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 1954 South African reserve bank:...














Report of the ... Ordinary General Meeting
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 Material Information
Title: Report of the ... Ordinary General Meeting
Alternate title: Verslag van die ... Gewone algemene vergadering
Report of the Ordinary General Meeting of Stockholders
Verslag van die ... Gewone algemene vergadering van aandeelhouers
Report of the Ordinary General Meeting of Shareholders
Physical Description: v. : ; 22-30 cm.
Language: English
Creator: South African Reserve Bank -- Ordinary General Meeting
South African Reserve Bank
Publisher: The Bank
Place of Publication: Pretoria
Creation Date: 1954
Frequency: annual
regular
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Genre: serial   ( sobekcm )
 Notes
Additional Physical Form: Vols. for 1921-1982 also available in microform.
Language: In English, 1921- ; in English and Afrikaans, 1982-; in English, <2001- >
Statement of Responsibility: South African Reserve Bank.
Dates or Sequential Designation: Began in 1921.
Numbering Peculiarities: Vols. for <1939- > also called: <19th- >
General Note: Vols. for <1939- > include its Report and annual accounts.
General Note: Description based on: 1965; title from cover.
General Note: Latest issue consulted: 2001.
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Source Institution: University of Florida
Rights Management: All rights reserved by the source institution and holding location.
Resource Identifier: oclc - 01949774
lccn - 46039325
System ID: UF00072080:00001
 Related Items
Preceded by: Verslag van de gewone algemene vergadering

Table of Contents
    Front Cover
        Front Cover
    Front Matter
        Front Matter
    Minutes of proceedings
        Page 1
        Balance of payments
            Page 2
            Page 3
        Monetary and banking situation
            Page 4
            Page 5
            Page 6
        Money rates
            Page 7
        General economic situation
            Page 8
            Page 9
            Page 10
            Page 11
        Background of policy of consolidation
            Page 12
            Page 13
        Factors which have facilitated readjustment
            Page 14
            Page 15
        Progress of readjustment
            Page 16
            Page 17
        Economic outlook
            Page 18
            Page 19
            Page 20
        Conclusion
            Page 21
            Page 22
            Page 23
            Page 24
    1954 South African reserve bank: Report of the board of directors
        Page 25
        Page 26
        Page 27
        Page 28
        Page 29
        Page 30
        Page 31
        Page 32
        Page 33
Full Text




1954


SOUTH


AFRICAN


RESERVE BANK


REPORT OF THE
THIRTY-FOURTH
ORDINARY GENERAL MEETING





54 t1

HIERDIE VERSLAG IS OOK IN AFRIKAANS
VERKRYGBAAR OP AANVRAAG


Walachs' Pta-15102-1O/8/54





33





SOUTH AFRICAN RESERVE BANK
Established under the Currency and Bankine Act. 1920




ARD OF DIRECTORS

MICHIEL HENDRIK DE KOCK ...... ..... GOVERNOR.
ERNST HEINRICH DANIEL ARNDT DEPUTY-GOVERNOR.

CHARLES EDWARD JAMES .............
WILLIAM HENRY ARTHUR COMMERCIAL,
LAW RENCE .................. ...... ............... AGRICULTURAL &
EUGENE O'CONNELL MAGGS ........ INDUSTRIAL
REGINALD HEINRICH PARKER .. REPRESENTATIVES.
ROBERT PYOTT ...... ...... .... .. ................
GIDEON JOUBERT ROSSOUW ..... ....j
PHILIP VALENTINE GAWITH ....... GOVERNMENT
GERRIT PETRUS JOHANNES LOTZ .REPRESENTATIVES
CHARLES THEODORE TE WATER .EPRESENTATES.




HEAD OFFICE PRETORIA

CHIEF CASHIER ...... ............. L. J. COCKHEAD
SECRETARY AND CHIEF
ACCOUNTANT ............... ... G. RISSIK
(R. F. A. LOUThV
DEPUTY CHIEF CASHIERS ......... F. T. GREAVES

ASSISTANT TO THE GOVERNORS J. B. DE K. WILMOT
STATISTICIAN .................... ...... T. W. DE JONGH
INSPECTOR ......... ................... E. W. WARREN
HEAD OF EXCHANGE CONTROL
DEPARTMENT .... ................ B. C. J. RICHARDS
HEAD OF GOLD DEPARTMENT ..... J. E. SPOTSWOOD
ASSISTANT SECRETARY ........... H. E. MOGGRIDGE
ASSISTANT CHIEF ACCOUNTANT A. P. MCLOUGHLIN










SOUTH AFRICAN RESERVE BANK




Thirty-fourth Ordinary General Meeting
of Stockholders




MINUTES OF PROCEEDINGS

The Thirty-fourth Ordinary General Meeting of Stock-
holders was held at the Head Office of the Bank, Pretoria,
on Wednesday, 28th July, 1954, at 11.30 a.m., the Gov-
ernor presiding.
The Governor declared the Meeting duly convened in
terms of the Regulations framed under the South African
Reserve Bank Act.
The Minutes of the previous Meeting were taken as
read and confirmed.
The Reports of the Board and of the Auditors for the
year ended 31st March, 1954, were presented and taken
as read.
The Governor then addressed the Meeting and said:
Gentlemen,
I have great pleasure in presenting to you the Bank's
Accounts for the year ended the 31st March, 1954, to-
gether with the Reports of the Board and the Auditors,
and, with your permission, I propose that they be taken
as read.
Before moving the adoption of the Accounts and Re-
ports, however, I will, as usual, give you a general review
of the principal factors bearing on the current financial
and economic situation in the Union.







2

BALANCE OF PAYMENTS.

On current account, the balance of payments of the
Union (including South-West Africa) showed a smaller
deficit in 1953 than in 1952, namely, 56,000,000 as com-
pared with 60,000,000. As a result, however, of a de-
crease of 26,000,000 in the surplus on capital account,
there was an increase of 22,000,000 in the net deficit,
namely, from 7,000,000 in 1952 to 29,000,000 in 1953.
The improvement of 4,000,000 in the current deficit
for 1953 took place notwithstanding increases of
6,000,000 in imports'of merchandise and of 2,000,000
in current invisible expenditure. Imports of Government
stores increased by 14,000,000 to 36,000,000, mainly in
respect of equipment for transport, telecommunication and
defence purposes. Excluding Government stores, there-
fore, there was actually a decline of 8,000,000 in imports.
There were, for example, decreases under the general
headings of "metals, metal manufactures, machinery and
vehicles", "books, paper and stationery", and "drugs,
chemicals and fertilisers", due, no doubt, to increased
local production of many of the goods concerned, while
the principal increase took place in respect of "textiles,
apparel, yarns and fibres", the imports of which had
shown a considerable decline in the previous year when
an accumulation of surplus stocks in some lines had mani-
fested itself.
The factor primarily responsible for the decrease in the
current deficit was an increase of 11,000,000 in exports
of merchandise, other than gold products. There was,
for example, an increase of almost 7,000,000 in the export
of wool, owing to an increase in the average price realized
during 1953. There were also increases in the exports
of sugar, fruit, fish, hides and skins, coal, chrome, man-
ganese, machinery and shoes, but these were largely off-
set by decreases in respect of copper, asbestos, preserved
vegetables, diamonds, maize and re-exports of imported
goods. In the case of the net gold output, there was an
increase of only 1,000,000.
The net inflow of capital, on the other hand, declined
from 53,000,000 in 1952 to 27,000,000 in 1953. Of the
latter amount 5,000,000 represented net official capital
receipts, i.e. after deducting an amount of 4,000,000
repaid in respect of the credits granted to the Govern-









