T T Mboweni: South Africa - a land of hope and opportunity
Remarks by Mr T T Mboweni, Governor of the South African Reserve Bank, at an ANC breakfast
meeting, Johannesburg, 22 June 2005.
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Ladies and gentlemen
Distinguished guests
Thank you for inviting me here this morning to say a word or two about the South African economy.
When I received this invitation to be here this morning, a number of questions arose in my mind. The
primary one being whether a governor of a central bank should speak at occasions such as this which
are organised by political organisations. It was a vexing question which required of me a serious
answer.
Central bank governors have to demonstrate at all times their commitment to the independence of
central banks from political influence. In fact central bank independence also means rebutting any
attempt by anyone including market participants to influence their decisions or interfere in their
operational work. At the same time, central bank governors have to engage in extensive
communications with the markets, the general population, governments and parliaments. So any
opportunity to communicate should be seriously considered and if time permits, should be entertained
whether from a political party, market participants or any other organisation which is reputable. So any
political organisations wishing to invite me to their functions are welcome to do so. We just have to
negotiate time.
It is against this background that I accepted your invitation to be here this morning.
South Africa is still very much a country in transition. It is a country of many hopes and opportunities.
Firstly, the political system is maturing. Most certainly, the political system is entrenching democratic
values and systems. People stand for elections within their parties - sometimes squabbling very badly
privately and in the media in their endeavours to be elected, they avail themselves as candidates for
local council chambers, provincial legislatures and the national parliament. Debate is generally
developing in its robustness. More often than not acrimoniously so. Not a place for the weak!
Secondly the media - the fourth estate - is lively and maturing too. Public officials and private
executives are closely scrutinised to check on their performances and good corporate governance
standing in order to move the country forward. The media questions and exposes. Sometimes their
approach is certainly questionable but on the whole they are making a good contribution to our
society. There is room for improvement particularly in financial journalism - a matter being attended to
by some journalism schools. But an open and democratic society by definition requires a vigorous,
investigative and independent media.
Thirdly, the judiciary, despite its many weaknesses given where we come from, is independent and is
making its contribution towards the respect for the law by all of us. Issues are being attended to as far
as the transformation of the judiciary both in terms of form and content is concerned. Progress in this
regard is promising as the government and the judiciary are hard at work to achieve this historically
fundamental objective. The respect for the judiciary really demands that the authorities must not keep
their eyes off the transformation ball. But whatever the outcomes of this process, the end result must
be to protect and enhance the independence and respect for the judiciary.
Fourthly, we have in South Africa policies and laws that respect, protect and understand the
fundamental role of private property rights in the economic development of our society. Those who a
couple of years ago doubted the positive role of private property in society and its role in the economy
are slowly coming to the conclusion that people's rights in private property are prerequisites for
promoting investment and certainty that one's investment today can be protected by law, with the
courts available to enforce it and thus confident to grow businesses whether industrial or agricultural.
There are still many countries on our continent which should still need to improve private property
rights in order to give surety and confidence to investors.
Fifthly, there is in this land of hope and opportunity a vibrant culture and entertainment industry which
is vital in any society. Music, dance, theatre, museums and other places to visit and enjoy. We are
even beginning to see the entry by black dancers into the ballet schools and companies. Even I,
coming all the way from rural Limpopo, now appreciate La Traviata! So it is not just about soccer and
rugby.
Sixthly, this is a normalising society where challenging issues are looked straight in the eye, in
particular race, gender and the development of a black business class.
Finally, the population expects and demands to be heard at every turn. Expectations are justifiably
high for housing, clean water, good public schools, good health services, good roads and streets,
including traffic lights that work, safety and security, employment opportunities, the fairness of the
justice system and the rest. There is demand for delivery everywhere. The public authorities and
private companies are kept in check all the time. Our society is moving ahead indeed. Of course with
demands for socio-economic needs also come responsibility to care and look after that which has
been "delivered".
How are we doing then as far as the economy is concerned? How has globalisation affected the South
African economy and society?
