circulated. Amazingly, these
1926, 15 942 530 in 1926 and a record of 18 768 964 in 1928
coins were remelted into bullion bars by the Bank of
before the minting gradually declined. As to be expected
England after all the work to mint them in South Africa!
from the world’s gold powerhouse, the total mintage
Above This one-ounce gold pattern was minted before 1941 at the Pretoria Mint and is housed in the Mint museum. The reason for this pattern is not clear as it was minted long before the concept of the Krugerrand was conceived. It is nevertheless tempting to consider this as a Krugerrand pattern. Photo by: Clive Hassal. Opposite page: A photograph of the Pretoria Branch of the Royal Mint in the late 1960s. The first Krugerrands were struck in this Mint. Photo by: SA Mint.
90
Here and then gone: the Gold Standard
91
Here and then gone: the Gold Standard
Opposite page: Historic main entrance of the Royal Mint in Pretoria. This was illustrated on the 1974 commemorative silver R1 coin (above). Photo by: SA Mint & F Malan.
93
Chapter 3
94
Here and then gone: the Gold Standard
Above and opposite page: Historic photographs of the various departments in the Pretoria Branch of the Royal Mint. Photo by: SA Mint
95
Chapter 3
Gallows and Gold In a strange twist of irony, the Pretoria branch of the Royal Mint and then the first South African Mint were built on the site of the old prison of the South African Republic (before it moved to a new building in Potgieter Street in 1907). Within the walls of the prison, the gallows themselves were said to be in the garden, situated close to Schubart Street – the very location of the two Mints. Among those who faced the firing squad in the prison were HH (Breaker) Morant and PJ Handcock, Australian members of the British irregular unit, the Bushveldt Carbineers, during the Boer War. Both were shot in the prison for alleged crimes committed during the war. Also imprisoned on the site were the leaders of the socalled Reform Committee who were involved in planning the Jameson Raid – an ultimately ineffective attempt to overthrow President Paul Kruger in December 1895.32 Sentenced to death (but later released) were Lionel Phillips, John Hayes Hammond, Frank Rhodes (brother of Cecil Rhodes) and George Farrar. Lionel Phillips wrote that after they were arrested in Johannesburg and transported to Pretoria, he, Farrar, Rhodes and Hammond were locked up together in a galvanised room in the prison.33 Jameson and his party were already detained in another part of the prison. The leaders of the Reform Committee were detained in the jail for three months after the death sentence was commuted, but were then released upon the payment of a fine of £25 000 each. It is ironic to think that the first Krugerrands with the effigy of Paul Kruger were struck at exactly the same location where the leaders of the Jameson Raid were imprisoned and where Morant and Handcock were executed. Was Oom Paul having the last say?
Above: Historic photographs of the Mint in 1966 illustrating the equipment available at the time when the first Krugerrands were struck. This illustrates the smelting room and pouring molten silver into moulds (top left), the rolling of the silver bars in a mill to reduce them to the correct width (top right), a blanking machine (middle) and coins being examined for imperfections (bottom). A modernisation of the Mint started in late 1968 and the Mint was officially opened in 1978. Photo by: Bickels Coin and Medal News.
96
Here and then gone: the Gold Standard
Above: HH (Breaker) Morant, an Australian member of a British Army Unit during the Anglo-Boer War, was executed by a firing squad in the Pretoria prison for alleged crimes committed during the war. This was the same location where the Pretoria Branch of the Royal Mint was later built and where the first Krugerrands were struck.
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Above: Historic image of the Mint in 1977 showing the minting presses. Photo by: Chamber of Mines
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Here and then gone: the Gold Standard
R E F E R E NCE S 1
Keynes, JM, A Tract on Monetary Reform, Macmillan and Company Limited, London, 1924.
2
Kemmerer, EW, Gold and the Gold Standard – The Story of Gold Money, Past, Present, Future, 1944.
3
Mackay, J, The World of Encyclopedia of Coins and Coin Collecting, Lorentz Books, 2010.
4
Carson, RAG, Principal Coins of the Romans, Volume I, The Republic, British Museum Publications Limited, 1978.
5
Sear, RS, Roman Coins and Their Values, 2nd Revised Edition, Seaby, London, 1974.
6
Carson, RAG, Principal Coins of the Romans, Volume II, The Principate, British Museum Publications Limited, 1980.
7
Porteous, J, Coins in History, Weidenfeld and Nicolson Limited, London, 1969.
8
Ibid
9
Ibid
10
Duveen, G and Stride HG, The History of the Gold Sovereign, Oxford University Press, 1962.
11
Ibid
12
Porteous, J, Coins in History, Weidenfeld and Nicolson Limited, London, 1969.
13
Kettell, B, Gold, Howard Timmins Publishers, 1982.
14
Porteous, J, Coins in History, Weidenfeld and Nicolson Limited, London, 1969.
15
Kemmerer, EW, Gold and the Gold Standard – The Story of Gold Money, Past, Present, Future, 1944.
16
Ibid
17
Ally, R., Gold & Empire, University of Witwatersrand Press, Johannesburg, 1994.
18
Ibid
19
Official Year Book of the Union of South Africa, 1933 1934, No. 16, Government Printer, Pretoria.
20
Ally, R., Gold & Empire, University of Witwatersrand Press, Johannesburg, 1994.
21
Ibid
22
Arndt, EHD, Banking and Currency Development in South Africa (1652 - 1927), Juta & Co., Ltd, Cape Town/ Johannesburg, 1928.
23
Ally, R, Gold & Empire, University of Witwatersrand Press, Johannesburg, 1994.
24
Ibid
25
Brekenridge, K, The Cultural Politics of Metallic Money Before the South African Gold Standard Crisis 1920 – 1933, African Studies Seminar Paper, 19 October 1992, African Studies Institute, University of Witwatersrand, 1992.
26
Ibid
27
Ibid
28
De Kock, G, A History of the South African Reserve Bank (1920 - 1952), J.L. Van Schaik, 1954.
29
Arnt, EHD, The South African Mints, Publication of the University of Pretoria, Series III, Arts and Social Sciences, No. 9, 1939.
30
Ibid
31
Bickels Coin and Medal News, 1968. New Building for South African Mint, Vol. 4, No. 2, October/November 1968; South African Mint Annual Report, 1985.
32
The Star, January 1923.
33
Phillips, L, Some Reminiscences, AD. Donker Publisher, 1986.
99
04
AS GOOD AS GOLD “In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value.” - Alan Greenspan, The Objectivist, 1966 1
Chapter 4
F
rom 1933 to 1971 the dollar price of gold was fixed
Vietnam and Cold Wars would have caused substantial
at a meagre $35 per ounce. And the South African
inflation during such an extended period. But the
gold mines struggled in the latter years. How was
Americans defended the dollar price of gold at all costs.
this possible?
In fact, the cost was so high that in the end they lost more
Economic principles dictate that the US deficit
than half of their post-war gold reserves by 1971.
spending of the Second World War and the Korean,
102
As good as gold
“In South Africa, the artificially “managed” gold price eventually gave birth to the Krugerrand.” “Under the Mattress” no more The Great Depression changed the way gold is owned –
a number of bank runs as large numbers of customers
right up to the present day.
withdrew their savings. Between 1929 and 1933, 40% of
Prior to the complete abandonment of the gold-
the banks went bankrupt – a major contributing factor
coin standard, even impoverished South African
to the damage inflicted by the Depression.
mineworkers were paid in gold coins (during the period
As stipulated by Executive Order 6102, all gold owned
1925 to 1932).
by private individuals had to be delivered to a branch of
After 1933, when the Great Depression reached its
the Federal Reserve before 1 May 1933. The owners were
nadir, gold mainly belonged to the Reserve Banks and
compensated $20,67 per ounce. This was done under
the elite. The poverty and declining economic activity
threat of a harsh penalty: violating the order would result
caused by the Depression resulted in the so-called
in a $10 000 fine or 10 years’ imprisonment.
“New Deal” being implemented by President Franklin D
The gold surrendered was stored at the gold
Roosevelt. Part of this New Deal was Executive Order
depository at Fort Knox and other secure locations.
6102 implemented on 5 April 1933, which made the
The only gold coins exempt from this order were coins
private hoarding of gold coin, gold bullion and gold
with recognised collectable value. Individuals were also
certificates illegal in the United States. Roosevelt’s
allowed to retain gold coins worth $100. This Executive
motivation was his belief that the excessive hoarding of
Order was superseded by the Gold Reserve Act of 30
gold was hurting the economic recovery.
January 1934, which upheld the criminality of hoarding
No-one can blame the Americans for keeping their
gold. It also increased the price of gold from $20,67 to
savings “under the mattress” as opposed to in the
$35 per ounce. Incredibly, this price in dollars remained
bank. At the start of the Great Depression, there were
fixed for the next 47 years!
Opposite page: The Mount Washington Hotel, Bretton Woods. This was the venue of the 1944 conference which resulted in the price of gold being fixed at $35 per ounce and only the dollar had direct parity with gold. Countries with excess dollars could demand settlement in gold. Photo by: Boston Public Library.
103
Chapter 4
104
As good as gold
“Roosevelt had to restore faith in the banks and the currency at all costs. To do this, private gold ownership was sacrificed.” Unlike in the United States, private ownership of gold
mint dies were used for the silver and bronze coins,
coins was not criminalised in South Africa.
while the gold pound and half-pound were minted using
In reality there was hardly a need to make this move:
special model dies.
according to the Mint, the gold coin left in the country
It was only during the outbreak of the Second World
in 1934 had dwindled to £4 000 000. Of this amount,
War that some restriction on gold ownership was placed
£3 000 000 was already held by the banks and could
on South African citizens. The Emergency Finance
not be demanded by the public, as the convertibility
Regulations (Government Notice No. 1426, 16 September
of the South African pound into gold was revoked at
1939) required that all South African residents in
the end of 1932.
possession of unwrought gold had to offer it for sale to the Treasury at the price of 150s per fine ounce.3 No
The figure of £4 000 000 is all the more stark when you consider that the Reserve Bank reissued £8 000
mention was made of minted gold coins. A final word on
000 at the resumption of the gold standard in 1925
the South African gold standard was written in 1944. A
and a further £84 000 000 in new gold coins had been
new Reserve Bank Act (Act No. 29 of 1944) had to be
produced at the State Mint. The bulk was officially
introduced, as the Bank’s sole right to issue banknotes
exported and the remainder was lost when South Africa
was due to expire in 1945 and this Act extended this right
abandoned the gold standard. In spite of the huge
indefinitely. Surprisingly, an amendment was introduced
original mintage, South African collectors find it difficult
in the Bill imposing the obligation on the Reserve Bank
to source these gold coins.
to redeem its notes in gold on demand. It nevertheless made provision that the Governor General could
Coinage was so scarce in South Africa during the
suspend this requirement by proclamation, and this
Depression years that “school” or fibre money was produced by the Mint for distribution to schools in order
was done immediately after the Act was passed into law.
to teach schoolchildren what money looked like.2 These
Was the feeling at the time that a return to the gold-coin
fibre coins were produced in the period 1930 to 1939
standard would be feasible sometime in the near future?
and were minted using sturdy cardboard. The official
Opposite page: Executive Order 6102 which made private ownership of gold illegal in the U.S.Photo by: US Government Printing Office
105
Chapter 4
The initial abandonment of the gold standard in South
It was the Second World War that finally lifted the
Africa in 1932 caused a boom in the mining industry.
United States out of the Depression. Ironically, misery
Revenue in the gold mines increased by £20-million in
in parts of the world created desperately needed jobs
1933 and then doubled over the next four years. The
in other parts. In 1939, it was estimated that there
industry’s dependence on the Government for these
were 10-million jobless people in America.5 With the
large profits was well understood by the National Party
Lend-Lease programme to provide war assistance to
cabinet. Recently much publicity has been given to the
Britain, a huge number of jobs were created and by 1944,
African National Congress party’s belief (and other
unemployment was virtually eliminated in the United
political parties) in the nationalisation of South Africa’s
States. Between 1941 and 1945, the American GDP more
mines, based on a conviction that wealth in the ground
than doubled.6 This phenomenal growth was made
belongs to the people and not shareholders. This is
possible by the easy access to credit for companies who
not something new and, indeed, the South African
wanted finance for war production or the expansion of
government had a similar agenda as far back as 1933 –
their plants. Unsurprisingly, the United States public
although, of course, with the intention to only benefit the
debt jumped to $257-billion by the end of the war.
country’s white population.
Inflation nevertheless remained subdued and interest rates remained at a low level as President Roosevelt
The Minister of Finance, Dr NC Havenga, made the following statement in his budget speech on 30 May
effectively nationalised the Federal Reserve. The US
1933: “South Africa’s departure from the gold standard
Treasury required cheap funding and a deal to this effect
and subsequent depreciation of our currency have had
was imposed on the Federal Reserve. The reserve ratio of
the effect of increasing the value ... of the production of
the Fed required for issuing banknotes was also reduced
the gold mines by many millions. This is an increment
in 1945 from 45% to 25%. In 1944, when the end of the war was in sight, the
due solely to State action. It is maintained by State action under the Currency and Exchange Act, and is no wise
Allied powers held a conference at Bretton Woods, New
an appreciation of the assets of the shareholders... In
Hampshire, to discuss the future of the world economic
considering its attitude to the premium, the State need
system. South Africa was represented by Dr MH de
therefore not be concerned with any claim that this money
Kock (who would become President of the South African
belongs by right to the shareholders.”
Reserve Bank in 1945).7 The British representative,
4
Lord Keynes, wanted to establish a new world currency
106
As good as gold
called the Bancor – no doubt in a bid to enhance the
United States to buy and sell gold to settle international
power of Britain and reduce that of the United States.
transactions – eventually leading to the downfall of
The once mighty British Empire was still in denial that
the agreement. If the US ran a payment deficit with a
it was in its twilight years and refused to accept the
particular country, the country may have demanded
ascendancy of the United States. Keynes’s efforts failed
settlement in gold at a rate of $35 per ounce.
and the US dollar became the new reserve currency of
In 1945, it became clear that Britain would struggle to
the world. Under this Bretton Woods agreement, the
recover from the effects of the war. As Webster Tarpley
price of gold was set at $35 per ounce and only the dollar
describes it in Surviving the Cataclysm: “For several
had direct parity with gold. The other currencies had a
decades, Britain was the sick man of Europe.”
fixed parity with the dollar, but small fluctuations were
A post-war loan of $3,75-billion to be repaid over 50 years
allowed. Sterling was initially worth $4,03. The Bretton
was provided by the United States with the condition
Woods agreement placed the onerous condition on the
that the British ratified Bretton Woods. Opposition
Above: New South African gold mines were opened in the Carletonville area in the 1950’s and 1960’s. This illustrates Western Deep Levels in the foreground and West Driefontein in the background. Photo by: Chamber of Mines
107
Chapter 4
108
As good as gold
“Gold was South Africa’s most important export product.” to Bretton Woods, however, never disappeared and
Reserve would spend the next ten years sending interest
exchange controls were reimposed after a capital flight
rates into orbit.” 8 All of this contributed to an economic stagnation
out of Britain.
in the United States for the next two decades. In 1957,
The British rejected convertibility of sterling at fixed parities for a good reason. A floating currency would
a severe recession in that country was caused by the
allow the Bank of England to use interest rates to control
unsustainable increase in consumer credit. Trade
the economy of Britain. In 1949, the British devalued the
deficits with other countries led to a loss of gold worth
pound by 30% to $2,80 after a period of a significant
$2-billion in 1960. The economic deterioration was
trade deficit. South Africa immediately followed Britain’s
slowed somewhat by the Kennedy administration and the
lead and parity between the South African pound
ambitious NASA moon programme, which created many
and sterling was maintained. This benefited the gold
job opportunities and technological advances. The drain
mines hugely and a further beneficial arrangement was
of gold from the United States reserves nevertheless
that from 1949, gold producers were allowed to sell a
continued as foreign countries demanded gold for their
maximum of 400 000 ounces per month at premium
dollar reserves. President Kennedy refused to devalue
prices for industrial, artistic and professional purposes.
the dollar against gold and instead the London gold pool was formed in 1960 by the United States and seven other
Although the Federal Reserve had toed the line during the Second World War, a different scenario
countries (Germany, the United Kingdom, France, Italy,
unfolded at the outbreak of the Korean War in 1950. The
Belgium, the Netherlands and Switzerland). The Central
Secretary of the Treasury attempted to impose the same
Banks of these countries attempted to protect the
wartime arrangements on the Federal Reserve but the
dollar by selling and buying gold on the open market to
Fed refused on the basis of fighting inflation and sound
maintain the price at $35 per ounce.
monetary policy. The bankers won the round when they
The Vietnam War undid all of Kennedy’s earlier
demanded the return of punitive usury. As described by
good work: the cost of war was simply too great and the
Wright Patman, Congressman of Texas: “… the Federal
country’s deficit spending increased. President Lyndon
Opposite page: 400-Ounce bars at the South African Reserve Bank in 1971. Photo by: South African Reserve Bank
109
Chapter 4
Unemployed men outside a depression soup kitchen in Chicago. Photo by: National Archives and Records Administration College Park.
110
As good as gold
Johnson told Congress in 1966: “I believe we can continue
CB Anderson, President of the South African Chamber
the Great Society while we fight in Vietnam”.9
of Mines, also issued a warning in 1965: “The last major
This “guns-and-butter” policy was simply too
increase in the price South African producers received
ambitious and rising inflation in the United States
for their gold occurred in 1949, as a result of the devalu-
concerned foreign holders of dollars – and so the flow of
ation of sterling, and an analysis of the trend of working
gold out of the United States accelerated. To compound
expenditure in the period since then is instructive. In 1964
the problem the French President, Charles de Gaulle,
there were 29 mines in production which were producing
broke ranks in 1965 and proposed a new role for gold.
in 1949. Their average working expenditure per ton milled
He converted $300-million US dollars into gold for
has increased steadily from R2.76 in 1949 to R4.79 or by
repatriation to France and proposed a return to the
73 per cent, in 1964.” 10 In spite of the rising costs, South Africa’s annual
gold standard. In the five months from November 1967 to March 1968, the United States lost 20% of its total
gold production showed remarkable growth, rising
gold holdings. As described by Bonner and Wiggin in
from 450 tons in 1952 to 950 tons in 1965.11 This can be
The New Empire of Debt: “By 1968, the empire was going
mainly attributed to the new goldfields in Carletonville,
broke. Gold reserves were being depleted. Congress had
Klerksdorp and the Orange Free State being brought
to act, passing the 10 percent tax surcharge with a budget
into production. In spite of this, as a result of the
cut of $18 billion. Johnson had to melt some butter to
increase in costs and the fixed price of gold, 14 mines
get more guns.”
ceased production during the period from 1949 to 1964. Out of desperation, the Chamber of Mines had to devise
However, the South African gold mines struggled in the 1950s and 1960s owing to the artificial low price of
methods to obtain a higher price for the South African
gold. In his 1953 publication Geld, Goud en Goedere, HWJ
gold. Although Switzerland was part of the London gold
Wijnhold estimated that the cost for South Africa to
pool, Swiss financial institutions were more interested in
import articles from the United States had doubled since
a free trade of gold.12 During the period from 1962 to 1965,
1934, but the price of gold remained constant during this
a huge number of South African gold R2 and R1
period. It implied South Africa had to produce double the amount of gold to import the same articles from America.
111
Chapter 4
coins (similar in size and weight to the old sovereign and
to the Swiss – and, undoubtedly, gave momentum to the
half-sovereign coins) were sold to Switzerland outside
concept of the one-ounce Krugerrand.
the gold pool.
