ADDRESS BY DR C.L. STALS, GOVERNOR OF THE SOUTH AFRICAN RESERVE BANK, AT THE SEVENTY-FIFTH ORDINARY GENERAL MEETING OF SHAREHOLDERS OF THE BANK, 1995-08-22  1. INTRODUCTION.The South African Reserve Bank was formally established in terms of the Currency and Banking Act, passed by the Senate of the South African Parliament on 1920-08-10. The Bank opened for business for the first time on 30 June 1921, and the first Ordinary General Meeting was held on 1921-07-29. It is my honour now to address this, the seventy-fifth Ordinary General Meeting of the shareholders of the South African Reserve Bank.The recovery phase in the South African economy which started in May 1993 has now lasted more than two years. During this period an average rate of real growth, as measured by increases in gross domestic production, of 3 per cent per annum was achieved. This represents a considerable improvement when judged against the contraction of total economic activity over the prolonged recession period from early 1989 to early 1993.The expansion in total economic activity, however, followed a roller-coaster path during the current upswing. Economic growth was particularly strong in the second half of 1993 but then contracted again during the first half of 1994, when the election took place and the accompanying political uncertainties had an adverse effect on the economy. In the second half of 1994, however, the economy rebounded, only to lose some momentum again in the first half of 1995 when adverse conditions in agriculture and in certain parts of the mining sector retarded growth.These erratic movements were partly caused by extraneous factors, but they also reflected the difficulties experienced by the South African economy in the process of returning to normal conditions after having been internationally isolated and politically castigated for more than a decade. The macro-economic limitations on growth, ingrained in the system through many years of distortion and uncertainty, are now being exposed whenever the overall growth rate reaches for levels beyond 3 to 4 per cent. These constraints confine the sustainable growth of the economy to a level that is much too low to create sufficient jobs for the gainful employment of the growing labour force.South Africa is now moving beyond the stage where investment interest was dependent on the return of the country to the world community. Investors, both domestic and international, are understandably becoming more assertive. They are demanding visible evidence of sound macro-economic policies, more certainty on future developments, and some assurance of reasonable returns, fair treatment and justifiable security. There is of course always risk in the future, and investments made for future returns can never be completely secure. The real question, however, is whether the South African investment environment perhaps holds more uncertainties than those of the many other countries competing for the funds of the global investor. If so, the foreign investor will remain shy of South Africa, while the South African investor will continue to exert pressure for the removal of exchange controls.South Africa now faces the challenge of creating an investor-friendly environment that will enable the economy to break through the current limits of a growth potential that, as evidenced by the experience of the past two years, is too low to provide for the many needs and expectations of the people of this country.A relatively stable financial situation as pursued by the monetary policies of the Reserve Bank, is an indispensable element of such an investor-friendly environment. On its own, however, financial stability is not a guarantee for more investment. To break through the existing ceiling of restricted economic growth, fiscal, labour, trade and industrial policies will have to join forces with monetary policy to pursue persistently the ultimate objective of a better economic future for all the people of this country.  2. RECENT ECONOMIC DEVELOPMENTS.Details of economic developments over the past year are pr