market, the ratio of government ’ s interest payments to gross domestic product rose steeply and government dissaving increased to unacceptably high levels. the post - apartheid south african government therefore placed considerable emphasis on restoring fiscal consolidation and stability. the economic strategy at first was to create stable macroeconomic conditions as a necessary precondition for economic growth and employment creation. the basic logic of the approach followed was that by improving fiscal sustainability, poverty reduction and income redistribution would become attainable objectives over the medium term. the expenditure restraint applied by the national and provincial governments reduced the fiscal deficit before borrowing and debt repayment to 1, 5 per cent of gross domestic product in fiscal 2001 / 02. this by any measure represented a major milestone by a government which was suspected of being macroeconomic populist. this successful fiscal consolidation allowed the government to adopt a more expansionary fiscal policy stance from fiscal 2001 / 02. more emphasis is now placed on infrastructural development and social upliftment. the government, however, continues to apply fiscal prudence and despite a decline in the growth of tax revenue, was able to contain the main budget deficit to an estimated 2, 4 per cent of gross domestic product in fiscal 2003 / 04. an important aspect of the budget reform was the adoption of the medium - term expenditure framework in the fiscal year 1998 / 99 and the public finance management act of 1999. the medium - term expenditure framework consists of three - year rolling expenditure and revenue projections for the national and the provincial governments. this creates greater certainty and transparency to the budgetary process. the public finance management act has enhanced the accountability of public sector managers by emphasising disciplines such as regular financial reporting, sound internal expenditure controls, improved accounting standards, performance monitoring and independent audit and supervision systems. the government has reduced its net loan debt from a peak of 48, 1 per cent of gross domestic product in fiscal 1996 / 97 to 36, 8 per cent in 2003 / 04. this not only contributed to lower interest payments on total public debt, but also to generally lower long - term yields in the south african capital market. the prudent measures applied by government have brought about a decline in government net dissaving from the high level of 7, 3 per cent of gross domestic product in 1992 to 1, 1 per cent in 2003. this is absolutely superb and provides an excellent support pillar for lower inflation. fourthly, monetary policy has also seen many changes. the objectives of monetary policy

and june 2008 ) sharply worsened the financial conditions of south african households and corporates that had increased their levels of indebtedness in the period prior to 2007. the various positive factors of the 2003 to 2007 period had resulted in a sharp rise in indebtedness which could not be sustained as growth and income in the economy slowed and inflation increased. indebtedness of south african households had increased from 54. 5 percent of disposable income in 2003 to 82. 3 per cent by 2008. the slowly unfolding financial crisis in the united states and the eventual shock of the lehman bankruptcy in october 2008 hit an already weakening economy. as credit was bis central bankers ’ speeches restricted globally and trade volumes collapsed around the world, the value of real exports of goods and services from south africa fell by 19. 5 percent in 2009. for many economies, including south africa, the decline in trade triggered the actual recession as it led to sharp contractions in output and labour retrenchment. south africa ’ s quarter on quarter annualised growth in gross domestic product contracted by 1. 7 per cent in the fourth quarter of 2008, falling to – 6. 3 and – 2. 8 per cent in the first and second quarters of 2009 respectively. the economy ’ s real gdp growth rate was – 1. 5 per cent in 2009 and 2. 9 per cent in 2010. stronger commodity prices in the boom period had pernicious effects as the crisis unfolded. exogenous shocks from food and oil prices combined with domestic inter - sectoral dynamics pushed nominal wage settlements to very high growth rates given the slowing economy. unit labour costs increased sharply as a result. the labour market outcomes in south africa were severe. while about 1. 6 million net jobs were created in the period 2003 to 2007, from 2008 to 2010 roughly 800 000 net jobs were lost. job losses were heaviest in construction, retail, and financial services, which were the major job gainers in the boom period. a key distinction between south africa and most other countries ’ experiences in the crisis has been the extent of job destruction, particularly considering the relatively shallow recession we experienced. stronger economic performance in 2010 gave way to much more volatile real economy outcomes in 2011. some of this had to do with adverse international economic events, including the tsunami in japan and sharply elevated oil prices due to the conflict in libya and political uncertainty as the arab spring unfolded. but a large portion of the domestic output volatility was related to domestic