EX-99.E 2 file2.htm QUARTERLY BULLETIN

QUARTERLY BULLETIN

MARCH 2007

[SOUTH AFRICAN RESERVE BANK LOGO OMITTED]

QUARTERLY BULLETIN

MARCH 2007

No 243

[SOUTH AFRICAN RESERVE BANK LOGO OMITTED]

South African Reserve Bank
--------------------------------------------------------------------------------

All rights reserved. No part of this publication may be reproduced, stored in a
retrieval system, or transmitted in any form or by any means, electronic,
mechanical, photocopying, recording or otherwise, without fully acknowledging
the Quarterly Bulletin of the South African Reserve Bank as the source. The
contents of this publication are intended for general information only and are
not intended to serve as financial or other advice. While every precaution is
taken to ensure the accuracy of information, the South African Reserve Bank
shall not be liable to any person for inaccurate information or opinions
contained in this publication.

Enquiries relating to this Bulletin should be addressed to:

The Head: Research Department
South African Reserve Bank
P O Box 427
Pretoria 0001
Tel. 27-12-3133668/3944

ISSN 0038-2620

http://www.reservebank.co.za/quarterlybulletin

--------------------------------------------------------------------------------
Quarterly Bulletin March 2007

South African Reserve Bank
--------------------------------------------------------------------------------

CONTENTS

QUARTERLY ECONOMIC REVIEW

Introduction....................................................... 1
Domestic economic developments .................................... 4
Domestic output ................................................ 4
Domestic expenditure ........................................... 7
Factor income .................................................. 10
Gross saving ................................................... 10
Employment...................................................... 12
Labour cost and productivity ................................... 14
Prices.......................................................... 15
Foreign trade and payments ........................................ 19
International economic developments ............................ 19
Current account ................................................ 20
Financial account .............................................. 23
Foreign debt ................................................... 24
International reserves and liquidity ........................... 25
Exchange rates ................................................. 26
Monetary developments, interest rates and financial markets ....... 28
Money supply ................................................... 28
Credit extension ............................................... 29
Interest rates and yields ...................................... 31
Money market ................................................... 35
Bond market .................................................... 37
Share market ................................................... 39
Market for exchange-traded derivatives ......................... 41
Real-estate market ............................................. 42
Public finance .................................................... 43
Non-financial public-sector borrowing requirement............... 43
Budget comparable analysis of national government finance ...... 44
The Budget for the fiscal years 2007/08 to 2009/10 ............. 47

STATEMENTS ISSUED BY MR T T MBOWENI, GOVERNOR OF THE SOUTH AFRICAN
RESERVE BANK

Statement of the Monetary Policy Committee 7 December 2006 ........ 53

Statement of the Monetary Policy Committee 15 February 2007 ....... 57

NOTE

Note on flow of funds in South Africa's national financial
accounts for the year 2005 ........................................ 61

NOTES TO TABLES.................................................... 78

STATISTICAL TABLES

Contents .......................................................... S-0
Key information ................................................... S-142

--------------------------------------------------------------------------------
Quarterly Bulletin March 2007

South African Reserve Bank
--------------------------------------------------------------------------------

QUARTERLY ECONOMIC REVIEW

INTRODUCTION

In 2006 the world economy recorded its third successive year of real growth at a
rate approximating 5 per cent, while on the African continent real growth
hovered around 5 1/2 per cent for the third year in succession. In both
instances it was the first time in at least a quarter of a century that growth
had progressed at such a firm pace for such an extended period. Under these
circumstances commodity prices remained strong and, in some instances, reached
record highs in 2006. Nevertheless, world inflation remained subdued, partly on
account of a general tightening of monetary policy.

In South Africa the economy also exhibited exceptional momentum with real gross
domestic product increasing at a rate of 5 per cent in 2006, broadly in keeping
with the growth rates in the preceding two years. Average growth over three
successive years at this pace was previously observed from 1979 to 1981.
Annualised growth accelerated from 4 1/2 per cent in the third quarter of 2006
to 5 1/2 per cent in the final quarter on account of an improvement in growth in
all the main sectors of the economy.

In the fourth quarter of 2006 agricultural production contracted at a slower
pace than before. At the same time growth in the real value added by the mining
sector was bolstered by the strongly rising production of platinum group metals
and, to a lesser extent, diamonds. Manufacturing recorded vibrant growth in the
fourth quarter, with most subsectors expanding output. Production of petroleum,
chemicals, rubber and plastic products in particular rebounded, following a
contraction in the preceding quarter. The construction sector experienced a
surge in non-residential building activity and a further increase in residential
construction in the fourth quarter of 2006. In the tertiary sector most
subsectors posted sturdy growth over this period.

The robust growth in domestic production in the fourth quarter of 2006 was
accompanied by exceptionally buoyant domestic expenditure. All the expenditure
components contributed to a marked acceleration of real domestic expenditure in
the final quarter of 2006, but the main growth impetus was provided by a
turnaround in real final consumption expenditure by general government and a
surge in inventory accumulation which partly reflected high oil imports during
the quarter. Nevertheless, real gross fixed capital formation also gained
further momentum in the fourth quarter of 2006 due to continued growth in real
capital outlays across all institutional sectors - private business enterprises,
public corporations and general government.

Growth in real consumption expenditure by households accelerated marginally in
the fourth quarter of 2006, supported by a further increase in real household
income. Along with households' acquisition of residences which pushed up
mortgage borrowing, this was reflected in yet further increases in the ratio of
household debt to disposable income. With both a higher level of indebtedness
and higher interest rates, the ratio of household debt service cost to
disposable income also rose significantly in the second half of 2006, but
nevertheless remained far below its record levels of 1998 in view of the
generally much lower level of nominal interest rates which has been established
in recent years.

Throughout 2006 imports continued to exceed exports by a considerable margin.
This brought the deficit for the year to 6,4 per cent of gross domestic product
- a magnitude previously observed in 1981. However, the imports of capital goods
contributed to the

--------------------------------------------------------------------------------
Quarterly Bulletin March 2007 1

South African Reserve Bank
--------------------------------------------------------------------------------

expansion of capacity and easing of bottlenecks which in time will support
export growth, while the financial inflows on the balance of payments again
exceeded the shortfall on the current account throughout 2006. The ease with
which the current-account deficit was financed extended to the final quarter of
the year, when strong capital formation and exceptionally high oil imports led
to a deficit on the current account of the balance of payments equal to 7,8 per
cent of gross domestic product. Had oil imports in the fourth quarter of 2006
progressed at their normal pace, the deficit ratio would have been reduced by
more than 2 percentage points.

