The extraction of commodities can be the fuel for financial booms and busts. Whether it be cotton in 19th century Egypt or oil in 20th century Venezuela, commodities have enriched people, firms, and nations, often temporarily. Perhaps some of the most historically memorable commodity booms were the gold rushes of the 19th century, which snapped attention to the far corners of the world, from America to Australia and Alaska to Africa.

           Popular familiarity and interest in these booms have been enduring because of what made them particularly distinct. First of all, gold was not like other natural resources in that it served as money itself. Secondly, gold rushes had especially profound effects on the places that hosted them, driving movements of people and capital that transformed, and made, nations. Gold rushes also had an individualistic aura around them; in many places, the extraction of gold was carried out by individual prospectors rather than the large firms that control other industries. However, these attributes were less present in South Africa; the gold rush there was more industrial than monetary in nature and more driven by firms than freelancers.


           The site of what became perhaps history’s most significant and unique gold rush was the Witwatersrand Basin in South Africa, a region once submerged by a large lake. At the bottom of this lake, sediment was deposited by meandering streams that fed it three billion years ago. The sediment contained gold from sources cut through by the streams. This basin was in the southern Transvaal, then an independent country in today’s South Africa and it surrounds the modern city of Johannesburg, just south of the old Transvaal’s capital, Pretoria.

           The Witwatersrand gold rush kicked off in 1886 when gold was found on a farm in Langlaagte, today a suburb of Johannesburg. Small amounts were retrieved earlier but this particular find was not kept a secret, igniting a prolonged frenzy in the otherwise quiet corner of the world. The Witwatersrand gold was different from that which sparked past gold rushes. Unlike that of other 19th century gold finds in Australia and America, the South African gold was found more thinly scattered and deeper underground. Reaching it was thus not a simple matter of gold panning along a creek or river. Whatever the geological hurdles, riches provided a strong motivation for overcoming them and the region was producing 20% to 25% of the world’s gold by the late 1890s.

Gold as Money

           At the end of the 19th century, gold was an international money. Gold exporting countries were thought of as essentially exporting money in a manner not too different than the United States today ‘mints’ the world reserve currency, the U.S. dollar. Though unlike the U.S. dollar which could be made only in one country, a handful of countries produced gold, including South Africa. Thus, just as foreign demand for dollars allows the United States to run ‘twin deficits’, that is fiscal and current account deficits, unabated, gold exports had the same effect on 19th century gold producing economies.

           However, there was a difference in the nature of South Africa’s production that muddled these monetary consequences. Gold was only widely accepted as money in its refined and struck form which could be more readily trusted than the raw metal. South Africa lacked the capacity to produce refined and coined gold; the country had no local mint or even gold refineries of note until well into the 20th century. So, local producers shipped gold to London in its raw form, paying for freight, insurance, and refining costs of between 14% and 15% of the value being sent abroad. The gold only truly became money there.

           Indeed, South Africa exported no coined gold and was actually an importer of the refined and struck metal, meaning that the country’s trade in gold was of a different sort than that of other exporters. In the case of the Witwatersrand gold, once the raw metal was refined in Britain, it was either sold in the market or sold to the Bank of England for £3 and 17 shillings an ounce, the price set by Britain’s Bank Charter Act of 1844.

           In the process, South African banks and mining firms built up large London bank balances from this trade, some of which it imported back to the country in gold coins and bars, of which the country was a net importer. However, the country also imported the equipment needed to mine and transport the gold, equipment critically needed given the locked-up location of the metal and equipment South Africa had no capacity to produce itself. This investment in imported capital equipment helped to industrialize the country.


           The Witwatersrand gold rush was perhaps the most important event in South Africa’s economic history. Prior to the discovery of gold, South Africa was an agrarian country whose only major natural resource of note was diamonds which were discovered there twenty years earlier, not far from the gold fields. As was the case for diamonds, the difficulty of extracting and transporting South African gold prompted the substantial investment in equipment and infrastructure already discussed. Separating out the mined ore to isolate gold was a process similarly requiring heavy machinery. It was the industrial nature of this extraction that gave the Witwatersrand gold rush a unique dimension which those of America or Australia, which involved alluvial gold deposits above ground, lacked. 

           Further consider that gold drove the development of South Africa’s railway network, especially important and expensive given the geographic barriers between the gold mines and the sea. The Netherlands–South African Railway Company was founded the year after the gold find and went on to develop and operate the railways in Transvaal which were extended to the Witwatersrand in the early 1890s. These railways supplanted the stagecoaches that previously brought gold to the ports.

