t t mboweni : lessons to be drawn from the financial crisis for multilateralism and global financial co - operation keynote address by mr t t mboweni, governor of the south african reserve bank, at a charity gala dinner, organised by the university of pretoria, pretoria, 15 october 2008. * * * introduction i would like to express my sincere appreciation to the university of pretoria and the organisers of the charity gala dinner for inviting me to address you tonight. i am glad to see that so many representatives of the financial sector are attending this function, notwithstanding the present financial turmoil. there are some encouraging signs that following the concerted commitment shown by various governments and central banks, and backed up by strong action, we may be finally embarking on the road to recovery from one of the worst crises the financial world has had to face. the global financial system has malfunctioned and there appears to be a need to seriously consider what changes and adjustments are required to ensure that the global financial architecture is better equipped to deal with future challenges. given that the changes will inevitably require certain vested interests to be confronted, the international community will have to commit itself to put the greater good of all of us at the centre of any efforts going forward. the change must, however, be managed and embedded in concrete actions plans to create stronger institutions, with more balanced representation, that will contribute to long term financial stability and sustainable growth. the global economic outlook presently, we are witnessing a severe financial crisis, a crisis that many commentators view as the worst since the great depression. even before the escalation of the financial crisis, growth in the advanced economies had been faltering, as shown in the recent world economic outlook of the imf. growth in advanced economies has weakened and is well below potential. economic activity in developing countries appears to be moderating at a somewhat faster pace than had been anticipated. the danger of a major and protracted slowdown in global growth, with inflationary pressures only likely to react with some time lag, is indeed very real. as most of you are participants in the financial market, i do not intend to go into any great detail about the causes of the global market turmoil. by now we seem to have a general consensus that accommodative monetary policy conditions in developed markets laid the foundation for an aggressive search for yield, which resulted in mispricing of risk on a large scale, coupled with some over - zealous “ financial innovation

mr. stals discusses the current economic situation and factors influencing monetary policy in south africa in 1999 address by the governor of the south african reserve bank, dr. c. stals, at an international conference arranged by abn amro bank and kagiso financial services, held in johannesburg, on 3 / 11 / 98. 1. domestic economy dominated by international developments during the past six months the south african economic scene was dominated by developments in the international financial markets. the east asian financial market crisis, which already started with pressures in thailand ’ s foreign exchange market in june 1997, took some time before it spread to other emerging markets outside of the east asian region, and also to the smaller industrial countries of the world. more recently, financial markets in major industrial countries also became contaminated. in the case of south africa, the contamination took place through the disinvestment of foreign funds from the south african bond exchange. during the first four months of 1998, non - residents increased their holdings of south african bonds by r16. 3 billion. during the next five months, from may to september 1998, they reduced their holdings of south african bonds by r22. 4 billion. this major switch was directly linked to a reassessment made by foreign investors during april / may 1998 of their investment positions, and the decision to reduce their exposure in fixed - interest bonds of the emerging market economies. it is interesting to note that non - residents continued to increase their investment in south african equities. after increasing their investment in south african shares acquired through the johannesburg stock exchange by r19. 4 billion in the first four months of 1998, they added a further r17. 3 billion during the following five months. the reversal in the investment trend on the bond exchange was, however, sufficient to change drastically the outlook for the south african economy, and some promising economic developments in the first quarter of this year were promptly aborted. 2. adverse financial developments lead the downward trend in the economy the sudden switch of foreign investors ’ sentiments had far - reaching effects in the south african financial markets : • • • the immediate effect of the withdrawal of investment funds from the bond exchange was a sudden and sharp increase in the yield on long - term bonds. the average monthly yield on long - term government bonds rose from 12. 9 per cent in april 1998 to 18. 3 per cent in september. the withdrawal of foreign investments created pressure in the foreign exchange market and the average effective exchange rate of the