Portfolio flows into South Africa constituted the most important component of
these financing transactions, with share investment significantly ahead of bond
investment in the first half of the year and broadly equal contributions from
these two sources in the second half. Despite a sizeable foreign direct
investment outflow in the fourth quarter of 2006 as a non-resident direct
investor sold its equity stake in a domestic gold-mining company to a South
African entity, inflows dominated the financial account of the balance of
payments throughout the year. This allowed the South African Reserve Bank (the
Bank) to accumulate net foreign reserves in each quarter of 2006, a process
which continued in the first 2 1/2 months of 2007.

Reflecting the improved growth picture, employment rose during the year to
September 2006. Adjusted for productivity gains, increases in average salaries
and wages per worker as well as wage settlements in 2006 remained consistent
with the inflation target. The significant depreciation of the external value of
the rand from May 2006 and the vicissitude of the prices of oil and food
nevertheless, on balance, added to the inflation momentum in the course of the
past year. Twelve-month inflation in production prices rose as high as 10 per
cent towards the end of 2006. The targeted CPIX measure of inflation also
accelerated significantly during the past year but remained within the target
range, its highest level of 5,3 per cent being recorded in January 2007. The
curbing of inflation benefited from the action taken by the Monetary Policy
Committee which, mindful of the increased inflation risks which were weighed to
the upside, raised the repurchase rate by 50 basis points at each of its four
successive meetings from June to December 2006.

Money supply growth maintained strong momentum throughout 2006 and in January
2007, reflecting vigorous expenditure, strong income growth, buoyant turnover in
the financial markets and positive wealth effects. Corporate-sector deposits
with the banking system continued to rise considerably more briskly than those
of the household sector during this period. Banks' loans and advances extended
to the private sector also rose at a robust pace throughout the past year
despite the increases in lending rates from June 2006. The sluggishness of the
response to higher interest rates partly reflected the relatively low level of
debt servicing costs, rising income and employment, high consumer and business
confidence, and strong balance sheets. Mortgage advances accounted for roughly
half of the increase in bank loans and advances over the past year. During 2006
bank advances to the corporate sector rose more strongly than those to the
household sector, possibly reflecting the acceleration in capital expenditure by
the former sector.

In the bond market the yield curve became downward sloping during the fourth
quarter of 2006 as short-term rates were influenced by the successive increases
in the repurchase rate. The inversion of the yield curve was also characterised
by declining yields for longer maturities, related to a projected lower overall
supply of bonds and expectations that inflation would remain well contained over
the longer term. The subdued supply of bonds originated in the public sector,
reflecting the strong fiscal position of the national government. At the same
time the private sector expanded its issues of bonds, partly in the form of
securitisation by banks.

--------------------------------------------------------------------------------
2 Quarterly Bulletin March 2007

South African Reserve Bank
--------------------------------------------------------------------------------

Share prices, on balance, again recorded strong gains in 2006, despite a setback
in May and June. The upward momentum of the South African share market was
sustained in early 2007, but prices receded somewhat from 27 February in
sympathy with developments in international equity markets. With global share
prices at relatively high levels, a retraction was triggered by a sharp decline
in Chinese share prices.

SHARE PRICES

[GRAPHIC OMITTED]

In the past year house prices continued to rise at a rate well above that of
consumer prices, strengthening household balance sheets and adding to consumer
confidence. There were tentative indications of a moderate reacceleration of
house prices in recent months.

The 2007 Budget, which was presented to Parliament on 21 February, provided for
the first main budget surplus ever in South African history - in fact, budget
surpluses are anticipated in both fiscal 2006/07 and 2007/08, reverting to small
deficits in the subsequent two years. Lower inflation and lower interest rates
contributed to lower debt service cost, and along with briskly rising tax
revenue created room for increased spending on health, education, economic
infrastructure and other growth-enhancing areas. At the same time the
government's social safety net already involved regular payments benefiting
almost 12 million recipients.

The tax proposals in the 2007 Budget were aimed at encouraging long-term saving,
and included the abolishment of the tax on interest and rental income of
retirement funds. The introduction of a broad-based social security framework
over the period 2007 to 2010 was also proposed to enhance households' income
security, reduce their vulnerability and contribute towards savings.

--------------------------------------------------------------------------------
Quarterly Bulletin March 2007 3

South African Reserve Bank
--------------------------------------------------------------------------------

DOMESTIC ECONOMIC DEVELOPMENTS

Domestic output(1)

The South African economy expanded further in the fourth quarter of 2006 as
growth in real gross domestic product increased from a revised annualised rate
of 4 1/2 per cent growth in the third quarter of 2006 to 5 1/2 per cent in the
fourth quarter. The acceleration in aggregate economic growth in the fourth
quarter of 2006 resulted from improved growth in the real value added by all the
main sectors of the economy. Subsequent to six consecutive quarters of negative
growth, real output in the primary sector also increased in the final quarter of
2006. For 2006 as a whole, real gross domestic product increased at a rate of 5
per cent, broadly in keeping with the growth rates in the preceding two years.

REAL GROSS DOMESTIC PRODUCT

[GRAPHIC OMITTED]

In the primary sector, real value added declined by 4 1/2 per cent in 2006 after
an increase of 3 per cent was recorded in 2005. This reversal was mainly due to
a sizeable contraction in the real value added by the agricultural sector in
2006. On a quarterly basis real production in the primary sector increased at a
rate of 1 per cent in the fourth quarter of 2006 after having declined at a
revised annualised rate of 4 per cent in the third quarter. This was the net
result of an increase in the real value added by the mining sector, which more
than neutralised the decline registered in agricultural output in the fourth
quarter of 2006.

The rate of decline in real value added by the agricultural sector slowed from a
revised 15 per cent in the third quarter of 2006 to 8 1/2 per cent in the fourth
quarter, reflecting a

(1) The quarter-to-quarter growth rates referred to in this section are based
on seasonally adjusted data.

--------------------------------------------------------------------------------
4 Quarterly Bulletin March 2007

South African Reserve Bank
--------------------------------------------------------------------------------

continued decline in the production of field crops, despite an improvement in
the wheat crop during the fourth quarter. This more than offset the higher
production of livestock. Consequently, the real value added by the agricultural
sector, which increased by 4 per cent in 2005, declined by 13 per cent in 2006
as a whole.