ment by certain groups of American and Swiss banks.
Net private capital receipts (inclusive of trade credits)
amounted to 24,000,000, of which 15,000,000 consisted
of drawings under the overseas loans granted to a num-
ber of mining companies for the erection of uranium-
extraction plants, but this inflow was offset, to the extent
of 2,000,000, by a decrease in the banks' short-term
foreign liabilities.
It should be noted, however, that the relatively small
capital inflow during 1953 had been duly anticipated by
the authorities, who nevertheless decided upon an import
programme which was estimated to involve a drawing of
25,000,000 on the country's monetary reserves. The
actual decline was about 30,000,000 which, therefore,
except for an underestimate of 5,000,000, represented the
deliberate outcome of official policy to provide not only
for all the essential current import needs of the manufac-
turing, mining and agricultural industries and the most
urgent requirements of consumer goods, but also for all
the capital equipment required for the large public and
private development programmes in various stages of
progress.
As far as the year 1954 is concerned, the import pro-
gramme again provides for large deliveries of capital
equipment and for total imports of at least the same mag-
nitude as during 1953. In view, however, of the expecta-
tion of substantially increased receipts from exports of
gold, uranium, maize and sugar and from capital inflow
during 1954, of which we have already had encouraging
evidence, it is now considered possible that this year
will show a net surplus in the Union's balance of payments
for the first time since 1950. During the first half of the
year there was actually an increase of 14,000,000 in the
Reserve Bank's gold and exchange holdings, in contrast
to a decrease of over 26.000,000 in the corresponding
period of the previous year. While the third quarter,
which nomally represents a lean period for exports, may
again produce an appreciable net deficit, the last quarter
can, as usual, be expected to yield a net surplus. It
deserves, however, to be mentioned that the surplus for
the first half of the year included transfers of 10,000,000
of short-term funds from London which were deposited
at call with the National Finance Corporation and which
may, in whole or in part, be repatriated in due course,
although this is unlikely to take place during 1954.









A noteworthy feature of our balance of payments has
been the recent improvement in our position vis-a-vis the
dollar area, due to a relative increase in imports from non-
dollar countries and also to substantial capital receipts in
dollars from American sources as well as from the Inter-
national Bank for Reconstruction and Development and
through the conversion into dollars of the proceeds of
Swiss loans. Between 1952 and 1953 imports from the
dollar area declined by 14,000,000, while those from other
non-sterling countries increased by 13,000,000 and those
from the sterling area by 7,000,000. Consequently,
apart from the customary settlements for net dollar ex-
penditure through London on South African account, we
were able not only to sell almost 78,000,000 of gold to
the United Kingdom during 1953, as compared with
64,000,000 of gold and dollars in 1952, but also to
increase our own gold and dollar reserves by 8,000,000,
while our sterling holdings were reduced by 38,000,000
during 1953. In view of this trend and the desirability
of facilitating the reduction of our cost structure by
widening the field of competition for our import trade.
it was decided to remove discrimination against the dol-
lar area from our import control as from the beginning
of 1954. Notwithstanding this important change in policy,
we were able to sell gold to the net amount of 48,000.000
to the United Kingdom during the first half of 1954, and
further to increase our gold and dollar reserves by
3,000,000.

MONETARY AND BANKING SITUATION.
The total money supply in the Union, which had shown
a net decline of 7,000,000 between the end of 1950 and
the end of 1952, increased by 5,000,000 to 444,000.000
at the end of 1953. This increase of 5,000.000 during
1953 was reflected in an increase of 8,000,000 in the
amount of notes and coin in the hands of the public as
against a decrease of 3,000,000 in the banks' demand
deposits, which, in turn, resulted from a decrease of
15,000,000 in Government and "other" deposits with the
Reserve Bank as against an increase of 12,000,000 in
current-account deposits with the commercial banks.
This increase in the money supply during 1953 took
place notwithstanding the deficit of 29,000,000 in the
balance of payments. After allowing for the previously-







5
mentioned repayment of 4,000,000 in respect of American
and Swiss credits, which affected the balance of pay-
ments and the monetary reserves but not the quantity of
money in circulation in the Union, the impact of the re-
maining external deficit on the money supply was more
than offset by an increase of 29,000,000 in internal bank
credit, namely 18,000,000 in Reserve Bank credit and
11,000,000 in commercial bank credit.
While the commercial banks' investments and their
deposits with the National Finance Corporation declined
by 3,000,000 and 13,000,000 respectively, their advan-
ces and discounts increased by 27.000,000. Of the latter
amount, a substantial part was accounted for by increased
advances to the Land Bank, which were, in turn, associa-
ted with the financing of larger stocks of farm products,
due to better harvests. The remainder was, no doubt,
attributable to the demand for increased working capital
by industry and trade as a result of a higher level of
economic activity which will be discussed later.
With regard to Reserve Bank credit, advances to the
Government, which had re-appeared after an interval of
almost four years, were responsible for 11,500,000 of
the total net increase of 18,000,000 during 1953, the
remainder having been made up of increases of 2,000,000
in discounts and "other" advances and of 4,500,000 in
investments in the Union. This expansion of Reserve
Bank credit was connected with a general tight-money
situation in the Union, due to both the appreciable deficit
in the balance of payments during that period and the
high level of public and private investment and of economic
activity in general. Thus, notwithstanding the relief
afforded by the creation of additional Reserve Bank cre-
dit, the commercial banks suffered a considerable decline
in their cash reserves in the Union, namely, from
79,600,000 at the end of 1952 to 63,000,000 at the end
of 1953, and from 20.1 to 15.4 per cent., respectively, in
the ratio of these reserves to their liabilities to the public
in the Union.
As far as the first half of 1954 is concerned, there was
a decrease of 21,000,000 in the money supply, despite a
surplus in the balance of payments as reflected in an
increase of 14,000,000 in the Reserve Bank's gold and
exchange holdings. This net decrease in the money sup-
ply arose primarily from a decline of 31,000,000 in bank









credit, namely 19,000,000 in Reserve Bank credit and
12,000,000 in commercial bank credit. The former was
connected with a considerable increase, from both local
and overseas sources, in deposits with the National
Finance Corporation, as well as with -a substantial excess
of Government receipts over disbursements during that
period. Thus, not only was the Treasury enabled to repay
the advances of 11,500,000 from the Reserve Bank out-
standing at the 31st December, 1953, but the National
Finance Corporation was also in a position to take over
from the Reserve Bank all the Treasury bills which it had,
in the meantime, rediscounted for the commercial banks.
With regard to the commercial banks, there was a further
increase of 17,000,000 in their discounts and advances
as against a decrease of over 29,000,000 in their invest-
ments. This large decrease in their liquid assets was, of
course, associated with both the increase in their discounts
and advances and the shift in funds to the Government;
and, as indicated previously, it was reflected, firstly, in
increased rediscounts by the Reserve Bank and, subse-
quently, in larger holdings of Treasury bills by the
National Finance Corporation.
Thus, the substantial decrease in the money supply
during the first half of 1954 was not the result of a
deliberate contraction of bank credit. Such contraction as
did actually take place was related, partly, to the surplus
of about 14,000,000 in the balance of payments and,
partly, to other factors which tended to increase still
further the rate of turnover of bank deposits. As far as
we could judge, there was no real need, nor was there any
specific demand, for official intervention with a view to
keeping up the volume of bank credit in use to such an
extent as to maintain the money supply approximately at
the level existing at the end of 1953. In fact, in the
prevailing circumstances such deliberate creation of cen-
tral bank credit as a counteracting measure might have
had an inflationary effect which would have been defin-
itely undesirable.
On reviewing the course of monetary events in the
Union against the background of the exceptionally rapid
economic development which has taken place since the
end of the War, it would appear that the money supply
has shown a relatively small net increase, namely, 27 per
cent. between the end of 1945 and the end of 1953.









