specific investment project or commercial venture. 3. financial infrastructure – south africa 3. 1 turning now to the domestic environment ; it is the case that the financial sector in south africa is strong and versatile, offering an extended range of products and services. 3. 2 there are currently 18 registered banks, two registered mutual banks and 15 registered branches of international banks in south africa, with combined assets of just below r2 trillion. as has been pointed out elsewhere 1 - this banking sector is highly integrated with the bond and equity markets – eight of the banks acting as primary dealers in the bond market. the four biggest banks are also settlement agents of the bond exchange of south africa, with the south african reserve bank serving also in that capacity. all the banks registered in south africa are closely supervised by the bank supervision department of the south african reserve bank which ensures that they remain well capitalised, have proper corporate governance and risk - management frameworks in place and fulfil all the requirements of the law. 3. 3 both the bond and equity markets are formalised and exchange driven, in the form of the bond exchange of south africa ( besa ) and the jse limited ( jse ). these exchanges have been very successful in fulfilling their function or raising funds and mobilising capital. in 2005, a total net amount of r23, 8 billion was raised through the primary issuance of bonds on besa ( after repayments of redemptions ), and r82, 2 billion of share capital was raised by companies listed on the jse. combined, this equals almost seven per cent of gdp. 3. 4 during 2005, secondary market turnover on the besa was equivalent to approximately 38 times the market capitalisation as at the end of december 2005. moreover, turnover on the jse amounted to r1, 3 trillion, about 35 times the total market capitalisation. both exchanges continue to enjoy the patronage of nonresidents, who account for approximately 20 per cent of the daily turnover on both exchanges. in short, south africa ’ s capital markets are broad, deep, liquid and accessible. 3. 5 it is also the case that south africa has a national payment system which has been recognised as a model for development initiatives in the region and internationally. the system operates in real time, is governed by an act of parliament and is linked to the cls bank settlement system ensuring that international transactions are settled with the same efficiency as are domestic ones. t. mboweni

and high inflation takes hold, this will have a negative impact on the economy. thus, in order to prevent such negative impact, it is important to act ahead of time. as asian emerging economies are the driving force behind global economic growth, attention is being paid to their potential future actions. lastly, european economies are recovering moderately led by exports, driven in particular by germany and other major economies. the rising inflation trend has become more pronounced and the european central bank has suggested a future policy rate rise. in some peripheral european countries that suffered fiscal problems, long - term interest rates have stayed high and uncertainty has remained elevated. c. japan ’ s economy in light of such recovery in the u. s. economy and high growth in asian emerging economies, the effects of inventory adjustments in it - related goods have run their course around the world. private consumption in japan is showing signs of picking up after suffering the reverse following the sharp increase seen previously. although this represents the judgment made prior to the earthquake, japan ’ s economy is getting out of the soft patch, driven in particular by the recovery in exports and production. looking at market developments prior to the earthquake, stock prices remained on an uptrend while the yen was in the range of 80 – 85 yen against the u. s. dollar. this is attributed to the fact that overseas stock prices, especially u. s. stock prices, rose in reflection of monetary easing in the united states, and that corporate profits and their cash flows improved substantially. on the other hand, the improvement seen in components related to domestic demand, such as business fixed investment and private consumption, and in the employment and income situation remained moderate. the pace of improvement in the output gap and price developments was generally moderate. just like in the united states, the channel through which the favorable performance in the corporate sector fed into the household sector seemed to be somewhat weak. the likely underlying mechanism is as follows. even if the economy were to achieve an export - led recovery, a rise in import costs due to the increase in commodity prices would cause the terms of trade to worsen and real income to be undermined. as a result, even if the gdp figure increased, gross domestic income ( gdi ) would not increase that much. for example, during the recovery phase in the 2000s – that is, during 2002 – 2007, before the lehman crisis – the real gdp growth rate was 1. 8 percent on average but the real gdi, excluding trading losses, remained