Meanwhile, the London gold pool faced a torrid time
Records indicate that 1,3-million R2 coins were
in 1968 when it was forced to sell increasing amounts
sold to Switzerland. Another source indicates that
of gold to support the $35 price. The climax of this
3,2-million of these coins were exported during the
occurred on 10 March 1968, when 900 tons of gold were
period from 1962 to 1965, so it is not clear if exports
sold on a single day for $1-billion. As a result, the United
to other countries also took place. In 1964, Anderson
States government requested that the British close
wrote that, with the assistance of a consortium of Swiss
the gold market on 15 March. The London gold market
banks, one-million R2 gold coins had been sold – and
remained closed for a further two weeks, but markets
the Chamber received a premium of eight percent
in other countries continued trading with increasing
on those coins, which included minting and shipping
gold prices. The collapse of the London gold pool forced
costs. It was these coin exports that assisted the South
an official policy of maintaining a two-tiered market
African mines in obtaining a higher price than the official
system in which an official exchange rate of US$35
London gold price.
was maintained, while also allowing open-market
In 1967, the Director General of the Chamber of Mines
transactions for gold. The Zürich gold market, for which
stated: “There are no restrictions or duties on import
South Africa had lobbied so hard, was established as a
or export of the coins, and from a publicity point of view,
result of this two-tiered market system. The end of the Bretton Woods agreement finally
Switzerland also offers advantages because of the large
came in August 1971, when the British demanded that
tourist traffic.” 13 The Governor of the Reserve Bank, Gerard Rissik,
$3-billion be converted into gold. This was almost a
approached the Swiss National Bank in 1963 and 1966
third of the remaining American gold reserves, and led
with a view to establishing an international gold market
to the “Nixon Shock”. The convertibility of the dollar
in Zürich, propelled in part by the risk of sanctions
into gold was suspended and the “gold window” was
against South Africa on the horizon. Not wanting to
closed. During a television broadcast on 15 August 1971,
upset the United States, the Swiss declined these
President Richard Nixon made his intentions plain:
overtures, but this didn’t stop the selling of gold coins
“In recent weeks, the speculators have been waging an all-out war on the American dollar... Accordingly, I have
Opposite page: Richard Nixon. He suspended the coversion of the dollar into gold in 1971. Photo by: United States Library of Congress.
112
As good as gold
113
Chapter 4
114
As good as gold
directed the Secretary of the Treasury to take the action
to thirty-eight US dollars an ounce was the first such
necessary to defend the dollar against speculators. I have
rise since 1934 and was a step of potential importance
directed Secretary Connally to suspend temporarily the
because, despite the nominal amount of the adjustment, it
convertibility of the dollar into gold or other reserve assets,
emphasized the basic role of gold and that the dollar price
except in amounts and conditions determined to be in the
was not in fact immutable.” 15 On 14 November 1973, the United States and
interest of monetary stability and in the best interest of the United States.”
European governments announced that they were
14
Suddenly, the once mighty dollar was not “as good as
abandoning the two-tier gold marketing system, which
gold” any more.
had been adopted when the London gold pool collapsed.16 At the end of the Second World War, the American
The dollar was also slightly devalued to $38 against gold at the Smithsonian agreement which realigned the
gold reserve stood at an impressive 20 205 tons. This
currencies in a revised fixed system. On 21 December
decreased to 8 139 tons in 1971, when Nixon closed the
1971, South Africa devalued the rand by 12,25% in relation
gold window. More than half of the gold was sacrificed in
to the major currencies. In 1973, the dollar was further
a period of 26 years to artificially support the dollar in
devalued to $42,22 per ounce of gold and in March that
an environment of poor economic growth, inflation and
year, the system of fixed exchange rates also collapsed.
growing trade deficits. A further chapter of American gold history was
The era of freely floating currencies and inconvertible fiat money had arrived. The Nixon Shock was a
written on 31 December 1974, when private ownership
psychological victory for the gold producers. John
of gold by United States citizens was legalised again by
Shilling, President of the Chamber of Mines, wrote at
President Gerald Ford. This opened the door for the
the time: “The devaluation of the dollar resulting in an
South African Krugerrand to be sold in huge numbers in
increase in the official dollar price of gold from thirty-five
the United States.
Opposite page: Henry Dexter White from the US (left) and John Manyard Keynes (UK) at Bretton Woods. White dominated the conference and this gave the US dominance in the postwar economic order. Photo by: International Monetary Fund.
115
Chapter 4
President Franklin D Roosevelt made private ownership of gold illegal in the U.S. in 1933. Photo by: United States Library of Congress
116
As good as gold
R E F E R E NCE S 1
Greenspan, A, Gold and Economic Freedom, (Article originally appeared in a newsletter called The Objectivist published in 1966 and reprinted in Ayn Rand’s Capitalism: The Unknown Ideal, 1967.
2
Engelbrecht, CL, Money in South Africa, Tafelberg Publishers Ltd, 1987.
3
De Kock, G, A History of the South African Reserve Bank (1920 1952), JL Van Schaik, 1954.
4
Brekenridge, K, The Cultural Politics of Metallic Money Before The South African Gold Standard Crisis 1920 – 1933, African Studies Seminar Paper, 19 October 1992, African Studies Institute, University of Witwatersrand, 1992.
5
Tarpley, WG, Surviving the Cataclysm, 2nd Edition, Washington Grove Books, 2009.
6
Brekenridge, K, The Cultural Politics of Metallic Money Before The South African Gold Standard Crisis 1920 – 1933, African Studies Seminar Paper, 19 October 1992, African Studies Institute, University of Witwatersrand, 1992.
7
South African Reserve Bank 1921 – 1971: A Short Historical Review Issued in Commemoration of the Bank’s Fiftieth Anniversary, 1971.
8
Tarpley, WG, Surviving the Cataclysm, 2nd Edition, Washington Grove Books, 2009.
9
Bonner, W and Wiggin, A, The New Empire of Debt, 2nd Edition, Wiley, 2009.
10
Anderson, CB, Curbs on Gold and Uranium Potential Must Be Lifted, Mining Survey, No. 57, October 1965.
11
Hartnady, CJH, South Africa’s Gold Production and Reserves, South African Journal of Sciences, Vol. 105, Sept/Oct 2009.
12
Kreis, G, Switzerland and South Africa 1948 – 1994, International Academic Publishers, Bern 2007.
13
Ibid
14
Tarpley, WG, Surviving the Cataclysm, 2nd Edition, Washington Grove Books, 2009.
15
Macnab, R, Gold – Their Touchstone, Jonathan Ball Publishers, Johannesburg, 1987.
16
Tarpley, WG, Surviving the Cataclysm, 2nd Edition, Washington Grove Books, 2009.
117
05
AN ICONIC COIN IS BORN “It is curious how exceedingly stupid an expert can be, and I considered myself an expert. One day Angus Collie said: ‘Why not struck (sic) a coin containing one ounce of gold!’ He just took the additional step that I hadn’t taken.” - Dr JE Holloway 1
Chapter 5
“The man credited with the Krugerrand concept is Dr JE Holloway from the Chamber of Mines.”
C
hanges in society are rarely “Big Bang” events.
Holloway was especially interested in the sale of
Unsustainable conditions gradually pave the
gold coins, as these commanded premiums on the
way for the inevitable change and innovation.
world market.2 But he faced a problem in that South Africa’s gold coins of the 1960s were relatively unknown.
This is also the story of the Krugerrand.
The South African Mint had resumed minting of the
The gold price was stubbornly defended at a price of $35 dollars an ounce for decades and South Africa
sovereign and half-sovereign in 1952, on a limited scale,
needed a higher price for its main export commodity.
for collectors only. These coins were replaced with
In addition, inflation had become a problem in the
the gold R2 and R1 of similar sizes and weights after
1960s and 1970s, and individuals were losing faith in
decimalisation of the coin system in 1961. These were the
the dollar. The insecurity brought by the Cold War, the
coins that were sold to Switzerland in large numbers. But the Chamber of Mines felt that the premium
Vietnam War and war in the Middle East created the next generation of survivalists who argued that something
these coins demanded was too small to warrant the
had to be hoarded for barter after the expected
setting up of machinery to produce and sell them in vast
Armageddon. The common 1kg or 400-ounce gold bars
quantities. The coins were also relatively unknown when
were for the rich and the banks, so why not produce
compared with other gold coins – the British sovereign,
something smaller and sell it by the “millions” to the
the American Double Eagle and the French Napoleon.
person on the street?
120
An iconic coin is born
An example of the R2 gold coins sold to Switzerland (top). These coins were similar in size and weight to the British sovereign coins. Proof R2 and R1 gold coins were also sold to collectors as a set (below). Photo by: F Malan.
121
Chapter 5
122
An iconic coin is born
The inspiration for the Krugerrand came, in the end, with
move greatly facilitated the efforts by the Chamber
a celebration.
of Mines to stimulate debate around the minting
As Holloway describes it: “In 1960 the Chamber of
of a gold coin. South Africa’s coinage system had already been
Mines celebrated its 75 Jubilee and for the occasion they had struck gold medallions which naturally contained one
decimalised in 1961, but the sizes, metals and designs
ounce of fine gold. As soon as they came onto the market
of the coins were kept similar to assist the public in
I said: ‘We ought to sell them by the million’. Because this
adapting to the new system. The old two-shilling coin,
was a way of earning the premium on our gold that we so
for instance, became the 20c coin. With the increase
desperately needed. The medallions, however, was [sic]
in the price of silver, the minting of the coins became
only struck in limited quantities and when the Chamber
uneconomical and the Government requested the
went into the possibilities of selling the medallion in
director of the Mint, GJ (Gert) Malan, to investigate the
quantity, found that being a medallion, a fair portion of
introduction of a revised coinage series. Malan researched this in detail4 and made
the premium earned will go into the coffers of various Governments because of the tax payable and the sale of
suggestions to the Minister of Finance, Dr Eben Dönges.
the medallions. It is curious how exceedingly stupid an
During the 1964 session of the House of Assembly,
expert can be, and I considered myself an expert. One day
Dr Dönges requested the appointment of a Select
Angus Collie said: ’Why not struck [sic] a coin containing
Committee of Parliament to finalise the matter of the
one ounce of gold!’ He just took the additional step that I
new coinage. The Speaker announced the formation of
hadn’t taken.” 3
the Committee on 24 January and this Select Committee
Coincidentally, at the same time South Africa was
on Coinage first met on Wednesday 29 January 1964
investigating a changeover to a new coinage series. This
under the Chairmanship of DJG van der Heever.
Opposite page top: The Gold Producers’ Committee of the Chamber of Mines in session in 1960. The concept of the Krugerrand originated out of these meetings at the Chamber. A few of the important personalities in this regard are shown in the photograph. The President at that stage was Dr Bill Busshau and he sits on the right with his chair pulled back. Clockwise from him are Tracey Milne, Hugh Thomson, Michael Falcon, Victor Robinson, John Shilling (Anglo American), Colin Anderson (Union Corporation), W S Findlay (JCI), Stowe McLean (General Mining), Attie von Maltitz (Anglo Vaal), Peter Anderson (Corner House), Christie Taylor, James Gemmill, Angus Collie (Public Relations Officer) and B T Tindall. Photo by: Chamber of Mines
Opposite page bottom: The one-ounce pure gold medallion produced by the Chamber of Mines during the 1960 Jubilee Celebrations of the Union of South Africa. Many numismatists consider this as the forerunner of the Krugerrand. Unlike the Krugerrand, this medallion was minted in pure gold. Photo by: F Malan.
123
Chapter 5
“As Holloway describes it: “In 1960 the Chamber of Mines celebrated its 75 Jubilee and for the occasion they had struck gold medallions which naturally contained one ounce of fine gold. As soon as they came onto the market I said: ‘We ought to sell them by the million’. Because this was a way of earning the premium on our gold that we so desperately needed.”
Opposite page: Dr Eben Dönges was the Minister of Finance during the time when the concept of a one ounce gold coin was born. His effigy later appeared on the silver R1 coin. He was appointed as State President to succeed CR Swart, but fell ill and died before he could assume office. Coin Photo by: F Malan Eben Dönges Photo: SA Mint
124
An iconic coin is born
125
Chapter 5
Less than a month after the formation of the Select
The Minister was nevertheless open to the idea of a
Committee on Coinage, a historic meeting took place in
gold coin heavier than the gold R2 coin as “the experts
Room 129 of the Marks Building in Cape Town.5
told him that there would be demand for a heavier
The Gold Producers’ Committee of the Transvaal
coin containing nearly an ounce of gold, like the Louis
and Orange Free State Chamber of Mines met with Dr
d’or of France”.
Dönges. Representing the Chamber were AA von Maltitz, CB Anderson, AT Milne and AC Collie and, during the
Anderson showed Dr Dönges a United States $20 “Double Eagle” coin minted when the gold price was
meeting, von Maltitz expressed his disappointment that,
$20,67 an ounce.
in the proposals for a new coinage system, no mention
Arising out of the meeting, the Minister
was made of a new gold coin. He felt that as the greatest
recommended that the Chamber make representations
gold-producing country in the world, South Africa should
to the Select Committee on Coinage on a gold coin that
have gold coins in circulation as money. This could be a
was heavier than the existing R2 and R1 coins.
gold coin with a face value of R20 with a gold content of
With the blessing of the Minister, a special Chamber
approximately R20 or, better still, a gold content of R10.
Sub-Committee on the Disposal of Gold met on 23
This comment surely must have lifted the eyebrows of
March 1964 at the Chamber of Mines building in Johannesburg.6, 7 Those present were Mr CB Anderson,
the Minister! The gold standard was long forgotten and a circulating gold coin with a face value equal to its gold
Dr JE Holloway and Mr MW Richards (all three from
content could be misinterpreted that South Africa was
the original Union Corporation), Mr FJL Wells from
keen to adopt this “barbaric” standard once again. In
JCI Limited and Mr AN Wilson from Anglo American
contrast, a circulating gold coin with a face value higher
Corporation. The Chamber staff present were Mr AC
than the gold content would degrade gold as simply
Collie, public relations adviser, and Mr HR Devonport,
token money. There were no winners here and Dr Dönges
committee secretary.
did not support the circulating-coin idea.
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An iconic coin is born
The minutes of this meeting are an historic
gold standard at the present price of gold, which the
numismatic document that is stored in the archives of
Gold Producers’ Committee has agreed is too low. • For international, economic and political reasons, no
the Chamber of Mines.
government, let alone the South African government,
They noted the key issues as: 8 • Gold represents essential money or “money proper”
could unilaterally return to a full gold standard with a
and it would be inadvisable to use it in the form
free circulation of gold coins. • The abolition of exchange control and import control
of token money. • Since South Africa and other countries left the gold
would be required before unlimited sales of gold
standard, the price of gold in terms of paper money
coins in South Africa could be permitted. Under
has not remained constant and any value imprinted
International Monetary Fund (IMF) and General
on the face of a gold coin would be untrue from time
Agreement on Tariffs and Trade (GATT) regulations,
to time, because of the continually fluctuating price of
any step that would seriously reduce foreign-exchange
gold in terms of paper money.
earnings would be open to criticism.
• The issue of gold coins with an inscribed value equal to the gold-content value would mean a return to the
Opposite page: An American Double Eagle gold coin of 1908. Such a coin was shown to the Minister of Finance in 1964 to sell the concept of the Krugerrand. The Double Eagle is a heavy coin containing of 30.09 grams or slightly less than an ounce of gold. These were minted at the time when the gold price was $20.67 an ounce. As the coin had a face value of 20 dollars, it contained slightly less than an ounce of gold. This design was minted from 1907 to 1933 with a total mintage of 70 290 830. Most of these coins were melted, however, after gold ownership became illegal in the US after 1933. Above: Another heavy gold coin was the British 5 Pound piece which contained more than an ounce of gold (36.6 grams). This specimen of 1887 was minted for the Jubilee celebrations of Queen Victoria. These 5 pound gold coins were only minted in small numbers, however, and were not intended for circulation. Photos by: F Malan
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“The key recommendation was that provision should be made for a coin with a gold content of one troy ounce. The troy ounce is the internationally recognised unit of weight for gold and to emphasise to the public that the weight was one troy ounce, it was suggested that the coin be named a “Trojan”. ” • Provision could, however, be made in the Coinage Act for
odd amounts, not designated on the faces of the coins
a gold coin having a fixed weight such as one-ounce troy,
and ascertainable only by reference to the Coinage Act
which is the internationally recognised unit of weight for
and to literature. Nevertheless, the R2 and R1 coins
gold. Such a coin need not have a face value inscribed on
should be retained in the Act for historic reasons.
it. The minting of such a coin would mean considerable
• The proposed one-ounce gold coins should be in
prestige for the Republic of South Africa, for it would be
addition to the existing gold coins and might be
an innovation in world coinage. The demand for such a
named “Trojan”, in order to emphasise to the general
coin, particularly overseas, would probably exceed the
public that the gold content of the coin is one troy ounce.
demand for the existing R2 and R1 gold coins, which are
• If issued in terms of the Coinage Act, the one-ounce
relatively unpopular compared with the gold coins of the
gold coin would have the status of a coin and, as such,
United Kingdom, France, Switzerland and the United States. The gold contents of the R2 and R1 gold coins are
128
An iconic coin is born
sales would not attract tax in overseas countries,
unchangeable if there is no standard in existence. Now
whereas a gold medallion would.
something that is unchangeable is the troy ounce. The
• The sale of a gold coin containing one ounce of gold,
measure and weight will always enable one to tell how
would be attractive to collectors of coins and private
much a troy ounce is and therefore we suggest that the
hoarders of gold.
gold content of the proposed prestige coin should be
• The inclusion of such a coin in the proposed new South
one troy ounce. It will have to be alloyed to make it hard
African coinage would, if accepted by the Government,
enough and we suggest a fineness of 22 carat gold. Thus
constitute permissive legislation. The Treasury would
the coin will weigh rather more than one troy ounce but
decide on the number of such coins to be minted and
on the other hand purchasers will have the certainty that
on the method of their disposal.
the coin contains one troy ounce of pure gold. That has
On Wednesday 29 April 1964, CB Anderson, AC Collie
certain practical advantages and desirable features in
and Dr JE Holloway, representing the Chamber of Mines,
a country like South Africa, where it is common cause
appeared before the Select Committee on Coinage. The
that the price of gold should increase substantially. Other
meeting was chaired by Mr van den Heever, and Mr
countries who believe in gold the same as we do share
GJ Malan of the Mint was also present. The Chamber
our belief that sooner or later the artificial barrier that
submitted a report that was included in the final report
keeps the price of gold down to 35 dollars per ounce must
of the Select Committee.
be broken down. In any case we want a check against
As Anderson put it in the Sub-committee
inflation which has been present now for more than a
report, “...for reasons of prestige and certain practical
generation. The Americans, on the other hand, oppose
considerations, we feel it would be very advantageous
our efforts to obtain a higher gold price and claim that the
to have a special coin. A problem that immediately
dollar is as good as gold – but they say in the same breath
presents itself is how to attach such a coin to something
that we must not put it to the test.” 9
Above: The “Liberty Head” type of the popular American Double Eagle gold coin. Photo by: F Malan.
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Chapter 5
As far as the purity of the gold was concerned, the
This flows naturally from the concept of not having
Chamber of Mines stated in the same report: “The
a coin of a fixed value in terms of currency, but rather a
Committee recommends that this gold coin should retain
coin of fixed weight in terms of gold. What was more, if
the traditional fineness that South Africa’s gold coins
the coin was accepted as a legal-tender coin in South
have been ever since minting began in Pretoria in 1922,
Africa, it would be popular in other countries, as there
namely, millesimal fineness 916.6 equivalent to 22 carat
would be no taxes imposed (in contrast to artefacts
gold and, with a gold content of one ounce Troy (31.103
such as gold medallions). A proposal considered by the
grammes) . This coin would weigh approximately 34
Chamber was to mint a gold coin with an indicated value
grammes. The weight of the gold content should be clearly
of R25 and a gold content of only R15 because of the
marked on the reverse side of the coin. Its diameter would
fluctuation of the gold price. This was rejected and it was
be approximately 35 millimeters.�
agreed that gold has value and it should never be used as
With the gold price fluctuating from day to day, it was
a token coin of any kind.
proposed that no currency value be indicated on the coin.