Admittedly, war conditions had led to the creation of an
excessive volume of money in the Union, which was
reflected in a decline in the rate of turnover of bank
deposits, in relation to bank debits, from 6.6 in 1938 to
4.6 in 1946. As a result, however, of the subsequent
expansion of economic activity, as well as structural im-
provements in the functioning of the financial system, a
significant increase occurred in the rate of turnover of
bank deposits, namely, to 7.7 in 1953. Nevertheless, even
if the total money supply were fully adjusted for this
increase in the rate of turnover of deposit money, it would
still show a smaller increase than, for example, that in
the total national income between the years 1946-47 and
1952-53, namely, 80 as against 86 per cent. This suggests
that, over the post-war period as a whole, the money
supply has not been permitted to operate in the direction
of stimulating or aggravating the inflationary pressures
arising from imported inflation. On the other hand, the
available evidence indicates that it has also not been
allowed to hamper unduly the development of the coun-
try's economic potentialities.

MONEY RATES.

Money rates in the Union remained relatively stable
during the past year at the higher levels which had been
reached during 1952-53 and to which I referred in some
detail at our two previous meetings. In fact, it has been
an important part of recent monetary policy to aim at
maintaining stability in money rates as far as possible.
Thus, not only has the Reserve Bank kept its discount
rate at 4 per cent. since March, 1952, but, in conjunction
with the Public Debt Commissioners, it has also continued
to maintain the pattern of rates for the various maturities
of gilt-edged securities, which had been decided upon in
August, 1952, in agreement with the Treasury and the
National Finance Corporation. The pursuance of this
policy involved the Bank in a further net acquisition of
Union securities to the total amount of 5,000,000 between
the 30th June, 1953, and the 30th June, 1954, namely
3,200,000 Government securities and 1,800,000 pubic
utility and municipal securities.
In recent months, however, there have been signs of a
slight improvement in the local gilt-edged market, which









may be attributable to a closer alignment between supply
and demand in that segment of our financial structure
and, perhaps, also to the influence of the downward trend
in money rates abroad. Thus, for example, the recent
Durban and Escom loans were oversubscribed on terms
which were a shade better than similar previous issues.
There has also been a slight hardening in the market
prices of private fixed-yield securities. Furthermore, in
its open-market operations the Reserve Bank has for some
time experienced a demand for securities with relatively
long maturities, while the offerings have consisted mainly
of securities with short maturities at the respective lower
yields laid down in its pattern of rates, which would also
appear to indicate some expectation of a decline in money
rates in the Union, as in many other countries.
As far as monetary policy in the immediate future is
concerned, it is not contemplated to contribute actively
towards a general lowering of money rates through either
the open-market operations of the Reserve Bank or a
reduction in its discount rate, as long as the prevailing
conditions of general economic strain continue to exist
in the Union. Although there has been an easing of
inflationary pressures as well as an improvement in the
balance of payments and in the Government's financial
position, which will be discussed later, the economy as
a whole will probably remain fully extended at least
until the end of the year.
On the other hand, if a downward trend in money rates
should arise from natural market forces, it is not contem-
plated, at this stage, to counteract or retard it through
official monetary action unless it should assume undue
dimensions in relation to other economic factors. Thus
while the Bank does not intend, in the absence of circum-
stances necessitating its active intervention, to lead a
downward movement in the money market, it may decide
to follow the market downwards. In short, the Bank will
watch financial developments and adjust its policy, as
and when required, in the light of its interpretation of the
national interest after consultation with the Treasury.

GENERAL ECONOMIC SITUATION.
The total national income of the Union, which had
shown only a moderate increase in 1951-52 as compared
with the exceptional rate of growth in the preceding four









years, again received a substantial impetus in 1952-53,
when it rose by 118,000,000 to 1,386,000,000, i.e. an
increase of 9.3 per cent. over the previous year. This
increase, which was accompanied by a rise of about 7
per cent. in the average wholesale and retail indexes, was
spread over a large area of the economy. Thus, there
were increases of 40,000,000 under the heading of "agri-
culture, forestry and fishing", 28,500,00 in respect of
private manufacturing, and 13,300,000 in trade and
finance, while the Government and other public authorities
accounted for an increase of 23,500,000.
The substantial increase in income from agriculture
arose mainly from relatively good maize and certain other
crops due to more favourable weather conditions than
those which had prevailed during the previous year, and
from both a larger wool clip and a higher average price
for wool. In consequence, the contribution of agriculture
was restored to the peak level of 1950-51, so that the
increase of 160,000,000 in the total national income
during the two years between 1950-51 and 1952-53 was
actually derived from the other branches of economic
activity. Of this increase, private manufacturing accoun-
ted for no less than 68,000,000. In fact, over the seven
years from 1946-47 to 1952-53, its contribution to the
national income increased from 21 to 25 per cent., which
is indicative of the significant change that took place in
the South African economy during that period.
As far as the year 1953-54 is concerned, the available
data indicate that there was a further expansion of
economic activity in the Union, in terms of both physical
and monetary volume, and that this expansion was re-
flected in almost all spheres of activity. While the rate of
investment was maintained at a relatively high level, the
principal factor was a general increase in the production
of goods and services.
The farming industry, for example, established new
records in respect of most products. Thus, notwithstan-
ding the steady increase in the local consumption of food-
stuffs, due not only to the growth of the population but
also the continuing rise in the standard of living of both
Europeans and non-Europeans, substantial surpluses of
maize, sugar, butter, cheese and potatoes have become
available for export, whereas in recent years their con-
tribution to our export trade had been unimportant. The







10
wool clip also increased further, and the exports of fruit,
hides and skins likewise showed an increase. While
these increases are to be attributed mainly to the rela-
tively favourable weather conditions which prevailed over
a large part of the country during the past year and which,
together with the continuance of remunerative prices,
stimulated production, there is no doubt that improved
production methods and the increased availability and
use of mechanical equipment and technical services have
also come to play a significant part in the total farming
picture.
The manufacturing output, moreover, continued to
increase as a result of the completion of various new
projects and the expansion of the output of those which
had previously been brought into operation. This was
reflected not only in an increase in such indexes as those
of manufacturing employment and electric current
generated, but also in a decrease in imports of some
consumer goods as well as steel and other metal products.
Some industries had indeed experienced a moderate
decline during the second half of 1952 or the first half
of 1953, but in the main this downward movement was
subsequently reversed. In the building industry for
example, the index of buildings commenced, which had
dropped from a monthly average of 151.9 (1948=100)
in 1951 to 128.8 in 1952, rose again to 142.3 in 1953.
In the case of mineral production, there was an increase
in the output of such products as gold, uranium and coal.
During the first six months of 1954, the gold output
increased by 460,000 ounces or 8 per cent., as compared
with the corresponding period of the previous year, while
there was an increase of about 4 per cent. in the coal
output. As far as uranium is concerned, no statistics of
production are available, but it is known that six uranium-
extraction plants have already been brought into opera-
tion and that some of them were in production for all or
most of the past year. The remainder of the mineral
production, consisting mainly of diamonds, copper, plati-
num, manganese, chrome and asbestos, represented a
mixed pattern of increases and decreases and did not
apparently show any appreciable net change in the
aggregate output.
Distributive and speculative activities which, during the
previous year, had revealed a declining tendency on the









