Address by Mr. T.T. Mboweni, Governor of the South African Reserve Bank, at the Rotary Club of Pinelands, Cape Town  1.    INTRODUCTIONLadies and gentleman, it is indeed a great honour and a privilege to be invited here to speak at this special induction meeting. I thank you for seeing fit to elect me as an Honorary Member of the Rotary Club of Pinelands. The topic I have chosen to talk about this evening is economic growth. It is a subject that affects us all, as citizens of South Africa, and it is something in which we all share; something from which we all reap the benefits.I have noted during my recent international visits ( to the US, London and Davos), that many people have become focused on South Africa's low growth rate. Over the past 40 years, the country's economic growth has declined from an average rate of 5 per cent per year in the 10 years immediately prior to the first oil crisis of 1973 to just over half of that in the latter years of the 1990s; not nearly enough to create and sustain the levels of employment we would like to see. 2.     ECONOMIC GROWTH SINCE 1963Between 1963 and 1973 growth in real GDP came to 5,0 per cent on average, and a large degree of financial stability and low inflation prevailed. The manufacturing sector expanded production, on average, by a solid 8 per cent per year over the period, although much of this was a result of the import replacement policies and protectionist measures in force at the time. The services industry was also expanding strongly at an average rate of 5,5 per cent per annum. Non-gold mining output expanded at a vibrant arithmetic mean rate of 7 per cent per annum while the gold mining sector reaped the benefits of new mine developments up to 1970 and a higher gold price thereafter.From the expenditure side, all domestic expenditure components recorded strong growth during this period. Gross fixed capital formation was exceptionally strong, with a recorded average growth rate of 9 per cent per annum. The expansion of the capital stock was widespread and considerable attention was given to infrastructure spending.The supply side of the economy was also boosted by the immigration of a considerable number of entrepreneurial and highly skilled people. Education and training of the whole South African population unfortunately did not receive the required attention, which came back to haunt us later on.For the next 10 years, from 1973 to 1983, the country’s real GDP growth dwindled to 2,6 per cent per annum. In the early 1970s, the semi-fixed exchange rate system, which had been in force up to that time in most parts of the world, broke down, reducing the discipline imposed on policy makers. The first oil price shock together with a substantial increase in the gold price initiated an inflation spiral and financial conditions became less stable with inflation rising to double-digit levels from 1974. Growth in manufacturing slowed to 3,4 per cent per annum, as momentum could not be sustained given the more uncertain economic environment and the shortages of highly skilled people.Still, growth in the tertiary sectors remained relatively buoyant at 3,5 per cent per annum. Non-gold mining output expanded by 3,6 per cent per annum during this period, with coal performing well as the high price of crude oil lifted the prices of all energy-related minerals. Although gold production contracted as ore grades were reduced to prolong the lives of mines, gold mining profits remained robust because of the high gold price. The high gold price of 1979 and 1980 acted as a buffer and protected South Africa from the effects of the second oil crisis in 1979, ensuring record growth in 1980. However, this artificial boost did not last as the gold price declined from its $800 a fine ounce peak.Fixed capital formation remained positive during 1973-83, although its average growth rate slowed down appreciably to 2,8 per cent per annum. But final consumption expenditure by general government recorded the strongest growth rate amongst the expenditure components. During this period, its growth