1. The New South Africa

It is now more than three years since the fully democratic election for a new South African Government took place in April 1994. Many things changed over the past three years in South Africa. The new Government now has a track record, albeit short, that points the way to the future destiny of a country that was once known as "the skunk of nations".

In South Africa itself, a consolidation of the new dispensation took place at the level of central, regional and local government authorities. The Interim Constitution that provided for the introduction of the Government of National Unity, was replaced with a revised, final version of the Constitution for the Republic of South Africa. At central government level, the National Party in early 1996 withdrew from the Government of National Unity to become a more effective opposition in a more conventional Westminster tradition. The financial and other relation-ships between central and regional governments were finalised, but some of the regional governments are still grappling with the task of establishing their own internal administrations. Elections of local authorities have taken place in all the regions, and the new structures created at this level are beginning to function more effectively.

Within the public administration in its broader context, major affirmative action or transformation processes took place to make the staff complement of the public service more representative of the composition of the total population. In the provision of public services such as health care, education and the judicial system, all forms of discrimination have been removed, and the new South Africa is indeed living up to the expectation of a fully democratic integrated multi-ethnic community.

It is amazing how little friction all these major socio-political changes created. The many sceptics, who three or four years ago predicted disaster for South Africa, were proven wrong. Most South Africans today are even more determined to make the new South Africa succeed, and to continue to participate in, and contribute to, the ongoing processes of social, political and economic reforms.

In the international arena, South Africa is no longer the outcast, or the despised nation of the world. South Africa has again taken its rightful place in the community of nations in the United Nations, the Organisation of African Unity, the British Commonwealth of Nations, and in many other multilateral and global organisations. South Africa is indeed expanding its role as a leader in Africa, and as a respected participant in the development process of the Southern African region.

It is human to want to be loved, and to be able to be part of the community. The changes in South Africa opened up the world for the travel-loving South African tourists, and opened up South Africa for the curious global wanderer. Last year, for the first time, more than one million overseas visitors came to South Africa, and South Africans love to find them in our pubs, on our beaches and in our game reserves.

The new South Africa opened up international participation in all forms of sport. For sport-mad South Africans, it is fantastic to see our athletes, cricketers, rugby and football players and other sportsmen and women compete internationally. South Africans like to win, but even when we lose, it is nevertheless still great to see our sportsmen and women play against the best participants of other countries.

The new South Africa led to the withdrawal of international sanctions, and the termination of boycotts and disinvestment campaigns, and opened up the way for South Africa to be reintegrated in the world financial and other economic markets. Major changes took place over the past few years in South Africa's international economic and financial relationships to which I will return within a minute.

No wonder that most South Africans are grateful today for the courage of former President F.W. de Klerk, for the leadership of Mr Nelson Mandela and for the opportunity to be part of this exciting world of reform and restructuring. The unavoidable frictions flowing from the process of transition become tolerable in light of a vision of a future that will bring forth a better world for millions of people in our country and on our continent. South Africans are as determined today, as they were three years ago, to make the new South Africa succeed. They have seen but a small step in the making of the history of this new nation, but they have discovered it to be real, to be working, and to be exciting.

2. The integration of South Africa into the world economy

During the past three years, South Africa also returned to the global economy, after almost two decades of isolation and exclusion. The world economy of which South Africa again became part, was, however, very different from the one it left in the late ninety seventies and early eighties. South Africa had to find its way back into a world economic environment that had changed a lot, and that was still changing dramatically at a frightening pace. The task of integrating into the global village is twice as challenging for South Africa than it is for other emerging economies that are also involved in this process of globalisation.

The consequences of the reintegration of South Africa into the world financial system can be illustrated by a few simple facts:

During the three years prior to the transition to a new government in South Africa, i.e. from 1991 to 1993, the capital account of the balance of payments showed a net outflow of US $7,1 billion. During the next three years, from 1994 to 1996, there was a net inflow of $7,4 billion. This turnaround of more than $14 billion had a major impact on South Africa's potential for economic growth and development.

The termination of international sanctions and other punitive actions enabled South Africa to increase its total foreign trade in merchandise (excluding gold and services) from $35,6 billion in 1993, to $50,1 billion in 1996.

These changes in our transactions with the rest of the world had a major impact on the economic growth potential of the country. The annual rate of growth in gross domestic product changed from a decline of 0,6 per cent over the three years 1991 to 1993, to an increase of 3,1 per cent over the next three years; in gross domestic expenditure it changed from a decline of 0,3 per cent, to an increase of 4,9 per cent over the same two three-year periods.