whole, began to move upwards again during the second
half of 1953 and maintained their higher level into 1954.
This applied to both external and internal trade and to
the volume of stock-exchange and real-estate transactions.
The extent of the increase in overall economic activity
can be gauged approximately from such general indexes
of physical volume as those of electric current generated
and ton-miles of revenue-earning railway traffic, which,
on the basis of monthly averages, increased by 6.8 and
2 per cent., respectively, between the years ended 30th
June, 1953, and 30th June, 1954, and from such monetary
indicators as the note circulation and bank debits to indi-
vidual accounts, which increased by 8 and 6.4 per cent.
respectively.
Notwithstanding this high level of economic activity,
there is evidence that inflationary pressures have subsided
in the Union, as in the leading countries of the world.
Thus, for example, the wholesale index (1948=100)
declined slightly from 151.5 in December, 1952, to 149.8
in December, 1953, and 150.2 in June, 1954, while the
retail index, which had stood at 129.0 in December, 1952,
rose only to 129.8 in December, 1953, and to 132.3 in
June, 1954.
While external influences have undoubtedly played
an important part in the halting of inflation in the Union,
there are also several local factors which have contribu-
ted to this achievement. Mention has already been made
of the official policy of maintaining the higher level of
money rates and keeping the money supply within appro-
priate limits. A second factor was the substantial increase
in taxation during 1953-54, with the deliberate object of
counteracting the inflationary effect of unavoidable fur-
ther increases in both the current and the capital expendi-
tures of the Government for that year, and also with a
view to financing a larger part of its capital expenditure
out of current receipts. Accordingly, customs and excise
duties on petrol, motor cars and motor tyres were in-
creased in July, 1953, so as to yield an additional
7,000,000 per annum, while a savings levy, repayable
after five years, was imposed on persons and companies
(excluding gold mines) in respect of income earned during
the tax year 1952-53, so as to yield 9,300,000. Further-
more, the budget of ordinary expenditure and revenue for
1953-54 provided for an amount of 18,000,000 to be









transferred from Revenue Account to Loan Account, but
as a result of the actual tax yield exceeding the estimates
the year closed with a surplus of about 20,000,000 on
Revenue Account, which was likewise transferred to Loan
Account.
In view, however, of the continuing economic expansion
in the Union and the evidence of inflation having been
checked here as well as abroad, and in view also of the
desirability of providing incentives for increased pro-
ductivity and risk investment in a developing country like
the Union, the Government decided upon a reduction of
taxation for the year 1954-55, after again providing for a
contribution of 15,000,000 from Revenue Account to-
wards meeting its capital expenditure during the current
year. The savings levy of the previous year was, there-
fore, not re-imposed, and, furthermore, the surcharge on
personal income taxes (normal and super) was reduced
from 20 to 15 per cent., while the maximum rate of the
personal income tax, including that of the Provinces, was
lowered from about 18s. 6d. to 12s. 6d. in the and that
of the estate duty from 331 per cent, to 20 per cent. Pro-
vision was also made for special depreciation allowances
on plant and machinery, ships and housing of employees.
On the other hand, the higher customs and excise duties
imposed in recent years on such articles as cigarettes,
liquors, motor cars and petrol, remained unchanged.
Additional factors which contributed towards the
checking of local inflation were the existence of an ade-
quate supply, whether from imports or increased local
production, of almost all kinds of consumer goods, and
the general restraining influence of the official policy of
economic consolidation.

BACKGROUND OF POLICY OF CONSOLIDA-
TION.

At our two previous meetings I had occasion to refer,
in some detail to the need for consolidation and readjust-
ment in the Union after a period of unprecedented economic
development which had indeed brought about a note-
worthy and welcome net increase in its real national in-
come, but had also confronted the country with some com-
plicated internal and external economic problems.









The exceptionally rapid rate of both industrial and
mining development after the end of the War had, for
example, caused a serious lack of balance between private
and public development, between development of a long-
term character and development yielding a quick return,
between development generally and current .production
of goods and services, and between production in indus-
tries catering wholly or mainly for the home market and
dependent in various degrees on foreign materials, equip-
ment and spares and that in industries which are large
net earners of foreign exchange. The net result was not
only that troublesome bottlenecks and internal inflationary
pressures were created but also that a severe disequili-
brium in our balance of payments emerged from time to
time. Thus, notwithstanding an unprecedented net inflow
of capital and a substantial devaluation, in 1949, of. our
currency in terms of gold and the dollar, as well as
several other currencies, and, furthermore, in spite of the
application of import control since the end of 1948, our
total monetary reserves declined from 248,000,000 at
the end of 1946 and a similar amount at the end of 1947
(with gold valued at 172s. per fine ounce) to 135,000,000
at the end of 1951 and 104,500,000 at the end of 1953
(with gold valued at 248s. per fine ounce).
Judging from statements which have appeared in the
South African press during the past year, it is evidently
not yet sufficiently appreciated that the possible extent
and rate of sound and enduring economic development
in any country during any particular period are determined,
in the first place, by the readily available, rather than
the potential, human, physical and financial resources
and by the extent to which the different factors of pro-
duction can be effectively organised, co-ordinated and
correlated during that period, and secondly, by the
country's available international resources and the state
and trend of its balance of payments with the outside
world. These limits to development had, by 1952, forcibly
exerted themselves in the Union and brought home the
need to attain a better balanced economy and to eliminate
inflationary pressures before we embarked on another
simultaneous series of large development programmes.
It was in these circumstances that the official policy
of consolidation was conceived about two years ago.
Apart from openly advocating such a policy for the coun-









try as a whole, the Government sought to implement it
by restraining capital outlays on non-essential or less
urgent projects through its existing controls over imports
and public borrowin s, and by restraining consumption
through increased taxation. As far as can be ascertained,
this policy has been carried out with a minimum of offi-
cial intervention and with sympathetic consideration for all
private and public projects which had already been
started as well as for new projects which were regarded
as essential or highly desirable.

FACTORS WHICH HAVE FACILITATED
READJUSTMENT.

Apart from the aforementioned efforts of the Govern-
ment in the direction of economic consolidation, several
other factors have operated to promote and facilitate
economic readjustment in the Union. In the first place,
the commercial banks and various other financial insti-
tutions, as well as the Provinces, municipalities and
public-utility corporations have, in general, supported the
authorities in the carrying out of the consolidation policy,
and, as indicated in their annual reports, many business
enterprises have also adopted such a policy in the conduct
of their affairs. Secondly, the bottlenecks in labour,
power and transport, as well as the scarcity of capital,
have automatically contributed towards readjustment by
slowing down the rate of new development. As I have
pointed out on previous occasions, this was bound to
happen in any case, but the earlier adoption of consolida-
tion as official policy has certainly helped to expedite
and smooth out the process, and thus to alleviate more
promptly the various forms and degrees of imbalance in
our economy. Thirdly, the gradual readjustment which
has recently taken place in several other countries has
facilitated the application of a policy of consolidation in
the Union.
Furthermore, the Union has been very fortunate in
being able to meet its urgent requirements of foreign
capital with the aid of special loans obtained during the
past five years. The Government itself, for example,
succeeded in raising 15,000,000 in London, 11,500,000
net in Switzerland, 18,000,000 from the Interna-
tional Bank for Reconstruction and Development and







