Address by Mr TT Mboweni, Governor of the South African Reserve Bank, at the Professional Society for Supply Chain Management (SAPICS) Conference, Sun City   1. Introduction Ladies and Gentlemen, thank you for inviting me to address this conference. I am certain that the efforts of your members in ensuring successful supply chain logistics in many sectors have played a very important supportive role in South Africa’s impressive economic achievements in recent years. Your successes are also evidenced by the moon rock you have secured so successfully for this event! No doubt you will continue to contribute meaningfully to making 2006 yet another year of significant positive growth in our economy. Customers worldwide are demanding ever higher levels of service and efficiency. And your society is to be commended for its sterling work in ensuring that South Africa’s growth potential is enhanced as companies adopt improved supply chain logistics in order to compete more effectively in a global environment that is characterised by increasing competitiveness and just-in-time processing and delivery. Of course, the economic context within which you operate is crucial to your success, too. 2. Recent domestic economic developments The South African economy has been in an upswing since September 1999, making the current business cycle expansion phase the longest on record. The upswing continues apace, with strong growth in the South African economy during the first quarter of 2006 as global growth provided a solid tailwind, inflation pressures were relatively calm and interest rates were steady. This is quite a remarkable achievement, given the domestic, regional and international challenges that have confronted South Africa during the course of this upswing. Real gross domestic product recorded an average annual growth rate of almost 5 per cent for the year 2005, which constitutes the highest annual growth rate since 1984. Although there was a deceleration from 4,1 per cent in the third quarter to 3,2 per cent in the fourth quarter of 2005, growth accelerated once again in the first quarter of 2006 to 4,2 per cent. Despite negative growth being recorded in the primary sector, the acceleration in growth was achieved due to the recovery in manufacturing output and continued buoyancy in other secondary and tertiary sectors. The seasonally adjusted real value added by the agriculture, forestry and fishing industry decreased by an annualised rate of 6,9 per cent during the first quarter of 2006 mainly due to the poor performance in the production of field crops. Following the decrease of 5,4 per cent in the fourth quarter of 2005, real value added by the mining and quarrying industry decreased at an annualised rate of 2,9 per cent during the first quarter of 2006 due mainly to declining gold production. However, growth in the real value added in manufacturing recovered significantly in the first quarter as other sectors such as construction, trade and other services remained extremely buoyant in the first quarter of 2006. The real value added by the non-agricultural industries (excluding the impact of the volatile agriculture industry) for the first quarter of 2006 increased by 4,7 per cent compared with the fourth quarter of 2005. Importantly for our members, the manufacturing sector is in an expansionary phase. The seasonally adjusted PMI for May, released this past week, showed the manufacturing sector expanded for the third consecutive month from a level of 54,3 in April to 57,6 in May. Some of the components that strengthened include the business activity component, new sales orders and suppliers’ performance. However, the PMI indicates that inventories fell from April’s level. And indications are that inventory investments in the manufacturing sector slowed in the fourth quarter of last year partly because of low crude oil imports and problems with the change to unleaded petrol. Many of these areas affect the members of your association but I am sure you are generally satisfied with the economy’s performance, thus far. Growth in r