REAL GROSS DOMESTIC PRODUCT
Percentage change at seasonally adjusted annualised rates

------------------------------------------------------------------------------------------------------------
2005 2006
--------------------------------------------------------------------------------
Sectors 1st qr 2nd qr 3rd qr 4th qr Year 1st qr 2nd qr 3rd qr 4th qr Year
--------------------------------------------------------------------------------

Primary sector ........... 10 1/4 -1/2 0 -1/4 3 -9 1/2 -7 1/4 -4 1 -4 1/2
Agriculture ........... -2 -1 1/4 1/2 1 4 -18 3/4 -30 -15 -8 1/2 -13
Mining ................ 16 0 -1/2 -3/4 2 1/2 -5 1/2 3 1/2 1/4 4 1/2 -3/4
Secondary sector ......... 2 10 1/4 6 3 5 1/2 4 3/4 7 1/4 5 1/2 8 1/2 5 3/4
Manufacturing ......... 3/4 11 6 1 1/2 5 3 1/4 6 1/4 4 3/4 8 1/4 4 3/4
Tertiary sector .......... 5 1/2 4 1/4 5 1/2 5 3/4 5 1/4 7 1/4 6 1/4 4 3/4 5 1/4 6
Non-agricultural sector .. 5 1/4 5 1/2 5 1/4 4 1/2 5 1/4 5 3/4 6 1/4 4 3/4 6 5 1/2
TOTAL .................... 4 3/4 5 1/2 5 4 1/4 5 5 5 1/2 4 1/2 5 1/2 5
------------------------------------------------------------------------------------------------------------

Growth in the real value added by the mining sector accelerated from a revised
annualised rate of a 1/4 per cent in the third quarter of 2006 to 4 1/2 per cent
in the fourth quarter. This was mainly the result of a strong increase in real
value added by platinum mining and, to a lesser extent, by diamond mining.
Platinum mining benefited from strong demand for both jewellery and industrial
use, while diamond production rose alongside a recovery of demand in the
international market. By contrast, gold mining declined further in the fourth
quarter of 2006. Overall real production in mining registered a decline of 3/4
of a per cent in 2006 as a whole.

Having increased at an annualised rate of 5 1/2 per cent in the third quarter
of 2006, the real value added by the secondary sector increased further at a
rate of 8 1/2 per cent in the fourth quarter. This strong acceleration was
especially due to the improved fortunes of the manufacturing sector.

The real value added by the manufacturing sector rose at an annualised rate of
4 3/4 per cent in the third quarter of 2006, surging to 8 1/4 per cent in
the fourth quarter. Positive fourth-quarter growth was registered by the
majority of the manufacturing subsectors. In particular, the output of the
subsector that manufactures petroleum, chemical products, rubber and plastic
rebounded strongly following contractions in the preceding quarter. In keeping
with the resumption of production at refineries which had undergone maintenance
during the third quarter, the real value added in the subsector for petroleum
and chemical products recovered.

The sustained increases in real value added by the manufacturing sector
throughout 2006 reflected the continued high level of business confidence and
the sustained high level of domestic demand, while manufacturing exports also
expanded somewhat. As a result, manufacturing experienced an increase in the
utilisation of production capacity from an average of 85,5 per cent in 2005 to
86,0 per cent in 2006, and registered a record high of 86,6 per cent in the
final quarter of 2006. In the calendar year 2006 the real value added by the
manufacturing sector increased by 4 3/4 per cent, just below the rate of 5 per
cent recorded in 2005.

--------------------------------------------------------------------------------
Quarterly Bulletin March 2007 5

South African Reserve Bank
--------------------------------------------------------------------------------

Following an increase of only 3/4 per cent in the third quarter of 2006, the
growth in real value added by the sector supplying electricity, gas and water
inched higher to 1 1/2 per cent in the fourth quarter. This can be ascribed to
increased demand, both domestically and abroad. However, for 2006 as a whole,
growth in the real value added by the sector supplying electricity, gas and
water accelerated to 3 per cent compared with an increase of 2 1/2 per cent
recorded in 2005.

Growth in real value added by the construction sector remained brisk, recording
an annualised rate of 14 1/4 per cent in both the third and fourth quarters of
2006. These increases could mainly be attributed to a surge in the construction
of non-residential buildings and a further increase in residential building
activity. As a result of the sustained buoyant conditions in the construction
sector, real value added by the sector increased by 13 1/4 per cent in the year
2006 as a whole, following an increase of 12 per cent in 2005.

The pace of growth in real value added by the tertiary sector increased from
4 3/4 per cent in the third quarter of 2006 to 5 1/4 per cent in the fourth
quarter. The higher growth was a reflection of marginally higher or unchanged
growth rates posted by all the subsectors of the tertiary sector with the
exception of the trade sector. Consequently, the growth in real production of
the tertiary sector rose from 5 1/4 per cent in 2005 to 6 per cent in 2006.

Growth in the real value added by the trade sector slowed from an annualised
rate of 6 1/4 per cent in the third quarter of 2006 to 5 1/2 per cent in the
fourth quarter reflecting slower output growth in the wholesale and retail
sectors. By contrast, growth in real value added by the motor trade subsector
accelerated over the period. The real value added by the trade sector as a whole
in 2006 increased by 6 3/4 per cent, marginally higher than the rate of 6 1/2
per cent attained in 2005.

The real value added by the transport, storage and communication sector
increased further at an annualised rate of 5 1/2 per cent in the third and
fourth quarters of 2006. During the fourth quarter, a brisk increase in
especially road transport comfortably offset slower growth in real value added
by air transport. In the communication sector, the mainstay of activity remained
cellular phone communication where increased competition and number portability
probably supported real output. As a result of these developments, the real
value added by the transport, storage and communication sector rose by 5 1/2 per
cent in 2006, the same rate attained for the year 2005.

With quarter-to-quarter growth rates ranging between 5 per cent and 14 per cent
in 2006, annual growth in real value added by the finance, insurance,
real-estate and business services sector amounted to a robust 8 1/4 per cent for
the year 2006, a rate previously attained in 2004. The solid performance in 2006
was underpinned by lively activity of banks, securities dealers as well as the
business services sector. The exceptionally high trading volumes on the JSE
Limited (JSE) during the past year boosted the real value added by securities
dealers. The strong demand in the economy along with the buoyancy in the
real-estate market provided a fillip to banks' output.