15
10,500,000 from a group of American banks. The Elec-
tricity Supply Commission was also able to raise
28,500,000 from the International Bank and the United
States Export-Import Bank, and 2,000,000 from the
Commonwealth Development Finance Corporation. In
addition, there were the loans granted by the Gov-
ernments of the United States and the United Kingdom
to certain mining companies for the erection of uranium-
extraction plants, of which 34,500,000 had actually been
drawn by the 30th June, 1954; the loans of 12,000,000
already received from the Kennecott Copper Corporation
by two new gold mines in the Orange Free State; the
loans of over 7,500,000 net raised in Switzerland by the
Anglo-American Corporation of South Africa, the Orange
Free State Investment Trust and the West Rand In-
vestment Trust; and the loan of 1,500,000 which the
South African Industrial Cellulose Corporation recently
received from the Commonwealth Development Finance
Corporation. These loans together total 141,000,000,
the greater part of which was obtained by the public
sector. If, by any chance, only a half of this amount
should have been forthcoming, the rate of new develop-
ment in the Union would inevitably have experienced a
severe, disrupting decline some time ago instead of the
gradual slowing down which has taken place during the
past two years.
Another favourable factor, the significance of which in
our recent economic development has also not been suf-
ficiently appreciated, has been the continuance of great
prosperity in the world diamond trade. This afforded
valuable support to our balance of payments throughout
the period of disequilibrium, due both to the realisation at
high prices of our own large output of rough and cut
diamonds and the substantial profits earned by local
interests on the marketing of rough diamonds produced
in almost all other parts of the world. Furthermore, as
a result of the liquidation of stocks and conservative
dividend distributions by the local diamond industry, it
also led to the accumulation of considerable surplus funds,
a substantial portion of which was allocated to gold-
mining and industrial development in the Union, while a
further large portion was directly or indirectly invested in
short or medium-term securities of the public sector which
was in need of funds for the financing of its huge devel-
opment programme.









These various factors have collectively been of great
assistance to the authorities in their efforts to achieve
gradual and orderly readjustment and to safeguard, as
far as possible, our monetary reserves and our economy,
in general. It can, in fact, be held that, if the consolida-
tion policy had not been applied in time, our reserves
might have been depleted to such a low level as to expose
our currency to the risk of speculation and depreciation.
This danger was actually demonstrated by the unfounded
rumour concerning a likely unilateral devaluation of the
South African pound, which circulated in the Union and
certain overseas countries during last January and caused
a temporary drain on our reserves. This rumour was
only laid when it was realized that the existing reserves
were still strong enough and that the balance of payments
position was under control.

PROGRESS OF READJUSTMENT.

The progress which has already been made with the
process of economic readjustment in the Union, has been
manifested in several directions.
In the first place, the worst of the bottlenecks which
had arisen out of the imbalance between public and private
development have been eliminated through an appreciable
increase in public investment during recent years. Al-
though Government departments, provincial administra-
tions, municipalities and public-utility corporations have
not as yet been able to catch up with the entire backlog
in respect of all the services and amenities provided by
them, they have succeeded in meeting the most urgent
demands for such vital services as power, transport, tele-
communications and water supply, and are, moreover,
steadily making up the remaining backlog. The Electri-
city Supply Commission, for example, incurred capital ex-
penditure of 70,000,000 during the five years ended 31st
December, 1953, and increased its generating capacity
by 45 per cent., while during the same period the Railways
and Harbours Administration invested more than
100,000,000 on new works and net additions to rolling-
stock and other equipment, which enabled it to handle
an increase of 36 per cent., in revenue-earning railway
traffic (in terms of ton miles). The municipalities have
likewise been spending large amounts on expanding their









own power supply and transport facilities as well as other
essential services.
Secondly, a better alignment has been attained between
development and current production. On the one hand,
many large-scale private and public projects have been
completed, while the undertaking of new long-term and
costly projects, particularly in the private sector, has been
retarded during the past two years, for the various
reasons which have already been given. On the other
hand, the actual production of goods and services has
increased considerably and now covers a much wider
field, as a result of both the widespread expansion of
existing enterprises and the output of new enterprises
which are now in full operation or are getting into their
stride.
Thirdly, the tendency in our recent industrial develop-
ment has been to make greater use of local raw materials
and to devote more attention to exports of manufactured
goods to neighboring territories and elsewhere. This
has improved the outlook for our balance of payments
through the medium of a net saving of foreign exchange.
The extent of such saving by secondary industries, how-
ever, is not, as some have claimed, the full amount of
the increase in their total output less the value of their
imports of materials and equipment.
To begin with, there is extensive duplication in their
aggregate output figures, since the raw material of one
industry is frequently the finished product of another and
since the latter would be classified as a local product
although it may have been manufactured mainly or sub-
stantially from imported material. Furthermore, the total
figures include the output of service and other "sheltered"
industries like power stations, brickworks, stone quarries,
bakeries and repair shops, whose products or services do
not enter into foreign trade. It must also be borne in mind
that an increase in the output of secondary industries
brings about a direct or indirect increase in personal
incomes from wages, salaries, dividends, etc., a part of
which inevitably tends to enhance the demand for im-
ported goods. There is, moreover, the fact that the
country's exports are reduced approximately to the extent
that secondary industries consume local materials for which
there is a ready market abroad but do not export finished
products of an equivalent value. Thus, although an in-







18

crease in industrial output does indeed help to increase
the national income and may at times be the only way
of raising the standard of living, it may nevertheless com-
plicate the balance of payments position to the extent that
it may take place at the expense of predominantly export
industries. This is, for example, borne out by the fact
that, notwithstanding the large increase in industrial out-
put, our imports in 1953 still amounted to over
420,000,000 and our balance of payments for that year
showed a deficit of 29,000,000, and that import control,
moreover, was required to keep imports down to the
figure mentioned. As stated previously, however, it is
gratifying to note that recent industrial development has
tended more in the direction of a net saving of foreign
exchange, on account of both the greater use of local
materials (some of which are not readily exportable) and
the greater attention that is being devoted to the export
of local manufactures.
Finally, the available labour supply has come to be
more efficiently utilised and more appropriately distribu-
ted between development and production and between
the net-export and the net-import industries. This is to
be attributed not only to the natural incentive to make
better use of our manpower resources as a result of the
persistent shortage of labour, but also to the slowing-down
of industrial development and the steady growth of the
working population. For some time, employment in the
secondary and tertiary industries had increased at such a
rate that a substantial shortfall was caused in the labour
requirements of the primary industries, some of which
could not entirely overcome the shortfall by increased
mechanisation. At present, however, the primary indus-
tries have a better chance of drawing their fair share of
the automatic increase in the labour force, whether from
inside the country or from net immigration. In the gold-
mining industry, for example, the supply of native labour,
which had been declining for several years, has, during
the past year, shown a rising tendency which still appears
to be continuing. The same applies to other mining in-
dustries and to farming activities generally.
ECONOMIC OUTLOOK.
The international situation has, on the whole, continued
to improve in the direction of economic and political
stability and exchange equilibrium. There has, for exam-









pie, been a further abatement of inflationary pressures,
accompanied by an easing of money rates in many coun-
tries, and the general level of world prices and costs has
shown a large measure of stability. There has also been
a further lessening of the strain in exchange relationships
between the dollar area and the rest of the world, as a
result of which several countries have been able to elimin-
ate or relax their discriminatory import restrictions against
the dollar area. The sterling area and Western Europe
have, moreover, acquired a substantial increase in their gold
and dollar reserves, although much of it can be attributed
to continued American military and economic aid in one
form or another. The result has been that sterling and
several other currencies have strengthened in terms of the
dollar, notwithstanding an appreciable liberalisation of
exchange controls.
In the United States, however, there has been a down-
turn in economic activity since the middle of 1953. So far
this recession would appear to have been mainly in the
nature of an inevitable readjustment or transition from an
exceptionally high level of activity, which had been sti-
mulated by phenomenal expenditures on defence and
stockpiling, to a more normal and stable level in the pre-
vailing and prospective circumstances of that country,
in relation to the world in general. Fortunately, this
decline in the United States has not so far had any
detrimental repercussions on other economies, except in
Canada and a few other countries. World production and
trade seems to have been maintained at a relatively high
level, probably because the remainder of the world had
previously undergone a readjustment and increased its
productivity and its competitiveness in international trade.
The consensus of economic opinion in the United States
appears to be that the economic recession there will not
proceed beyond a healthy readjustment; that the anti-
deflationary monetary and fiscal measures which have
already been taken, as well as those which could still be
brought into operation if necessary, should be sufficient
to keep the situation under control; and that a revival of
economic activity may take place during the second half
of the year or early next year. If this should prove to be
the case, the prospects for the maintenance of world
stability at a high level should be considerably enhanced.







