John Paterson was at the forefront of many of the developments in Port Elizabeth. Amongst these were the establishment of the Grey Institute and the Eastern Province Herald. Perhaps the least obvious creation of John Paterson, was that of the Standard Bank.
It was to be in 1857, that Paterson, a prominent Port Elizabeth businessman, was to turn his hand at banking when he attempted to commence a bank with the title The Standard Bank of Port Elizabeth. A prospectus was duly issued reflecting a proposed capital of £ ¼ million.
Main picture: The first building erected specifically for the Standard Bank
An overoptimistic press report claimed that the bank would offer facilities to trade which would be “unfettered by any of the conventional restrictions which prevent the existing banks from obliging their customers with unlimited credit.” More sober assessments and reports followed.
In spite of the optimism expressed in the prospectus and local press, for the following eighteen months Paterson failed to attract sufficient local capital to launch the Bank with overseas capital. Paterson’s ambitions collided with the local reality. Not to be stymied, in March 1859 Paterson decided to attract oversea investors. To this end, he sailed for London to take the necessary steps. Finally after travelling to America to meet the principals / suppliers of another business in which Kemp was a partner, he returned to England to resuscitate his banking dream. One of Paterson’s favourite maxims was that “It is no use having grand ideas without the gold to back them.” In April 1860, a Prospectus for the Standard Bank of British South Africa appeared, but once again a delay of unknown origins occurred. Concurrently with this, rumours abounded that new banks were to be launched at the Cape, until finally the Standard Bank emerged with a nominal capital of £1 million and a Memorandum of Association signed on the 13th October 1862.
When the news reached Port Elizabeth of the creation of the Standard Bank of British South Africa in London, the editor of the Herald wrote, “The name of Paterson is already associated with most of our public institutions, and to him this town is greatly indebted for the position [that] it holds and the progress that it has made.” The Herald was honouring a man who was at the pinnacle of his amazingly successful career.
On the 15th October 1862, Paterson’s partner in Port Elizabeth, George Townshend Kemp, died suddenly. The cause given for his demise was overwork. Apparently, the responsibility of managing the affairs of Paterson, Kemp & Co alone, with Paterson being overseas, had proved to be too great a burden. George had never married and had alone lived at ‘Frances Place’, in Bird Street.
George Kemp’s death was a great blow to John Paterson, especially as it followed so soon after the death of his wife. In her will, made the day before her death, Mrs. Paterson had appointed her brother, George, as co-trustee of her estate with her husband. Immediately on receiving news of George’s death, Paterson cabled his chief clerk, Mr. Vardy, instructing him to manage the business in Port Elizabeth as well as he could until he could come out to the Colony. By this time, Paterson was beginning to wonder whether or not he could continue to carry on the Port Elizabeth branch. Ultimately, he decided to postpone the final decision until he could ascertain for himself what the trade prospects in Port Elizabeth were.
Between 1861 and 1862, John Paterson met Marizza Bowie, a lovely charming girl of 18, who was to become his second wife. Her uncle, Captain Henry Thurburn, who lived at 25 Queensbury Terrace, London, was a business associate of Paterson’s and a director in one of the new companies formed by Paterson. At the time that Paterson met Marizza, she was living with her widowed mother, sisters and brother in Bath. Marizza had been educated at a well-known boarding school in Edinburgh where she became head girl and had a reputation for brains. Thus it was not surprising that some of their children had brilliant careers, inheriting their brains from both of their parents.
Standard Bank to the Fore
John Paterson was resident in London during the whole period of the establishment of the Bank. Paterson intimately supervised the flotation, being appointed Chairman after the Head Office was established in London. On sailing for South Africa in February 1863, John Paterson carried with him a mandate to engage in a policy of active expansion. This aimed, ab initio, to establish a widespread system of branches throughout the country in order to make the Standard Bank a national bank for South Africa.
Paterson acquired a beautiful house in Earls Court Square. From now onwards, the Patersons would divide their time between this house London and the Cape Colony.
Meanwhile at the beginning of 1863, Port Elizabeth was getting ready to welcome Paterson back into the fold. Early in January, the Port Elizabeth Corporation met at a dinner in the Town Hall at which Mr. Chabaud proposed a toast coupling the names Paterson and Pearson, describing Paterson as “one who has always been associated with the progress of Port Elizabeth.” During his last few months in London, Paterson was actively engaged in Port Elizabeth affairs, amongst which had been interviewing candidates for the post of Grey School Headmaster, ultimately appointing Mr. H.J. Johnstone.