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An iconic coin is born
Above: Report of the Select Committee on Coinage.The report mainly considered the change from silver coins (bottom) to nickel coins (top left). This report recorded the discussion between the Chamber of Mines representatives and Committee on the possibility of introducing a one-ounce gold coin. Opposite page: Dr JE Holloway. He is credited with the Krugerrand concept.
During the Select Committee meeting, the Chamber
availability of the coin to the public that Anderson
delegates were questioned extensively about the
proposed generating local interest in the coin by, for
expected availability of the gold coins in South Africa.
instance, General Motors quoting the prices of Chevrolet
Some concern was raised that the proposed coin would
cars in Trojans.
only be available in limited quantities in South Africa,
During the hearings, the possibility of a half-
given the advantages of exporting the bulk of the coins
Trojan was raised, but Holloway felt that this was
to generate foreign exchange.
unnecessary. The 400-ounce standard bar, the kilogram
But manufacturing a prestige coin that was not
bar, the Trojan and the R1 gold coin were deemed a
available in South Africa was seen as pointless. Indeed,
sufficiently wide range.
so committed were members of the committee to the
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Chapter 5
Top left: The initial market for the Krugerrand was mainly collectors and it was described in the September 1967 Bickels Coin and Medal News. Photo by: Bickels Coin and Medal News Top right: Schedule of the 1964 Coinage Act which made provision for the one-ounce gold coin. It was called a ‘Trojan’ in the Act.
The doyen of South African numismatics in the 1950s
proposed coins. Provision was made for the Trojan gold
and 1960s, Dr Frank Mitchell, and JP Roux, ex-director
coin of a standard weight of 33,9305g with a least current
of the Mint, also gave evidence to the Select Committee
weight of 33,7205. The fineness was specified as elev-
on behalf of the National Numismatic Society of South
en-twelfths fine gold and one-twelfth alloy.
Africa. Their views on the one-ounce gold coin differed
Although the Act made provision for what would
somewhat from that of the Chamber of Mines. Their
become the Krugerrand, the Government was still in
preference was that the coin rather be called an R8 or
two minds regarding the production of the coin. During
a R10 coin to fit in with the rest of the proposed series.
the debate in the Houses of Parliament on 13 June
The revolutionary concept of a one-ounce gold coin was
1964, the Minister of Finance stated: “Amongst other
also considered problematic. Millions of coin collectors
things the committee also recommended the issue of two
across the world were familiar with the British £5 piece,
new gold pieces, that is to say, a R5 piece and one which
which contained 36,613g of gold. It was feared that the
contains precisely one ounce troy-weight of gold. ....The
new coin might not be popular with the collectors. Both
Government has not had the opportunity of properly con-
Mitchell and Roux nevertheless admitted that the new
sidering the practical effects of the recommendations in
coin would be useful for buyers of gold who could not
respect of the R5 gold coin and the so-called Trojan. The
afford the 1kg bars. There was real potential for it to
Government has certain misgivings with regard to these
become a popular collector’s item.
two items but is nevertheless prepared to include both
The Select Committee on Coins met 15 times in total
these coins in the series subject to the understanding that
and its draft report was submitted on 11 June 1964. This
if it considers it to be necessary it will introduce an amend-
report formed the basis for the new Coinage Act (Act
ment next session to withdraw them from the new series.”
No. 78 of 1964). A schedule in this Act described the
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An iconic coin is born
The historic headline of the Cape Argus newspaper of 12 June 1964. This was the day Nelson Mandela was sentenced to life imprisonment. This newspaper appeared a day after the Select Committee on Coinage issued their report. The sub-heading on the right announces the new coins. Ironically, time eventually proved both these headlines wrong. Nelson Mandela became President of the country 30 years later, the tickey (South African nickname for the threepence coin) did not survive after 1964 and the name of the new gold coin was changed to the Krugerrand. Photo by: The Cape Argus
History Collides On 12 June 1964, The Cape Argus led with the headline
Nelson Mandela became President of South Africa
“Life Sentences for Rivonia Men”. “Dramatically abrupt
30 years after his life sentence, along with those given
end to trial that lasted seven months” ran the subheading,
to the other Rivonia trialists, was handed down. The
and, also, “Crime Essentially Treason, Says Judge”.
tickey (the South African threepenny coin) did not
One of the only other stories on the front page that
survive after 1964. And the name of the new gold coin
historic day in July was headlined “Tickey stays, Trojan
was changed from Trojan to the Krugerrand, delaying
is new gold coin” and it detailed the Select Committee on
the introduction of the gold coin for two years. Why was
Coinage’s report, which had been issued the previous day.
Trojan consigned to the dustbin of history? It might not
Time eventually proved both these headlines wrong.
be what you imagine.
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Chapter 5
Although the idea of the Krugerrand cannot be
1922 to 1925 he became the university’s first full
attributed to a single person, Dr John Edward
Professor of Economics. In 1925 Dr Holloway
Holloway played a prominent role in developing
entered public service as the Director of Census
the concept of the coin. He was a well-known
and Statistics. General Hertzog’s party was in
person in public service in South Africa during
power and Holloway frequently interacted with
the 20th century andfor many years he enjoyed
Mr N.C. Havenga, the Minister of Finance. It
the confidence of the Minister of Finance. As
was during this time that South Africa finally
reflected by his funeral programme, he defended
abandoned the gold standard. In 1934, Havenga
the principles of “honest money” based on gold
appointed Dr Holloway as an economic adviser to
during his entire life. Raised in Stellenbosch, Dr
the Treasury and, in 1937, to the post of Secretary
Holloway received a BA (Hons) degree in history
for Finance, which he filled until his retirement
from the Victoria College, Stellenbosch, in 1910.
in 1950. In this capacity he represented South
He taught history at Grey College in
Africa at international conferences, including
Bloemfontein, and in 1913 married his wife Tienie.
Bretton Woods in 1944. In 1954 he was appointed
In 1914 they left for the University of Ghent
Ambassador to Washington and from 1956 to
in Belgium to study history. When war broke
1958 the High Commissioner at South Africa
out, the couple fled to Britain and Dr Holloway
House in London.
enrolled at the London School of Economics
Dr Holloway’s involvement with the
(LSE). In 1917 he obtained the DSc (Econ) with
Krugerrand started when he was appointed
a thesis on the economic causes of the Great
as economic adviser to the Union Corporation,
Trek. On returning to Bloemfontein, he lectured
which was a member of the Chamber of Mines.
on history and economics. Numismatists will
He attended the various meetings when the
find it interesting that among his students was
concept was discussed and his insight into
E.H.D. Arndt. In 1919 he was appointed senior
gold and economic matters and his influence
lecturer in economics and economic history at
in government no doubt assisted the Chamber
the Transvaal University College (which later
in getting the coin included in the new
became the University of Pretoria) and from
coinage act of 1964.
Opposite page: Chamber of Mines Building, Johannesburg. Photo by: Clive Hassal
134
An iconic coin is born
R E F E R E NCE S 1
Krugerrand Story, Part One, Unknown author. Typed notes in the records of the National Numismatic Society, South Africa
2 Report of the Select Committee on Coinage, Printed by order of the House of Assembly, Government Printers, South Africa, June 1964. 3 Krugerrand Story, Part One, Unknown author. Typed notes in the records of the National Numismatic Society, South Africa 4 Malan, DF, History of the Nickel coins of South Africa, Published by Randburg Coin, 2013 5 Chamber of Mines Archives File, Extract from Report on Interview with the Minister of Finance, the Hon TE Dönges., in Cape Town, On 20th February 1964. ‘Dec. Coinage – Gen 1’, 1964, Transvaal and Orange Free State Chamber of Mines, Gold Producers’ Committee. 6 Chamber of Mines Archive File, Sub-committee: Minutes of the Meeting of the Special Sub Committee on the Disposal of Gold held in Johannesburg on 23rd March 1964. ‘Dec. Coinage –Gen 1’, 1964: Transvaal and Orange Free State Chamber of Mines, Gold Producers’ 7 Lang, J, Bullion Johannesburg – Men, Mines and the Challenges of Conflict, Jonathan Ball Publishers, Johannesburg, 1986. 8 Chamber of Mines Archive File, ‘Dec. Coinage –Gen 1’, 1964: Transvaal and Orange Free State Chamber of Mines, Gold Producers’ Sub-committee: Minutes of the Meeting of the Special Sub-committee on the Disposal of Gold held in Johannesburg on 23rd March 1964. 9 Report of the Select Committee on Coinage, Printed by order of the House of Assembly, Government Printers, South Africa, June 1964.
135
06
From Trojan to Kruger Rand to Krugerrand:
WHAT’S IN A NAME? “What’s in a name? That which we call a rose/ By any other name would smell as sweet.” - William Shakespeare, Romeo and Juliet
Chapter 6
“Those generations that have grown up with the metric system of units find it difficult to understand the old imperial system. It is simply not logical why there should be 16 ounces in a pound. Even worse, an ounce is not always an ounce!”
A
s with just about all aspects of this iconic coin,
dating back to the fifth century and was world-famous by
the journey to the name Krugerrand was not
the 12th century. As it attracted merchants from many
a simple one. But in order to understand it, we
countries, a standard system of weights was required
once again need to dial back into history – and, in
and the troy system was adopted. In contrast, the
particular, the frequently mind-numbing systems of
avoirdupois weight system was created based on a pound
weights that are assigned to precious metals.
of 16 ounces. The avoirdupois ounce is equivalent to
The troy ounce is mainly used for precious metals
28,3495231g, and the avoirdupois weights are typically
and 12 ounces is equal to a pound in the troy system of
used in the United States, United Kingdom and else-
weights. The troy ounce is defined as 31,1034768g in the
where where the imperial units are still dominant.
metric system and appears to be a remnant of the Roman
Among the reasons why the troy ounce is still used for
monetary system.
precious metals is that a large amount of monetary gold
Although not confirmed, some believe the word Troy
in bank storage consists of 400oz (troy) London Good
refers to the system of weights used in the ancient fair
Delivery Bars.
of Troyes in Champagne, France. This fair has a history
138
From Trojan to Kruger Rand to Krugerrand: What’s in a name?
Stack of 2016 Krugerrands. Photo by: Clive Hassal
139
Chapter 6
Historically, these bars were primarily cast by Rand
Angered, she threw her gift through the open door. It was
Refinery in South Africa (since 1921), the Royal Mint in
a golden apple inscribed with the words “To the fairest”.
Perth (since 1934), the Canadian Mint (since 1934) and
The goddesses Hera, Athena and Aphrodite quarrelled
NM Rothschild & Sons (from 1852 to 1967).
over who should claim ownership of this golden apple. All
Even though it is now one of 64 refineries accredited
three wanted to win the heart of Paris, a prince of Troy.
by the London Bullion Market Association to deliver
All three presented themselves naked to Paris to win
these 400oz bars, South Africa’s Rand Refinery holds the
his heart. Aphrodite bribed Paris by promising him the
historic record of numbers of bars manufactured. This is
most beautiful woman in the world if he chose her. This
not surprising, as Rand Refinery has refined more than
resulted in Helen from Sparta, wife of the King of Sparta,
50 000 tons of gold since 1921.
Menelaus, being abducted and taken to Troy.
With so many 400oz bars around, it would be
The golden apple and The Judgement of Paris
impractical to convert them to either avoirdupois ounces
are beautifully portrayed in paintings by the likes
or a rounded metric weight. New bars cast at a different
of Peter Paul Rubens, Pierre-Auguste Renoir and
weight (although 1 000g bars are commonly produced)
Enrique Simonet.
would create much confusion, as the individual bars in a
Gold also played other important roles in Greek
mixed stockpile would have to be inspected or weighed to
mythology. The Midas touch and the burial of the dead
determine their weight.
with gold coins on their eyes to pay Charon for the ferry
Precious metals were always sold in units of troy
across the river Styx are well-known myths. Thousands
ounce, and so it was natural that the Krugerrand should
of years later, when the name for the new coin was
also contain a troy ounce of gold. When the Chamber of
being considered, it was believed that the mythical
Mines suggested Trojan as the name for the proposed
aspects of gold would add mystique and allure to the
coin, it was initially positively received.
proposed gold coin.
Alongside the troy ounce, Trojan was a compelling
The Minister of Finance, Dr Eben Dönges, disagreed.
choice in the way it highlighted the role of gold in
During the third reading of the South African Mint
ancient storytelling.
and Coinage Bill in 1964, he commented as follows:
In Greek mythology, for instance, a golden apple plays
“I have already said during the second reading that we
a role in the early part of the Trojan War that was waged
are not quite sure about the Trojan and the five rand gold
against the city of Troy by the Greeks. When Peleus and
coins. I just want to add this, that if we accept the one
Thetis were set to get married, all the gods were invited
ounce coin I am very anxious to find a better name than
and brought gifts. Eris, the goddess of discord, was
Trojan for it. We should like to have suggestions. The
turned away at the door by Hermes on the orders of Zeus.
legislation is going through as it is and I do not want to
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From Trojan to Kruger Rand to Krugerrand: What’s in a name?
“In contrast to the goddesses Hera, Athena and Aphrodite, the Afrikaner Parliament of the 1960s was conservative. After the new Coinage Act was promulgated in 1964 and the name Trojan was published, it was discovered that the brand name of the most popular condom in the United States was also the Trojan! ” make any changes. I have already said that we may scrap
years later, a significant portion of all condoms sold in
the whole idea completely. It may also be that we accept
the United States remain Trojans. Even as a name for
the principle of a one ounce gold coin but with another
a condom, Trojan is not uncontroversial, as the many
name. I should like to receive suggestions. Perhaps the
online debates show. Surely the last thing you want is
Press could assist us in this regard. I am not saying it
any soldiers slipping through the defences of the city, say
is not being accepted, but I should like to have a few
some online commentators! But just as Troy fell to the
alternative names.”
Greeks, so the demise of the name “Trojan” for the new
Did Dönges know this when the Act was introduced?
gold coin was inevitable.
Or was his objection to the name for other reasons?
A list of alternative names was suggested
America’s Trojan condoms were manufactured as
to the Minister.
early as 1920 by Young’s Drug Products. Close to 100
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Chapter 6
The Chamber of Mines preferred the Biblical talent.1
of the coin was submitted. The “rand” refers to the
The Afrikaner community proposed names linked to
South African monetary unit, which is an abbreviation of
President Paul Kruger. Reports have it that the name
“Witwatersrand”.
Krugerrand was finally conceived during a Cabinet
A letter stored in the National Archives of
meeting, although it is unclear if it can be attributed
South Africa records the correspondence of Mrs C
to the Minister of Finance himself, or any other
Zevenbergen with the Minister of Finance, Dr Diederichs,
member of Cabinet.
in September 1967 3. She claimed that Mr L Maré of
2
Initially it was written as two words – Kruger Rand –
Mountain View, Pretoria proposed the name “Kruger”
but later changed to one word after a preliminary design
or “Paul” after the newspaper Die Transvaler requested
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From Trojan to Kruger Rand to Krugerrand: What’s in a name?
when the name for the new coin was being considered, it was believed that the mythical aspects of gold would add mystique and allure to the proposed gold coin.
Opposite page: Peter Paul Rubens - The Judgement of Paris, c.1606. He holds a golden apple in his hand and his choice of goddess led to the Trojan war in Greek mythology. Photo by: Museo del Prado.
that the public choose a name for the coin. She requested
Whatever the motivation, the change of name from
that formal recognition be given to Mr Maré.
Trojan to Krugerrand returned Paul Kruger to the minds
In the selection of the name Krugerrand, the
of South Africa’s citizens. The old President had fled to
legend of the Kruger Millions and the gold coins of the
Europe in 1900 during the Boer War and was never to see
old Transvaal President were in the minds of many
the country or his wife alive again. A full 67 years later,
Afrikaners and probably some of the Cabinet members.
Kruger reappeared on the gold coins that were destined
With Afrikaner Nationalism and apartheid at a peak, it
to become South Africa’s most recognised brand.
can be speculated that the name was favoured as it would
The South African Mint and Coinage Further
promote the historic links with the old Boer Republic
Amendment Act (No. 40 of 1966) was passed on 12
and the symbolism of an independent nation fighting an
October 1966, officially changing the name Trojan to
“evil” world empire.
Krugerrand. Compared with the 1964 Act, the standard
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Chapter 6
weight in grams was changed slightly to 33,93107,
United States were lifted in 1975, huge numbers of
with a least current weight of 33,71792. The South
Krugerrands were sold in North America. Not even the
African Mint and Coinage Further Amendment Act
most astute campaign could have easily marketed a
still made provision for the R5 gold coin, but this coin
gold coin that bore the same name as a popular brand of
was never minted.
condoms to Americans.
It turned out that the name change was fortuitous. Once the restrictions of private gold ownership in the
Packaging of one ounce Krugerrands in the SA Mint. Photo by: Clive Hassal.
144
From Trojan to Kruger Rand to Krugerrand: What’s in a name?
R E F E R E NCE S 1. Lang, J, Bullion Johannesburg – Men, Mines and the Challenges of Conflict, Jonathan Ball Publishers, Johannesburg, 1986. 2. Krugerrand Story, Part Two – Name and Design, Unknown Author, Typed Notes in the Records of the Numismatic Society, South Africa. 3. National Archives of South Africa, Letter From Mrs Zevenbergen to Dr Diederichs, Goue Muntstuk Krugerrand: Verwysing Die Transvaler 29/9/66, Received by Minister of Finance 11th September 1966.
145
07
AN OLD GENTLEMAN GETS TO SHINE “Picture to yourself a sturdily well-built old gentleman, grizzly beard, with straight black hair, very little impaired by the storms which have swept over the wearer during times of war and trouble. His face has few wrinkles, the only prominent feature being the large tear lobes, which hang loosely beneath his eyes and which grow more prominent every year.� Paul Kruger character sketch, The Cape Illustrated Magazine, 1892
Chapter 7
N
ow that the name had been officially changed, work on the design of the coin began.
The reverse of the coin should simply contain the words “Republiek van Suid-Afrika” and “1 ons fyn goud – 1
On 8 March 1967, the Director of the South
oz fine gold”.
African Mint, Koos Groenewald, wrote a letter to the
However, Groenewald felt that this design did not
Secretary of the Treasury in which he referred to an
meet the requirements of the rest of the coin series and
earlier design proposed by the Minister – namely the
suggested an alternative design.
use of a Kruger bust and the inscription “Kruger Rand”.
Above: A profile view of Paul Kruger from The Cape Illustrated Magazine, 1892.
148
An Old Gentleman Gets to Shine
“The ZAR dies of the Kruger halfcrown coins should be used for Kruger’s bust and, similar to the rest of the gold coins in the series, the name of the country should appear in both languages: “Suid-Afrika – South Africa”. The reverse of the coin should be the springbok, as depicted on the gold R1 and R2 coins. The name “Kruger Rand” should appear above the springbok in an arch and below the springbok “Fyngoud 1 oz Fine gold”. The year should be on both sides of the springbok.” 149
Chapter 7
Koos Groenewald was Director of the Mint when the first Krugerrands were struck in 1967 and also in 1980 when the fractional coins were introduced . He influenced the design of the coin by proposing the use of the springbok. Photo (left) by: SA Mint Photo (right) by: Chamber of Mines
It is interesting to note that in his letter to the Secretary
Town, to the Director of the Mint. Typed in Afrikaans, it
of the Treasury, Groenewald refers to a pattern coin
stated: “Kabinet het ontwerp vir Krugerrand goedgekeur
of the proposed design that accompanied the letter.
behalwe dat Krugerrand H RPT een herhaal een woord
Currently, the numismatic community in South Africa is
in albei tale moet wees X Dit kom ooreen met die schedule
not aware of this pattern. It is currently not in the mint
van Wet No 40 van 1966 X.”
museum or any of the large collections in the country. Is
The telex , now preserved in the National Archives
this possibly one of the rarest South African patterns?
of South Africa, states that the Krugerrand has been
It sure would fetch a small fortune if it ever surfaced. It is
approved by Cabinet but that the name should be
not clear whether it was struck in gold or simply in one of
written as one word. A letter in this regard was also sent
the base metals. It could also have simply been a sketch
to the Mint on 17 March 1967. Groenewald stated: “We
of the proposed design – a design that was similar to
found that we still had the master dies of most of the old
the 1967 coins, except that the name Krugerrand would
ZAR coins and the Kruger bust was simply a must for
appear as two words.
the Krugerrand”.1
An historic telex was sent on 16 March 1967 from the Secretary of the Treasury, Victor Lodder, in Cape
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An Old Gentleman Gets to Shine
The historic Telex which states that the Krugerrand was approved by Cabinet.
