the complex structures of some derivative instruments and investment conduits make it almost impossible to determine who is exposed to whom, and to what extent. the current turmoil and illiquidity in the major financial markets is largely attributable to this uncertainty and lack of trust. emerging markets, in particular, are vulnerable to the contagion effect, which is regularly illustrated. this has affected south africa on a number of occasions during the past year and contributed to volatility in domestic financial markets. in times where risk aversion increases and investors pull out of riskier assets, the rand tends to be in the basket of currencies that suffers the most. this can be related to some extent to the liquid nature of the rand market. nevertheless, despite the risks and complexities associated with financial globalisation, there are also clear benefits. speaking from a south african perspective, the central bank ’ s inflation targeting framework has been well supported by the benign global inflation outlook over recent years, as well as by conditions in global financial markets that led to increased foreign capital inflows to emerging markets. the combination of global liquidity, combined with favourable conditions in the domestic economy, caused demand for south african equities by non - residents to increase at an exceptional pace, recording net purchases of r33 billion in 2004, r50 billion in 2005, r74 billion in 2006 and a record r66 billion in the year to 20 september 2007. in the bond market, activity has been a little more volatile, with nonresidents purchasing a net r365 million in 2004, selling a net r10, 7 billion in 2005 and purchasing a net r34 billion in 2006. partly supported by these activities, but also in line with global trends, the jse ’ s all - share index recorded a succession of record highs, while domestic bonds hardly interrupted their five - year rally, despite a cumulative increase of 300 basis points in the reserve bank ’ s repo rate since june 2006. to date, the significant foreign portfolio inflows, combined with a favourable outlook for the domestic economy, have enabled the country to finance a relatively large current account deficit, which, in turn, was to a large extent driven by investment expenditure and infrastructural developments – hopefully efforts from which the country would benefit in years to come. capital inflows have also enabled the south african reserve bank to increase official reserves to a much healthier level, contributing to a series

on reshaping the sarb's management, in the hope that the upper echelons of the central bank would be 50 % black by 2005. 1 / 4 bis - central bankers'speeches this would be easier said than done and tito publicly decried the institution's struggle to retain black talent. but his work ultimately did pay off. by the end of his second term, 60 % of sarb employees were black. today this stands at over 84 % and 63 % of the sarb's senior leadership is black and female. tito's time at the sarb was very much an extension of his broader ambition for south africa's economy – a sense of purpose that was nurtured over many years and which he poured into his policy work. on a number of occasions i have spoken of the loss of tito's beautiful policy brain. he has left a deep void in our personal lives, and the country as a whole. but we must take comfort in the fact that his legacy is felt across so many aspects of our economy, and more recently, in the kitchen. at the sarb, tito fought fiercely to keep inflation from ravaging workers'wages and the spending power of pensioners and the unemployed. he did so by championing inflation targeting, which the sarb adopted a year into his tenure as governor. this policy has ensured that double - digit inflation prints are relegated to history. early in his first term, tito also negotiated a memorandum of understanding ( mou ) between the sarb and national treasury, then led by trevor manuel as finance minister. this mou entrenched the coordination of macroeconomic policy and has remained in place to this day – outlasting the tenures of these two titans of policy. tito's work as governor extended beyond south africa's borders. when he assumed the role, he, like other central bankers at the time, was concerned about the effects of globalisation, which had left emerging markets vulnerable to financial turmoil. 2 to maximise the benefits of building multilateral institutions, tito sought to create greater economic integration within the south african development community ( sadc ) and to insulate the region's central banks against political interference. he was a staunch proponent of central bank independence, even before it was written into south africa's constitution. he created greater central bank transparency and accountability, establishing the monetary policy committee ( mpc ) and the monetary policy forums to enhance public engagement and accountability.