Perhaps it was the death of his business partner and the urgent necessity of being in Port Elizabeth as soon as possible to attend to his affairs, as well as his desire to be in Port Elizabeth in time for the formal opening of the Head Office of the Standard Bank of British South Africa, that hastened his wedding plans.
The following notice was inserted in the London Times, “On January 21st 1863 at Trinity Church, Paddington, by the Rev. Charles Kemble, Rector of Bath, John Paterson, Esq., of Port Elizabeth, Cape of Good Hope, to Marizza, eldest daughter of the late William Bowie and of Mrs. Bowie.”
Probably on the day after the wedding, the couple left for South Africa, spending their honeymoon on the Briton, which arrived in Cape Town on the 17th March 1863. The Patersons continued eastwards to Algoa Bay aboard the Norman, arriving on the 21st March. On arrival, the Patersons went to live in ‘Francis Place’.
Interest in Finance
From the very beginning of his career, Paterson appears to have been deeply interested in Finance and Banking. He frequently made reference to the subject and an early article of his compares the different systems of banking prevalent in the 1840s in England and Scotland. In these articles, he sought to analyse the respective merits of these systems especially during hard periods of commercial pressure and economic chaos.
On the 26th January 1846, Paterson wrote in the Eastern Province Herald, apropos the founding of the town’s first Bank, the Port Elizabeth Bank, “Another evidence of the prosperity of Port Elizabeth will be seen in the announcement contained in our advertising column of the formation of a Joint Stock Bank of Issue and Deposit with a capital of £40,000. We cannot but congratulate the inhabitants on this event as an indication of the opening of a new era in the town. It will afford great facilities to the transaction of business, and greatly increase the happiness of the place. We are therefore glad to find that the community have entered warmly into the project and that 1140 out of 1600 shares of £25 each have already been taken.”
Due to the unexpected default in payment of many share instalments and turmoil prevailing during the War of the Axe (the 7th Frontier War of 1846-7), the opening for business was delayed until January 1847. It appears that The Port Elizabeth Bank operated from the old Commercial Hall and Court House Building on the site now occupied by the Main Library.
When was the Standard Bank project conceived?
In her book, One Titan at a Time, Pamela Ffolliott raises the prospect that Paterson had envisaged the creation of Standard Bank as far back as 1847. She bases this supposition on a cryptic notice appearing in the Herald dated 22nd March 1859 in which it claims that “A third banking establishment in Port Elizabeth has become an indispensable necessity. We are informed that a meeting will be held this afternoon at the offices of Mr. Wormald for the purposes of revising the Standard Bank project of 1847 (sic). There can be no doubt that a very large and profitable field is open to a third bank and we believe the trading interests are prepared to give it support.”
Another possible interpretation of this comment written in 1859 was that the date 1847 was merely a misprint for 1857 for it was during this year that a Prospectus was circulated in the Colony for the establishment of the “Standard Bank of Port Elizabeth” with a proposed capital of £250,000, with John Paterson and other Port Elizabeth merchants making up the members of the Provisional Committee. In spite of a good response for shares, however, the design was not carried through, possibly on account of the mutiny of the Sepoy troops in India. Moreover the economic situation in the Colony was still critical after the Namaqualand Copper Boom subsided.
On the other hand, perhaps the muted response of investors to the proposed establishment of the Standard Bank could also have signalled that the existing two banks were capable of supplying the town’s monetary needs and, in those uncertain times, were not prepared to take any more risks. The second bank mentioned, was the Commercial Bank of Port Elizabeth. This bank had been created in 1853 with a capital of £100,000 and operated from premises at the corner of Donkin and Main Street. By 1857 both the Commercial and Port Elizabeth Banks were doing excellent business. At this stage, Paterson was a comparatively large shareholder in both banks. Paterson was later instrumental in persuading both institutions to merge with larger concerns. The Commercial Bank of Port Elizabeth was absorbed by the Standard Bank in 1863 whereas the Port Elizabeth Bank was taken over by the Oriental Bank in 1873.
Launching of Standard Bank
The Standard Bank, launched in October 1862, was not the only company founded by Paterson during his stay in England as he also founded the South African Irrigation and Investment Company and well as the Eastern Province Railway Co shortly afterwards. The Standard Bank would open its doors in Port Elizabeth with capital of £1 million, a clerk, a cashier and a manager. Towards the end of December 1862 the E.P. Herald noted that “Perhaps the most important item brought by the last mail steamer from England is that which has reference to the formation of the Standard Bank. An institution of this kind is calculated to have the most important bearing on the trade of this Colony; and in a variety of collateral ways the advantage accruing to the Eastern Province, by the successful management of such an establishment are greater and more numerous than at first perceived. The Colony will thus become better known than it has been, and its trade and capabilities better understood. We shall in fact, be brought into closer and direct contact with monied men of the old world, who will soon find that the South African Colonies offer a fine field for legitimate trading, and especially for the profitable employment of surplus capital, coupled with undoubted security.”