The real value added by general government increased at an annualised rate of 3
1/2 per cent in the fourth quarter of 2006, and for the year as a whole rose by
3 1/4 per cent compared with 3 1/2 per cent in 2005. The increase in the real
output of general

--------------------------------------------------------------------------------
6 Quarterly Bulletin March 2007

South African Reserve Bank
--------------------------------------------------------------------------------

government mainly reflected an expansion of the staff complement of general
government as it strived to meet its service delivery obligations.

Real gross national income increased by 5 1/4 per cent in 2005 and 6 1/4 per
cent in 2006. These increases could mainly be attributed to rising real output,
but were augmented by an improvement in South Africa's terms of trade from 2005
to 2006 which more than offset an increase in net primary income payments to the
rest of the world over the period.

DOMESTIC EXPENDITURE

Growth in aggregate real gross domestic expenditure accelerated from an
annualised rate of 1 1/2 per cent in the third quarter of 2006 to 12 1/4 per
cent in the fourth quarter. All the expenditure components contributed to this
acceleration, but it was especially due to a turnaround in real final
consumption expenditure by general government and strong inventory accumulation,
partly reflecting a surge in oil imports during the fourth quarter. For the
calendar year 2006, aggregate real gross domestic expenditure increased by 8 3/4
per cent compared with an increase of 6 per cent in 2005.

REAL GROSS DOMESTIC EXPENDITURE
Percentage change at seasonally adjusted annualised rates

---------------------------------------------------------------------------------------------------------------
2005 2006
-----------------------------------------------------------------------------
Components 1st qr 2nd qr 3rd qr 4th qr Year 1st qr 2nd qr 3rd qr 4th qr Year
-----------------------------------------------------------------------------

Final consumption expenditure:
Households .................. 6 5 3/4 6 6 6 1/2 8 1/4 8 7 1/2 7 3/4 7 1/4
General government .......... 1/4 5 3/4 5 3/4 15 5 1/4 -3 1/4 15 3/4 -4 1/4 4 3/4 5 1/2
Gross fixed capital formation .. 9 1/2 8 3/4 11 1/4 11 1/2 9 1/2 14 1/4 12 1/2 14 1/4 16 1/2 12 3/4
Change in inventories
(R billions)* .................. 12,3 7,4 13,5 2,0 8,8 15,9 16,3 9,0 21,8 15,8
GROSS DOMESTIC EXPENDITURE ..... 6 3/4 5 1/2 8 6 6 15 9 1 1/2 12 1/4 8 3/4
---------------------------------------------------------------------------------------------------------------

* At constant 2000 prices

Real final consumption expenditure by households increased at an annualised rate
of 7 3/4 per cent in the fourth quarter of 2006 compared with a rate of 7 1/2
per cent in the third quarter. The sustained robust expansion in household
spending was broad based and proceeded at a roughly similar pace in all the
spending categories. The annual growth in real final consumption expenditure by
households amounted to 7 1/4 per cent in 2006 compared with a rate of 6 1/2 per
cent recorded in 2005.

Growth in real household expenditure on durable goods accelerated from an
annualised rate of 7 per cent in the third quarter of 2006 to 8 1/2 per cent in
the fourth quarter, buoyed by spending on recreational and entertainment goods.
Real outlays on furniture, household appliances and medical equipment, however,
slowed in the fourth quarter.

Growth in real household expenditure on semi-durable goods decelerated from a
brisk 24 per cent in the third quarter of 2006 to 8 per cent in the fourth
quarter. This was due to slower spending growth in all categories of
semi-durable goods.

--------------------------------------------------------------------------------
Quarterly Bulletin March 2007 7

South African Reserve Bank
--------------------------------------------------------------------------------

Real household expenditure on non-durable goods picked up, its growth rate
accelerating from 3 1/4 per cent in the third quarter of 2006 to 6 1/2 per cent
in the fourth quarter. Slower growth in the subsectors food, beverages and
tobacco and household consumer goods was offset by stronger spending on
household fuel and power, medical and pharmaceutical products and petroleum
products.

REAL FINAL CONSUMPTION EXPENDITURE BY HOUSEHOLDS
Percentage change at seasonally adjusted annualised rates

----------------------------------------------------------------------------------------------------
2005 2006
------------------------------------------------------------------------------
Components 1st qr 2nd qr 3rd qr 4th qr Year 1st qr 2nd qr 3rd qr 4th qr Year
------------------------------------------------------------------------------

Durable goods ...... 15 1/2 17 1/4 10 1/4 24 18 3/4 19 3/4 13 7 8 1/2 15 1/2
Semi-durable goods.. 19 1/4 12 3/4 16 8 16 1/2 23 3/4 26 1/2 24 8 18 1/2
Non-durable goods... 3 1/4 4 1/4 4 1/4 4 3/4 4 3/4 4 6 3/4 3 1/4 6 1/2 4 3/4
Services ........... 2 1/2 2 1/4 3 1/4 2 1/4 2 1/2 4 1 3/4 6 8 3/4 3 1/2
TOTAL .............. 6 5 3/4 6 6 6 1/2 8 1/4 8 7 1/2 7 3/4 7 1/4
----------------------------------------------------------------------------------------------------

Real disposable income of households increased in the fourth quarter of 2006,
albeit at a slower rate than in the third quarter. The moderation in growth
could partly be ascribed to lower farm income recorded over this period. The
level of indebtedness of households also increased at a slower pace in the
fourth quarter of 2006 due to a slowdown in mortgage advances during this
period. However, household debt as a percentage of household disposable income
increased further from 73 per cent in the third quarter of 2006 to a new high of
73 3/4 per cent in the fourth quarter.

Real final consumption expenditure by general government increased at a rate of
4 3/4 per cent in the fourth quarter of 2006, recovering from a broadly similar
rate of decline in the third quarter. The strong increase reflected expenditure
on goods and non-wage services. Real expenditure on compensation of employees by
government continued at annualised rates of between 3 and 4 per cent in the
third and fourth quarters of 2006. Consequently, real final consumption
expenditure by general government as a ratio of gross domestic product edged
higher from 19 per cent in the third quarter of 2006 to 19 1/4 per cent in the
fourth quarter.

