way for south africa ’ s participation in this process. 5. the southern african development community a further consequence of the socio / political / economic reforms in south africa over the past few years was a natural greater involvement for the country in the economic development process of the african continent. apart from a more active participation in continental initiatives working through the organisation of african unity, the united nations economic commission for africa, and the african development bank, south africa is taking an active part in the activities of the southern african development community ( sadc ). fourteen countries of the southern african region now belong to this formal agreement for economic co - operation, with the long - term goal of eventual economic integration. south africa plays a leading role in the development of financial and investment co - operation amongst the participants in sadc. within the structured institutional framework of sadc, a committee of governors of all the central banks of the region was established. this committee introduced a number of co - operation projects intended to develop the financial systems and markets of the region. the approach of the governors committee at this stage is first to develop the financial infrastructures in each of the countries, before venturing into the more challenging task of macroeconomic co - ordination or integration. one of the important projects in the work of the sadc governors committee is to remove remaining exchange controls within the region. where practicable, countries are encouraged to do this even faster than what has been programmed for the overall phasing out of the controls. it is envisaged that there will eventually be a relatively free movement of goods, services and capital in this vast area with a total population of more than 180 million people. 6. the financial globalisation process the phasing out of exchange control and the restructuring of the financial system are important preconditions for south africa ’ s greater participation in the financial globalisation process. as can be deducted from some of the statistics quoted in this address, south africa is now firmly on the road of greater participation in the expanding international financial markets. recent events in the wake of the east asian financial crisis proved once again, however, that the globalisation process is not without risk. the easy movement of large amounts of funds into and out of countries with relatively small economies can at times be very disrupting. during the four months january to april 1998, non - residents increased their holdings of south african bonds, acquired through the bond exchange, by more than r16 billion. over the next ten weeks,

that is during may, june and the first half of july 1998, they reduced their holdings again by r12 billion. both the inflows and the outflows of capital on this occasion disrupted the south african financial markets and complicated the implementation of monetary policy centred on the medium - term objective of maintaining financial stability in the interest of optimum economic growth. in the situation and against the background of a rather depressed domestic economy, the yield on long - term government bonds increased from 12. 7 per cent on 30 april 1998, to 16. 4 per cent on 6 july, before it declined again to 15. 5 per cent last week. the reserve bank ’ s fluctuating repo rate similarly showed wide fluctuations and increased from 14. 8 per cent in early may to a peak of 24. 0 per cent on 22 june, before settling down at a level of about 21 per cent. all banking institutions in the country were forced to raise their deposit and lending rates by about 6 percentage points since the end of april. the prime overdraft rate of the major commercial banks now stands at 24 per cent. with the latest measure of inflation at only 5 per cent per annum, real interest rates are at an extremely high level. the exchange rate of the rand also came under a lot of pressure. after being relatively stable for a period of about 18 months from october 1996 up to the end of april 1998, the rand depreciated from r5. 05 against the us dollar in the middle of may to r6. 62 = $ 1 on 6 july 1998. since then, the exchange rate appreciated again to fluctuate around the r6. 00 = $ 1 level for the last few days. at this level, the rand, measured against a basket of currencies, is still about 18 per cent down from where it was at the beginning of this year. some critics do believe that the removal of the exchange controls is partly to be blamed for this greater volatility in financial conditions. they advise south africa, therefore, to reintroduce some of the controls, for example, the two - tier exchange rate system. this view is not shared by the monetary authorities in south africa. despite the gyrations of recent weeks, we still believe that the advantages of participation in the financial globalisation process will, over time, bring more advantages to the south african economy than disadvantages. 7. concluding remarks the policies of the phasing out of exchange