in mind relates to the big changes in the exchange rate of the rand, i. e. the relative price of producing goods and services locally rather than elsewhere. a domestic wine exporter selling a bottle of wine for us $ 5 would have pocketed r37 five years ago ; today they would realise r69. the entrepreneurial response – expanding exports and substituting imports – is probably initially muted due to what the academic literature attributes to lags in both consumers ’ and producers ’ responses and imperfect competition. given the state of the world economy, the probability of a strong recovery in the international prices of south african export commodities in the near term seems low, which should assist the real exchange rate of the rand to remain relatively competitive. in addition, entrepreneurs can use hedging strategies to lock in the advantages of a certain set of relative prices for lengthy periods ; for example, in south africa there is an active market for forward cover in foreign exchange, with outright forward transactions against the rand fluctuating at around us $ 1, 7 billion and swap transactions at around us $ 13 billion per day. i am therefore confident that the adjustment towards external balance will gain further momentum and it is supported by the fact that export volumes have risen more briskly than the pace of global growth in the first half of 2015. to incubate entrepreneurship, south africa needs bold improvements in the education and school system. interestingly enough, south africa ’ s total public expenditure on education as a percentage of gdp, at 7, 0 per cent, puts the country in the third - highest position among the 61 countries ranked, with only denmark and iceland above it. however, the amount spent per capita gives a dramatically different result, pushing south africa down to the 42nd position on the imd ranking. education outcomes in south africa do however show room for further improvements in support of enhancing the small business sector as well as in the interest of long - term economic growth and developments. the role of the south african reserve bank ( the “ bank ” ) the bank is responsible for monetary policy in south africa. it has been given the task of protecting the purchasing power of our money in the interest of balanced and sustainable economic growth and development. apart from ensuring price stability, it also plays a key role in maintaining an environment of financial stability. since 2000 the task of protecting the purchasing power of our money has been given clearer definition, with government adopting an inflation - targeting framework. the target has been set at 3 to 6 per

cent, and the bank has instrument independence to do what is necessary with its repurchase rate to ensure that inflation remains inside the target band. in doing so, the bank is mindful of the lag between changes in the repurchase rate and inflation, and of the need to avoid unnecessary volatility in output. bis central bankers ’ speeches since 2002, when the inflation target became effective, the targeted rate of consumer price inflation has averaged 6, 1 per cent to date. in the preceding two decades, consumer price inflation averaged 12, 3 per cent. furthermore, the more gradualist approach facilitated by the adoption of flexible inflation targeting can be inferred from the range within which the banks ’ prime lending rate fluctuated over the respective periods. under inflation targeting, the prime rate has ranged between 8, 5 and 17 per cent per annum. in the two decades prior to that, it ranged between 9, 5 and 25, 5 per cent. small businesses often lack the financial reserves and facilities of the large business sector. accordingly, large swings in interest rates and inflation can be far more crippling to the smme sector. it follows that keeping inflation low and stable, and therefore being in a position to prevent sharp swings in interest rates, is the contribution that the bank can make to the financial health of the country and of smmes in particular. this is complemented by the role of the bank in making sure that the financial system is safe and sound, while allowing for the orderly entry and exit of financial institutions. conclusion in conclusion, let me firstly emphasise that the current environment is testing for small businesses. with agricultural output and mineral commodity prices down, the spending power arising from agriculture and mining - based communities and enterprises is under considerable downward pressure. this also triggers various multipliers and accelerators in the economy, working in reverse gear and extending the pain to other sectors, capital expenditure and the like. secondly, every opportunity should be grasped and, as indicated above, the depreciated external value of the rand may be one such opportunity, bringing about more attractive relative prices of exports and import - substituting goods and services. agile businesses that can respond appropriately stand to benefit. thirdly, to grow the number of small businesses in the country the education system has an important role to play by raising the level of skills among the workforce and empowering potential entrepreneurs to realise that potential. finally, the growth and indeed the flourishing of small business is key to our