20
In respect of the Union, where a strong urge for devel-
opment has been restrained by deficits in the balance of
payments amounting to 74,000,000 during the three years
1951-53, there are good prospects of relief in the near
future, due not only to the greater degree of balance
recently achieved in our economy as a whole but also to
some special factors working in the direction of a favour-
able balance of payments.
On the one hand, there is the prospect of larger earn-
ings of foreign exchange from gold and uranium as the
new gold mines and uranium-extraction plants come into
production or get more fully into their stride. During the
past three years eleven new gold mines have started pro-
duction, and although, at first, their output was obtained
mainly at the expense of the older mines, due to the
shortage of labour and power, the recent increase in the
total supply of mine labour has already brought about a
rising tendency in the total gold output. Furthermore,
six uranium-extraction plants have commenced operations,
of which some are still in the process of increasing their
output, while another six or so are due to start during
the next twelve months. In addition to gold and uranium,
there is the prospect of increased earnings from exports
of surplus agricultural products, such as maize and sugar,
as a result of both an increased acreage under production
and favourable climatic conditions, while the latter have
also benefited the production of wool.
On the other hand, there is the prospect of lower
capital expenditure abroad, due to the anticipated decline
in total domestic investment from the previous abnormally
high level and the increased production of capital goods
in the Union, while the local output of consumer goods
should continue to show a substantial increase. Thus,
several large projects are nearing completion, such as the
oil-from-coal project and the nitrogen, phosphate and
paper projects, whose output should save us a substantial
amount of foreign exchange, while the cellulose project
should make a material contribution to our earnings of
foreign exchange.
Admittedly, some unfavourable factors might enter into
the balance of payments situation should the economic
recession in the United States continue and spread
abroad, with a consequent decline in the prices for some
of our exports. In such event, however, the increased









purchasing power resulting from our larger gold and ura-
nium exports, in conjunction with the reduced cost of im-
ported goods, should be more than ample to counteract
such possible adverse influences.
In view of these generally brighter prospects for our
balance of payments, both the Minister of Finance and
the Minister of Economic Affairs were able to announce,
during the recent session of Parliament, that a substantial
relaxation of import control could be expected next year,
and that there was also a likelihood of its total abolition
in the not too distant future.

CONCLUSION.

In the course of this address I have indicated that,
during the past year, economic activity in the Union has,
in general, been maintained at a very high level and that,
through the instrumentality of official intervention and
guidance as well as the conjuncture of helpful factors, a
considerable degree of necessary readjustment has been
effected in our economy, as a result of which the overall
economic situation in the Union is now sounder than it
has been for some time. I have also pointed out that,
after a series of deficits, the balance of payments has now
begun to turn in our favour, and that there are good
prospects of a substantial further improvement in the
near future.
This favourable trend in our balance of payments
should, in the first place, ensure the uninterrupted com-
pletion of existing development programmes in various
spheres of our economy. The gold-mining industry, for
example, has a considerable development programme in
hand. Thus, of the twenty gold-mining projects which
have been started since the end of the War, there are
nine which have not as yet reached the stage of initial
production, while all of the eleven new producing mines
still have to incur large capital expenditure on under-
ground development and expansion of milling capacity in
order to attain a more economic scale of production.
Likewise, the Electricity Supply Commission and the Rail-
ways and Harbours Administration have still to execute
a substantial part of their current development pro-
grammes which are designed to meet the whole of the
existing demand for their services and the estimated









increase in demand during the next few years. There are
also various other public programmes, government, pro-
vincial and municipal, as well as private projects, in the
course of execution.
A favourable balance of payments should, moreover,
tend to encourage and promote new undertakings. There
are, for example, various public and private projects of
a highly desirable nature which have had to be postponed
or curtailed under the prevailing conditions of economic
strain, but which can be taken in hand as and when the
completion of the more urgent projects makes the neces-
sary resources available. Furthermore, we still have con-
siderable untapped or partially developed natural resour-
ces, particularly in respect of metals and other minerals,
chemicals and textiles, which offer opportunities for
profitable exploitation by local and foreign capital.
With regard to the latter, the Union has consistently
followed the policy of welcoming the participation of
foreign capital in its development and of keeping "the
door open to foreign capital-open in both directions" and
of treating "foreign capital on the same footing as indi-
genous capital", as the Minister of Finance declared in
his Budget Speech as far back as March, 1949. It is true,
of course, that as a result of the recent phenomenal
increase in the productive capacity of our manufacturing
and mining industries, and also in view of the consider-
able increase in both its capacity and propensity to save,
the Union is now less dependent upon foreign capital
than it was some time ago. In fact, we can to-day accom-
plish a great deal of new development with our own
private and public savings. According to the latest avail-
able estimates, net domestic saving (i.e. exclusive of
depreciation allowances) amounted to an annual average
of no less than 170,000,000 during the four years 1950-53.
Nevertheless, we accept the fact that an adequate, regular
inflow of foreign capital and the technical know-how
which frequently accompanies it, would facilitate and
expedite the exploitation of our natural resources.
In short, as a result of the considerable increase in our
capacity both to produce capital equipment and to provide
financial resources out of domestic saving, together with
such foreign capital and skill as we should continue to
attract in view of the available opportunities in the Union
and the welcoming hand extended by our authorities, we









should, except for possible temporary interruptions due
to world circumstances, be able to continue the develop-
ment of our country at a high rate with a view to raising
the standard of living of our population as a whole.
At the conclusion of his address the Governor moved
"That the Report and Accounts beadopted".
Mr. L. L. French seconded the motion which was then
put to the meeting and carried unanimously.
On the motion of the Governor, seconded by Mr. S. R.
Barnes, it was unanimously resolved:
That Mr. W. H. A. Lawrence whose period of
office expired on the 1st July, in accordance with the
terms of the South African Reserve Bank Act, be
re-elected as a Stockholders' Representative on the
Board of Directors.
In connection with the vacancy on the Board resulting
from Mr. Duncan Baxter's decision not to seek re-election
the meeting, at the instance of the Governor, placed on
record their high appreciation of the valuable services
rendered to the Bank by Mr. Baxter as a Director for
over 30 years.
Mr. R. H. Parker then moved that, as recommended
in the Report of the Board of Directors, Mr. E. O'C.
Maggs be elected as a Stockholders' Representative in
the place of Mr. Baxter.
The motion was seconded by Mr. C. E. James, put to
the meeting and carried unanimously, whereupon the
Governor heartily welcomed Mr. Maggs as a member of
the Board and also Mr. P. V. Gawith who had been
appointed a Government Representative in the place of
the late Mr. E. W. Cattell.
The Governor then moved:
1. That Messrs. Whiteley Brothers and Messrs.
Deloitte, Plender, Griffiths, Annan and Company
be paid the sum of Two Thousand guineas each, in
accordance with the recommendation of the Board,
for auditing the accounts of the Bank for the year
ended 31st March, 1954.
2. That Messrs. Whiteley Brothers and Messrs.
Deloitte, Plender, Griffiths, Annan and Company
be appointed Auditors of the Bank's accounts for
the current year.