Annualised growth in real gross fixed capital formation accelerated from 14 1/4
per cent in the third quarter of 2006 to 16 1/2 per cent in the fourth quarter.
The increase in the fourth quarter could be attributed to continued growth in
real capital outlays across all institutional sectors - private business
enterprises, public corporations and the general government. This lifted the
ratio of gross fixed capital formation to gross domestic product from 18 1/2 per
cent in the third quarter of 2006 to 19 1/4 per cent in the fourth quarter.

Real gross fixed capital formation in the private sector expanded at annualised
rates of 13 per cent in the third quarter of 2006 and 13 1/2 per cent in the
fourth quarter. The latter increase could be attributed to strongly rising real
capital outlays by the mining, manufacturing, construction and commerce sectors.
Projects to expand mining production continued, notably in the mining of iron
ore. As illustrated in the graph at the bottom of page 9, real fixed capital
formation in the manufacturing sector continued to rise as manufacturers
experienced high rates of capacity utilisation and prepared for further demand
pressures arising from the planned infrastructural

--------------------------------------------------------------------------------
8 Quarterly Bulletin March 2007

South African Reserve Bank
--------------------------------------------------------------------------------

COMPONENTS OF REAL GROSS FIXED CAPITAL FORMATION

[GRAPHIC OMITTED]

investment. This expansion was evident in rising capital outlays on machinery
and equipment. Although the growth in the residential property market was
tapering off, the construction sector benefited from strong demand for offices,
industrial buildings and retail shopping facilities.

FIXED CAPITAL FORMATION AND CAPACITY UTILISATION IN MANUFACTURING

[GRAPHIC OMITTED]

Public corporations stepped up spending on electricity and transport
infrastructure. The growth in real gross fixed capital formation by public
corporations increased from an annualised rate of 24 1/2 per cent in the third
quarter of 2006 to 40 3/4 per cent in the fourth quarter. The electricity sector
increased real capital outlays, especially to upgrade the capacity of the
distribution network. The transport sector increased investment to

--------------------------------------------------------------------------------
Quarterly Bulletin March 2007 9

South African Reserve Bank
--------------------------------------------------------------------------------

replace rolling stock. In addition, capital expenditure was stepped up at
several airports to accommodate the rising numbers of travellers.

Gross fixed capital formation by general government increased in the fourth
quarter of 2006 at an annualised rate of 13 per cent, compared with an increase
of 11 1/2 per cent recorded in the third quarter of 2006. All the tiers of
government increased their real capital investment, gearing up to address
infrastructure backlogs.

Estimates indicate that annualised real inventory accumulation increased sharply
from R9,0 billion in the third quarter of 2006 to R21,8 billion in the fourth
quarter. Most inventory investment occurred in the manufacturing sector, where
imports of oil rose substantially to replenish low levels which had arisen due
to maintenance work on refineries during the third quarter of 2006. Accordingly,
real inventories contributed 4 1/4 percentage points to growth in real gross
domestic expenditure in the fourth quarter of 2006, which compared favourably to
the 2 1/2 percentage points that the change in inventories subtracted from
growth in the third quarter of 2006.

FACTOR INCOME

The growth over one year in total nominal factor income inched higher from 13
1/2 per cent in the third quarter of 2006 to 13 3/4 per cent in the fourth
quarter. The firmer increase was the net result of an acceleration in the gross
operating surpluses of business enterprises which more than offset a minor
slowdown recorded in the compensation of employees over the period. Total factor
income increased by 12 per cent in 2006 compared with 9 per cent in 2005. This
increase can be attributed to stronger growth recorded in the gross operating
surpluses of businesses underpinned by sustained increases in nominal
compensation of employees.

The year-on-year rate of growth in compensation of employees decreased
marginally from 9 1/2 per cent in the third quarter of 2006 to 9 1/4 per cent in
the fourth quarter. The rate of growth in compensation of employees slowed from
10 per cent in 2003 to 8 1/4 per cent in 2005, but this was reversed in 2006
when the growth rate edged up to 9 per cent. Higher wage settlements, an overall
increase in employment levels and upward pressure on wages due to the scarcity
of specialised skills contributed to the higher annual increase in remuneration
of employees in 2006.

Following the brisk real economic growth throughout 2006, the growth in the
gross operating surplus of business enterprises, measured over four quarters,
increased from 17 per cent in the third quarter of 2006 to 18 3/4 per cent in
the fourth quarter. All the major sectors, with the exception of the transport,
storage and communication, and mining sectors, contributed to the improvement in
aggregate gross operating surpluses. The annual growth in total gross operating
surplus amounted to 15 1/4 per cent in 2006 compared with 10 per cent in 2005.
Consequently, the share of gross operating surplus in total factor income
increased from 49 1/4 per cent in 2005 to 50 1/2 per cent in 2006.

GROSS SAVING

The ratio of gross saving to gross domestic product declined abruptly from 14
1/4 per cent in the third quarter of 2006 to 13 3/4 per cent in the fourth
quarter. This deterioration of the national saving ratio brought the annual
saving ratio to a historical low of 14 per

--------------------------------------------------------------------------------
10 Quarterly Bulletin March 2007

South African Reserve Bank
--------------------------------------------------------------------------------

GROSS SAVING AS PERCENTAGE OF GROSS DOMESTIC PRODUCT

[GRAPHIC OMITTED]

cent in 2006. The dependence on foreign capital to finance gross capital
formation increased substantially from about 21 per cent in 2005 to almost 32
per cent in 2006.

Gross saving of the corporate sector as a percentage of gross domestic product
declined from 10 1/4 per cent in the third quarter of 2006 to 10 per cent in the
fourth quarter. Likewise, the annual corporate saving ratio declined from 11 per
cent in 2005 to 10 1/4 per cent in 2006. Notwithstanding the strong and
sustained improvements in the gross operating surpluses of companies, higher
dividends, tax and interest payments resulted in a declining level of corporate
saving.

The financial position of general government continued to strengthen in 2006.
The gross saving by general government as a percentage of gross domestic product
recovered to 1 1/2 per cent in 2005 and further to 2 1/4 per cent in 2006. The
strengthening in the saving ratio was due to strong and sustained increases in
current income from taxes, which exceeded increases in government's recurrent
expenditure.

The gross saving ratio of the household sector declined from 1 3/4 per cent in
2005 to 1 1/2 per cent in 2006, reflecting a sustained strong propensity to
consume. After allowing for depreciation, the household sector's consumption
exceeded its income in the calendar year 2006, resulting in the first ever net
negative saving by the household sector for a full year. Simultaneously, the
household sector debt relative to disposable income reached a new high of 73 3/4
per cent in the fourth quarter of 2006.

