in 2016 will be the weakest in seven years. south africa, like other commodity - exporting nations, is facing a terms - of - trade shock as a result of the persistent decline in commodity prices since 2011. this has been exacerbated by periods of protracted labour unrest and electricity supply shortages. more recently, the severe drought conditions have begun to weigh on activity in the agricultural sector. at an aggregate level, corporate profit growth in the third quarter of 2015 ( known as the gross operating surplus ) was at its lowest level on record at 0, 3 per cent year - on - year. this was due to declining profitability in agriculture, mining, and manufacturing. pressure on corporate income suggests that investment, consumption, and hiring by the private sector will be muted in 2016. sarb ’ s leading indicator of economic activity has declined on a year - on - year basis for the past 12 months. this supports our view that the risks to the growth outlook are skewed to the downside. meanwhile, the inflation outlook has also deteriorated. after averaging 4, 6 per cent in 2015, inflation is expected to accelerate to 6, 8 per cent in 2016 and 7 per cent in 2017. the elevated inflation trajectory is largely as a result of multiple supply - side shocks which are expected to feed into consumer prices over the forecast horizon. these include a sharp depreciation of the exchange rate, a spike in domestic maize prices, and above - inflation electricity tariff increases. the domestic drought conditions have forced south africa to import maize, which means that the depreciated exchange rate is now a determinant of the local maize price. as a result of this double whammy, food inflation is expected to reach 11 per cent this year. even the sharp drop in the international oil price is unlikely to provide much reprieve to consumers as the rand ’ s depreciation means that petrol prices are likely to be slightly higher this year than in 2015. persistent weakness in the south african economy poses very real risks to employment and investment growth over the longer term. ultimately, this means that the collective gains in prosperity which we as a nation have achieved are at risk of being eroded. monetary policy against this difficult economic backdrop, the reserve bank must continue to execute its mandate of protecting the value of the currency in the interest of balanced and sustainable economic growth. protecting the value of the currency means that we aim to maintain its purchasing power. the purchasing power of the rand is influenced

remember that the structures of financial markets differ across countries, and hence a policy tool that appears appropriate in some jurisdiction may not necessarily be the most desirable one in a different country. furthermore, empirical evidence does not, so far, suggest that the volatility of south african financial assets has meaningfully diverged from those of markets in countries where such policy tools have been implemented. it is, however, important that investors remain assured and convinced of the firm commitment of south african authorities to price stability and sustainable public finances, irrespective of the challenges that the country faces in the pursuit of sustained economic growth and development. in that respect, the bank ’ s commitment to flexible inflation targeting, monetary policy transparency and predictable implementation, remain crucial to limiting any rise in financial market uncertainty and volatility. the monetary policy committee at its november meeting judged that an unchanged policy rate was consistent with its mandate at this stage. in order to maintain the integrity of the inflation targeting framework, however, it would not hesitate to take appropriate action, should the medium - term inflation outlook deteriorate significantly. at the same time, a reduction in public deficits as per the framework laid out in the october 2013 medium - term budget policy statement, together with the implementation of measures agreed upon in the national development plan, aimed at unlocking the country ’ s longer - term growth potential, would substantially assist the bank in carrying out its mandate of price and financial stability, in the interest of sustained economic growth and development. 6. conclusion let me then finish by answering the question of whether there is still a case for investing in emerging markets with a “ yes ”. while challenges remain and headwinds in the form of uncertainties around fed tapering, lower growth in key emerging market economies, and continued volatility are likely to be with us for some time, and the need to address certain structural challenges by emerging economies is beyond question, the much better fundamental backdrop of emerging markets and continued prospects of higher growth than in advanced economies, especially in regions such as sub - saharan africa, appear to suggest that it would be a mistake to write off emerging markets. by rather adopting a somewhat medium to longer - term investment horizon with appropriate diversification strategies, and looking through some of the temporary turbulence, investors that maintain their loyalty to this asset class are likely to reap the benefits. emerging markets appear to be adjusting both bis central bankers ’ speeches cyclically and structurally from spectacular levels of growth observed previously to more sustainable levels