KrugerRand Book

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.

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“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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Chapter 3

“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

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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.

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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

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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

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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.

97

Chapter 3

Above: Historic image of the Mint in 1977 showing the minting presses.

Photo by: Chamber of Mines

98

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.

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“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

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An iconic coin is born

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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

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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

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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.

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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

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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.

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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.

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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.”

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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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Chapter 7

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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Chapter 7

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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Chapter 7

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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Chapter 7

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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An Old Gentleman Gets to Shine

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

175

Chapter 7

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

177

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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Chapter 7

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

182

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.

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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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Chapter 8

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

196

Chapter 8

198

Making and Selling a “Strange Coin�

Opposite page and Above: Inside the Rand Refinery. Photos by: Clive Hassal

199

Chapter 8

Opposite page and Above: Inside the Rand Refinery. Photos by: Clive Hassal

200

Making and Selling a “Strange Coin”

201

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

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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

263

Chapter 12

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!

265

Chapter 12

Above: GRC Krugerrand being minted. Photo by B Jack

266

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.

267

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

270

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

272

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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Chapter 13

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

275

Chapter 13

276

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

280

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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293

Chapter 14

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