The globalisation process The liberalisation of the South African financial sector and concurrent developments in the structure and volumes in the capital, money and foreign exchange markets, supported the absorption of the South African markets in the process of globalisation. Last week, Mr Andrew Crockett, General Manager and Chief Executive Officer of the Bank for International Settlements in Basle, delivered the annual Gerhard de Kock Memorial Lecture in Pretoria. I take it to mean a process in which geographic and market barriers are being rapidly eroded. Economic agents are now able to make financial transactions with little hindrance in all major markets of the world. Not only this, they can switch with increasing ease between different types of intermediation, each of which is in increasingly close competition with the others.
Globalisation holds many advantages for a country such as South Africa.
It gives developing countries or emerging markets easier access to the surplus saving of the more mature industrial countries of the world. The advantages in globalisation for South Africa are clearly illustrated by the figures on gross cross-border capital flows over the past five years quoted above. The volatility in these capital flows, however, can also cause many macroeconomic problems for participating countries, particularly in the short-term, when international investment sentiments may change very quickly and often unpredictably. Last year, South Africa felt the full impact of adverse developments in the global financial markets when large amounts of portfolio funds previously invested in the country were suddenly withdrawn. To illustrate the severeness of this problem, the flows of non-resident portfolio investments into and out of the South African Bond Exchange last year can be quoted.