The motions were seconded by Mr. D. J. Tredoux and
and having been put to the meeting were carried unanim-
ously.
After the conclusion of the formal business of the
meeting Mr. J. P. Kakebeeke said that he wished on
behalf of the commercial banks to associate himself with
the sentiments expressed in the Director's Report regard-
ing Mr. Cattell who had served the Bank so well as Chief
Cashier for a period of 24 years and since his retirement
in 1945 as a Director.
In proposing a vote of thanks to the Governor for his
interesting address Mr. Kakebeeke said that Dr. de Kock's
review of economic conditions was of the greatest interest
not only to people in the Union but throughout the world.
The heartening views expressed by the Governor would
be a source of satisfaction to all but particularly to the
commercial banks.
On behalf of the Banks he referred appreciatively to
the happy relationship which had always existed between
them and the Governor as well as his associates in the
Bank.
The Governor thanked Mr. Kakebeeke for his kind
remarks and said that before the meeting closed he wished
to express appreciation to Mr. L. J. Cockhead who had
served the Bank since its inception in various capacities,
and since 1945, as its Chief Cashier. He wished him every
happiness in his retirement from its service at the end of
September.
After Mr. Cockhead had thanked the Governor for his
kind remarks the proceedings terminated.









1954

South African Reserve Bank

REPORT OF THE BOARD OF DIRECTORS TO
BE PRESENTED TO STOCKHOLDERS AT
THE THIRTY-FOURTH ORDINARY GENERAL
MEETING TO BE HELD AT PRETORIA ON
WEDNESDAY, THE 28TH JULY, 1954.

In accordance with the provisions of the South African
Reserve Bank Act, 1944, and the Regulations framed
thereunder, the accompanying statement of the Bank's
accounts for the year ended 31st March, 1954, certified
by the Auditors as prescribed, is presented to Stockholders.
CAPITAL.-The Bank's capital of 1,000,000 was held
by 973 stockholders of whom 49.9 per cent held less than
500 stock each.
RESERVE FUND.-In terms of Section 16 (3) of the
Act, 160,000 of the net profit for the year, after pay-
ment of a dividend to Stockholders, was allocated to the
Reserve Fund, thus increasing it to 2,816,000.
NOTES IN CIRCULATION.-At the end of the
financial year, the Bank's note issue amounted to
96,754,000, representing an increase of approximately
7,600,000 over the year. Of this increase, however, about
2,000,000 was accounted for by larger holdings of notes
by the commercial banks, so that the net increase of
approximately 5,600,000 in holdings outside the banking
system was only 600,000 greater than that recorded
during the previous year.
DEPOSITS.-The Bank's total deposit liabilities in-
creased from 70,143,000 to 72,952,000 during the year.
This increase of 2,809,000 as contrasted with a decrease
of 6,174,000 during the preceding year, was the net
result of increases of 6,754,000 in Government and Prov-
incial deposits and 1,584,000 in bankers' reserve ac-
counts, and of decreases of 5,393,000 and 136,000 in
the current accounts of the commercial banks and in other
deposits, respectively.








FOREIGN CURRENCY LIABILITIES INCURRED
AS AGENT FOR THE UNION GOVERNMENT.-
In January, 1954, the three-year 24 per cent. revolving
credit of 7,143,000 ($20,000,000) granted by a group of
American banks to the Government matured, when the
drawings outstanding under the credit amounting to
3,571,000 ($10,000,000), were repaid. The same group
of banks, however, extended a new revolving credit to the
Government in the same amount of $20,000,000 but with
a currency of only two years, and at a rate of 3' per cent,
in conformity with the general increase in interest rates
which had taken place in the United States at the time.
Drawings under this new credit totalling 5,357,000
($15,000,000) were outstanding at the 31st March, 1954.
No change took place during the year in respect of the
credit granted to the Government by a group of Swiss
banks. The total liability in respect of these foreign loans
accordingly increased over the year by a net amount of
1,786,000 to 11,389,000, consisting of 8,929,000 in
U.S. dollars and 2,460,000 in Swiss francs.
GOLD COIN AND BULLION.-The Bank's gold
reserve increased during the year from 61,573,000 to
62,660,000, i.e., by 1,087,000.
Gold purchases by the Bank during the year, valued
at the statutory price of 248s. per fine ounce, amounted
to 113,172,000 of which 113,102,000 was acquired from
gold producers in the Union and the balance from other
sources. The total purchases were approximately
23,200,000 higher than in the preceding year, chiefly as
a result of an appreciable decline in the amount of gold
sold directly by the mines,. at a premium, for industrial
purposes, and also, but to a much lesser extent, as a result
of an increase in the gold output.
Sales of gold by the Bank during the year, valued at
the statutory price, amounted to 112,085,000 of which
89,826,000 was sold to the Bank of England and on the
London free gold market. Of the balance, 20,466,000
was sold to the Bank for International Settlements against
payments in U.S. dollars on more favourable terms than
would have resulted from direct shipment and sale to
the United States Assay Office. Transfers of gold to
the Mozambique Government in respect of deferred pay
due to native mineworkers from that territory employed
in the Union, totalled 1,250,000, the balance of the sales
consisting of miscellaneous items.









The mines continued to sell gold for industrial purposes,
at a premium, during the greater part of the year. The
premium, however, showed a declining trend and, about
the middle of November, 1953, the price realized reached
approximately the official dollar parity. Thereafter
practically the entire output of the Union was purchased
by the Bank, and when the restricted free gold market
was opened in London on the 22nd March, 1954, the
authority granted to the gold producers to undertake such
sales was withdrawn, as was announced by the Minister
of Finance on the 20th March, 1954.
The opening of the restricted free market in London
did not involve any change in the official price of gold.
Nor did the decision to make the maximum use of that
market affect the existing financial arrangement with
the United Kingdom, in terms of which the Union under-
took to meet all its own hard currency requirements and,
in addition, to sell a minimum of 4,000,000 fine ounces of
gold per annum to the United Kingdom.
The opening of this market did, however, result in a
change in the basis upon which the price of gold payed
to gold producers in the Union is calculated. Thus,
whereas from the 1st April, 1953, to the 21st March, 1954,
the price continued to be based upon the middle closing
London/New York rates, the basis thereafter became the
London market price, as determined at the daily price
fixing. This price is determined by demand and supply
in the market, and varies from day to day, the range since
the opening of the market until the end of May having
been between 248s. 3d. and 249s. Id. per fine ounce. The
market price may, af course, at times be higher or lower
than that determined on the previous basis, but, having
regard to the international nature and the leading posi-
tion of the London market, it appears unlikely that a bet-
ter price could normally be obtained elsewhere.
BALANCES WITH OVERSEAS BANKS;
MONEY -AT CALL IN LONDON; FOREIGN
BILLS DISCOUNTED.-These items which, together
with an amount of 926,000 in investments domiciled
abroad, represent the Bank's foreign exchange resources,
totalled 41,577,000 at the end of the year. The total
comprised 26,638,000 in sterling, 13,562,000 in U.S.
dollars, 323,000 in Canadian dollars and 563,000,
254,000 and 229,000 in Swiss francs, Deutsche marks