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Top: An obverse die of the old Kruger half-crown coin was used as a pattern for the obverse of the Krugerrand. Bottom: A comparison of the obverse of the old Kruger half-crown coin and a Krugerrand. As the die of the half-crown was used as a pattern, the bust of Kruger on the half-crown coin and Krugerrand is identical in size. Photo by: F Malan
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An Old Gentleman Gets to Shine
The first Krugerrand minted in 1967. Photo by: Clive Hassal.
The Kruger bust that appeared on the ZAR coins was
not cancelled and he could make a new punch directly
designed in the 1890s by Otto Schultz of the Berlin Mint.
from one of the dies, only adding new lettering.
In creating the bust, Schultz produced a flattering,
During the Select Committee hearings, it was agreed
stately profile of Kruger – a man many considered to be
that the design of the springbok, which had previously
less than attractive.
appeared on the R2 and R1 gold coins, should be reserved
Writing in 1877, William Morcom, the legal adviser
for exclusive use on the gold coins.
to Sir Theophilus Shepstone, noted that, “Paul Kruger
Dr Holloway made the point during the hearings that,
is an elderly man, decidedly ugly, with a countenance
“...in my opinion, it is a pity that the springbok design on
denoting extreme obstinacy, and also great cruelty …
the gold coins will now appear on the small token coins as
his scanty hair was in such a condition of greasiness
well...I wish to emphasise strongly that the reverse side
that it lay in streaks across his head, the drops of rancid
of a token coin should not have the same design as the
coconut oil gathering at the ends of each streak of hair,
reverse side of gold coins...” JP Roux, ex-Director of the Mint, supported this view.
and thus rendering necessary the use of the pocket comb during lunch.”
“...As for the springbok design – which is internationally
2
It is claimed by some sources that these old Kruger
acclaimed as the most attractive and best modern design
dies were cancelled and so had to be repaired before
on money in the world – I consider it should appear on
being used for the Krugerrand by Tommy Sasseen, the
the golden one rand and half rand coins ....we feel that
Chief Die-sinker of the South African Mint. However,
the springbok design could be reserved exclusively for
Sasseen has confirmed that some of these old dies were
our gold coins.”
3
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Tommy Sasseen was born in Pretoria on 4 June 1932 and matriculated at the Christian Brothers College in Pretoria. He began working at the South African Mint in 1950 as an artisan, memorably being told by a senior official a mere month after he joined that he did not have the right skills to become a die-sinker. Fortunately for the country and the coin-collecting fraternity, he brushed this comment aside and, with the support of his father, took the first steps to become one of the finest home-grown die-sinkers in South Africa. After initially attending design and modelling classes at Pretoria’s Technical College, Sasseen was mentored by the sculptor Hennie Potgieter, who sculpted some of the friezes inside the Voortrekker Monument. Over a period of three years, Sasseen visited Potgieter for lessons once a week, honing his considerable sculpting skills. After a short period working for Pretoria Metal Art, Sasseen returned to the South African Mint in 1959 and was soon promoted to the position of Chief Die-sinker. This placed him firmly on the front line when the new designs of the nickelcoin series had to be finalised and he was also responsible for many other designs, including CR Swart’s design on the 1968 nickel coins, Dr Eben Dönges’ bust in 1969 and the coat of arms, which appeared on coins in 1969 and 1970. In March 1974, Sasseen resigned and he has been running his own medallion business ever since.
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An Old Gentleman Gets to Shine
Top left: The die-sinker Tommy Sasseen cutting a die in the 1960s at the South African Mint. He was the person who prepared the master dies for the Krugerrand in 1967. Photo by: Huisgenoot Top right: Tommy Sasseen photographed with his design for the new 20c coin in 1964. Photo by: SA Mint
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With the design of the springbok selected, all Sasseen
Fittingly, the royal family undertook a gold-mine visit at
had to do was to cut dies to the correct size using
the West Rand Consolidated Mines on the West Rand.
the original model produced by Coert Steynberg for
Prior to the visit, the South African Numismatic
the first crown (5s) in 1947. The correct lettering also
Society submitted a letter to the Minister of Finance
needed to be added.
suggesting the striking of a commemorative coin. They
The springbok design was already well known on the
recommended a crown piece and that a springbok
coins, as it had appeared on the South African 5 shilling
be used for the reverse of the coin. Five sculptors
(crown) since 1947. It was introduced as a commemorative
were invited to submit designs – Joan Kendall, Coert
piece to celebrate the British royal visit to South Africa in
Steynberg, Hennie Potgieter, James Gardiner and Ernie
1947, when Queen Elizabeth II was still a young princess.
Naylor. Steynberg’s design was selected and remains
This historic visit from the royal family resulted in the
among the most recognised in the world.
design that would be used on the Krugerrand years later.
The springbok design of the Krugerrand was first used on the 5 shilling or “Crown” piece to commemorate the visit of the Royal family in 1947. It became a popular coin and was minted every year as part of the South African coin series until 1964. Photo by: F Malan
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ORIGINAL SKETCHES OF THE KRUGERRAND SPRINGBOK By Coert Steynberg Courtesy of SA Mint
An Old Gentleman Gets to Shine
The original springbok design of the Krugerrand Photo by: Clive Hassal
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Coert Steynberg was born in 1905 in Pretoria and attended school in the small town of Bethal.
African Mint approached him in 1942 to design 3
a suitable coin for the Free French authorities.
His father was a farmer and it was a good corn
Later he was commissioned to design the 1947
crop that enabled Coert to go to an art school in
crown piece and this springbok design was so
Grahamstown. In 1928, he went to London and
successful that it has appeared continuously
studied under the famous British sculptor Henry
on South African silver and gold coins from
Moore. Life was hard in London during the Great
that time right up to the present Krugerrands.
Depression and hunger drove him to the streets
Very few people know that the letters C.L.S.
to make a living from his paintings. By 1933, he
below the springbok on the Krugerrand stand
was so desperate that he went to South Africa
for Coert Laurens Steynberg. From hungry and
House for a loan to go back to South Africa. To his
desperate in the streets of London in 1933, to
amazement, he was awarded an assignment for a
having his initials appearing worldwide on more
Jan van Riebeeck statue for South Africa house
than 60-million gold coins years later, this was an
and his fortunes began to change. Steynberg’s
incredible achievement for the boy from Bethal.
numismatic career started when the South
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Above: Coert Steynberg working on the Dias Marble statue, 1933. Opposite page: Coert Steynberg with 1960 Adv JG Strijdom. Photos by: University of Pretoria Art Archive
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Edwards4 reports that in creating his design, Steynberg went to the Pretoria Zoo to better study the springbok and also used photographs of prancing springbok. JG Millais’s work A Breath from the Veldt 5 was reportedly very helpful to Steynberg’s design. Steynberg’s springbok design was reportedly not influenced by classical Greek coins, which were notable for their “leggy” designs. But he noted: “I also like the wiry or ‘leggy’ shapes best. They not only ‘read’ better but they also present more shapes and lines to arrange and compose.” 6 One of South Africa’s well-known aloes, Aloe Claviflora, was depicted between the legs of the springbok. The aloe was first described by British naturalist William Burchell in his 1822 work, Travels in the Interior of Southern Africa. He collected the plant while camping at Riet River in the Fraserburg district of what was then known as the the Cape Province, but this particular aloe is currently found over a widespread region in the dry interior of South Africa (the Karoo). The springbok is also abundant in this part of the country and the small hills in the background of the design are typical of the koppies (small hills) seen in the Karoo landscape. One of the more interesting aspects of the Krugerrand design is the reeded edge (the small grooves on the edge of the coin, which are also called “milling”). Historically the use of the reeded edge was to prevent the filing or cutting of gold or silver from the edge of intrinsically valuable coins. This practice was a serious problem during the early days of coinage and resulted in many of these coins being underweight.
Opposite page: The 1967 dies used to mint the first Krugerrands. Photo by: Clive Hassal.
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An Old Gentleman Gets to Shine
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Chapter 7
The Proclamation authorising the minting of the Krugerrand.
When the new series of coins for South Africa was
The diameter of the coin was chosen to be similar
designed in 1964, it was agreed that the reeded edge
to the R1 silver coin in use at that time, as it gave the
was no longer a requirement and the nickel token coins
practical advantage that the same minting equipment
appeared with a smooth edge. But there was consensus
could be used.7 This resulted in the now familiar
that it should nevertheless be retained for the gold
diameter of the Krugerrand of 32,77mm. A schedule in the South African Mint and Coinage
coins. As Dr Holloway put it to the Sub-committee, “The process of milling dates back to the 18th century and was
Act (Act No. 78 of 1964) specified the fineness of the
introduced to prevent pieces of coins minted in precious
Krugerrand as eleven-twelfths fine gold and one-twelve
metals from being cut off. It is unlikely that something
alloy. This makes it a standard 22-carat gold coin. It
like that would be done in the case of coins made of base
nevertheless contains an ounce of gold, so the actual coin
metals, and milling is, therefore, no longer necessary,
is heavier than a troy ounce.
except in the case of gold.�
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An Old Gentleman Gets to Shine
The springbok (Antidorcas marsupialis) is an
by jumping with stiff legs and an arched back – as
antelope indigenous to Southern Africa and was
depicted on the Krugerrand. The origin of the
part of South Africa’s coat of arms until recently.
springbok as a national symbol can be traced
It first made its appearance on the South African
back to 1906, when the South African rugby team,
coins during the design of the commemorative
captained by Paul Roos, toured Britain for the first
five-shilling coin in 1947, and no wonder:
time. The name “De Springbokken” was adopted
springboks are fast sprinters, can reach speeds
by the team in England after some concern that
of up to 80km per hour and jump more than 10m.
the British press might invent a less flattering
The springbok is currently widespread in the drier
nickname. The endurance of the springbok
western regions of South Africa and throughout
was confirmed when President Nelson Mandela
Namibia. It is usually found in small herds but
intervened to allow the South African rugby team
during migratory periods, these herds can
to retain the use of the name in spite of a move to
number in the thousands. The springbok prances
refer to all post-1994 sporting teams as Proteas.
Paul Roos, captain of the Springbok rugby team during the tour of Britain in 1906. The team adopted the name “The Springboks” during the tour and this contributed to the eventual adoption of the springbok as a national symbol of South Africa. Photo by: SA Rugby
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Numismatists define a pattern as a proposed coin
Krugerrand in silver and a specimen is housed
of a new design, metal or denomination. A pattern
in the collection of the South African Mint. No
can be struck in a variety of metals on normal or
official documentation is available describing the
thick planchets (the metal discs used to strike
purpose of this pattern, but no doubt it was useful
the coins or patterns). Very few patterns of the
to evaluate the final design when struck as a coin.
Krugerrand exist and this is probably the result
The existence of a special set of six Krugerrand
of the coin being based on existing designs: there
patterns similar to the 1967 coin in a single case
was therefore no need to strike many samples to
is acknowledged. These coins were struck using
evaluate different designs. An unsolved mystery
different alloys and the Minister of Finance was
is the correspondence between the South African
asked to choose the one that went into production.
Mint and the South African Treasury, which
The current whereabouts of these patterns is
indicated that a Krugerrand design was submitted
not known, however, and no photograph exists
to Parliament for approval.
of the different colours of these coins. Regarding
The name Krugerrand appeared as two
the fractional coins, the only patterns that exist
words in this submission. It is not known if this
are bronze planchets that were apparently used
was an actual pattern coin or simply a sketch
by the Chamber of Mines to evaluate the sizes of
or photograph of the proposed design. The
the fractional coins. An interesting 1998 pattern
Krugerrand was officially proclaimed in the
of the Krugerrand is housed in the collection of
Government Gazette on 28 June 1967 and a
the South African Mint. This coin was struck
photograph of the 1967 Krugerrand accompanied
in platinum to investigate the possible issue of
this proclamation. Samples of the 1967 coin
platinum coins. In spite of South Africa being
must have already been struck by this date. Only
the largest supplier of platinum in the world, this
rarely encountered by collectors is the 1967
concept was not further pursued.
The alloy is not specified in the Act but in recent years
minted at the Pretoria branch of the Royal Mint used
the alloy used has consisted only of copper, making it
this same alloy along with the later R2 and R1 gold
identical to the historic crown gold used for British gold
coins, so it was no surprise that it was also selected for
coins for many centuries. Crown gold was first used
the Krugerrand. In the comprehensive Hern’s Handbook on South
during the reign of Henry VIII in England in 1526, while earlier English gold coins were made of a softer 23-carat
African Coins & Patterns, compiler Brian Hern suggests
gold, leading to their premature wear. 8 The famous
that six Krugerrand patterns of different colours are
guinea coins and the sovereigns first minted in 1817 were
stored in the vaults of Rand Refinery. The current
all minted using crown gold. The millions of sovereigns
whereabouts of these patterns is unknown. In the early
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An Old Gentleman Gets to Shine
“The final design of the Krugerrand was approved on 28 June 1967 by the acting State President, JF Naudé, who signed the Krugerrand design Proclamation. A photograph of a Krugerrand identical to the coins minted in 1967 accompanied this Proclamation.” years of the coin’s history, the Minister of Finance
When it came time to settle on a selling price, the
selected the one that went into production. It is not
South African Mint made some suggestions in 1967.10
clear what alloy he chose and how it changed over the
The cost of the gold in March 1967 was R25,226, to which
years. Some of the earlier Krugerrands appear to have a
a manufacturing cost of R0,225 and a profit of 20% were
different colour. The crown-gold alloy was nevertheless
added for a suggested price of R30,55. In July 1967, this
adopted for all new Krugerrands – a decision that
price recommended by the mint was slightly increased to
proved wise when it became clear that the pure-gold
R31 owing to an increase in the price of gold. In the end, the bullion Krugerrands first offered to the
coins minted by the Krugerrand’s competitors were easily damaged, compromising their attraction for
public during Johannesburg’s Rand Easter Show in 1970
bullion investors.9
sold for less at R27,24.
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Chapter 7
Above: Silver pattern of the Krugerrand. Photo by: Clive Hassal Above centre and above right: The ceremonial first striking of the Krugerrand in 1967 by South African President Dr Nic Diederichs. This striking was done on “Oom Paul�, which is one of the oldest working mint presses in the world. This press was originally used in the old State Mint to strike Kruger coinage in the late 19th century. Photo by: SA Mint The event was celebrated 40 years later when a medallion of this moment was included in the Krugerrand anniversary set. Photo by: F. Malan
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An Old Gentleman Gets to Shine
Bottom right: Only a handful of people attended the first ceremonial striking of the Krugerrand on 3 July 1967. This is a copy of the visitor’s book from the Pretoria branch of the Royal Mint which was still used in later years. It contains the signatures of Dr and Mrs Diederichs, Victor Lodder (Secretary of the Treasury) and Koos and Adele Groenewald (Mint Director). Photo by: SA Mint
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Chapter 7
Above: Coert Steynberg with his springbok model for the Crown size commemorative coin for the Royal visit in 1947. Photo by: The National Numismatic Society.
184
An Old Gentleman Gets to Shine
R E F E R E NCE S 1
Krugerrand Story, Part Two – Name and Design, Unknown Author, Typed Notes in the Records of the Numismatic Society, South Africa.
2 Meredith, M, Diamonds, Gold and War, Simon & Schuster UK Ltd, 2007. 3 The Krugerrand, Bickels Coin and Medal News, Vol. 3, No. 3, September 1967. 4 Edwards, SE, Coert Steynberg and his Numismatic Work, De Nummis, Journal of the Transvaal Numismatic Society, No. 3, 1960. 5 Millais, JG, A Breath from the Veldt, Henry Sotheran and Co, London, 1895. 6 Roux, JP, The Historical Background of the South Africa Five Shilling Piece, The South African Numismatic Society, Newsletter, Vol. 1, No. 5, January 1949. 7 Letter from the Director of the Mint to the Secretary of the Treasury, Ontwerp van die Kruger Rand en die moontlikheid om ’n goue tiekie aan te munt, Ref. 8.0.61/5, National Archives of South Africa, 8th March 1967. 8 Standard Catalogue of British Coins, Coins of England and the United Kingdom, 40th edition, Spink & Son Ltd., London, 2005. 9 New U.S. Mint .9999 Fine Gold Coins a Golden Opportunity, CMI Gold & Silver, Inc. (online) 10 Letter from the Director of the Mint to the Secretary of the Treasury, Verkoopsprys van die Krugerrand, Ref. 7/2/1. 17th March 1967, National Archives of South Africa; Letter from the Director of the Mint to the Secretary of the Treasury, Verkoopsprys van die Krugerrand, U Goedkeuring B7/2/4 van 28 Junie 1967, Ref. 7/2/1, National Archives of South Africa, 27th July 1967.
185
08
MAKING AND SELLING A “STRANGE COIN” “This strange coin – it contains exactly one ounce of gold – was invented by the South Africans in those faroff days (1967) when they were having trouble selling the stuff. So it doesn’t have the romantic ancestry of sovereigns, and sells on a premium of just eight percent of its underlying gold value – against more than 30 percent for even the cheapest sovereign.” Daily Mail, London, 1974 (as quoted in The Star newspaper, 3 January 1974)
Chapter 8
T
he rough gold bars produced by the South African mines in their plants typically assay 84% gold, 11% silver and 5% base metals.1 The base
metals are typically copper, lead, zinc and iron. It is no
secret that anyone wanting to own a Krugerrand would be unhappy if their coins had the same composition, and so, from the beginning, it was imperative that the gold was refined before it was minted.
Rand Refinery The establishment of a local refinery became important from the early days of South Africa’s mining industry and, in 1920, Rand Refinery was established by the Chamber of Mines. Its location in Germiston, 16km east of Johannesburg, was selected for its centrality to those early Witwatersrand mines and the necessary rail infrastructure was available. The shareholders of the company were the major gold producers in South Africa and by December 1921, the refinery was completed with a capacity of 12-million ounces per year.
Opposite page: An historic photograph showing the first deposit of gold received at Rand Refinery in 1921 being cast into a 500 oz ingot. The gold came from Crown Mines. Photo by: Chamber of Mines
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Making and Selling a “Strange Coin”
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190
Making and Selling a “Strange Coin”
This capacity was gradually expanded over the years and
Sydney Mint, in 1867.3 This was in contrast to the London
a major expansion programme was undertaken in 1965,
refinery, which was still using a sulphuric-acid process,
positioning Rand Refinery to play an integral role in the
but it was believed that the chlorine process allowed for
roll-out of the Krugerrand.2 As at 2016, Rand Refinery
the efficient treatment of large amounts of bullion.
had produced millions of blank gold discs for the bullion
As a first part of this refining process, chlorine gas
Krugerrands struck by the South African Mint, and is
is passed through molten gold. The alloying elements
showing no signs of slowing down.
are converted to their respective chlorides and they
These days, Rand Refinery is the “largest integrated
can be separated as a gas or a liquid slag. Gold that is
single-site precious metals refining and smelting complex
at least 99,6% pure is readily obtained from this step.
in the world”, as its official literature describes it. The
As a second step, electrolytic refining is used for the
figures back up this claim: Rand Refinery has refined
gold allocated to manufacture Krugerrands, giving a
more than 50 000 tons of gold since it opened and the
purity of 99,99%.
quality of its refined gold is acknowledged globally,
At first, the blanks for the Krugerrand coins struck
resulting in Rand Refinery being appointed as only one
between 1967 and 1969 were manufactured at the South
of five internationally recognised referees by the London
African Mint. But, by the end of 1969, the Chamber of
Bullion Metal Association (LBMA).
