rest of the world. this is why we pay such close attention to developments in the us, including who will replace ben bernanke when his term expires at the end of january 2014. while the news from the us appears relatively positive, the same cannot be said about the prospects for the eurozone, where the outlook for growth is poor, despite the fact that the region as a whole emerged from recession in the second quarter of this year. a number of european countries are still experiencing negative growth and, even where growth is positive, it remains very weak. the july world economic outlook ( weo ) update of the imf forecasts growth of – 0, 6 per cent in 2013 and 0, 9 per cent in 2014, with the risks still seen to be on the downside. one of the constraints facing these countries is the weak state of their banking sectors, which have not recovered sufficiently to resume lending on a large scale, and there is still very slow progress towards a banking union in the region. at the same time, fiscal consolidation continues to be quite severe in some countries and the debt ratios are still deteriorating in the peripheral countries, for example, the debt to gdp ratio in greece now stands at around 160 per cent, and that of italy at around 130 per cent. from a south african perspective, given our trade and investment links, this is not good news, and implies that the crisis will be with us for some time. europe is still our major trading partner, despite accounting for a declining share of our manufacturing exports, from around 38 per cent to 25 per cent between 2007 and 2012. the importance of europe to south africa is further underlined by its weight as a source of foreign investment into south africa. according to the census of foreign transaction, liabilities and assets, published by the south african reserve bank earlier this month, european countries and the uk are the main sources of foreign capital to the south african economy, with the relative share unchanged at around two - thirds since 2001. however, the share of the uk has declined from 45, 5 per cent in 2001 to 37, 6 per cent in 2011. the recent july weo downgraded its global growth forecasts for emerging markets, and unfortunately the brics countries featured strongly in this downgrade. the 2013 growth forecast for china was reduced from 7, 8 per cent to 7, 5 per cent ; russia from 3, 4 per cent to 2, 5 per cent ; and brazil from 3,

partly reflect excess capacity in some sectors, but also a lack of general business confidence. there are indications that private sector fixed capital formation has begun to improve, but this appears to be gradual and tentative. in the second quarter of 2013, growth of 4, 4 per cent was recorded. michael spence sums it up appropriately as follows : “ put bluntly, growth requires investment, and that means present sacrifice for future gain. the job of leaders is in part to get everyone on board, to build a consensus behind a forward - looking vision, underpinned by a growth and development strategy that is credible. multiple classes of participants and organised stakeholders need to be willing participants. these include labour, unions, businesses and entrepreneurs, civil society organisations, and households at various levels in the income distribution. ” unfortunately, while there is a common view that we need investment, there is no consensus around how this should be achieved, and how the sacrifices should be shared. this brings us back to where i began this evening, and that is the need for education or investment in human capital. i have on numerous occasions in the past stressed the need to bis central bankers ’ speeches improve the quality of education in south africa and to fix the parlous state of many of our dysfunctional schools. we need to value education and, thereby, knowledge, and not simply the certificate of qualification. but we also need to ensure that the education we do receive is of value. the cde report referred to earlier suggests that, while not perfect, the university system is turning out appropriate and good quality skills. but we also need to focus on other technical skills that are not taught in universities but are no less important to the economy. not only does an undertrained and undereducated workforce constrain economic growth, it reinforces the cycle of unemployment and widening inequalities. as michael spence has noted, in a world in which knowledge and connectivity are increasingly the basis for value creation, failures in the educational system are the surest form of exclusion there is. in conclusion, the crisis is still with us, and south africa faces a challenging future. however, the doom and gloom associated with the emerging markets is probably overstated : whereas there will be global adjustments in response to normalisation of monetary policy in the advanced economies, and this means volatility in emerging market financial markets, it is hard to see a recovery of global demand or demand from the advanced economies as being anything but good news in the