           The capital invested in transforming the economy was massive. Much of the money invested by the mining industry and other new enterprises in South Africa was raised in London, where many South African firms issued stock and floated bonds. Gold further linked the economies thousands of miles apart. As just an example, Witwatersrand gold made up 68% of Britain’s gold imports a decade into the 20th century by which point extraction of the metal made up 64% of the new Union of South Africa’s exports and 30% of its national income.

           The gold rush also drove the growth of Johannesburg, today the largest city in South Africa, which was founded the same year as the gold discovery. In the early days of its growth it was little more than a shantytown yet, by 1910, the year of the unification of South Africa, it had already become the country’s largest city, surpassing the populations of Cape Town and Pretoria. The growth came from an influx of mostly English-speaking foreigners arriving in Afrikaner territory. However, these immigrants were not independent prospectors extracting gold in the style of the California Gold Rush forty years earlier. Rather, in South Africa, the extraction of gold was organized through corporate entities owing to the complexity of reaching the metal thinly but predictably scattered deep underground.

Implications in Africa

           The financial development of South Africa owes much to the gold rush which saw the widespread creation of new corporate organizations. Several mining companies were formed soon after the discovery of gold in 1886 and many other firms incorporated in all manner of industries. These firms turned to the capital markets in a way that individual prospectors could not. Domestically, there were five hundred companies listed on the Johannesburg Stock Exchange by 1889, remarkable considering the exchange itself had been formed just three years earlier.

           The share prices of the new mining companies saw booms and busts from the late 1880s on. By 1890, investors realized that many of these firms would never make a profit, causing stock prices to crash. However, this downturn soon gave way to massive growth. In fact, the aggregate market value of leading mining firms rose from £25 million in 1894 to £150 million in 1895. It was not to last; conditions were set to deteriorate amidst the Second Boer War.

           The Second Boer War, also known simply as the South African War, was fought from 1899 to 1902 but was foreshadowed by the Jameson Raid in December 1895, the year South African stocks peaked. The Jameson Raid was a failed British attempt to trigger an insurrection among the foreigners, mostly Brits, who made up much of Johannesburg’s population. The goal was to bring about the coup that would put Transvaal under Britain’s control. The attempt failed but spoiled the state of peace in South Africa and the fortunes of the gold industry. Gold mining company shares crashed again and South African exports of gold fell. The raid foreshadowed the war to come, by the end of which, the Transvaal and its gold fields were under British control.

Implications Globally

           Whereas gold helped foment disorders in South Africa, it promoted stability in international finance. Increased gold production had the tendency to cause other commodity prices to rise as would any other shock increases to the money supply. This helped reverse a deflation that had been persistent since the global depression of the 1870s. The large exports of South African gold allowed for improved liquidity to the benefit of global finance and trade.

           This was no small thing, enabling the gold standard to be maintained for longer than may otherwise have been possible with the limitations posed by limited quantities of the precious metal. The Witwatersrand Basin continues to produce massive amounts of gold each year; perhaps as much as 30% of the world’s cumulative gold supply has come from the basin. The history of money and finance in those days when gold was money would have been very different had the South African gold finds never happened, as would the history of South Africa itself.


           Whatever its role in perpetuating the gold standard in the late 19th and early 20th centuries, Witwatersrand gold no doubt played an important part in the history of South Africa, and not just its economic history. The financial markets in the country were developed partly as a means of delivering the capital needed to mining companies and other firms formed during the boom years. Yet, the precious metal has had more than just monetary or financial significance, also serving to simultaneously drive the industrialization, urbanization, and economic and political unification of South Africa. 

More from the Tontine Coffee-House

Read about how the California Gold Rush led to the formation of one of America’s leading banks. Also learn about other commodity booms, from Egyptian cotton to Indian indigo to Dutch tulips.

Further Reading

1.      Gilbert, Donald Wood. “The Economic Effects of the Gold Discoveries Upon South Africa: 1886-1910.” The Quarterly Journal of Economics, vol. 47, no. 4, 1933, pp. 553–597.

2.      Kirk, Jason, et al. “The Origin of Gold in South Africa.” American Scientist, vol. 91, no. 6, 2003, pp. 534–541.

3.      Mountford, Benjamin, and Stephen Tuffnell. A Global History of Gold Rushes. University of California Press, 2018.

4.      Palmer, P. F. “Gold and South African Economic Development.” Economic Inquiry, vol. 2, no. 2, 1964, pp. 142–155.

5.      Van-Helten, Jean Jacques. “Empire and High Finance: South Africa and the International Gold Standard 1890–1914.” The Journal of African History, vol. 23, no. 4, 1982, pp. 529–548.

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