Mines began focusing on selling an increased number
When Rand Refinery was established, a decision
of coins internationally and so in February 1970, Rand
was taken to adopt the chlorine refining process used
Refinery began producing blanks for the Krugerrands at
in Australia and patented by FB Miller, Assayer of the
a rate of 2 000 a day.
Opposite page: An historic Rand Refinery deposit note indicating that 5334.3 ounces of bullion was received from Modderfontein East Mine. The assay report indicated that this deposit contained 4595.94 ounces of gold and 391.02 ounces of silver. Photo by: Ken Bezuidenhout
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Chapter 8
Above: Gold bullion from the mines being received at Rand Refinery in the early 1980s. Opposite page: A deposit of gold is melted and cast into 12.5 kg bars on the casting wheel. Photo by: Chamber of Mines
These initial blanks were manufactured using equipment
The next production hurdle came with the launch of
borrowed from the South African Mint, but as the
the fractional coins in 1980. The small size of the tenth-
demand for the coins rose, production was increased to
ounce Krugerrand required that the strip gold be rolled
40 000 blanks a day. In order to meet the huge demand
to close tolerances. Only eight percent of the gold cast
for Krugerrands in the late 1970s, a new rolling mill
into strip was manufactured into coins. The high level of
was installed.
scrap-gold recycling required that high-precision rolling
4
equipment be installed.
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Chapter 8
194
Making and Selling a “Strange Coin�
Opposite page: The gold electrolytic refining plant. Above: Refined bars are examined for blemishes in 1980 before dispatch. Photos by: Chamber of Mines
A continuous casting machine was also installed and
At the punch section, the strips are fed into a punch
became operational in October 1983. To produce the 22-
that produces four blanks with each stroke. The blanks
carat alloy, which contains between 91,67% and 91,72%
are tumbled to remove sharp edges and oil, and stored in
gold, refined gold and the correct amount of copper are
bags. During final inspection, blanks are fed into auto-
melted and poured into a holding furnace. The continu-
matic sorting machines and weighed, before the machine
ous casting machine allows solid metal to be drawn from
sorts the blanks into various buckets. The underweight
the holding furnace. The strip is coiled and cut when a
coins, as well as those that are too heavy to be ground
certain mass is reached. The strip is passed through the
to the correct mass, are rejected. The blanks that are
rolling mill a number of times to reduce the thickness
slightly overweight have their edges ground to obtain the
from 8mm to 2,34mm for one-ounce Krugerrands and
correct weight.
0,94mm for tenth-ounce coins.
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Chapter 8
Bullion and Proof Bullion coin is a term reserved for mass-produced
negotiations between the Chamber of Mines and a
gold coins, while proof coins are specially prepared for
consortium of three Swiss banks, namely the Swiss Bank
collectors and struck in limited numbers. In the case of
Corporation, the Swiss Credit Bank and the Union Bank
the Krugerrand, minted bullion coins are sent back to
of Switzerland. These banks had advised the Chamber
Rand Refinery for distribution, while the South African
that it would be difficult to market the Krugerrand in
Mint markets and sells only proof coins.
competition with other well-known coins and therefore it should be minted in limited quantities and in high-
In addition, the coining process differs somewhat for the bullion coins and the proof Krugerrands, which are
quality proof-like condition. This consortium sold 70
both produced at the South African Mint.
000 coins between October 1967 and October 1969. The Krugerrand’s first steps were tentative.
Krugerrand proof coins are identifiable by their mirror-like fields and frosted designs. As a further
From 1967 to 1969, only proof coins and some
distinguishing property, introduced in 1977, the
high-quality coins for export were produced by the
serrations on the milled edge of the proof coins are 220,
South African Mint. The bullion Krugerrand was only mass-produced
while those on the bullion coins are 180. The dies for the proof coins are specially prepared by sandblasting
from April 1970 after the Chamber of Mines received
to induce a frosted design. The fields of the die are
permission to sell coins over the counter at local banks
subsequently polished to give the coin the combination
in South Africa.6 Dr AA ‘Attie’ von Maltitz, Chairman of the Gold
of a frosted design and mirror-like fields. During the
Study Committee at the Chamber of Mines, became
minting process, the proof coins are struck several times to give clear definition to the design, while the bullion
increasingly frustrated with the slow pace of coin sales.
coins are struck only once.
In 1969, he initiated discussions with the Swiss and also looked at ways to broaden the coin’s distribution
From 1967 to 1969, only a few proof coins (10 000 per
channels. Despite objections from the Swiss bankers, he
year) were minted and marketed, mainly to collectors. These first Krugerrands are scarce and command a
was adamant that the Chamber should market the coin
premium among collectors because of their gold content.
as a mass-produced bullion coin and not a proof coin
Only a small number of the so-called “high-quality”
for the collector’s market.7 Reluctantly, they ordered 100 000 coins.
coins (40 000 in 1967 and 20 000 in both 1968 and 1969) were exported. These coins were a result of 5
Opposite page: Blanks for the Krugerrand being punched in 1980. Photo by: Chamber of Mines
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198
Making and Selling a “Strange Coin�
Opposite page and Above: Inside the Rand Refinery. Photos by: Clive Hassal
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Chapter 8
Opposite page and Above: Inside the Rand Refinery. Photos by: Clive Hassal
200
Making and Selling a “Strange Coin”
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Chapter 8
Top: Rand Easter Show in the 1960’s. Photo by: CTP Publishers. Bottom: Chamber of Mines Pavilion at the Rand Easter Show. Photo by: Rand Show, Messe Frankfurt
202
Making and Selling a “Strange Coin”
“The bullion Krugerrand was first offered to the general South African public at the Rand Easter Show in Johannesburg in 1970 and a total of 23 000 were sold.8 The price on 30 March 1970 was R27,24. At that time the exchange rate was R1 = $1,4, which made the dollar selling price $38,14 – an eight percent premium over the gold price of $35,35.” At the end of 1969, the Chamber took the decision to mint
then imposed on goods entering Germany. This would
500 000 of the uncirculated bullion coins. The initial
give Germans access to the cheapest form of gold
launch of the coin in overseas markets took place in the
available. He took a personal decision to order 50 000
then West Germany. In his book Bullion Johannesburg,
coins, but then ran into some difficulties when several
author John Lang interviewed Fritz Plass, who was then
branches returned the coins to head office, believing
in charge of the Gold Branch of the Deutsche Bank AG.
the coin would never sell. The launch day was set for 13
He revealed that he received the following instruction
November 1970 and to Plass’s relief, the coins quickly
from his Chairman: “I have a Mr Angus Collie here from
sold out. Another 105 000 coins were sold over the next
South Africa with some coins to sell. Help him.”
two weeks. Scepticism now gave way to a problem of
Plass realised that the legal-tender Krugerrands
meeting the massive demand and by 1978 Deutsche Bank
would not be subject to the 12% value-added tax (VAT)
AG had bought its five-millionth coin.
203
Chapter 8
Above: The 1970 Krugerrand was offered for sale at R27.24 a coin at the Rand Easter Show of that year. Photo by: F. Malan Opposite page: The order form for Krugerrands used at the Rand Easter Show in Johannesburg in 1970. Photo by: E Levine
In its 1970 annual report, the Chamber of Mines reported
only permitted retention of gold coins of “recognisable
that following the marketing of Krugerrands through
numismatic value�. What constituted recognisable
commercial banks (about six months earlier) 73 000 had
numismatic value created confusion for many years and
been sold in South Africa and 359 000 abroad. This was
gold coins were generally available from numismatic
a total of 432 000 coins, together worth R12-million.
dealers. In 1954, the Treasury Department amended
In spite of the early success in Germany, the
the regulations and recognised that all gold coins
international marketing of the Krugerrand faced difficult
minted prior to 1933 would be considered rare. Coins
challenges in the early 1970s.
minted after 1933 would be subject to evaluation of
Among these was the fact that it was still illegal for
the Numismatic Curator of the United States National
citizens of the United States and Britain to own modern
Museum.9 The gold-coin collectors in Britain faced a
gold coins. In the United States, the Gold Reserve Act of
similar dilemma.
1934 and the Executive Order and banking laws of 1933
204
Making and Selling a “Strange Coin�
For many years it was only possible to collect gold coins
different institutions. Members of the Chamber of Mines
minted prior to 1837 and the introduction of the Gold
mined the gold and dispatched it to Rand Refinery. After
Coins Order in April 1966 caused further problems
the gold was refined and alloyed with copper, the blanks
when the Bank of England issued regulations requiring
were produced to exact standards. These blank discs
registration of coin collectors. These collectors were
were dispatched to the South African Mint (then still
also restricted to four gold coins minted after 1837.10
in Pretoria) for minting. The Economist reported that
By 1970, the only other major nation that prohibited
in 1974, the Chamber of Mines paid the South African
trade of gold by its citizens was the Soviet Union, where
Mint 17p (17 British pennies) for each coin minted. The
private ownership of gold was considered to be a serious
Chamber then sold the coins to the South African
economic crime and was punishable by death. This
Reserve Bank at a price three percent above the average
did not stop a flourishing black market in gold from
of the previous four fixings of the London gold market.
existing in Russia.
The Reserve Bank sold it again at eight percent above
In 1971, the restrictions on British citizens hoarding
this price and was prepared to buy it back at two percent
gold coins were finally lifted, opening the door for the
below the ruling London price. This ensured a buy-sell
marketing of the Krugerrand in the United Kingdom.
spread of 10%.
In the early 1970s the manufacturing and marketing of the Krugerrand was complex and involved a number of
205
Chapter 8
“From January to August 1974, 1 740 000 Krugerrands were exported. Of these, 826 000 went to Germany, 500 000 to Britain, 380 000 to Switzerland, 28 000 to Canada and 3 000 to Belgium. Another 3 000 went to Hong Kong, as South Africa was actively marketing the coin in the Far East, propelled by fears that Britain might impose a ban on gold-coin imports.� The strategy of declaring the Krugerrand as legal-
From January 1974, it had become legal for American
tender coin proved important in marketing the coin in
citizens to own gold coins minted prior to 1960. This
Britain, as it was exempted from VAT and the investment
allowed for restrikes of old gold coins from Austria
currency premium. This gave it a distinct advantage over
and Mexico, but not the Krugerrand, to be imported.
the Mexican peso and the Austrian ducat, although it was
An amendment to the International Development
still subjected to capital gains tax (CGT).
Association Bill finally restored the freedom to own gold on 31 December 1974.11
206
Making and Selling a “Strange Coin”
Historic Krugerrand advertisements. Photo by: Chamber of Mines
For the first two years after the launch of the Krugerrand
Anglovaal Limited, General Mining Union Corporation
in the United States it appeared as though the American
Limited, Gold Fields of South Africa Limited,
public had lost its appetite for gold, but then sales of
Johannesburg Consolidated Investment Company
Krugerrands took off at a rapid pace.
Limited and Rand Mines Limited.
Gold investment was concentrated in two areas in
Intergold’s key objective was the worldwide
those years – Krugerrands and futures markets.
promotion of gold through its jewellery, coin-investment
International marketing of the Krugerrand was
and industrial divisions. With headquarters in
entrusted to the International Gold Corporation
Johannesburg’s Corner House, and regional and branch
(Intergold) – a subsidiary company of the Chamber of
offices in Geneva, New York, Hong Kong, Brussels,
Mines that was funded by its mining-house members.
Barcelona, Tokyo, Paris, London, Los Angeles, Milan and
The six mining houses controlling Intergold were
Munich, Intergold had an ambitious plan to market the
Anglo American Corporation of South Africa Limited,
Krugerrand and appoint primary distributors.
207
Chapter 8
Historic Krugerrand advertisements. Photo by: Chamber of Mines
In 1976, Intergold launched a major United States
Worldwide – vividly illustrates the massive publicity
advertising campaign and an exhibit was staged at
campaign that Intergold put into place, which no doubt
the New York Jewelry Trade Fair and the American
played a key role in the international success of the coin.
Numismatic Association Convention. Part of the exhibit
“The world’s best way to own gold”
was a competition to win a Krugerrand by guessing
“There’s never been a wrong time to own gold. And there
the value of coins in a fish tank filled with Krugerrands
may never be a better time than now”
and guarded by piranhas. In Los Angeles and Dallas,
“Are your investments as good as gold?”
visitors had to guess the number of Krugerrands that
“Add a little gold to your blue chips”
filled a shoe.
“Invest in gold and you can always alter the terms”
12
A booklet published by the International Gold
“Be a Bullionaire!”
Corporation in 1984 – Krugerrand Advertisements
208
Making and Selling a “Strange Coin”
“Maybe you ought to look beyond Wall St. for part of your
Marketing of the new gold coin remained a
investment program.”
challenge in America.
“In the world of gold coins the new Krugerrand
The gold price had remained stable at $160 an ounce
sizes stand out”
for most of 1975. On 17 July 1976, three days before the
“Man does not live from Wall Street investments alone.”
New York launch of the coins, it plunged to $117, with
“Gold. The backbone of your investment portfolio”
Zürich-based analysts predicting it was headed for $60.
By December 1979, the premium of the Krugerrand
Don Mackay Coghill, chief executive of Intergold,
over its gold content dropped as low as two percent.
recalled a tough question he faced from a New York
This gave it a significant competitive edge over other
banker during the launch. “Son, I’d like to know how you
gold coins available during that time. As an example, the
can have the audacity to come into this, the largest and
premium of the new British sovereign was nine percent
most sophisticated investment market in the world, to
and the old US $20 coin was 17,5% during that period.
launch the Krugerrand – whatever it is – as an investment
Intergold appointed a number of primary
related item when just 18 months ago the gold price was
worldwide distributors and, by April 1984, there were
$200 an ounce and, from what we read coming out of
20. These were:
Zürich, it is now on its way down to $60 an ounce?”
London: Johnson Matthey Ltd, Mocatta & Goldsmid
Mackay-Coghill’s answer was audacious. “Sir, it is
Ltd, Samuel Montagu & Co. Ltd, NM Rothschild & Sons
people like you who are going to buy the Krugerrand at
Ltd and Sharps, Pixley Ltd.
the present price – and who in six months’ time, when
New York: J. Aron & Company, Mocatta
the price is back up at the $150 dollar level, will sell the
Metals Corporation, Phibro and Republic National
coin for me.” 13 In 1984, in accordance with exchange-control
Bank of New York. Canada: Bank of Nova Scotia in Toronto.
regulations, South African banks were not permitted to
Zürich: Swiss Bank Corporation, Swiss Credit Bank,
export Krugerrands. When leaving South Africa, foreign visitors were nevertheless permitted to use foreign
Union Bank of Switzerland and Bank Leu. Germany: Deutsche Bank AG, Dresdner Bank AG
currency to purchase any number of Krugerrands from Volkskas Bank in the departure transit lounge at Jan
and Bayerische Landesbank Girozentrale. Tokyo: Tanaka Kikinzoku Kogyo K.K., Mitsubishi
Smuts Airport (now OR Tambo International Airport) in Johannesburg.
Corporation and Sumitomo Corporation.
209
Chapter 8
Above: Minting Krugerrands in 1980. Image by: Chamber of Mines
210
Making and Selling a “Strange Coin”
R E F E R E NCE S 1
Fisher, KG, Refining of Gold at the Rand Refinery, In: Stanley, GG (ed.), The Extractive Metallurgy of Gold in South Africa, SAIMM Monograph Series M7, Johannesburg, 1987.
2 Ibid 3 Ibid 4 Ibid 5 Hern, B, Hern’s Handbook on South African Coins & Patterns 2013, Published by the author, 2013. 6 The Economist, South Africa wants the world to fall for its gold prices, 7th September 1974. 7 Lang, J, Bullion Johannesburg – Men, Mines and the Challenge of Conflict, Jonathan Ball Publishers, Johannesburg, 1987. 8 South African Scope, The Kruger Rand – A Prestige Coin, p.12, March 1974. 9 Hoppe, DJ, How To Invest In Gold Coins, 1970. 10 Ibid 11 Kettell, B, Gold, Howard Timmins Publishers, 1982. 12 World Coin News, Name Winners in Krugerrand Guess Contests, 26th October 1976. 13 Cairncross, C, World Debut for a New Generation of Krugerrands, Mining Survey, no 3/4, 1980.
211
09
A SCRAMBLE FOR GOLD “It’s only fair that, from now on, you should pay more for oil. Let’s say ten times more.” The Shah of Iran, 1973 1
Chapter 9
Gas shortage in the US. Photo by: National Archives and Records Administration, College Park.
214
A Scramble for Gold
I
n August 1971, gold was still priced at $35 per ounce. On 21 January 1980, less than nine years later, the price briefly touched $850.
How did this happen? A perfect storm was brewing
to push gold to a high that has still not been surpassed in real (inflation-adjusted) terms. With no other oneounce gold coins available to investors, marketers of the Krugerrand were able to sell 30 382 335 coins between 1971 and 1980. 2 Contributing to the perfect storm was the depreciation in the value of the dollar after the abandonment of Bretton Woods. With oil priced in dollars, the oil-producing countries were getting the same dollars for their oil, but had to pay more for imports owing to high global inflation. The Organization of Petroleum-Exporting Countries (OPEC) was slow to adjust prices after the 1971 crisis and oil lagged behind other commodity price increases.
215
Chapter 9
216
A Scramble for Gold
The Shah of Iran put it succinctly in a 1973 interview with
Americans were concerned that Israel might consider
The New York Times: “You increased the price of wheat
a nuclear-attack option. On 9 October, President Nixon
you sell us by 300%, and the same for sugar and cement
ordered the commencement of Operation Nickel Grass,
… You buy our crude oil and sell it back to us, refined as
an American airlift to supply Israel with replacement
petrochemicals, at a hundred times the price you’ve paid
military hardware. This assisted Israel in regaining the
to us. It’s only fair that, from now on, you should pay more
upper hand and it recaptured all the territories lost.
for oil. Let’s say ten times more.”
America’s aid to Israel angered the Arab world and
The trigger for this overdue oil-price increase was the
the members of OPEC declared an oil embargo against
1973 Arab-Israeli War.
the West. On 16 October, Saudi Arabia, Iran, Iraq, Abu
On 6 October, Egypt and Syria attacked Israel on
Dhabi, Kuwait and Qatar increased the oil price by 17%
two fronts. The day of the attack was chosen to coincide
to $3,65 per barrel and announced production cuts.
with Yom Kippur, the holiest day of the Jewish calendar.
An embargo of oil exports to the United States and the
The Egyptian forces crossed the Suez Canal and
Netherlands was imposed in the days that followed. On
advanced into the Sinai Peninsula, while the Syrians
23 November 1973, the oil embargo was also extended to
attacked simultaneously on the Golan Heights. Owing
Portugal, Rhodesia (now Zimbabwe) and South Africa.
to large material losses suffered by the Israelis, the
Opposite page: Solid lines of cars in Portland resulted in a first come first served limit of five gallons. Photo by: National Archives and Records Administration, College Park.
217
Chapter 9
Iranian hostage crisis protest, 1979. Photo by: United States Library of Congress.
218
A Scramble for Gold
Fighter plane during the 1973 Yom Kippur war. Photo by: The Central Intelligence Agency.
