t t mboweni : reflections on some economic and social developments in south africa in the past 15 years address by mr t t mboweni, governor of the south african reserve bank, at the 10th annual steve biko memorial lecture, university of cape town, cape town, 10 september 2009. * * * introduction i wish to express my gratitude to the steve biko foundation, the biko family and the university cape town for extending this invitation to deliver the 10th annual steve biko memorial lecture. i am particularly humbled to belong to the club of those who have previously addressed this august gathering. september 2009 marks the 32nd anniversary of the murder in detention of bantu stephen biko. it is, therefore, a fitting tribute to steve biko to hold this event in september, south africa ’ s heritage month. this is particularly so because the threat of forgetting who we are, where we come from and how we got to be where we are looms ever larger, particularly for the younger generations. i never met steve biko personally, having been a teenager in limpopo by the time he departed this world. his teachings, though, had a profound influence on me. that was the period historians referred to as a period of political lull. my ultimate involvement in politics stemmed, in part, from some of those efforts of the black consciousness movement to “ conscientise ” the masses and revive political activism. indeed, as archbishop desmond tutu writes in his preface to steve biko ’ s i write what i like : “ black consciousness sought to awaken in us the sense of our infinitive value and worth in the sight of god because we were all created in god ’ s image, so that our worth is intrinsic to who we are and not dependent on biological irrelevancies such as ethnicity, skin colour or race. black consciousness helped to exorcise the horrible demons of self - hatred and selfcontempt that made blacks suck up to whites whilst treating fellow blacks as the scum they thought themselves to be. black consciousness aroused in us the knowledge of our share in what st paul called the glorious liberty of the children of god, urging us to enter into that splendid heritage. ” 1 inflation to break a bit with tradition, the thrust of my address tonight will be on economic issues. in particular, i will share a few observations and thoughts on selected macroeconomic developments in south africa in the past 15 years. from 9 november 2009 i will no

longer be allowed to comment on monetary policy. as the outgoing governor, however, i will take advantage of this platform to remind you of a few truths, one being that no central bank worth its salt can ever tolerate high inflation. price stability may not be a sufficient condition but i maintain that it is a necessary condition for a solid foundation for sustainable growth and prosperity. i would like to believe that steve biko would have been gratified by the fairly contained pace of inflation over the past 15 years, knowing the dire consequences of inflation for the poor – those who are usually least able to hedge against inflation – in particular. since 1994 average headline inflation has amounted to approximately 6, 5 per cent per annum. over the steve biko, i write what i like, a selected of his writings. preceding 15 years, 1979 to 1994, it had averaged almost 14 per cent per annum. inflation has been uneven over the period, though, induced typically by significant changes in key exogenous drivers of inflation, such as oil prices. secondly, the recent upsurge in strike action has led to some commentators describing the wave as a “ winter of discontent ”. in this regard, i would like to comment on some worrying trends in the settlements reached. wage settlements above the projected rate of inflation and in excess of productivity gains tend to undermine the fight against high inflation. they lead to labour cost increases way above those of trade competitors and, therefore, loss of competitiveness. though i will discuss the labour market in much depth later, i need to refer briefly to our labour laws. many commentators have described the labour market as rigid and inflexible. as the country ’ s first post - 1994 minister of labour, some of the blame has been pointed in my direction. i am the first to admit that some things could have been done differently. hindsight, however, is useful only when it improves our foresight. i would like to take this opportunity to espouse some of the theoretical and philosophical underpinnings behind the labour relations act. the labour movement regarded me as a hero then. social ills the break with tradition, however, cannot be complete when addressing such an established forum. i will, therefore, digress slightly and venture an opinion on a few matters not related to economics and central banking. the shameful xenophobic tendencies we witnessed last year should have caused all south africans to exclaim : “ oh, beloved country, what would steve biko have