and Belgian francs, respectively, the balance consisting
of small amounts of other currencies.
The net decline in the Bank's gold and exchange
resources during the year, which resulted from a deficit
in the Union's balance of payments, amounted to
19,083,000, the decrease of 20,170,000 in its exchange
holdings having been partly offset by the increase of
1,087,000 in the gold reserve, to which reference was
made above.
DOMESTIC BILLS DISCOUNTED.-The total
amount of domestic bills under discount, representing tem-
porary accommodation granted to various parties, in-
creased by 30,100,000 during the year. The outstanding
balance of 32,100,000 consisted of 30,850,000 in Union
Treasury bills and 1,250,000 in promissory notes of the
commercial banks secured by the pledge of eligible com-
mercial bills as collateral.
LOANS AND ADVANCES.-Loans and advances
during the year decreased by 5,341,000 to 9,590,000,
and consisted of advances to Government and quasi-
Government bodies for financing the importation and
storage of essential commodities.
GOVERNMENT AND OTHER SECURITIES.-
The Bank's investments increased during the year by
6,008,000 to a total of 36,117,000. The increase in
Government securities amounted to 3,620,000 and in
other securities to 2,388,000. The latter figure included
an amount of 700,000, representing the net increase in
investments domiciled abroad, while the balance of the
aggregate increase, namely, 5,308,000, reflected the net
result of the Bank's open market operations during the
year.
FURNITURE AND FITTINGS AND FIXED
PROPERTY.-The balance on both these accounts stood
at 1, all expenditure during the year under these heads
having been written off, as shown in the Profit and Loss
Account. Against these nominal balances are held all
the furniture and fittings of the Bank, including strong-
room equipment and safes, as well as its fixed property in
Bloemfontein, Cape Town, Durban, East London, Johan-
nesburg, Pietermaritzburg, Port Elizabeth and Pretoria.
*PROFIT AND LOSS ACCOUNT.-The net profit
for the year, after meeting all expenses and making provi-









sion for income tax, investment reserve and other liabilities,
as well as writing off 66,000 from Fixed Property Ac-
count and 16,000 from Furniture and Fittings Account,
and after transferring 42,500 to the Pension Fund,
amounted to 1,696,000, the corresponding figure for the
previous year having been 1,618,000. Dividends to
Stockholders absorbed 100,000 of the net profit, while
a sum of 160,000, representing one-tenth of the remain-
ing balance, was allocated to the Reserve Fund, leaving
an amount of 1,436,000 to be paid to the Government.
DIVIDENDS.-The Directors declared an interim
dividend of 5 per cent. for the half-year ended 30th Sep-
tember, 1953, and a final dividend of the same amount
for the half-year ended 31st March, 1954, making a total
of 10 per cent. for the year.
DIRECTORS.-The Directors record with deep regret
the death of their colleague, Mr. Edwin Winter Cattell,
a Government Representative on the Board. The vacancy
thus caused has not yet been filled.
In terms of the Act, Mr. W. H. A. Lawrence retires
by rotation but, being eligible, offers himself for re-elec-
tion. Mr. W. Duncan Baxter, whose period of office
expires on the 1st July, 1954, does not submit himself for
re-election, and Stockholders will have to elect a represent-
ative in his place. To fill this vacancy, the Board recom-
mends the election of Mr. E. O'C. Maggs who served
as a Government representative on the Board from 1947
to 1952, written notice of whose proposed nomination at
the meeting has duly been given.
AUDITORS.-Stockholders will be requested to
determine, upon the recommendation of the Board, the
remuneration of the Auditors for the recent audit, and to
appoint Auditors for the current year.
Messrs. Deloitte, Plender, Griffiths, Annan and Com-
pany and Messrs. Whiteley Brothers offer themselves
for re-election.
E. H. D. ARNDT
G. P. J. LOTZ Directors
W. H. A. LAWRENCE
C. T. TE WATER
G. RISSIK, Secretary.
16th June, 1954.












BALANCE SHEET 31st. MARCH, 1954.


Capital ......... ...... ..... ..............
Reserve ............ ... ...................
Notes in Circulation ......................
Notes of Other Banks in Circulation ......
Deposits-
Bankers' Reserve Accounts ... 37,603,188
Bankers' Current Accounts ... 6,145,051
Government and Provincial
Current Accounts ......... 27,257,554
Other Accounts ............... 1,946,079


1,000,000
2,816,413
96,753,618
146,273


72,951,872


Rebate on Bills not yet Due ............... 369,465
Foreign Currency Liabilities incurred as
Agent for the Union Government-
United States Dollars ......... 8,928,571
Swiss Francs .................. 2,460,025
--- 11,388,596
Other Liabilities ......... ......... ......... 3,467,368
Stockholders For Final Dividend ...... 50,000
Government For Remainder of Surplus 1,436,034

190,379,639


Gold Coin and Bullion at Statutory Value
Other Coin ......... .............. ......
Balances with Overseas Banks ............
Money at Call in London ................
Foreign Bills ... ......... ... ...... ... ... ...
Domestic Bills Discounted ..................
Loans and Advances .................. .....
Government Securities .... ...............
Other Securities .................. .........
Furniture and Fittings .................. ...
Fixed Property .................. ............
Other Assets ... ... ... ... ... ... ... ... ... ...


62,659,672
226,549
5,602,536
1,025,000
34,023,472
32,100,000
9,589,595
31,648,793
4,468,360
1
1
9,035,860


190,379,639


I' ----II~ ~--- ---~~ ---`--1---s-~-`-









PROFIT AND LOSS ACCOUNT

for the year ended 31st. March, 1954.


General Expenditure-
Including Rates, Salaries, Directors' Fees,
etc ............ ....................
Written Off-
Fixed Property ............... 66,272
Furniture and Fittings ......... 15,945

Pension Fund Contribution ...............
Profit for the Year-
Allocated as under:-
(Vide Report of Directors)-
Stockholders ... ... ......... .. 100,000
Reserve ............... ... ... 159,559
Government ...... ............ 1,436,034


607,474



82,217
42,500






1,695,593

2,427,784


Gross Revenue-
After making provision for Income Tax,
Rebate on Bills not yet due, Other
Liabilities, Contingencies and writing
down Securities ............... ......... 2,427,784











2,427,784


G. RISSIK, Secretary.


PRETORIA,
16th June, 1954.


E. H. D. ARNDT, Deputy Governor.
G. P. J. LOTZ
W. H. A. LAWRENCE LDirectors.
C. T. TE WATER I


=I

















To the Stockholders of the
South African Reserve Bank.

We have audited the Balance Sheet dated 31st March,
1954, above set forth and report that, in our opinion, the
Balance Sheet is a full and fair Balance Sheet and is
properly drawn up so as to exhibit a true and correct view
of the whole of the Bank's affairs, according to the best
of our knowledge and the explanations given to us and
as shown by the books of the Bank as at 31st March, 1954.
We also report that, in our opinion, the affairs of the
Bank have been conducted in accordance with the provi-
sions of the South African Reserve Bank Act, 1944, and
the Regulations thereunder, so far as they affect the
Balance Sheet and Accounts.

DELOITTE, PLENDER, GRIFFITHS, ANNAN & Co.,
WHITELEY BROTHERS,
Auditors.
Pretoria, 9th June, 1954.















BRANCH OFFICES.










BRANCH : AGENT


BLOEMFONTEIN ................. ............. E. M OORE.


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