--------------------------------------------------------------------------------
Quarterly Bulletin March 2007 11

South African Reserve Bank
--------------------------------------------------------------------------------

The household debt servicing cost of 9 per cent of disposable income in the
fourth quarter remained well contained compared with the previous high of 14 1/4
per cent recorded towards the end of 1998.

HOUSEHOLD DEBT AND DEBT DEBT SERVICE RATIO

[GRAPHIC OMITTED]

EMPLOYMENT

The robust performance of the South African economy during the past three years
paved the way for significant employment gains. From the most recent lower
turning point in the employment cycle, i.e. the second quarter of 2003,
enterprise-surveyed formal non-agricultural employment increased by around 528
000 up to the third quarter of 2006. Of this increase, 200 000 jobs were created
during the year to September 2006, an increase of 2,7 per cent. Employment
growth in the public sector marginally outpaced employment gains in the private
sector over this four-quarter period.

According to the enterprise-based Quarterly Employment Statistics (QES) compiled
by Statistics South Africa, employment growth occurred at an annualised rate of
3,9 per cent in both the private and public sector in the third quarter of 2006.
In the public sector, employment numbers surged at local government level,
following five consecutive quarters of decline. Employment growth also continued
in other tiers of the public sector, albeit at a slower pace. In the private
sector, the most sturdy employment increases occurred in the transport, storage
and communication sector, followed by the finance, insurance, real-estate and
business services sector as well as the construction sector. Employment in the
manufacturing sector, however, fell slightly during this period while the
electricity-generation sector suffered a more substantial loss in employment
opportunities.

The latest business survey of the Bureau for Economic Research (BER) conducted
in the building and construction industry indicates that the business confidence
of residential contractors improved in the fourth quarter of 2006 after a slight
lapse in the preceding

--------------------------------------------------------------------------------
12 Quarterly Bulletin March 2007

South African Reserve Bank
--------------------------------------------------------------------------------

quarter. By contrast, business confidence of non-residential contractors dropped
marginally over the period notwithstanding an expansion in building activity
levels and a further increase in the number of people employed. Indications are
that widespread shortages of skilled labour prevailed in the industry, with no
less than 96 per cent of respondents indicating that skilled-labour shortages
constrained their business operations. The outlook for 2007 was nevertheless
perceived as remaining positive, with no substantial change in business
conditions being expected.

NON-AGRICULTURAL EMPLOYMENT

[GRAPHIC OMITTED]

Business confidence in the manufacturing sector increased significantly from the
third to the fourth quarter of 2006, lifting confidence levels to an eleven-year
high. According to the survey conducted by the BER, production volumes increased
sharply in the fourth quarter while employment growth accelerated to rates
previously observed during the 1970s and 1980s. In addition, the average hours
worked per factory worker also increased in the final quarter of 2006. These
findings of improved job prospects in the manufacturing sector were corroborated
by the employment sub-index of the Investec Purchasing Managers Index for the
three-month period to February 2007. The generally favourable business
conditions were expected to continue in the first quarter of 2007.

According to the National Association of Automobile Manufacturers of South
Africa (NAAMSA), employment in the South African motor manufacturing industry
surged to a ten-year high in the third quarter of 2006. The number of jobs in
the industry rose by 6 355, or 19,5 per cent, during the 21 months to September
2006. The increase in employment levels contributed materially to higher
production levels associated with the increased domestic and foreign demand for
South African manufactured vehicles.

--------------------------------------------------------------------------------
Quarterly Bulletin March 2007 13

South African Reserve Bank
--------------------------------------------------------------------------------

Within an environment of improved job prospects, the number of mandays lost rose
from 2,3 million in 2005 to 2,9 million in 2006, according to the Wage
Settlement Survey by Andrew Levy Employment Publications (a private-sector
labour consultancy). This increase in the number of mandays lost was mainly due
to widespread and prolonged strike action in the transport and security sectors
during the course of 2006. Despite the increase in the number of mandays lost,
the incidence of industrial action during wage negotiations declined from 22,5
per cent in 2005 to 15,6 per cent in 2006. Furthermore, 76 per cent of companies
reported that wage negotiations had taken place in a positive bargaining
environment in 2006, compared with 60 per cent in the preceding year.

LABOUR COST AND PRODUCTIVITY

The pace of increase in nominal remuneration per worker in the formal
non-agricultural sector accelerated rapidly from a year-on-year rate of 4,4 per
cent in the fourth quarter of 2005 to 7,3 per cent in the first quarter of 2006
and to 8,1 per cent in the third quarter. Accelerated nominal wage growth
resulted from double-digit increases in remuneration per worker in a diverse set
of sectors, namely electricity generation; manufacturing; gold mining;
community, social and personal services; transport, storage and communication;
and national government departments. These increases were, however, partly
offset by more subdued rates of wage growth in the non-gold mining and
manufacturing sectors as well as the trade, catering and accommodation services
sector.

Output growth in the economy outpaced employment gains in recent quarters,
leading to an acceleration in labour productivity growth from 1,0 per cent in
the year to the first quarter of 2006 to 2,6 per cent in the year to the third
quarter. Notwithstanding the rise in labour productivity in recent quarters, it
still fell short of the average labour productivity growth of 4,1 per cent
attained in 2005. Labour productivity growth in the manufacturing sector also
slowed from an average annual rate of 5,0 per cent in 2005 to year-on-year rates
of around 3 per cent in the first three quarters of 2006. In contrast with the
preceding two years, when labour productivity growth in the manufacturing sector
clearly set the pace, recent productivity growth in manufacturing exceeded that
in the formal non-agricultural sector of the economy only by a slender margin.

The rate of increases in nominal unit labour cost, i.e. the cost of labour per
unit of production, accelerated meaningfully from a year-on-year rate of 3,0 per
cent in the second quarter of 2006 to 5,3 per cent in the third quarter. Changes
in nominal unit labour cost normally precede or coincide with changes in
consumer price inflation. Growth in nominal unit labour cost in the
manufacturing sector, however, slowed to a year-on-year rate of 2,5 per cent in
the third quarter of 2006, mainly due to labour productivity growth which
slightly exceeded remuneration growth in the sector over this period.

