should constantly think of ourselves as citizens of the global village. the strength of the united states economy and trends in financial markets in new york, london, tokyo and elsewhere will be significant factors in influencing whether or not south africa realises its economic potential. but we must not underestimate our own responsibility as south africans to develop our own potential and to run our economy responsibly and efficiently. as citizens of the global village, we must continue to participate actively in the debate on improving the international financial architecture in the hope that a way can be found to minimise the intensity of financial shocks to emerging and developed markets alike. after a long, stimulating and challenging year which i have spent navigating the transition from cabinet minister to central banker and getting to know my colleagues in south africa and other parts of the world, i am looking forward to starting officially next week with enthusiasm and confidence, inspired in no small part by many of you present here tonight. we are fortunate that the south african reserve bank is staffed by well qualified, committed and loyal people. to the president, the members of the board of directors of the bank, my colleagues the deputy governors, management and staff, and esteemed guests : sweswi hi ngene eka nkari wa mahlambandlopfu ( we are now entering the time of the day when the elephants go washing ; that is, the crack of dawn ).

it is particularly encouraging that share prices performed so well despite the resilience of the exchange rate. this is true even for sectors that have historically been very sensitive to exchange rate fluctuations. part of this buoyancy is, of course, attributable to high commodity prices. however, in the bank, we like to see this also as a sign that, in general, companies have adapted to a relatively robust exchange rate. as for developments in the south african foreign exchange markets, the exchange rate of the rand remains resilient and liquidity remains high relative to other emerging markets, despite the retracement in recent days. we have seen the average net daily turnover ( in respect of transactions involving the rand ) increase from around usd8bn in 2004 to just below usd10bn in 2005. in addition, the volatility of the zar exchange rate has also subsided. from the most recent peak of around 30 per cent and 25 per cent in january 2004, the one - month historical volatility and one - month implied volatility were at a level around 10 and 12 per cent, respectively, in march 2006. it is this positive environment that has attracted substantial investment flows into south africa, allowing the central bank to build up the official gross foreign exchange reserves from usd8, 0 billion in january 2004 to slightly more than usd23 billion in april 2006. it is partly owing to this increase in the reserves in recent times that the country was awarded credit ratings upgrades by all three rating agencies in 2005, to bbb + with a stable outlook. this has also contributed to a decline in sovereign risk spreads. a more stable currency is critical to an attractive investment environment. exchange rate volatility has in the past made the rand vulnerable to speculation and discouraged direct investments. the recent build up in reserves, together with some structural impediments that have now been dealt with ( e. g. the net open foreign currency position ), should over time add to the stability we have already seen and reduce uncertainty for both domestic as well as non - resident long - term investors. the sell - off in emerging - market assets and currencies during the first part of may 2006, and the effect that it had on financial markets and exchange rates, including our own, has once again reminded us of the vulnerability of emerging - market economies to a sudden and sharp change in sentiment by nonresident investors. in the case of south africa, the effects could be