reserve bank has therefore taken the initiative to introduce a major reform to the national payments, clearing and settlement system. in april 1998, a new integrated system will be introduced to provide for real - time on - line settlement on a gross basis of large transactions, and for a daily netting - process and final settlement of smaller transactions. the intention with this major reform project is to reduce the risk exposure of possible default by any individual institution that could lead to the collapse of the whole system. at the same time, the new system must be compatible with global network systems for payments and clearing operations, and must provide a framework for an integrated cross - border settlement system for the sadc region. 2. 6 the gradual removal of exchange controls at the centre of the south african programme for financial reform is the gradual phasing - out of exchange controls. comprehensive exchange controls were introduced in south africa over an extended period of time, ranging from 1961 to 1993. these direct control measures were intended to provide some protection to the domestic economy against the adverse effects of non - economic factors that afflicted south africa over a long period of time. when the government of national unity came into power in april 1994, it was accepted as a policy objective to remove the exchange controls. at that time, however, south africa had virtually no official foreign reserves at its disposal for this purpose. the pragmatic solution was therefore adopted to embark on a process of a gradual phasing - out of the exchange controls. good progress has been made over the past three years with this programme. so far all effective exchange controls on current account transactions have been lifted ; exchange controls applicable to non - residents have been fully removed ; the two - tier exchange rate system for certain capital account transactions was formally terminated in 1995 ; south african resident corporates were given permission to make certain direct investments in branches and subsidiaries in foreign countries ; south african resident institutional investors ( insurers, pension funds and mutual funds ) may now diversify up to 10 per cent of the total assets managed by them in foreign currency denominated assets ; and south african resident private individuals will shortly be allowed to transfer limited amounts of capital from south africa for foreign investment. the removal of the exchange controls is a process that has far - reaching effects for the financial sector and the development of the financial markets in south africa. it is a process that must be applied with caution, and must be supported by other macroeconomic policy measures aimed at improving the international competitiveness of the

needed to adapt the financial sector to major internal socio - political reforms, and to accommodate the challenges presented by an enhanced participation in the global financial markets. as far as regional developments are concerned, south africa welcomes the opportunity of participating more actively through the southern african development community in the development of the financial sector of the african continent. there is a growing need for some closer contact between the various regional financial sector arrangements on the african continent. from the level of financial reforms applied within each one of the more than fifty african countries, through the second tier of regional financial cooperation, the ultimate objective must be to establish a sound, stable and well - functioning financial system in support of economic development in the whole of africa. co - ordination on a continental basis of the financial reforms applied within the regions can, perhaps, become an important function of the economic commission for africa, working under the auspices of the economic and social council of the united nations.