According to Andrew Levy Employment Publications, the average level of wage
settlements in collective bargaining agreements increased marginally from 6,3
per cent in 2005 to 6,5 per cent in 2006. Settlements in 2006 ranged from 4,6
per cent to 9,7 per cent. The average minimum monthly wage per worker across all
sectors over the year to December 2006 amounted to R3 065, with sector minima
ranging from R1 200 in the retail sector to R6 007 in the transport sector.
Apart from these sector minima, minimum monthly wages as stipulated by
governmental sectoral determinations applying to domestic and agricultural
workers amounted to R1 067 from 1 December 2006 and R989 from 1 March 2007,
respectively. The annual increase in the minimum monthly wage for domestic
workers amounted to 7 per cent, while that for agricultural workers in the rural
areas amounted to 11,8 per cent.

--------------------------------------------------------------------------------
14 Quarterly Bulletin March 2007

South African Reserve Bank
--------------------------------------------------------------------------------

WAGE SETTLEMENT RATES AND CPIX INFLATION

[GRAPHIC OMITTED]

PRICES

CPIX inflation accelerated considerably during the middle quarters of 2006,
mainly as a consequence of accelerating food price inflation, rising services
prices and steep increases in the international price of crude oil up to August.
The depreciation in the exchange rate of the rand added to further price
pressures in the domestic economy. As a consequence, annual average CPIX
inflation accelerated from 3,9 per cent in 2005 to 4,6 per cent in 2006.
Year-on-year CPIX inflation accelerated from 3,7 per cent in April 2006 to 5,0
per cent in each of the three closing months of 2006. Subsequently, this rate of
increase ticked up somewhat to 5,3 per cent in January 2007, but nevertheless
extended the period that it has remained within the inflation target range of
between 3 and 6 per cent to almost 3 1/2 years. Concurrently, production price
inflation more than doubled from an annual average rate of 3,1 per cent in 2005
to 7,7 per cent in 2006.

INFLATION

[GRAPHIC OMITTED]

--------------------------------------------------------------------------------
Quarterly Bulletin March 2007 15

South African Reserve Bank
--------------------------------------------------------------------------------

Driven mainly by the depreciation in the exchange rate of the rand, the annual
average rate of increase in the production prices of imported goods rose from
3,6 per cent in 2005 to 7,7 per cent in 2006 - the highest rate of increase in
the past four years. Year-on-year imported goods price inflation almost doubled
from the opening months of 2006 to 11,3 per cent in November, but receded
slightly, on balance, to 10,9 per cent in January 2007 along with a deceleration
in inflation in the prices of oil and agricultural food.

When measured from quarter to quarter and expressed at an annual rate, the
prices of imported goods increased by as much as 21,2 per cent in the third
quarter of 2006. This rate of increase fell meaningfully to 10,1 per cent in the
fourth quarter of 2006 as international crude oil prices declined over the
period.

Significant increases in food prices at both the agricultural and manufactured
level pushed domestically produced goods price inflation to levels previously
experienced in late 2002. The annual average rate of increase in the production
prices of domestically produced goods accordingly increased almost threefold
from 2,9 per cent in 2005 to 7,6 per cent in 2006. When measured over
twelve-month periods, domestically produced goods price inflation almost touched
the double-digit level, accelerating to 9,9 per cent in October 2006. This rate
of increase subsequently slowed somewhat to 9,5 per cent in the year to January
2007, as inflation in the prices of agricultural food, mining and petroleum
products moderated. In fact, as white maize and wheat prices levelled out,
agricultural food price inflation receded meaningfully to 12,6 per cent in the
year to January 2007 from rates as high as 23,5 per cent in August 2006.
Manufactured food price inflation continued to fluctuate between 10 and 12 per
cent during the five months to January 2007, after having accelerated from
mundane rates of increase during the opening months of the year. The
quarter-to-quarter pace of increase in domestically produced goods price
inflation also decelerated considerably in the fourth quarter of 2006,
especially as mineral product prices declined substantially towards the end of
the year.

Resulting from these higher rates of increase in the prices of imported goods
and the acceleration in domestically produced goods price inflation, all-goods
production price inflation rose from 3,1 per cent in 2005 to 7,7 per cent in
2006. When measured over periods of twelve months, all-goods production prices
increased by 10,0 per cent in both October and November 2006 - the highest rate
of increase in 45 months. Following the moderation in inflation in the prices of
petroleum and mining and quarrying products such as coal and metal ores,
all-goods production price inflation, on balance, declined somewhat to 9,8 per
cent in the year to January 2007.

Food-price increases contributed 0,5 percentage points to all-goods production
price inflation in the twelve months to January 2007. However, even if food
price inflation is disregarded, non-food production price inflation more than
doubled during the nine months to January 2007, indicating that price pressures
became more pervasive during the year.

Year-on-year CPIX inflation lost some of its earlier upward momentum and
amounted to 5,0 per cent during the closing months of 2006, having accelerated
from 3,7 per cent in April. It picked up somewhat further to 5,3 per cent in
January 2007. CPIX consumer food price inflation, which had broadly doubled from
4,3 per cent in January 2006 to 8,3 per cent in January 2007, contributed
materially to the increase in CPIX inflation during the past year. In fact, when
food prices are omitted from the calculation, CPIX inflation remained fairly
stationary at around 4 per cent during 2006, accelerating only slightly to 4,2
per cent in January 2007.

--------------------------------------------------------------------------------
16 Quarterly Bulletin March 2007

South African Reserve Bank
--------------------------------------------------------------------------------

FOOD PRICES
Percentage change over twelve months
--------------------------------------------------------------------------------
Domestic production prices of food
-----------------------------------
Agricultural Manufactured CPIX consumer
Period food food Total food prices
--------------------------------------------------------------------------------
2005: Year.............. -3,3 -1,2 -2,1 2,1
2006: Jan .............. 12,8 1,7 6,2 4,3
Feb .............. 14,4 2,5 7,2 4,5
Mar .............. 15,1 4,0 8,5 5,1
Apr .............. 18,6 5,4 10,6 5,5
May .............. 19,8 6,0 11,5 6,2
Jun .............. 22,5 6,0 12,6 7,2
Jul .............. 21,5 7,5 13,1 6,7
Aug .............. 23,5 8,7 14,6 7,2
Sep .............. 21,5 10,0 14,7 7,9
Oct .............. 17,7 12,0 14,3 9,4
Nov .............. 13,1 12,0 12,5 8,9
Dec .............. 12,2 11,4 11,8 7,7
Year.............. 17,6 7,3 11,5 6,7
2007: Jan .............. 12,6 10,9 11,6 8,3

--------------------------------------------------------------------------------
As a result of the consistent decline in international crude oil prices during
the closing months of 2006, the quarter-to-quarter pace of increase in CPIX
inflation decelerated meaningfully to a seasonally adjusted and annualised rate
of 3,4 per cent in the fourth quarter of 2006, substantially less than in the
preceding two quarters.

