the republic which have been acquired directly from the treasury by subscription to new issues, the conversion of existing issues or otherwise, a sum exceeding its paid - up capital and reserve fund plus one third of its liabilities to the public in the republic ”. this section therefore restricts the direct financing of government deficits. at the same time, the act also allows the reserve bank to provide unsecured loans and advances to government and companies in which it has acquired shares. although there are limits on government borrowing, serious consideration in the revision of the reserve bank act should be given to removing this potentially dangerous provision. the south african reserve bank is also financially independent from the government because of its adequate financial resources and full control over its own budget. 8. conclusion in pursuing financial stability, the south african reserve bank is relatively well aligned with international best practice. it operates autonomously within a legal framework which affords it a substantial degree of independence, while remaining accountable to parliament. but ultimately it is the appreciation by the public at large of the importance of financial stability, and their understanding of and support for the role of the reserve bank in this regard, that is needed to entrench and develop the bank ’ s independence. to this end, ongoing communication between the reserve bank and all levels of society is essential. in this connection, governor jean - claude trichet asked the question : “ so to whom is the central bank accountable? in the end, i think it is accountable to public opinion itself. it is our great responsibility to communicate with public opinion as a whole, and not just market operators and investors. this communication must be as direct and precise as possible, in terms as simple as the subject matter allows while remaining very professional. ” while we are fully aware that we face many daunting challenges, it is gratifying to note the degree of financial stability that has been attained over the past years. and it is exciting to note that financial stability provides a sound basis for sustainable strong economic growth and development ; more and more evidence suggests that central bank independence and prudent policies in general are starting to pay off in south africa.

longer be allowed to comment on monetary policy. as the outgoing governor, however, i will take advantage of this platform to remind you of a few truths, one being that no central bank worth its salt can ever tolerate high inflation. price stability may not be a sufficient condition but i maintain that it is a necessary condition for a solid foundation for sustainable growth and prosperity. i would like to believe that steve biko would have been gratified by the fairly contained pace of inflation over the past 15 years, knowing the dire consequences of inflation for the poor – those who are usually least able to hedge against inflation – in particular. since 1994 average headline inflation has amounted to approximately 6, 5 per cent per annum. over the steve biko, i write what i like, a selected of his writings. preceding 15 years, 1979 to 1994, it had averaged almost 14 per cent per annum. inflation has been uneven over the period, though, induced typically by significant changes in key exogenous drivers of inflation, such as oil prices. secondly, the recent upsurge in strike action has led to some commentators describing the wave as a “ winter of discontent ”. in this regard, i would like to comment on some worrying trends in the settlements reached. wage settlements above the projected rate of inflation and in excess of productivity gains tend to undermine the fight against high inflation. they lead to labour cost increases way above those of trade competitors and, therefore, loss of competitiveness. though i will discuss the labour market in much depth later, i need to refer briefly to our labour laws. many commentators have described the labour market as rigid and inflexible. as the country ’ s first post - 1994 minister of labour, some of the blame has been pointed in my direction. i am the first to admit that some things could have been done differently. hindsight, however, is useful only when it improves our foresight. i would like to take this opportunity to espouse some of the theoretical and philosophical underpinnings behind the labour relations act. the labour movement regarded me as a hero then. social ills the break with tradition, however, cannot be complete when addressing such an established forum. i will, therefore, digress slightly and venture an opinion on a few matters not related to economics and central banking. the shameful xenophobic tendencies we witnessed last year should have caused all south africans to exclaim : “ oh, beloved country, what would steve biko have