During the period before 1994, macroeconomic management posed many challenges, but at the same time was very frustrating. Economic policy initiatives were almost always blocked by a huge and impenetrable wall, built on the foundations of non-economic considerations. After 1994, macroeconomic policy became even more challenging, but is now also more rewarding. Many South Africans are still learning to operate again in a free and open global environment, where we can not only trade on an unrestricted basis with the rest of the world, but must also face the competition of other countries.

The removal of the Berlin Wall around South Africa not only opened up the way for South Africans to move out, but also for outsiders to move in. The new South African Government accepted this challenge and started immediately in 1994 to remove as many barriers as possible to facilitate the process of the reintegration of the South African economy in the world economy.

A programme for the gradual removal of all exchange control regulations was already embarked upon in 1994. Today, South Africa has effectively abolished exchange controls on current account transactions; non-residents are completely free to move funds for any purpose into and out of South Africa; and the remaining exchange controls on the outward investment of funds by South African residents are gradually being removed. South African corporates, institutional investors, and private individuals all now have limited freedom to make investments in the rest of the world.

The financial sector was opened up for foreign participation, and for active foreign competition. Today, about 17 foreign banks operate in South Africa, with about 36 domestic banks providing banking services. In addition, about 60 foreign banks have established themselves through representative offices in South Africa. Last year, in a major restructuring operation, the Johannesburg Stock Exchange and the Bond Exchange of South Africa changed their rules for corporate and foreign ownership of broking firms. As a result, the volumes on the financial markets exploded. Last year, the turnover in the Bond Exchange of South Africa exceeded $703 billion, and in the Johannesburg Stock Exchange (market for equities) $27 billion. The average daily turnover in the South African foreign exchange market now exceeds $7 billion -- relatively small in terms of the turnovers in the major financial centres of the world, but large in the context of a relatively small South African economy.

Further steps to improve the structure of the South African economy include a five-year programme for the simplification and reduction of the protective import tariff structure; a gradual reduction in the budget deficit of Government; a determined privatisation programme; and important initiatives for better education, training, and the development of skills.

The Government committed itself to the implementation of a longer-term macroeconomic strategy for Growth Employment and Redistribution (GEAR), with the ambitious objective of raising the growth potential of the South African economy to 6 per cent per annum by the year 2000. Without such a programme, it will not be possible to meet at least some of the very desperate needs of the South African community for more jobs, better living conditions, and an improved standard of living for the many disadvantaged people of the country.

3. Challenges for the future

The process of socio-political and economic transformation of South Africa has not yet been completed. In retrospect, progress made over the past three years is very encouraging and, on the economic front, much better than most people expected or predicted four years ago.

There remain very daunting challenges that must still be tackled with even greater resolve and determination. The level of crime and violence is a major concern, not only within the country, but also for the foreign investors and potential participants in the development process. At this stage, crime and violence provide the main stimulus to the unfortunate continuing emigration of many highly qualified and skilled young South Africans.

The country has also not really come to grips with the most important macroeconomic problem, and that is the creation of more employment. Over the past four years, total employment in the formal sectors of the economy declined by more than 400 000 workers. Many of the unemployed make some kind of a living in harsh and insecure informal activities, but total unemployment is nevertheless estimated to be in the region of 30 per cent of the total economic active population. This is one of the major contributing factors to the escalation of crime and violence.

South Africa now faces, together with the rest of Africa, the challenge of solving the many remaining problems of the continent. Our involvement in the Southern African Development Community is making many demands on our own resources, but is also bringing new expectations of a better life for the children of millions of people in the region. It is a privilege to be able to participate in the making of a new history, not only for our country, but hopefully also for the whole sub-region.

The restructuring of the South African economy to enable us to reach the goals of GEAR by the year 2000 is an ambitious programme which will require painful and costly adjustments over the next few years. The creation of greater flexibility in the labour market, the adaptation to greater international competition, and the retention of disciplined fiscal and monetary policies, are no easy tasks, and at times lead to many unpopular decisions. At this stage, many South Africans still fight battles against persons, instead of principles.

4. Conclusion

The influence of the assistance and support given to South Africa and the pressures exercised on the Government and the people, by the friends of South Africa in other countries over the past few years can never be over-emphasised. Without our friends in the rest of the world, the process of transformation could easily have taken a different and disastrous course.

When South Africa had many enemies, we in desperation looked for friends. Now that we have many friends, we look for more friends in appreciation of what you have done, for what you are still doing, and for what you can do in future to ensure that the transformation process of South Africa will not lose its momentum. It must be driven to the common destination South Africans are attempting to achieve with the approval of our foreign friends in their political, social and economic support for the country.