and its further reduction a strategic imperative. annualised growth in real gross domestic product accelerated from 3, 5 per cent in the first quarter of 2005 to 4, 8 per cent in the second quarter, with firm growth recorded in virtually all the main sectors of alan greenspan in his testimony to congress on 3 november 2005 said : “ the bottom line is that in periods of extreme chaos, it ’ s turned out that gold has been the ultimate means by which transactions have been consummated. it occurred, for example, during world war ii that you could only negotiate transactions with gold. ” the economy. all the final demand components – household consumption, government consumption, and fixed capital formation – have been expanding briskly. as could be expected, the upswing in economic activity and expenditure was accompanied by a strong increase in import volumes. accordingly, the current account of the balance of payments moved into deficit from 2003. the current - account deficit amounted to approximately 3½ per cent of gross domestic product in the first half of 2005. information on visible foreign trade suggests a larger trade deficit in the third quarter of 2005 than in the first two quarters of the year, but comprehensive data on services and income flows for the third quarter still need to be finalised before the current - account balance for the third quarter of the year can be determined. relatively favourable prices for most of south africa ’ s export commodities have been helping to contain the trade and current - account deficits. at the same time sizeable inflows of financial capital have been recorded over the past three years, exceeding the current - account deficits and enabling the bank to increase its foreign exchange reserves. on a trade - weighted basis, the rand appreciated by 11, 7 per cent in 2004. during the first 10 months of this year it has depreciated by 9 per cent. the rand ’ s overall recovery since the lows of late 2001 can be mainly attributed to improved perceptions about south africa ’ s economic fundamentals, us dollar weakness, rising commodity prices, positive interest rate differentials, and, of course, a recovery from heavily oversold levels. the emerging view of the rand is that it will respond to changing fundamentals in an orderly manner. rising income levels, improved confidence and lower interest rates have bolstered credit extension, resulting in banks ’ loans and advances to the domestic private sector increasing by 21, 5 per cent over the twelve months to september 2005. mortgage lending has been exceptionally strong, supported by

update, copies of which are both available here tonight as well as on the sarb website3. conclusion allow me now to conclude by saying that we have come through another busy and challenging year, characterised by high levels of volatility and uncertainly in our markets. the collaboration between the sarb and financial market participants continued in a constructive atmosphere and ensured the orderly functioning of our markets in the wake of these challenges. our collaboration extends to many of you being our partners in our monetary policy implementation activities, government debt operations, sharing of market information and analyses, as well as participation in various market forums. we look forward to our continued cooperation so as to enhance the effectiveness, integrity and resilience of our financial markets. let me take this opportunity to thank our financial markets team, under the leadership of mr leon myburgh, for their hard work and dedication to the work of the bank during the past year. many projects had to be managed simultaneously while keeping the day - to - day operations running smoothly. i should also mention that mr callie hugo will be going on retirement later this year, and that this will be his last attendance of the annual cocktail function in his current capacity. 2 http : / / w w w. resbank. co. za / markets / south _ african _ foreign _ exchange _ committee / pages / announcements. aspx http : / / w w w. resbank. co. za / pages / default. aspx page 7 of 8 i believe that i can speak for all of us in conveying our gratitude to callie for the great work he has done over many years in contributing to the development of our financial markets, and being one of the key links between the sarb and financial market participants. even if somewhat pre - mature, because you are still around and have some work to do, we wish you all the best for the future, callie. last but not least, a very special thank you must also go to ms sharlay madalane, from the sarb protocol section for her assistance in organising this event. ladies and gentlemen, please enjoy the rest of the evening. thank you. page 8 of 8