t t mboweni : a review of economic and financial developments in south africa during 2002 address by mr t t mboweni, governor of the south african reserve bank, at the dinner for heads of foreign missions, pretoria, 10 december 2002. * * * mr el - herfi, acting dean of the diplomatic corps, ambassadors, high commissioners, heads of international organisations, senior management of the department of foreign affairs, senior management of the reserve bank and honoured guests, all protocol observed 1. introduction integrating dinner with discussions of finance is not unfamiliar to central bankers. the key ingredients are good food and brevity and relevance of the discussion. i will do my best to adhere to the latter two ingredients. the former is out of my hands. 2. the global economy in 2002 the developed countries were already experiencing a slowdown in economic activity in 2001 when the events of 11 september shocked the world. transport and tourism in particular were hit very hard, with some fallout continuing to this day. world growth in 2002 has been subdued and for the full year is expected to amount to around 2, 8 per cent, slightly better than the 2, 2 per cent recorded in 2001 but still way below the 4, 7 per cent recorded in 2000. alongside the uninspiring growth performance, however, inflation has been very low. in japan prices are in fact falling, while in the euro area the latest average inflation rate is 2, 2 per cent. in the united states, inflation is running at 2, 0 per cent. beyond the lacklustre world growth and low inflation, there were a number of key events in 2002. argentina's one - to - one peg of the peso to the american dollar, that had led to a significantly overvalued peso, collapsed. against the one - to - one rate at the end of last year, the current exchange rate is 3, 54 peso per dollar. the argentinian economy has been contracting, while their inflation rate has accelerated to more than 40 per cent. brazil experienced some problems, partly related to the country's high government debt and its linkages with troubled argentina. imf funding is helping to soften the adjustment process. in the northern reaches of the american continent, the demise of enron led to disillusionment with corporate governance and accounting practices. this has led to a greater awareness of the need for sound structures and practices, revised codes of conduct and a sharpening of regulation. and

africa at the end of 2000 exceeded r24 billion. other continents are also attracting the attention of south african companies that are leaders in their respective fields and some of these companies have sought listings on foreign exchanges. companies like the resources giants anglo american and billiton, the financial services companies investec and old mutual, the brewer sabmiller and sappi, the pulp and paper company now have global reach and are making their presence felt beyond their home market. 5. conclusion in short, then, the south african economy is in fairly good shape, with the exception of the inflationary consequences of the 2001 exchange rate depreciation. and the four interest rate increases as well as the notable appreciation of the rand in 2002 will in due course brake the inflation spiral decisively. while my address tonight focused on broad macroeconomic trends, it is worthwhile to stress that the macroeconomy is built up from the microeconomic decisions and actions of millions of participants. real life happens at the microeconomic level. as diplomats you will know that it is your individual encounter with the businessperson or potential tourist that counts - where interest in south africa or in your country is either nurtured, or nipped in the bud. a sparkling, enthusiastic, well - informed diplomat is a catalyst forging friendship and economic ties across borders. indifference or ignorance sabotages these linkages. accordingly, i would like to challenge you to continue deepening your knowledge of our country, its people, its economy, its incentives, rules and regulations, its magnificent places. true expert knowledge takes many years to build up, plus a lifetime of ongoing study to maintain. but it enables one to sparkle, to catch the attention of the key investor or potential tourist, to make things happen. i wish you well in 2003 and beyond in sparkling for your fraternal countries, forging links that are crucial to our mutual economic success and our ability to understand and appreciate one another. once again it is our honour and privilege to host you at this function which has become one of the highlights of the calendar of the south african reserve bank. may the friendships between south africa and your countries continue to go from strength to strength. thank you.