The effect of all of this was severe and, by 1974, the price
The South African Mint in Pretoria was manufacturing
of oil quadrupled to US$12 per barrel. 3
75 000 coins a week and was planning to double this
The global stock-market crash of 1973 to 1974 played
number with added capacity. An incredible 30% of
no small part in the continuing global woes. From
South Africa’s gold production was now being used to
11 January 1973 to 6 December 1976, the Dow Jones
manufacture Krugerrands.
Industrial Average benchmark lost 45% of its value. The
The scramble for gold resulted in the implementation
London Stock Exchange was particularly hard hit and
of certain restrictions on the number of Krugerrands
lost 73% of its value.
for sale to the South African public.The South African
As the rate of inflation soared – in the United States,
Mint maintained a subscribers’ list in the 1960s and
the consumer price index (CPI) jumped from 3,4% in 1972
allocations of collectable coins were restricted to
to 12,3% in 1974 and in the United Kingdom it peaked
these subscribers only. Until 1972, subscribers could
at 23% in 1975 – gold became an attractive option.
essentially order as many gold coins as they desired.
Combined with global economic uncertainty, this high
But by 1973, they were limited to five Krugerrands and
inflation greatly assisted the sales of the Krugerrand in
20 other gold coins (the R1 and R2 gold coins). In 1974,
Europe. The Economist reported that by July 1974, coins
subscribers were limited to only one proof Krugerrand
worth £13-million were imported into Britain, already
and six other gold coins.
exceeding imports for the whole of the previous year.
219
Chapter 9
Soldiers during the 1973 Yom Kippur War. Photo by: The Central Intelligence Agency.
Individual collectors were not the only ones affected
Mint to strike the coins. At that stage, the premium on
by the restrictions. On 23 July 1974, the Treasury
the coins sold in South Africa was 15% above the gold
drastically restricted the supply of Krugerrands to
price. Owing to the large demand, the Rand Daily Mail
the South African public sold through the commercial
reported that the Treasury would slightly increase the
banks. According to The Economist, a limit of 4 800
local allocation in 1975 to 2 000 coins a week.
coins a month was imposed for the domestic market as
The last push towards record-high gold prices came
a way of satisfying growing international demand. Dr
during the Iranian Revolution and the panic caused by
Nic Diederichs, Minister of Finance, told Parliament in
the subsequent Iranian hostage crisis.
1974 that it was policy to focus on exports, as demand
In early 1979, massive protests led to the Shah of Iran
was outstripping the capacity of Rand Refinery to
fleeing his country and Ayatollah Khomeini assuming
manufacture the blanks and that of the South African
control. The revolution disrupted Iranian oil production
220
A Scramble for Gold
“By 1981, there were just four major issuers of official gold coins –South Africa, Great Britain, Mexico and Canada. But the Krugerrand was by far the dominant coin in world markets.
and forced oil prices to more than $30 per barrel by 1980.
One of the conditions set by Iran was the unlocking
The situation deteriorated on 4 November 1979, when
of Iranian assets in America. The Iranians insisted on
Islamist militants and students took over the American
payment in gold rather than American dollars and the
Embassy in Teheran in support of the Iranian Revolution.
United States government transferred 50 tons of gold
A total of 52 Americans were held hostage for a period
to Iran to compensate them for the Iranian gold that was
of 444 days and a failed rescue attempt from the United
frozen at the New York Federal Reserve Bank.
States aircraft carrier Nimitz on 24 April 1980 resulted
By 1981, there were just four major issuers of official
in the death of eight American soldiers. The invasion
gold coins –South Africa, Great Britain, Mexico and
of Iran by Iraq eventually defused the situation and
Canada.4 But the Krugerrand was by far the dominant
after negotiations the hostages were released just after
coin in world markets.
Ronald Reagan became president.
R E F E R E NCE S 1
Smith, WD, Price Quadruples for Iranian Crude Oil at Auction, New York Times, 12th December 1973.
2 Hern, B, Hern’s Handbook on South African Coins & Patterns 2013, Published by the author, 2013. 3 Wikipedia, 1973 Oil Crisis. 4 Kettell, B, Gold, Howard Timmins Publishers, 1982.
221
10
SMALLER IS BETTER “The new smaller denominations, which are exact fractions of an ounce, will once more place gold in the pocket of the average man.” Senator Owen Horwood, 1980
Chapter 10
T
he 1960s and early 1970s were an anomalous
grams during their 500-year history. The Venetian
period in the history of the gold price.
zecchino weighed 3,49g when it was in circulation from
The Bretton Woods agreement and
1595 to 1797. The famous British guinea contained exactly
coordinated interference by Western powers kept gold at
7,66g of gold from 1663 to 1813. The British sovereign,
a dirt-cheap price. The creation of the London Gold Pool
containing 7,32g of gold, dominated world trade for 100
was a key vehicle in keeping the rising gold price under
years and was the standard for gold coins until 1932.
control. Although annoying to the gold producers, this
History tells us that a practical gold coin should
low price assisted with the launch of the Krugerrand, as
weigh between seven and eight grams or less, and this
the middle class could afford to splurge on a full ounce of
practicality caught up with the one-ounce Krugerrand in
gold (or several) at a time.
the late 1970s.
This was indeed the intention of the Chamber of
Research by Roy Jastram at the University of
Mines – to make gold available to the average man and
California, Berkeley suggests that gold maintains its
woman – and it worked well during the coin’s infancy.
purchasing power over long periods of time, despite
With hindsight, it is easy to recognise that these good
periods of major inflation and deflation.1 This supports
times for the gold hoarders could not last.
the notion that a practical gold-coin size should typically not exceed seven or eight grams, otherwise it is simply
Compared with other successful gold coins in history,
too valuable for use by ordinary people.
the Krugerrand was in fact a heavy coin. The Roman aureus and solidus weighed between four and eight
Above: Copper size patterns of the proposed fractional Krugerrands. Photo by: F Malan. Opposite page: The second South African Mint was built in the same location as the first Royal Mint in Pretoria. The new modern Mint, built in phases but officially only opened in 1979, allowed for the minting of the large number of Krugerrands in the 1970s. The first fractional Krugerrands were minted here in 1980. Photo by: Chamber of Mines
224
Smaller is Better
When the United States went off the gold-exchange
from $100 an ounce in 1976 to $850 an ounce in January
standard in 1971, the price of gold rose sharply from $35
1980. This increase in the gold price made the one-ounce
an ounce to $200 an ounce. This mirrored the sharp
Krugerrand simply unaffordable for the middle class.
rise in commodity and consumer prices in the 1973/74
Intergold admitted that, by 1980, “The original
period. An interim gold peak occurred in 1975, which
concept remains sound, but the size of the package needed
coincided with a period when the inflation rate started
rethinking�.2 Three additional sizes were introduced –
dropping. When consumer price inflation started rising
the half-ounce, the quarter-ounce and the tenth-ounce.
again, reaching 14% in 1979/80, gold also increased
225
Chapter 10
226
Smaller is Better
Cutting a master die for the new fractional Krugerrand from a large scale model in 1980. This was for the half-ounce coin. Photo by: Chamber of Mines
227
Chapter 10
228
Smaller is Better
The new Krugerrands were marketed with increased
In the United States, a coast-to-coast roadshow by
premiums over the gold price; these were five percent
representatives of the Chamber of Mines and Intergold
for the half-ounce, seven percent for the quarter-ounce
announced the launch of the new coins. Marketing
and nine percent for the tenth-ounce.3 The existing
proved easier as, by this time, America had become
premium of three percent for the one-ounce coin
the biggest consumer of gold in the world and the new
remained unchanged.
coins allowed Americans to buy a Krugerrand that
The worldwide launch of the new Krugerrand coins
was described as “smaller than a dime” for as little as
took place in September 1980 with a number of functions
$80. 5 The marketing campaign paid dividends and
in New York, Frankfurt, London and Hong Kong. The
in the days after the launch 118 000 half-ounce coins,
Vice-President of the Chamber of Mines, LWP van den
154 600 quarter-ounce coins and 214 610 tenth-ounce
Bosch, attended the London launch and expressed his
coins were sold.6 By October 1980, gold was trading
confidence in the continued long-term upward trend
in the region of $672 to $676. At the time, Manfra,
in the price of gold.4 What he didn’t know was that gold
Tordella & Brookes, one of the biggest coin dealers in
would remain in the doldrums for the next two decades.
the United States, quoted the full-ounce coin at $699,
Time, however, eventually proved Van den Bosch right
the half-ounce at $361, the quarter-ounce at $186 and
and the fractional Krugerrands did the job of allowing
the tenth-ounce at $77.7 Demand for the smaller coins
members of the public to acquire coins at an affordable
increased during the remainder of the year and Intergold
price. As van Den Bosch said at the launch, “It is our belief
launched a $12-million advertising campaign in 1981
that these new, smaller Krugerrands will make a major
to explore additional markets for the smaller coins –
impression on the world gold market, as they will enable
including the jewellery and gift markets, along with a
the general populace once again to afford to buy a ‘piece
savings programme (the latter going under the slogan in
of gold’ – something which has eluded many of them as the
Germany of “save-a-coin-a-month”).
price of gold has soared.”
Opposite page: Adding the finishing touches to a die for the 1980 Krugerrand. Photo by: Chamber of Mines
229
Chapter 10
The production of the mini Krugerrands (as
also demanded that the names of the 60 guests be made
the fractional came to be known) was not
public. Horwood countered by referring the issue to the
without controversy.
Advocate General and also called for a Select Committee
During the October 1981 session of Parliament, a
of Parliament to investigate the allegations against him.
nasty dispute erupted between the Minister of Finance,
The story was of such significance that it made the
Owen Horwood, and the PFP MP for Gardens, Ken
headlines of the Afrikaans Sunday newspaper, Rapport,
Andrew, as reported in the Rand Daily Mail of 10 October
on 11 October 1981. The article detailed how the minting
1981. Andrew stated that during the launch function
of just 60 proof sets meant that ordinary coin collectors
of the fractional coins in 1980, the 60 official guests
were never given the opportunity to purchase proof
were allowed to buy the only proof sets of the 1980 mini
sets of the 1980 mini Krugerrand. The newspaper also
Krugerrand coins. The price at the function was set
revealed additional details, including how the function
at R473,83 and by October 1981, the price for this set
had been arranged by Koos Groenewald of the South
among collectors had increased to between R5 000 and
African Mint, along with the Chamber of Mines. Dr Chris
R11 000. Andrew wanted an explanation for this private
Stals of the Reserve Bank admitted to the newspaper
sale and accused Horwood of misusing his position as
that he was one of the guests, but he did not reveal any of
Minister of Finance and as protector of State funds.8 He
the other guest names.
Above: The 1980 bullion Krugerrand fractional set. Photo by: F Malan Opposite page: The Chief Executive of Intergold, Don Mackay-Coghill, at an international launch of the new generation fractional Krugerrands. Photo by: Chamber of Mines
230
Smaller is Better
231
Chapter 10
The Rand Daily Mail reported a few days later that the
The controversy subsided but the fractional proof-coin
guests included top finance and banking officials, cap-
sets still fetched high prices, with the Rand Daily Mail
tains of the gold industry, members of the Chamber of
reporting in 1981 that a dealer paid an unidentified South
Mines, chairman of the Commission for Administration
African Mint official R6 500 in 1980 for one of the sets.
and the Director General of Finance. In spite of the
Ironically, the value of these sets collapsed with the
controversy, the Advocate General, Justice van der Walt,
other proof coins in 1985. A 1989/90 South African coin
found no reason to initiate an investigation. He also
catalogue only listed these sets at a value of R2 000,
added that no complaint by way of a sworn statement, as
but Hern’s 2014/15 coin catalogue currently lists it at a
provided for in the Advocate-General Act (Act No. 118 of
price of R90 000.9
1979), was submitted to him.
Above: The Minister of Finance, Mr Owen Horwood, holding a fractional Krugerrand. A nasty dispute erupted in Parliament over these coins. Photo by: CTP Publishers
232
Smaller is Better
R E F E R E NCE S 1
Jastram, R, The Golden Constant, John Wiley & Sons, 1977.
2 Cairncross, C, World Debut for a New Generation of Krugerrands, Mining Survey, no 3/4, 1980. 3 Kettell, B, Gold, Howard Timmins Publishers, 1982. 4 Cairncross, C., World Debut for a New Generation of Krugerrands, Mining Survey, no 3/4, 1980. 5 Egan, J, Less Gold For Less: The New Krugerrands, New York, 20th October 1980. 6 Cairncross, C., World Debut for a New Generation of Krugerrands, Mining Survey, no 3/4, 1980. 7 Egan, J, Less Gold For Less: The New Krugerrands, New York, 20th October 1980. 8 Rand Daily Mail, Gold Coin Row: Horwood Wants Inquiry, 12th October 1981. 9 Hern, B, Hern’s Handbook on South African Coins & Patterns 2014/5, Published by the author, 204.
233
11
POP WENT THE PROOF-COIN BUBBLE “The rage for possessing them soon caught the middle classes of society, and merchants and shopkeepers, even of moderate means, began to vie with each other in the rarity of these flowers and the preposterous prices they paid for them� Charles Mackay, 1841 1
Chapter 11
Above: Cutting a Krugerrand die at the SA Mint in 1983. Photo by: Chamber of Mines
236
Pop Went the Proof-coin Bubble
“With gold fever at its height in the late 1970s, the Krugerrand became the darling of the small investor. But a bubble was also inflating, unseen, in the background.”
I
t is easy to condemn earlier generations for their
produces millions of bullion Krugerrands, but only a few
occasional stupidity when you reflect back on
thousand proof coins (typically 10 000 coins in the 1970s,
history from the distance of time.
and currently far less per annum) for collectors.
The Dutch tulip mania of the early 17th century is a
These proof coins are struck from specially prepared
popular example. How on earth could a sane person offer
dies and struck using several blows to ensure that
to swap 12 acres of land for a single Haarlem tulip bulb, as
the designs are crisp. Proof coins have a beautiful
reported by Charles Mackay? The tulip bubble reached
mirror finish in the fields and the designs are frosted (a
its peak in 1635, when people would invest as much as
process where the dies are sandblasted and the fields
100 000 florins just to buy 40 bulbs and many houses
subsequently polished). The result is a coin in which the
were sold to raise cash for tulip investment. The demand
fields are mirror-like, but the design of the coin appears
for rare tulip varieties increased to such an extent that
to have a matt finish. In comparison, the bullion coins do
by 1636, markets for their sale were established on the
not have frosted designs and the fields can be rather dull.
stock exchanges of Amsterdam, Rotterdam and other
The first bullion Krugerrands were only produced in
Dutch towns. The bubble burst when prudent investors
1970, three years after the initial striking of the coin in
saw the “madness of the crowds”. As fear gradually
1967. From 1967 to 1969 only proof coins and so-called
spread, the prices fell and never recovered. Tulips,
high-quality coins for export were produced. This
which sold for 6 000 florins at the peak, could then be
created confusion among collectors, as the high-quality
purchased for 500 florins. Many ordinary people and
coins were often mistaken for proof coins.
merchants were ruined.
The 1967 and 1968 proof Krugerrand also differed from those minted in later years.2 Both the 1967 and 1968
The Dutch tulip experience is one of many examples of crowd-fuelled madness – many of which Mackay wrote
coins have the characteristic mirror-like fields, but the
about in his book Memoirs of Extraordinary Popular
designs for the 1967 proof coin are plain (unfrosted). The
Delusions and the Madness of Crowds as long ago as 1841.
1968 proof coins were mostly only frosted on the reverse
But modern society forgets these lessons and investment
side, except for a few rare “frosted” 1968 coins, where the
bubbles remain with us. The South African Mint
designs on both sides of the coin are frosted.
237
Chapter 11
As early as 1974, a coin magazine described the proof
R112,35, while the average proof-coin price rocketed to
Krugerrand as an “investor’s coin”.3 It argued that while
R290,63. Proof coins were now on average worth more
the price of bullion coins is strictly determined by the
than two-and-a-half times their intrinsic gold value.
gold price, the prices of proof coins are determined by
These increases in price prompted one company to offer
supply and demand and “Experience has shown that their
to repurchase any proof Krugerrands sold within one
values do not decline when the price of gold declines”.
year from the date of sale at a minimum price of 90% of
In April 1973, the bullion Krugerrands were selling
the selling price.
at R75,39 compared with the average proof-coin price
During this time a grading system was developed for
of R80,83. By June 1974, the bullion prices increased to
these proof coins by a South African company.4
238
Pop Went the Proof-coin Bubble
Opposite page: Proof coin characteristics. Above: Exchange to determine the daily price of proof Krugerrands. Photos by: Chamber of Mines
239
Chapter 11
The prompt for this was the fact that not all proof coins
figure was 40 points. To this, between zero and three
were born equal. Some had a better strike and blemish-
merit points were added, depending on the quality of
free fields, while others could have been accidentally
the frosting on the bust. Similarly, between zero and
scratched. After the “grading� of each coin, the company
three merit points were added for the frosting of the
encapsulated the coin in a tamper-proof capsule and a
springbok. Points were then deducted with respect to
grading certificate was issued. Similar to Dutch tulips,
faults. The first tables indicating recommended buying
some of the proof coins now became more desirable than
and selling prices were published on 17 January 1975.
others. The first merit system to evaluate these coins was
A 1974 proof coin with a rating of 25 was considered
published in January 1975 and considered parameters
to be worth R385, whereas the same coin with a rating of 44 would sell for R740. Krugerrands are desirable,
such as rim imperfections, nicks in the field, scratches and weaknesses in the design caused by a poor striking.
but surely it is a better financial investment to own the
5
Some of the prominent numismatists who gave input on
highest-graded proof Krugerrand in existence?
this new system were R Bickel, P Bowles, H Cain, A Jaffe,
The dealers noted that more people were using their
S Kaplan, R Sher and I Witkin.
bullion Krugerrands to exchange for proof Krugerrands.
An updated version of the system was published
The proof krugerrands were also holding firm and even
three months later, and later became known as the
advanced slightly during times when the price of bullion
Original Evaluation System (OES). The basic starting
Krugerrands fell.
6
Opposite page: The S100 evaluation system for proof Krugerrands Photo by: Chamber of Mines
240
Pop Went the Proof-coin Bubble
241
Chapter 11
A reminder of the era when proof coins were popular in South Africa. An encapsulated proof coin and the accompanying certificate are shown in the photograph above. Photo by: F Malan
The evaluation system was further revised in April 1976
“One of our clients who had to go abroad for two
and each coin now had a base value of 100. The capsule
years sold his home and invested the total proceeds
in which each graded coin was sealed was also changed.
in Krugerrands (R40,500.00 in Proof and R7,627 in
Coins evaluated according to the OES were sealed in
UNC). Significantly, he would have to pay 9% less for
soft transparent plastic bags, while all coins evaluated
the Uncirculated coins today if he was able to get them
according to the S100 were ultrasonically sealed in
at the official bank price and 22% more on the open or
rigid tamper-proof acrylic capsules. The mechanism
numismatic market. However, he would have to pay
of grading, smart marketing, a rising gold price and
43% more to buy the Proofs. At current selling prices,
the necessary investor greed was now in place to blow
his R48,127.00 investment is worth an astonishing
a huge bubble.