As we know, the South African economy was primarily dependent on gold and diamond mining
together with agriculture for many years. Many African people were driven from the land where they
lived as peasants and pastoralists to the mines, emerging factories, agriculture and domestic service
through the combination of political repression, land dispossession and yes, taxation. In the 1960s, the
South African economy increasingly became industrialised and services oriented. Of course the
scourge of the colour bar in our society and the workplace was used as a major instrument to racialise
everything. Agriculture and mining together contributed about 20.4% to Gross Domestic Product
(GDP). In the 1990s this declined to 11.3%. Today mining contributes about 7.8% and agriculture
3.6%. This is a major change in the structural make up of the economy.
The secondary sector contributed about 27.8% to GDP in the 1960s. Although this has declined
somewhat to 24% currently, this is nevertheless testimony that our economy remains highly
industrialised. Another major change in our economy occurred in the services sector. In the 1960s, this
sector contributed about 51.8% to GDP and today it accounts for 64%. Again this is a major structural
change in our economy. Clearly, mining and agriculture have been the major "losers" in these
developments. But let us not make the mistake of abandoning these sectors for we still have two-thirds
of our gold in the ground and there are still many viable mineral deposits in this country and we still
have to feed ourselves from agricultural activities. Oh by the way: food does not come from Pick 'n
Pay but from agriculture! Sometimes people forget this.
The structural change from mining, agriculture and some extent manufacturing to an economy heavily
dominated by the services sector has major implications for the jobs market. It means that the skills
required for the services sector are much higher than was the case previously. Many people have
made the observation that the consequences of the Bantu education system are being more severely
felt now than at any time in the past. There is no doubt that one of the most critical areas of focus in
South Africa at the moment and for the foreseeable future is education and broadly human resources
development. This has to be strategic in nature. We have to focus and provide resources for training
people in those areas of extreme need side by side with general education. We need engineers,
accountants, pilots, of course lawyers, actuaries, doctors, nurses, scientists and other specialised
technical skills for a an increasingly services sector driven economy. And how can I forget economists!
Mathematics education is fundamental to this.
Alongside these structural changes in our economy has been the process of global integration of the
South African economy. Whilst in the 1960s we were mainly an extractive economy, by the 1990s the
South African economy was fairly integrating broadly into the world economy. With sanctions out of the
way, imports and exports of goods and services amounted to about 44% of the economy. Currently
this has increased to 55.6%. The manufacturing sector, despite its challenges from time to time saw its
exports rise to 29.6% in the 1990s to about 37.9% in the period 2000-2004.
One of the most notable features about the globalisation of the South African economy is to be found
in the banking sector. South African banks as a percentage of GDP averaged 77% during the period
1965-1994. In 2004, this share of GDP by South African banks was 109%. The equity market
averaged R2 billion in the period 1970 to 1985., R21 billion per year for the period 1986-1993, the
annual turnover in the equity market was R62 billion in 1994 and in 2004, the annual turnover was
about a R1 trillion. Market capitalisation on the JSE increased from an annual average of R40 billion
for the period 1970-1980 to R2 trillion in 2004.
Further more compelling evidence of globalisation is to be found in the performance of the bond
market. Between 1970 and 1985, turnover in this market was about R8 billion, in 1995 this had
increased to R2.3 trillion and in the year 2004 turnover was R8.4 trillion.
Finally the foreign exchange market which interests so many people has also seen some remarkable
evidence of globalisation. To cut a long story short, in 1987 the average daily turnover in this market
was 1.1 billion US dollars and during the course of 2005 the average daily turnover in this market in
some 12 billion US dollars. So there is a lot of activity going on there.
The only conclusion I can come to is that we are coping well with globalisation. We have seen some
benefits but yes there has also been some costs such as the impact of globalisation on the gold
mining sector.
Let me conclude by saying that there has been a remarkable achievement in the two areas that I
closely focus on as part of my job. This is inflation and budget management in South Africa. Inflation
has so far been contained within the inflation target. The government's budget management is an
example to many countries throughout the world recording budget deficits before borrowing of less
than three percent of GDP consistently. Progress has indeed been made.
The hope and opportunities that characterise South Africa make me happy to be a South African at
this historic juncture in the development of humankind.
President Mandela remarked somewhere that 'the sun will never set on such a glorious human
achievement' I agree with that.
I thank you.