Address By Mr TT Mboweni, Governor of the South African Reserve Bank, At the South Africa Ten Years On - Empowerment, Finance, Trade And Investment conference, Cape Town   1.            Introduction                Ladies and Gentleman, thank you for the invitation to speak at this conference. After ten years of democracy in South Africa, I think it is useful to consider what we have achieved and what challenges we will still have to face. My address this morning is a summary of a more detailed chapter that I wrote on this same subject for a book to be published by the World Economic Forum entitled "South Africa, The Miracle Continues". This may be a book of interest to many of you. I believe it will be launched at the Africa Economic Summit 2004, which will be held from 2 to 4 June in Maputo, Mozambique. 2.            The South African Economy in 1994                When the first democratically elected South African government came to power in 1994, the country was to a large extent economically isolated from the rest of the world. Trade boycotts, economic sanctions, disinvestment, the withdrawal of other capital and the declaration of a partial debt standstill from September 1985, forced the authorities to pursue an inward-oriented policy that had a severe impact on domestic economic performance. At the time of the standstill, the affected debt amounted to US$13,6 billion and the total debt amounted to US$23,7 billion. As a consequence living standards deteriorated, economic growth was constrained, unemployment rose, productivity growth slowed down and economic management became less effective.                The refusal of foreign creditors to roll over the short-term credit facilities of domestic borrowers led to a shortage of foreign exchange and a confidence crisis in 1985. Despite the debt standstill on the repayment of foreign debt, capital continued to flow out of the country. At first this consisted mainly of short-term capital that was not affected by the standstill arrangements. Blocking this capital would have jeopardised trade flows. Later these capital outflows also included amounts which became payable in terms of the various standstill agreements. From the beginning of 1985 to 1993 the net financial outflow from South Africa amounted to about R45 billion, or to 11 per cent of gross domestic fixed investment.                As a result of this outflow, the South African authorities were forced to generate current account surpluses. The gold and other foreign reserves of the country remained at low levels and domestic savings had to be used to finance the withdrawal of capital. The balance of payments constraint effectively limited the policy options the authorities had at their disposal. Although the forced repayment of loans improved the overall foreign debt position of the country, the policy of constrained domestic expansion called for huge sacrifices by the South African population and continued to affect the domestic economy for a long time after 1994. 3.            Global integration                Even before the new government came to power, many countries started to normalise trade relations with South Africa when it became apparent that the political transition would be negotiated in a peaceful manner. Trade boycotts, economic sanctions and the disinvestment campaign were suspended. However, debtors in South Africa had to continue making repayments on debt affected by the standstill arrangements for a number of years. The standstill only ended on 15 August 2001 when the final repayment on the affected debt was made. In the meantime, the South African government started raising funds again on international capital markets from 1995 and non-residents resumed investing in private entities in the country.                This normalisation of international relations allowed the newly-elected democratic government to gradually reintegrate the domestic economy into the global environment. High priority was given to the reform of trade policy in this process.                The trade regime at the begin