Address by Mr TT Mboweni, Governor of the South African Reserve Bank, at the Regional Business Achievers Awards Dinner of the Businesswomen’s Association Pretoria, 27 June 2007 Honoured guestsLadies and gentlemen 1. Introduction Thank you for your invitation to speak at this business achievers awards ceremony. For too long the world of business has been a domain for men only, but in recent years more and more women have been making their mark in this arena. The Businesswomen’s Association has been instrumental in promoting and encouraging women who have entered the business world. The important role that women played in the liberation of our country is without question. Women have also played an important role in various fields which have contributed to the overall development of the country. It is now time for women to be at forefront of the business sector. Women in business are a scarce resource and your efforts deserve support. The economic environment in South Africa has been extremely positive in recent times, with growth averaging around five per cent for the past three years. An important contributing factor to this favourable environment has been the behaviour of commodity prices. As a commodity producer, we should be pleased when commodity prices are performing well. However, as we know from past experience, commodity price booms can be a mixed blessing. Too often in our history we have ignored the fact that commodity prices move in cycles. There had been a tendency to regard price booms as being permanent, only for things to end in tears when the cycle ended. The current boom has persisted for longer than many had predicted, leading to suggestions that we are now in a commodity super-cycle. At the same time, commodities have become a new asset class on their own. In my comments this evening I will highlight some of the recent developments in commodity prices and some of the challenges posed for the economy in general and monetary policy in particular. 2. Commodities and the South African economy As you are aware, commodities have played a central role in South Africa’s economic development. The mining industry, largely supported by gold, diamonds, coal and the platinum group of metals, has for more than a century contributed significantly to the national economy. It has provided the impetus for the development of physical infrastructure, as well as the establishment of the country’s secondary industries. South Africa is a leading supplier of a range of minerals and mineral products. According to the Chamber of Mines, in 2005, approximately 55 different minerals were produced from 1 113 mines and quarries, of which 45 mines produced gold, 29 produced platinum-group minerals, 64 produced coal and 202 produced diamonds. Mining, therefore, remains a key foundation of the South African economy. In 2005 mining made a direct and indirect contribution of approximately 15 per cent to GDP, accounted for around 50 per cent of merchandise exports (including primary and beneficiated mineral exports), 12 per cent of fixed investment, 30 per cent of the market value of the JSE limited and 20 per cent of formal-sector employment. However, it is important to note that an abundance of resources has not always implied a prosperous economy. This is particularly true for many resource-rich African countries, which until recently have not benefited from their resource endowments. Natural resources are also not a prerequisite for growth. Countries such as Japan and Switzerland with few natural resources have at times outperformed countries with a wealth of resource endowments. In fact, having natural resources is sometimes regarded as a curse. As far back as the 1950s, Prebisch and Singer postulated the secular decline of terms of trade of commodity-producing countries. The essence of their argument was that commodity prices had a tendency to decline over the long term. This, until recently, has been largely borne out by empirical evidence. In the last 140 years there have been 18 commodity cycles, with slumps being more persistent