revised the outlook on the rating to negative, a move that was not generally expected by the market. in addition, the changes in the ministry of finance shortly after the ratings action, drew an adverse reaction from the markets and contributed to further significant depreciation. since the low of the rand to the dollar at r16. 87 on 18 january 2016, the rand has recovered considerably. by the close of business yesterday, the rand was trading at r14. 21, an appreciation of 15. 8 per cent against the dollar from the 18 january low. this strong appreciation in the rand was predominantly driven by global factors as the jp morgan emerging market currency index had rallied 9. 8 per cent over the same period. this rally was triggered by a more benign view in the market on the likely trajectory of interest rate bis central bankers ’ speeches increases in the us, unexpected policy stimulus in europe and japan, and improving economic data out of china. portfolio flows to emerging markets, which had been negative in the second half of 2015 and early 2016, reversed into significant inflows in february and march. according to institute of international finance ( iif ) data, portfolio flows into emerging markets totalled usd36, 8 billion in march compared to the outflow of usd53, 7 billion for the second half of 2015. in south africa, portfolio inflow totalled usd1, 6 billion in march compared to outflows of usd2, 2 billion for the second half of 2015. however, local factors also played a role. the budget delivered in february showed strong commitment to fiscal prudence, and the 75 basis points of interest rate increases by the monetary policy committee in 2016 seemed to assure the market of the bank ’ s commitment to maintain price stability. the recent strengthening of the rand is welcomed, following the sharp sell - off late last year. however, as the rand remains vulnerable to negative external and domestic factors, we will need to continue to monitor economic and financial developments in china as a key driver for commodity prices and emerging market currencies. ongoing concerns about a shallow and hesitant global economic recovery ( as again highlighted last week with the release of the imf ’ s world economic outlook ) will also be a key factor. also, the expected trajectory of the policy rate in the united states will be important, with there still being a significant discrepancy between expectations of policy makers when compared to those of market participants, and uncertainties arising from how the fed will factor in what seems

with determination. in a recent study of the south african economy, economists from goldman sachs of new york concluded as follows : “ the gnu ( government of national unity ) successfully led the country through the first phase of the transition ( 1994 - 98 ) from the apartheid era. the gnu completed a program of structural reforms, including progressive current and capital account liberalization, committed to respect the independence of the sarb ( south african reserve bank ), and announced a development strategy emphasizing gradual fiscal consolidation. however, a second round of structural reforms to address structural rigidities on the supply - side of the economy are required if real gdp growth and employment are to be boosted in a significant and sustainable way. these reforms include liberalization of labor markets, completion of the trade reforms, completion of capital account liberalization, and further public sector reform - - including an aggressive privatization program ”. 3. longer - term developments in the south african economy turning to the longer - term developments in the south african economy, it is interesting to note that some remarkable improvements did take place in parts of the economy over the past five years. an analysis of a few selected key economic indicators of developments over the past ten years ( see table 1 attached to this document ) reveals the following : • the rate of growth in real economic activity as reflected in changes in gross domestic product increased from a yearly average of 0 per cent in the first period ( 1989 to 1993 ) to 2 per cent in the second period ( 1994 to 1998 ). similarly, the rate of growth in real gross domestic expenditure changed from minus ½ per cent to positive growth of 3 per cent per annum. greater confidence was also reflected in a substantial improvement in gross domestic fixed investment, which declined by 2½ per cent per year from 1989 to 1993, but then increased by 7 per cent per year from 1994 to 1998. one of the emerging weaknesses in the economy is reflected in the decline over these two periods in gross domestic saving as a percentage of gross domestic product, from an annual average of 19 per cent in the first, to 16 per cent in the second period. • where the economy failed most was in the creation of jobs. total employment indeed declined by an average annual rate of 2 per cent from 1994 to 1998, which was even worse than the average decline of 1. 3 per cent in the preceding period of five years. despite the further increase in unemployment, the annual rate of increase in average real wages and salaries more than doubled, from 1. 7 per cent