needs of economic reconstruction and development. great value is also attached to the enhancement of economic co - operation in the southern african region. the southern african development community ( sadc ) now includes 12 countries with a total population of more than 130 million people, and with a great potential for economic development. plans are gradually being implemented for economic co - operation to include the harmonisation of policies on financial services, trade development, education and training, fisheries and agriculture, water resource and energy development and other areas of economic activity. these are some of the challenging economic opportunities presented by the new south africa. there are, however also constraints that must be removed and concerns that must be addressed to enable south africa to develop its economy to its full potential. 4. concerns in the south african economy economic developments over the past three years were encouraging and provided sufficient evidence to prove that, given a supportive environment, there is still enough vitality left in the economy after years of depression, mainly by non - economic factors. the movement through the upward phase of the business cycle, however, also exposed a number of inherent weaknesses in the economic structure. these include : * the insufficient level of saving in the domestic economy which last year was equal to only 16 per cent of gross domestic product. this makes south africa very dependent on foreign investment capital in support of a durable expansion of the existing production capacity ; * a high marginal propensity to import, particularly when substantial new investments in the manufacturing sector are made. the low level of the country ’ s official foreign exchange reserves makes the country vulnerable to current account deficits in an environment of volatile international capital movements ; * inflexible conditions in the labour market. despite unemployment of about 30 percent of the labour force, workers continue to demand wage increases in excess of the rate of inflation and of productivity gains ; * a lack of competitiveness which is exacerbated by inflation in excess of the average rate of inflation in the country ’ s major trading partners and international competitors. these deficiencies require incisive structural adjustments which will not be possible without some painful reforms, as provided for in the government ’ s gear programme. in the short - term, it is extremely difficult to find a workable compromise between the legitimate demands of the people for better living conditions, and the need for j - curve structural adjustments that will first inflict more pain before benefiting the total economy. in addition to these deficiencies in the macro - economic structure, a few noneconomic concerns

raise the growth potential of the economy gradually to about 6 per cent by the year 2000. the gear programme is now again criticised from some quarters as being too restrictive, and is even regarded by some critics as an abortion of the rdp. to be realistic, however, it will not be possible to provide in the demands of the rdp without also implementing the programme of gear. great progress has also been made in re - integrating south africa in both the political and economic global environment. on the political side, south africa is now again a full member of the united nations, has been readmitted as a member of the british commonwealth and joined the organisation of african unity and the united nations economic commission for africa. on the economic front, south africa is fully engaged as a respected member in the activities of the world bank and the international monetary fund, has joined the african development bank, and has entered into a number of bilateral and regional economic co - operation agreements. the south african financial markets are being opened up for foreign competition ; the tariff structure on imports is under major revision ; the government, parastatals and private sector corporations have become major borrowers in the international capital markets, and a market in eurorand bonds developed outside of south africa where total borrowings in excess of the equivalent of us $ 4. 1 billion are now outstanding. on the negative side, south africa has made little progress in addressing the urgent unemployment problem. in fact, over the past seven years, total employment in the formal non - agricultural sectors of the economy declined by 421, 395 workers. what growth there was in the economy, was brought about by new technology, capital investments and productivity increases, and not by any additional employment. the best estimates available indicate that at this stage, about 30 per cent of the economic active population of the country is unemployed. closely linked to the unemployment problem is the rising rate of crime and violence in the country. the need for urgently addressing this problem is now recognised by government as the major challenge for securing almost all the social, economic and political objectives of the new south africa in the longer term. recent steps taken by government in this regard include the provision for the additional employment of 5, 250 policemen, and the appointment of a prominent south african business leader, mr meyer kahn, as administrative head of the police force. 2. major economic developments over the past three years as already indicated, the south african economy was in an upward phase of the business cycle for the past three years