The London and South African Bank, fostered by a band of colonial merchants, had forestalled Paterson by commencing business in Cape Town and Port Elizabeth towards the end of 1861. Notwithstanding and earlier entrance into the market, it was never to be a serious threat to Standard Bank and was ultimately absorbed by the Standard Bank in 1879.
In January 1863, the Standard Bank, through its agents, Messrs. A. Croll and Co, commenced business at the corner of Donkin and Main Streets. The initial operations were limited to the discounting of bills for the mercantile community, paid for by means of drafts drawn on England. Through his intuitive astuteness, Paterson had managed to start the Bank at a cost of £2,200, way below the usual cost between £8,000 and £12,000. Preliminary expenses and promotion fees had been dispensed with as Paterson had personally bargained with the brokers, solicitors, printers and secretaries. In this regard, his Scottish meanness had ensured that these costs were kept to a bare minimum.
On the 21st March 1863, Paterson arrived in Port Elizabeth aboard the Norman. Pride must have welled up in his newly-married bride, Marizza Bowie, as the couple were greeted with adulation and acclaim.
With feverish haste, Paterson approached other banks with offers that they either could not refuse or understand. The first bank to be devoured in this quest, was The Commercial Bank of Port Elizabeth. Furthermore the Standard Bank advertised that it was prepared to receive offers from other local banks to amalgamate with it. Within a short time period, they were engaged in negotiations with the Colesberg Bank, the British Kaffrarian Bank and the Fauresmith Bank, all of which were amalgamated into the Standard Bank fold.
One of the first overtures made regarding amalgamation was by Alexander Croll to the Commercial Bank of Port Elizabeth prior to Paterson’s arrival. From his temporary premises in the Guardian Building, Paterson contemplated the placement of branches in various parts of the Colony. To this end, Paterson arranged that a notice be placed in the E.P. Herald notifying Banks that applications from any banks would be given due consideration for purchase up to the middle of May 1863. Owing to the zeal with which Paterson drove his expansion agenda, by the end of July, the Standard Bank already comprised five Branches and two Agencies and its Capital had increased to £2 million.
Paterson bows out
Paterson continued to be associated with the Standard Bank until 1865 when, owing to adverse criticism for painting too sanguine a view of business prospects stemming from commercial crises, repercussions of the American Civil War and the consequent inflation. Sensing that the writing was on the wall regarding his future at the Bank, Paterson resigned as Chairman. The rift with Standard Bank was amplified when, at the end of the year, Standard Bank refused to provide his firm with extended facilities. As a consequence, Paterson and his partner, Vardy, were forced into liquidation.
Location, location, location
The site on which the Standard Bank is located in Main Street once belonged to Captain Francis Evatt, to whom it was granted as a token of appreciation in assisting the disembarkation of the Settlers in 1820. This grant of land comprised not only the land on which the Standard Bank was ultimately constructed but also the land in which the Guardian Assurance and Trust Co, the new Phoenix Hotel and St. Mary’s Terrace were located. On the sale of the Bank site, Evatt received approximately RDs 4,000. By 1858, this portion of land was owned by Paterson. It was on this land that two two-storied buildings were erected.
The Standard Bank took over these properties from Paterson, but it cannot be ascertained whether the Bank operated from those premises or continued in the Guardian Building until such time as the new bank building had been constructed. Until its demolition, it was the oldest banking hall in South Africa still being used as such.
The first part of it, as an entity, was erected in 1874 but this proved to be inadequate for the Bank’s increasing business. As it also had to accommodate the Bank’s General Management, it was compelled to duplicate the building four years later. During this process, it was uncovered that the original had been constructed at a slight angle to the street. This mistake had to be duplicated in the second building but in the opposite direction with the result that the façade formed an unmistakeable convex shape plainly visible to the naked eye.
Port Elizabeth: A Social Chronicle to the end of 1945 by Margaret Harradine (c1996, published by E H Walton Packaging (Pty) Ltd for the Historical Society of Port Elizabeth, Port Elizabeth) One Titan at a Time by Pamela FFolliott & E.L.H. Croft (1960, Howard Timmins, Cape Town) Port Elizabeth: From a Border Garrison Town to a Modern and Industrial City edited by Ramon Lewis Leigh (1966, Felstar Publishers, Johannesburg)