R67,275.00 today. Believe it or not, his purchases took
The proof Krugerrand bubble frenzy was noted in a
place in March 1974, scarcely 6 months ago, when gold
September 1974 coin magazine.
was approaching its alltime high of $179.�
242
Pop Went the Proof-coin Bubble
During 1976, a dealer introduced a monthly sale of proof Krugerrands based on a tender system. Booklets listing coins available for sale were produced and distributed. No live auctions were held, but tenders were accepted in writing. The highest tender per coin was the successful one, provided that the reserve price was met. The amount payable was reduced to R5 above the secondhighest tender. The most desirable proof Krugerrand during the 1970s and early 1980s was the 1968 “frosted” coin. Eli Levine 8 described it as the rarest of the proof coins in his publication The Golden Key: General Rational Investment Strategy and Numismatics for the Investor. Research recently conducted by this author turned up handwritten notes about the 1968 coin from Koos Groenewald, the Director of the Mint at the time, which gives some clarity on the number of coins minted. In short, the striking of the frosted 1968 coin was unplanned. At the end of the minting programme for 1968, it had been decided that all future Krugerrands would be struck with frosted designs on both sides of the coin (coins had been struck previously with a frosted springbok, but not the bust). From the production figures and other evidence available to Groenewald, it appears that the last 1 044 coins from a run of 10 000 were the “frosted” variety. Even by late 1973, the frosted 1968 coins were still not considered rare, with the Phoenix Coins price list giving selling prices of the 1968 proof coins as R120, while the 1967 proof coins were given a higher value of R135.
Right: Annual growth rate in the price of the frosted 1968 proof Krugerrand compared to other coins Photo by: E Levine
243
Chapter 11
Levine noted that the subsequent increase in price of
the Gold & Hard Asset Exchange, was less optimistic and
this 1968 frosted coin was spectacular. In March 1975, the
was quoted as saying, “We would not advise anyone to
price for a coin graded at 96 points was listed as $1,736.
dabble in proofs at the moment.”
In 1979, the highest price achieved for the same grade
The average price of a proof Krugerrand was R1
was $15,775.9 This was an unsustainable growth over a
600 compared with R530 for the bullion Krugerrand.
four-year period.
The charge for an evaluation was R60 as well as 15%
The proof coins were not only marketed in South
commission on sales.
Africa, but also in the United States. The exclusive
The reasons for the collapse of the proof-Krugerrand
distributor of the evaluated proof coins was Hintzpeter-
market are diverse and were no doubt exacerbated by
Redman Co of Fort Thomas, Kentucky.
the worldwide sanctions imposed on the coin in 1985
The New York Times published an article in 1981
(as will be described in the next chapter). Whatever the
describing the promotion of the proof Krugerrands.
reasons, the severity of the collapse is evident from the
“Ironically, proof Krugerrands, struck in the first place for
prices listed in the third (1985/86) and fourth (1986/87)
collectors – indeed, as a collector version of an investor-
editions of The South African Coin Catalogue (Randburg
orientated coin – are being marketed now primarily
Coin Co.). In the third edition, the frosted 1968 coin was
among investors. Mr. Levine has geared his company’s
listed with a value of R10 000, but the price had dropped
sales techniques to the investor mentality, and has
to only R3 000 in the fourth edition.
buttressed this approach by devising a grading system
In the September 1986 sitting of Parliament, HH
which, in his words, ‘puts the man in the street on the
Swartz requested the Deputy Minister of Finance
exact same level as the expert.”
to clarify the situation regarding proof coins and
But cracks in the proof-coin market started
the creation of a market for proof coins, leading to
appearing in 1984.
a discussion in Parliament about the collapse of the
On 5 February 1984, the Sunday Times published an
proof-Krugerrand market. As recorded in Hansard, the
article detailing the R2,7-million building one coin dealer
Minister stated, “As far as we are concerned, we have
had erected in Jan Smuts Avenue in Parktown. The
seen a situation in South Africa where a major market
building housed branches of Barclays and UBS banks for
for proof coins has completely collapsed. Many people
the convenience of customers. It could accommodate up
have, in fact, suffered heavy losses as a result of it. So the
to 25 brokers and was expected to increase turnover to
question that had to be asked, is: Bearing in mind that the
R200-million per annum.
Mint produces both ordinary gold coins and proof coins,
Proof sales had increased by 50% in 1983, so few took issue with this dealer’s approach. Bruce Holsten from
is there not a need or desirability that the Mint should take the lead in creating a market for proof coins?”
244
Pop Went the Proof-coin Bubble
Proof Krugerrand description from a 1984 Intergold publication. Photo by: Chamber of Mines
245
Chapter 11
Third party grading and encapsulation of coins have become popular in South Africa again. This illustrates a Krugerrand encapsulated by Numismatic Guaranty Corporation (NGC) in the USA. Photo by: F Malan
246
Pop Went the Proof-coin Bubble
The proof Krugerrand never recovered as an investment
appears that most of the certificates have been lost.
or collector’s coin and the number of proof coins minted
Ironically, these encapsulated proof Krugerrands, if still
in recent years remains low.
accompanied by their correct certificates, are becoming
Although the proof market collapsed, it gave South
sought after collectables, forming a key part of South
Africa an interesting link with the history of formal
African numismatic history.
grading and slabbing of coins. The South African Gold
Perhaps the last words on the damage done by the
Coin Exchange graded and encapsulated coins long
proof-Krugerrand bubble should be left to the famous
before the first collector’s coins were slabbed in the
numismatist Dr Frank Mitchell, who was instrumental
United States – the latter following the introduction
in the lobbying process for the silver R1 in 1964 when the
by Professional Coin Grading Service (PCGS) in 1986.
one-ounce gold coin was also considered.
This was a full decade after The South African Gold
“We got our Silver Rand – but I am convinced as I look
Coin Exchange provided a similar service for proof
back now, that the bullion gold coin which was later
Krugerrands. Other popular third-party grading
named the ‘Krugerrand’ has done more damage to
companies were formed at the time, including the
coin collecting in South Africa, to genuine academic
Numismatic Guarantee Corporation (NGC), located in
numismatics in our country, than can possibly be
Sarasota, Florida. NGC began grading US coins in 1987
compensated for by our interesting series of silver rands.
and later expanded into world coins. Although a large
The sale of Krugerrands in world markets brought
number of grading coin companies exist, PCGS and NGC
substantial profits to the South African gold mining
are most popular with South African collectors.
industry, and soon other countries around the world were
In the wake of the collapse of the proof-Krugerrand
striking their own bullion ‘coins’ for sale at a premium.
market, the grading of the coins in South Africa was
This trend inevitably led to overriding emphasis being
abandoned and many Krugerrands were subsequently
placed on the speculative investment aspect of these much
removed from their capsules. Although some
publicized ‘coins’, and of numismatics in general.” 10
encapsulated Krugerrands can still be found today, it
247
Pop Went the Proof-coin Bubble
R E F E R E NCE S 1
Mackay, C, Memoirs of Extraordinary Popular Delusions and the Madness of Crowds, 1841.
2 S100. A full and complete explanation of S100 system for the evaluation of Proof Krugerrands incorporating a wealth of information about Krugerrands. 3 The New Kruger Millions, Gold Bullion Survey and Coin Magazine. Ltd, Vol. 1, No 2, Third quarter, 1974. 4 Ibid 5 The New Kruger Millions, The South African Gold Coin Exchange (Pty.), Ltd, Vol. 1, No. 6, January 1975. 6 The New Kruger Millions, Evaluation Issue, The South African Gold Coin Exchange (Pty.), Ltd, Vol. 1, No 7, 14th March 1975. 7 The New Kruger Millions, Ltd, Vol. 1, No 6, January 1975. 8 Levine, E, The Golden Key – A Complete Guide to Gold Coin Investment, Purnell and Sons (SA) Pty Ltd, 1980. 9 Ibid 10 Mitchell, FK, An Old Member Wanders Down Memory Lane, The South African Numismatic Society Jubilee Journal, 1991.
Opposite page: Inspecting a Proof Krugerrand Photo by: Chamber of Mines
249
12
SANCTIONS HIT! “The Krugerrand measure ordered was taken in recognition of the fact that the Krugerrand is perceived in the Congress as an important symbol of apartheid. This view is widely shared by the U.S. public.� Ronald Reagan, 1985 (Message to the Congress on the Prohibition of the Importation of the South African Krugerrand, 1 October 1985)
Chapter 12
T
he collapse of the proof-Krugerrand bubble wasn’t the only significant challenge facing the coin.
The anti-apartheid movement was already
successfully mobilising against the apartheid government when President PW Botha opened the Natal Congress of the National Party on 15 August 1985. Ahead of his address there was intense speculation in the international community that the President would make a significant– even momentous – announcement about the scrapping of apartheid policies and the release of imprisoned ANC leader Nelson Mandela. Instead, Botha gave notice that he was not prepared to lead the white South Africans on a road to what he termed “abdication and suicide”.1 His speech concluded with these now infamous words, “I believe that we are today crossing the Rubicon. There can be no turning back.” The international response to the President’s speech was swift and brutal. The drive for harsher sanctions intensified and the South African currency deteriorated to R2,40 against the dollar (R2 could still buy a dollar in February 1985).
Opposite page: The ‘Oom Paul’ press when it was still in operation at Gold Reef City Mint. Photo by: G Schoeman
252
Sanctions Hit!
253
Chapter 12
In fact, a campaign against the Krugerrand had started
ACOA article stated that sales of the Krugerrand served
much earlier than Botha’s Rubicon speech.
directly to support the system of apartheid. “In order to
In the United States, the Chicago Coalition on
provide cheap labor for the mines, Africans were driven
Southern Africa wrote an open letter as early as April
off their land, herded into ‘Native Reserves’, forced into
1977 urging people to demonstrate on 15 and 25 April
the labor market by taxes, and rigidly controlled by the
at the First National Bank of Chicago and Continental
imposition of pass laws, which regimented the labor flow.
Illinois Corporation, both of which granted loans to
Most African miners are migrants, forced to live in huge
South Africa and sold the Krugerrand. The Coalition’s
company compounds.”
letter stated that, “Both banks sell the South African
The authors also highlighted the fact the black
gold coin called the Krugerrand, a coin which is being
miners’ average salary was only $124, compared with
distributed by South Africa to change its image in the eyes
$563 for white miners. Gold and Krugerrands were
of the world community.” The Michigan Daily reported
specifically targeted in the article, as these were seen as
on 16 June 1977 – the first anniversary of the Soweto
a crucial commodity for South Africa to generate foreign
uprising – that in Ann Arbor, Krugerrands could only be
exchange and fund the necessary imports.
bought at the National Bank and Trust. Protests were
In Michigan, the United Methodist Church ran an
planned by students to picket the banks to stop the
anti-Krugerrand advertisement in the Detroit Free
sale of the coins.
Press in December 1976. The 1977 Boston Krugerrand
In October 1977, the American Committee on Africa
campaign by Intergold was countered by an anti-
(ACOA) published an article on the Krugerrand in their
Krugerrand protest at a meeting of the National
newsletter Southern Africa Perspectives. This was in
Association of Broadcasters. By 1977, some of the
response to the 27 September 1977 advertisement
successes of these campaigns were the resolutions
in Boston Herald American, which claimed that the
passed by the City Councils of Denver, San Antonio,
Krugerrand was the world’s best way to own gold. The
Dayton and Chicago requesting their citizens not to buy
254
Sanctions Hit!
“Both banks sell the South African gold coin called the Krugerrand, a coin which is being distributed by South Africa to change its image in the eyes of the world community.” the coin. The Denver resolution of November 1976 stated:
compared with the 0,56 rate for the white miners. The
“That the Council hereby expresses its opposition to and
anti-Krugerrand campaign resulted in the television
loathing of the racial policies of the so-called Republic of
stations ABC, CBS and NBC discontinuing Krugerrand
South Africa; and urges the people of Denver not to buy
advertisements, the First National Bank of Chicago
the coins known as Krugerrands, whose sales will help
suspending sales and Shearson/American Express
to reinforce the present government of South Africa in
halting Krugerrand promotions.
pursuing its repugnant and inhuman racial policies.”
In an attempt to counter the anti-Krugerrand
2
Major department stores in Brooklyn and Cleveland
sentiment, the South African government hired some
agreed to stop selling Krugerrands and, in Chicago,
influential lobbyists. These included a number of former
Seaway National Bank followed suit. Another article was
members of Congress – John Sears, Ronald Reagan’s
published in 1979 by ACOA after Intergold advertised
former campaign manager, Peter Teeley, George Bush’s
in The New York Times of 20 March 1979. By that stage,
former press secretary, and Howard Liebengood, a
Merrill Lynch, Pierce, Fenner & Smith had also stopped
former Senate sergeant at arms.3 The argument they
selling Krugerrands. In 1985, David Brooks from
offered was that a total ban on Krugerrands would result
ACOA described the Krugerrand as “Buying a Piece of
in thousands of black mineworkers losing their jobs.
Apartheid”. “Over 424,539 black miners dig the gold that
Former Republican Garry Brown, who coordinated the
makes South Africa rich, under the direction of 48,389
lobbying effort, further argued that “… it all may be an
white miners. In 1982, monthly wages of black miners at
exercise in futility, as violence continues in South Africa.
the gold mines averaged $232 compared to $1,267 paid to
It’s the Pretoria government’s choice of response – reform
whites, or less than a fifth.”
or repression – that counts. What we in Washington do
Brooks also expressed concern about the large
is of little consequence, but what the government does in
number of deaths of miners and noted that the black
South Africa is what’s important.”
miners had a death rate of 1,33 per 1 000 per year
255
Chapter 12
This lobbying effort came with a hefty price tag. In
including the International Emergency Economic
1985, it was alleged that John Sears had been paid
Powers Act (50 U.S.C. 1701 et seq.), in order to take steps
$1,3-million in quarterly installments since April 1983.
additional to those set forth in Executive Order No.
The law firm headed by ex-Senator George Smathers was
12532 of September 9, 1985, to deal with the unusual and
paid $406 034 between January 1984 and March 1985.
extraordinary threat to the foreign policy and economy
Intergold also paid the Washington law firm Kirkpatrick
of the United States referred to in that Order, and in
and Lockhart $247 857 in 1983 to lobby against the
view of the continuing nature of that emergency, the
Krugerrand ban.
recommendations made by the United Nations Security
As far back as 1983, the United States House of
Council in Resolution No. 569 of July 26, 1985, and the
Representatives had passed a bill to ban the sales
completion of consultations by the Secretary of State
of Krugerrands, but it did not gain the support of
and the United States Trade Representative directed by
the Senate. However, by 1985 it was clear that the
Section 5(a) of Executive Order No. 12532, it is hereby
Krugerrand’s days in America were numbered – at least
ordered that the importation into the United States
while the apartheid government was still in power.
of South African Krugerrands is prohibited effective
President Ronald Reagan issued Executive Order
12:01 a.m. Eastern Daylight Time October 11, 1985. The
12532 of 9 September 1985 requesting the Secretary of
Secretary of the Treasury is authorized to promulgate
State and the United States Trade Representative to
such rules and regulations as may be necessary to carry
investigate the adoption of a prohibition on the import
out this prohibition.”
of Krugerrands. When Reagan presented his message
This ban was formally enacted in law on 2 October
to the Congress on 1 October 1985, he was at pains to
1986 (Public Law 99-440-OCT. 2, 1986). Title III of the Act
emphasise that all of the measures he had adopted
described measures by the United States to undermine
against South Africa were directed at apartheid and the
apartheid. Section 301 dealt with the prohibition on the
South African government, and not against the people of
importation of Krugerrands and stated: “No person,
the country or its economy.
including a bank, may import into the United States any
Ronald Reagan signed Executive Order 12535 –
South African Krugerrand or any other gold coin minted
Prohibition of the importation of the South African
in South Africa or offered for sale by the Government of
Krugerrand – on 1 October 1985.
South Africa.”
“By the authority vested in me as President by the Constitution and laws of the United States of America,
256
Sanctions Hit!
The American Eagle one ounce gold coin was introduced in the USA in 1986 after sanctions were imposed on the Krugerrand. Photo by: F Malan
257
Chapter 12
In an article titled “South Africans suspend Krugerrand
Krugerrand sales. An irate coin dealer, James Hausman
Production”, The New York Times reported on 14
from Springfield, filed a lawsuit challenging this tax and
November 1985 that South Africa had suspended the
in December 1986 the Illinois Supreme Court declared
production of the Krugerrand. The CEO of Intergold,
the sales tax illegal. But the court ruling did little to boost
Don Mackay-Coghill, did his best to counter the negative
falling sales. Walter Perschke, President of Numisco Rare
publicity and stated that production had been halted a
Coins in Chicago, summed up the situation by saying,
number of times in the past owing to the cyclical nature
“Our Krugerrand business essentially has gone from
of the Krugerrand business. He nevertheless admitted
zero to zero.”
that the market was sluggish and was being supplied by
In Europe, the Netherlands was a key base for the
secondary sources. The article concluded with a reference
anti-apartheid organisations. In 1984, the KZA movement
to a story on the South African television news that
initiated a campaign against the sale of Krugerrands
seemed to suggest that the suspension was final.
by Dutch banks. Trade unions in the banking industry
There was, however, no panic selling of Krugerrands in
supported the campaign and the banks were forced to act
the United States when the ban on new imports became
when individuals and institutions started threatening to
imminent. The Krugerrands already in the United States
withdraw their money from the banks. By February 1985,
could still be traded if owners found a willing buyer,
the sale of Krugerrands in that country had come to a
according to a November 1985 report in the Deseret News.
complete stop. 4
Mike Kramer from Manfra, Tordella & Brookes in New
South Africans made every attempt to counter the
York noted in an article in the Durant Daily Democrat
sanctions. A speech delivered by the Minister of Finance,
that “a lot of people who own them apparently are
Barend du Plessis, on 28 August 1986 in Parliament,
holding on to them”.
discussed the decline of the Krugerrand sales. “In the past the South African Mint has relied heavily on the sale of
But the fact remained that the Krugerrand had been stigmatised in the United States and it faced opposition
Krugerrands for its profitability. Due to intensified boycott
on several fronts.
campaigns abroad, as well as the unfavourable domestic climate, the sale of ordinary Kruger coins has declined
In January 1985, Illinois passed a law requiring dealers to charge sales tax on Krugerrands, but not on coins made
significantly, whilst the sale of Kruger coins of proof
by other countries. This resulted in a dramatic drop in
quality have declined drastically. In order to compensate
258
Sanctions Hit!
“Johannesburg’s centenary celebration was chosen as the first theme, and the coin produced to celebrate this event was called a Protea, with the obverse of the coin depicting South Africa’s King Protea (Protea cynaroides).” for this decline in demand it has been thought necessary
or silver commemorative coin. The gold coin is normally
for the South African Mint to find an alternative source
minted in two sizes, a one-ounce coin and a smaller one.
of profits. In this connection, it should be mentioned that
Consequently two denominations are being suggested
the 1985 Parliamentary commemorative coin enjoyed
in this Bill, a one-ounce coin and a one-tenth of an ounce
good sales both in South Africa and abroad. The demand
called a ‘Protea’”. (Debates of the House of Assembly 9
for this coin has shown that a continued programme of
Hansard, Third Session –Eighth Parliament, Vol. 11)
commemorative gold and silver coins can prove successful.
The Government became intent on using the new coins
To capitalize on this initial success, the South African
to commemorate events considered to be of importance
Mint investigated the strategies adopted by overseas
– both as a way of enhancing South Africa’s image abroad
mints in regard to commemorative issues. The majority of
and earning foreign exchange.
