Address by Dr Chris Stals, Governor of the South African Reserve Bank, at a Meeting of the Enterprise Investment Forum, Cape Town. 1. Introduction Article 3 of the South African Reserve Bank Act defines the primary objectives of the Bank as follows: "In the exercise of its powers and the performance of its duties the Bank shall pursue as its primary objectives monetary stability and balanced economic growth in the Republic, and in order to achieve these objectives the Bank shall influence the total monetary demand in the economy through the exercise of control over the money supply and over the availability of credit".This assignment has been repeated in Sections 195 to 197 of the South African Constitution in terms of which the Reserve Bank must protect the internal and external value of the rand. The Bank must exercise these duties as an independent institution and in regular consultation with the Minister of Finance. In the final situation, the Bank is accountable to Parliament for the implementation of its duties. In the mandate given to the Bank by the South African Parliament the emphasis falls clearly on "monetary stability", "balanced economic growth" and "the protection of the value of the rand". In terms of the Act, the Bank must pursue these objectives by influencing "the total monetary demand in the economy" and this must be done through "control over the money supply and over the availability of credit". 2. The institutional framework It is generally accepted today that the central bank of a country should have a major say in the making and implementation of monetary policy. To achieve the objective of monetary stability, it is often necessary to implement unpopular measures that may not be reconcilable with the short-term objectives of politicians or of governments. Governments will, for example, be very reluctant to introduce a more restrictive monetary policy in a period shortly before an election. In such a situation, it will suit the politicians to be able to pass the responsibility for the unpopular measures to an independent central bank. The power of central banks to control the money supply and the availability of credit is a very potent one. If not managed with great responsibility, it can lead to a breakdown in the financial system, to hyper- inflation and a final rejection by the people of the country of the total money and banking system. This will, in the longer term, not be in the interest of economic development and will frustrate all other efforts to improve the standard of living of the people in general. Governments and politicians are at times very short-sighted and may be prepared to sacrifice medium and longer-term financial stability, and therefore economic growth, for short-term expediencies. Monetary policy, on the other hand, must be applied consistently over time in order to achieve its objectives. The South African Reserve Bank is a relatively independent institution, owned entirely by the private sector and managed by a relatively independent Board of Directors. Seven of the Board members are elected by the shareholders and seven are appointed by Government. Board members may not be members of Parliament and may also not serve in the board of any private banking institution.The Bank is also sufficiently autonomous to take independent decisions on matters of monetary policy such as interest rates, discount facilities, open market operations, minimum cash reserve requirements and bank regulation and supervision. The Reserve Bank manages the country's official gold and foreign exchange reserves on behalf of Government, and also implements exchange controls and the exchange rate system as an agent for the Minister of Finance.In all matters, the Bank works very closely with the Minister of Finance. The Bank also submits an annual report on all its activities, including its monetary policy decisions, to Parliament. The Governor from time to time appears before the Parliamentary Joint Committee on Finance. Useful discussions take place within this Forum on the objectives and implementat