Western countries mark important events with a gold and/
259
Chapter 12
Above: The one-ounce legal tender Protea coin was introduced in 1986 in an attempt to circumvent the sanctions against the Krugerrand. The first theme for this coin was Johannesburg’s centenary celebrations. Opposite page: Collectors could buy the one-ounce and tenthounce Protea coins as a set. Photos by: F Malan
During the Parliamentary debate it was noted that local
Protea coin to overcome sanctions as a “stupid one”. The
orders of R4-million and R1-million from abroad had
US legislation clearly prohibited the importation of all gold
already been received and so the Protea was seen to be a
coins from South Africa.
useful way of circumventing sanctions. But, as reported
The irony of the sanctions was that South Africa had
by Hern in his catalogue, during the period 1986 to 1992
little difficulty exporting its gold during this period. A gold
only 19 646 Protea one-ounce coins were minted – a far
bar in the vault of a central bank is less conspicuous than
cry from the millions of Krugerrands minted since 1967.
a Krugerrand advertisement in The New York Times. In
What is more, United States legislation prohibited the
Switzerland, gold swaps for a term less than 12 months
import of all gold coins, not only the Krugerrand. This
did not require authorisation and could not be traced
was highlighted by HH Swartz during the September 1986
to South Africa.5 For these transactions, South Africa
Parliamentary session, when he described the idea of the
deposited gold in exchange for short-term loans and in
260
Sanctions Hit!
this way foreign exchange could be generated without
Homestake Mining, proposed the concept of the World
causing a fall in the gold price. According to 1989 studies
Gold Council. Initially funded 50% by the South African
by the UN, these gold swaps helped South Africa to cope
mines, it focused on the promotion of universal gold
with liquidity problems. The report stated: “...the gold
products such as jewellery, instead of devoting itself to the
swaps and the gold loans of the Swiss banks provided the
marketing of the gold coins of one country. By the time America closed the door on South Africa’s
South African economy with the oxygen balloon it required
coins, sanctions against the Krugerrand had also been
during particularly critical moments.” Sanctions did, however, result in the demise of
imposed by the EC, Australia and Japan. The question
Intergold, requiring South African mining groups to find
on the minds of collectors was whether the Krugerrand
a different mechanism to market their gold. Tom Main
would be buried for good – like President Kruger – never to
from the Chamber of Mines and Harry Conger, CEO of
successfully return.
6
261
Chapter 12
Striking Gold! The Gold Reef City Krugerrands During the sanction years, South African numis-
striking the coin additionally received a certificate
matists were given the opportunity to add a differ-
with his or her name and date of minting, signed
ent Krugerrand variety to their collections. The
by the Director of the Mint and the Deputy Master
Director of the Mint, Mr CJ Dannhauser, stated in
of the Gold Reef City Mint. A photograph of the
the 1985 Annual Report that the Mint had decid-
person striking the coin was also taken, but this
ed to participate in the Gold Reef City project. A
practice was discontinued in 1989.
theme park in the south of Johannesburg, Gold
The inaugural striking of the GRC
Reef City was built at the site of the now defunct
Krugerrands was on 30 January 1987 and was
Crown Mines No. 14 Shaft. During the building, the
done by the Barnib Group (now part of First
shaft was kept in working condition and visitors
National Bank). Also noteworthy was a visit by the
are still able to experience the city’s heritage with
Transvaal Numismatic Society on 25 November
an underground visit to a historic mine stope.
1987. A total of 30 sets containing the four
A replica of the first Royal Mint Building in
different sized coins were issued, their blue boxes
Pretoria was erected as part of this project and
bearing the wording “Transvaal Numismatic
was planned to be a working branch of the South
Society Gold Reef City Visit 25th November 1987”.
African Mint. Among the vintage machinery taken
The coins were initially sold “as struck”, so
to Gold Reef City was the famous “Oom Paul” coin
visitors had to accept the risk of a poor striking.
press that was first used in the State Mint of the
In 1988, to improve the quality of the coins, the
old ZAR. On completion, this presented a unique
obverse was struck in the South African Mint,
facility for visitors to relive the excitement of a
while the remainder of the striking was completed
working mint at the time when gold coins were still
by the visitor at the Gold Reef City Mint. This
the preferred method of payment.
led to several errors, including the “ghosting” of
In 1987, the South African Mint gave
Kruger’s image.
permission for visitors to mint their own
In 1991, the last of the GRC Krugerrands
Krugerrands at the Gold Reef City facility. The
were struck. These GRC Krugerrands were only
coins were, in all aspects, identical to the normal
minted in small numbers from 1987 to 1991 and are
proof Krugerrands, bar a small “GRC” mint
therefore sought-after by collectors. The 1991 set,
mark below the springbok’s hind legs. The visitor
in particular, is scarce, with only 426 ever minted.
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Sanctions Hit!
A replica of the original Royal Mint in Pretoria was erected at the Gold Reef City theme park in Johannesburg. It was a working mint and visitors could strike their own “GRC� Krugerrands in this facility. The original headgear of Crown Mines No. 14 Shaft can be seen behind the building. Photo by: F Malan
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Above: GRC Krugerrand Certificate. Opposite page: A GRC Krugerrand. Note the small “GRC” mintmark above the word “Fyngoud”. Photo by: F Malan
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Sanctions Hit!
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Above: GRC Krugerrand being minted. Photo by B Jack
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Sanctions Hit!
R E F E R E NCE S 1
Giliomee, H and Mbenga, B, Nuwe Geskiedenis van Suid Africa, Tafelberg Publishers, Cape Town, 2007.
2 Rothmyer, K and Pitterman, S, The Krugerrand: Facts About South Africa’s Gold Coin, Southern African Perspectives, The Africa Fund, No. 7, 1977. 3 Anderson, J and Van Atta, D, Pretoria’s Influential Lobbyists, The Hour –Norwalk, Connecticut, 11th September 1985. 4 International Institute of Social History, The Netherlands against Apartheid 1980 (3) 5 Kreis, G, Switzerland and South Africa 1948 1994. Final Report of the NFP, Swiss Federal Council, Peter Lang Academic Publishers, Bern, 2007. 6 Morris, JH, Going for Gold, The History of Newmont Mining Corporation, The University of Alabama Press, 2010.
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13
RISING FRO M THE ASHES “The Krugerrand will remain South Africa’s and the world’s, primary investment coin.” - The Numismatist, 1997¹
Chapter 13
O
n 10 July 1991, President George H.W. Bush
14 June 1994, The Seattle Times published an article
concluded that the government of South Africa
“Krugerrand: A Golden Opportunity -- Sales of South
had taken all the steps as required by the
African Coin Rising�. 4
Anti-Apartheid Act of 1986. He therefore ordered all
An advertising blitz by the Chamber of Mines
departments and agencies to terminate the sanctions
contributed to the renewed interest in the coins, with
imposed on the country, effectively removing the ban on
advertisements appearing in a number of prominent
the imports of Krugerrands and other gold coin.
financial magazines like Kiplinger's Personal Finance,
2
It nevertheless took time for the Krugerrand to regain
Worth, Smart Money and Money. This was supported by
its former glory. As Bill Emery, Vice-President of Fiscal
television and newspaper advertising in key cities and
& Monetary Services of Bridgewater, Massachusetts
soon dealers were reporting a 40% to 70% increase in
said in 1994, "Buying the Krugerrand still had political
sales of the Krugerrand. The renewed interest drove
connotations."
the coin's premium to 2% over the spot gold price –
3
Following the release of President Nelson Mandela
an increase of 1.5% from the start of the advertising
and the peaceful elections of 1994, it once again became
campaign. This premium was in fact non-existent when
acceptable for US citizens to buy Krugerrands. On
the import ban was lifted. The authoritative numismatic
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Rising From The Ashes
Above and opposite page: Marketing material for the Millenium Krugerrand programme. Photos by: Rand Refinery
271
Chapter 13
intention of the WGC was not to promote particular
journal in America, The Numismatist, also published an article in 1997 describing the history of the Krugerrand.
countries’ gold coins. At the launch Rand Refinery’s
5
This resulted in renewed interest amongst the interna-
chairperson Kelvin Williams spoke eloquently about
tional coin collectors who had shunned the coin during
the coin’s importance: “The Krugerrand is enormously
the sanction years.
important not only to South Africa but to all gold-
The new millennium created a valuable marketing
producing countries as a vehicle to drive gold investment
opportunity and Rand Refinery launched its
demand.” Interestingly, he also hinted at a significant
Krugerrand 2000 programme in October 1999. The
potential change to the coin. "Did we think of a different
“new” Krugerrrand was referred to as the Millenium
coin? We absolutely did. We intended to, in co-operation
Edition. The South African Reserve Bank authorised
with someone who is working on the project right now, to
the early issue of the year 2000 coins. The design of
get the support of the government for a Mandelarrand.
the Krugerrand was slightly altered as a different font,
And we've been trying for over a year to get support for
Goudy, was used for the lettering. The beading on the
the Mandelarrand as a legal tender coin." In spite of the
edge of the coin was also changed to straight lines.
renewed interest in the coins, the figures of newly minted
On 14 October 1999, the Millenium Krugerrand was
Krugerrands remained low during the 1990s and the
launched in New York in conjunction with the World Gold
early part of the new millennium. The mintage figure for
Council (WGC). This was somewhat ironic as the WGC
one-ounce bullion coins in 1995 was a miniscule 8 285.
was created after the demise of Intergold and the original
In subsequent years, it barely increased and in 2000 it
6
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Rising From The Ashes
dropped to 6 657. The Krugerrand marketing campaign
Compounding the problem was the selling of gold by
in 1999 did little to resuscitate the coin.
various Central Banks. Gordon Brown, UK Chancellor of
There were several reasons for this including the fact
the Exchequer, infamously sold 395 tons over 17 auctions
that the Krugerrand now faced stiff competition from the
from July 1999 to March 2002 at the average price of only
American Eagle. Slow USA sales were also exacerbated
$275 per ounce.8 Some commentators refer to this period
by the Krugerrand’s phenomenal success in the late
as the “Brown Bottom�. The indiscriminate dumping of
1970s. The Chamber of Mines estimated that in 1994,
gold by the major Reserve Banks was only arrested by
20 million Krugerrands were already held by individuals
the Washington Agreement signed during September
and institutions in the United States. This resulted in an
1999.9 The European Central Bank (ECB) - the national
active secondary market for the coin and existing supply
central banks of nations then participating in the new
met the demand. The premiums at which these existing
European currency - Sweden, Switzerland and the
coins traded were also lower than the premiums asked
United Kingdom - agreed to limit their sales to no more
for newly minted coins.
than 400 tons annually over the five year period from September 1999 to September 2004. During this period
Weighing on the entire gold market at this time was the unusually low gold price. After the bursting
of low prices, many gold mining companies used hedging
of the gold investment bubble in 1980, die-hard gold
and sold future production at the then current prices.
investors had a torrid time over the next 20 years. The
This artificially increased the supply and suppressed
price dropped from a peak of $850 on 21 January 1980
the price further. This all changed on 11 September 2001. The attack
to a low of $252 during August 1999. One reason for this decline was the appointment of Paul Volcker as the
on the World Trade Centre resulted in the closure of the
Chairman of the Federal Reserve during August 1979.7
financial markets until 17 September. Investor sentiment
He substantially increased the federal funds rate to 20%
changed to fear and the demand for gold increased in
in June 1981 to fight the double digit inflation of the late
the months that followed. A moving aspect of the salvage
1970s. As a result, the inflation rate fell from 12.5% in
work following the 9/11 attacks was the gold recovered
1980 to 1.1% in 1986. This decreased the attractiveness of
from vaults below the World Trade Centre complex.10
investing in gold as an inflation hedge.
ScotiaMocatta, the precious metal trading unit of the Bank of Nova Scotia, stored gold and silver bullion coins
In the mid 1990s, a tight monetary policy in the US
in a vault below building 4 of the complex.
was reintroduced - the real interest rates were positive and gold investment was less attractive as a result.
Opposite page: Marketing material for the Millenium Krugerrand. Photo by: Rand Refinery
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A Krugerrand recovered from the vaults below the World Trade Centre complex. This was encapsulated by the coin grading company PCGS. Photo by: F Malan
The Wall Street Journal reported, “A Bank of Nova Scotia
can be argued that profits should not be made from this
spokeswoman said a coin specialist and wholesaler
human tragedy. The prices for the coins were exorbitant
approached Bank of Nova Scotia and offered to buy some
as reported by the WSJ, “The prices are striking, even by
of the coins from the Toronto bank. The coins are being
the standards of souvenir collecting. For example, among
sold in plastic coin holders emblazoned with the phrase
the Ground Zero coins, a one-ounce gold Krugerrand,
“9-11-01 WTC Ground Zero Recovery”. Among this
a common gold coin issued by South Africa, has been
11
hoard were Krugerrands. Professional Grading Services
offered for $1,195. By comparison, an ounce of gold is
Company (PCGS), a well-known third party coin grading
priced on the market at less than $350.” 12 Although the
company, encapsulated these coins in tamper resistant
coins were controversial, the symbolism of Krugerrands
capsules and included a commemorative United States
recovered below the debris of the World Trade Centre
Flag, to identify the coin as recovered from the site. The
is difficult to ignore. The Krugerrand sales increased
flag design is protected by copyright and is only used for
substantially in the years following the attack. This was
these particular coins. The coins are popular with some
literally a gold coin rising from the ashes.
collectors, but are nevertheless subject to criticism as it
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Rising From The Ashes
“Although the coins were controversial, the symbolism of Krugerrands recovered below the debris of the World Trade Centre is difficult to ignore. The Krugerrand sales increased substantially in the years following the attack. This was literally a gold coin rising from the ashes.” In the aftermath of 9/11, the spot gold price increased
2011 were “unbelievable – 10 times more than is usually
from $285 per ounce on 11 September 2001 to over $1,820
seen in a day”.15 The headline of the Business Times newspaper on
on 11 September 2011. The demand for Krugerrands increased correspondingly. After the financial meltdown
14 August 2011 was “The New Gold Rush”.16 It stated
in 2008, the USA began to import Krugerrands from
that if the reader had invested R10 000 in Krugerrands
South Africa again.13 Bloomberg reported on 28 August
in 1970, they would be worth R4.7 million in 2011. Even
2008 that Rand Refinery ran out of Krugerrands after
after the sudden decline in the gold price in April 2013,
an unusually large order (5,000 ounces) from a buyer in
the worldwide sale of Krugerrands soared. The South
Switzerland. The mintage figure for one-ounce bullion
African Scoin shop sold gold coins in the Westfield
14
coins in 2008 was 256,288 and in 2009 it increased
Shopping Centre in West London and reported on 28
to 731,262. The momentum in coin sales continued to
April 2013 that the sales of Krugerrands increased 468%
gain traction in the years that followed. First National
during that week in April.17
Bank in South Africa reported that sales on 11 August
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Rising From The Ashes
R E F E R E NCE S 1
Hayward, A, The Krugerrand: Making history for three decades, The Numismatist, July 1997.
2 Griffin, JP and Calabrese, M.R., Most South African Sanctions Lifted. 3 Tyler, FT, Krugerrand: A Golden Opportunity -- Sales of South African Coin Rising, Seattle Times, 14 June 1994. 4 Ibid 5 Hayward, A, The Krugerrand: Making history for three decades, The Numismatist, July 1997. 6 SA putting glitter back on to world’s most widely-held coin, Mining Weekly, 29 October 1999. 7 Richards, J, Currency Wars The making of the next global crisis, Portfolio/Penguin, 2011 8 Sale of UK gold reserves, 1999–2002 Source: https://en.wikipedia.org/wiki/Sale_of_UK_gold_reserves%2C_1999% E2%80%932002?oldid=713134110 9 Washington Agreement on Gold Source: https://en.wikipedia.org/wiki/ Washington_Agreement_on_Gold?oldid=672510108 10 Dwyer, J, A NATION CHALLENGED: THE VAULT; Below Ground Zero, Silver and Gold, The New York Times, 1 November 2001. 11 Martinez, AJ, ‘Sept 11’ coins carry hefty markups, baggage, The Wall Street Journal, 6 August 2003. 12 Ibid 13 Krugerrands: low premium gold bullion coins, CMI Gold & Silver, http://www.certifiedmint.com/krugerrand-gold-coins.htm. 14 Carpenter, C, World’s largest gold refiner runs out of Krugerrands, Bloomberg, 28 August 2008. 15 Lefifi, TA, The New Gold Rush, Sunday Times, 14 August 2011. 16 Ibid 17 Murray-West, R, Demand for Krugerrands soars 468%, Sunday Times, 28 April 2013.
Oppisite page: A Krugerrand inside the collar used in the minting process. Photo by: Clive Hassal
277
14
FIFTY YEARS OF THE WORLD’S FAVOURITE BULLION COIN “Ideas need constant renewal. A great idea will never be perfect and will never work perfectly in all markets and all seasons.” - Max McKeown
Chapter 14
In 2015 almost 20% of South African gold production was beneficiated in the form of Krugerrands, underlining the relevance of the Krugerrand to the country
O
n July 3rd 2017, the Krugerrand celebrates its
platinum coin proof coin will also be added in 2017. The
Golden Jubilee. Fifty years after the now iconic
development of a silver Bullion is in the pipeline.
coin made its appearance, the Krugerrand
In preparation for the Golden Jubilee, designers at
remains an undisputed leader in the global gold bullion
the SA Mint undertook an intensive re-examination of
coin market, and is the most widely held gold bullion coin
the Krugerrand – with both the coin’s history and its
the world. In 2015 almost 20% of South African gold
future as the guiding lights for a clean up of this globally
production was beneficiated in the form of Krugerrands,
recognised design.
underlining the relevance of the Krugerrand
Unsurprisingly, some of the artistic detail of the
to the country.
original design had been lost with the die cutting that
To commemorate the Golden Jubilee celebrations,
occurred over the decades– for instance the crispness
the proof Krugerrand series was expanded from the four
of the Aloe and some landscape detailing. This detail
traditional sizes to feature 50 oz, 5 oz, , 1/20 oz and 1/50
was put back, using modern technology to enhance the
oz coins, for 2017 only. In a boon for silver and platinum
beauty of the Krugerrand.
collectors, a 1 oz silver proof-Krugerrand and a 1 oz
Previous page: Dies for the 2017 Krugerrand coin. Photo by: Clive Hassal Opposite page: Minting of a 2016 Krugerrand Photo by: Clive Hassal
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Fifty Years of the World’s Favourite Bullion Coin
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Chapter 14
Handrawn Typeface An exciting development was the design of a new typeface for the lettering of the Krugerrand. Drawn by hand, the typeface was inspired by 15th century Dutch letter punches while taking into account key requirements - among them the avoidance of very sharp corners as the die cutting equipping has restrictions on the angles that can be cut.
Page 279-286 Scamps drawn by typography designer Jan Erasmus in development of the Krugerrand font. Scans provided by SA Mint.
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Chapter 14
Above: Thinus Scheepersâ&#x20AC;&#x2122; model of Krugerâ&#x20AC;&#x2122;s bust for the obverse of the 2017 Krugerrands. Opposite page: The springbok design was improved by senior die-sinker at the SA Mint, Thinus Scheepers. Note the greater level of detail on the landscape below the antelope. Photos by: Clive Hassal
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In a world characterised by uncertainty, where volatile currencies and political situations are increasingly the norm, there is a rediscovery of this age-old store of wealth as an excellent vehicle for generational wealth
1967 all over again Another special 50th anniversary commemoration coin
access to the worldâ&#x20AC;&#x2122;s first legal tender gold coin
has also been struck with new master dies being cut from
custodial certificates â&#x20AC;&#x201C; and a growing number of new
the original matrices for the 1967 Krugerrands. A small
financial products based around this legendary coin.
mintmark indicates that these are anniversary coins â&#x20AC;&#x201C;
In a world characterised by uncertainty, where volatile
and indeed legal tender. Demand for the original 1967
currencies and political situations are increasingly
coins is expected to increase amongst collectors with the
the norm, there is a rediscovery of this age-old store of
two coins now making a collectable pair.
wealth as an excellent vehicle for generational wealth.
As the Krugerrand moves into the next 50 years,
The Krugerrand is, however, much more than a
the same innovative spirit that saw its launch in 1967 is
convenient store of value: it is nothing less than
being applied to exciting new ways to enable more and
a packaged history of the fabulous gold reefs of
more people to own the coin. Through a relationship with
the Witwatersrand that helped shape the destiny
major South African bank, Rand Merchant Bank, private
of South Africa.
investors and institutions in South Africa now have
Opposite page: 2016 Krugerrand manufacturing. Photo by: Clive Hassal
294