Year-on-year CPIX goods price inflation touched the upper limit of the inflation
target range of 6 per cent in August 2006, driven mainly by petrol and food
price increases. Continued deflation in the prices of furniture and equipment,
clothing and footwear, new and used vehicles as well as petrol, however,
suppressed CPIX goods price inflation in the closing months of 2006. On balance,
twelve-month CPIX goods price inflation accordingly receded to 5,2 per cent in
December 2006. Following an acceleration in especially food price inflation,
CPIX goods price inflation accelerated to 5,7 per cent in the year to January
2007. The quarter-to-quarter pace of increase in CPIX goods prices decelerated
markedly to only 0,8 per cent in the fourth quarter of 2006 - the lowest rate of
increase in nine quarters - having exceeded 10 per cent in the third quarter.

CPIX services price inflation picked up from a year-on-year rate of 3,3 per cent
in June 2006 to 4,8 per cent in December and 4,6 per cent in January 2007.
Higher rates of increase in CPIX services prices were fairly pervasive, led by
increases in domestic workers' wages, home owners' costs and transport services.
A deceleration in medical services price inflation, however, contained CPIX
services price inflation in January 2007. When measured from quarter to quarter
and expressed at an annualised rate, CPIX services price inflation accelerated
to 6,9 per cent in the fourth quarter of 2006, considerably higher than the 1,8
per cent recorded in the first quarter.

As indicated in the table on the following page, only three of the ten main
components, constituting roughly 36 per cent of the overall CPIX, increased at
an average annual rate in excess of 6 per cent in 2006. Year-to-year inflation
in the prices of four components fell below the inflation target range, while
three components, constituting almost half of

--------------------------------------------------------------------------------
Quarterly Bulletin March 2007 17

South African Reserve Bank
--------------------------------------------------------------------------------

the index, fell within the range. Most striking is the pick-up in annual average
food price inflation from a rate below the target band in 2005 to above it in
2006.

INFLATION IN CPIX COMPONENTS
Percentage change over one year
--------------------------------------------------------------------------------
Weights 2005 2006
---------------------
Transport running cost ................................. 5,7 14,1 12,8
Alcoholic beverages and tobacco ........................ 3,1 8,1 8,0
Food and soft drinks ................................... 26,9 2,2 6,6
Services excluding housing and transport ............... 16,5 6,2 4,5
Housing services ....................................... 13,4 5,9 3,6
Other goods (not included elsewhere) ................... 17,5 3,0 3,5
Transport services ..................................... 3,9 1,9 2,8
Furniture and equipment ................................ 3,2 -0,5 -1,5
Vehicles ............................................... 5,7 -1,2 -0,7
Clothing and footwear .................................. 4,1 -3,4 -7,3
TOTAL CPIX ............................................. 100,0 3,9 4,7

--------------------------------------------------------------------------------
Italics denote values inside the inflation target range of between 3 and 6 per
cent in 2006

In 2006, inflation in the prices of administered goods and services, on average,
amounted to 6,8 per cent, substantially lower than the rate of around 8 per cent
recorded during the preceding two calendar years. Excluding petrol prices from
the calculation, administered price inflation would have amounted to no more
than 4,2 per cent in 2006 - almost on a par with that in the overall CPIX
measure of inflation. This demonstrated the considerable progress made in
addressing the elevated rates of increase in administered prices which had
characterised the preceding years.

Drought conditions affected a large part of South Africa in the first few months
of 2007, and were reflected in a sharp increase in maize prices, as shown in the
accompanying graph. This development could adversely affect the near-term
prospects for food price inflation.

MAIZE PRICES

[GRAPHIC OMITTED]

--------------------------------------------------------------------------------
18 Quarterly Bulletin March 2007

South African Reserve Bank
--------------------------------------------------------------------------------

FOREIGN TRADE AND PAYMENTS

INTERNATIONAL ECONOMIC DEVELOPMENTS

Current estimates indicate that global economic growth moderated in the second
half of 2006. However, for the year as a whole real output growth of about 5 per
cent is still expected as emerging-market countries such as China continue to
record rapid growth alongside the strong growth momentum in the developed
countries.

Real gross domestic production in the United States of America (US) rebounded
somewhat in the fourth quarter of 2006, resulting in a firm rate of expansion
being registered for 2006 as a whole. After decelerating in the second and third
quarters of 2006, real gross domestic product growth in Japan improved
substantially in the final quarter of 2006, mainly due to a
sharper-than-expected rebound in private consumption expenditure. Real economic
growth in the euro area slowed in the third quarter of 2006, but regained
momentum in the fourth quarter due to higher exports.

In most emerging-market economies real economic growth continued at a steady
pace, notwithstanding a moderation in economic activity in China and India in
the final quarter of 2006. The economic expansion in Africa remained robust,
underpinned by the sustained strong demand for commodities, favourable commodity
prices, and increased oil production in Southern and Central Africa.

After reaching US$65 per barrel at the beginning of December 2006, Brent crude
oil prices receded to a 20-month low of around US$51 per barrel in mid-January
2007. The decline in crude oil prices was mainly caused by mild winter weather
conditions in the northern hemisphere and fund switching into equities. In an
effort to counter sliding prices, the Organisation of the Petroleum Exporting
Countries (OPEC) announced in mid-December 2006 a further cutback in production
of 500 000 barrels per day, effective from 1 February 2007. Crude oil prices
rebounded to levels above US$61 per barrel in the beginning of March 2007 as
colder winter temperatures were registered, prompting fund buying and higher
demand for heating fuel. In addition, plans to boost the US emergency crude oil
reserves, the resurgence of geopolitical tensions in Iran and

BRENT CRUDE OIL PRICES

[GRAPHIC OMITTED]

--------------------------------------------------------------------------------
Quarterly Bulletin March 2007 19

South African Reserve Bank
--------------------------------------------------------------------------------

Nigeria, consecutive declines in US distillate stocks and US oil refinery and
pipeline problems supported oil prices. Oil prices briefly edged lower, but
subsequently returned to levels above US$61 per barrel due to a decline in US
crude oil and fuel inventories and production setbacks in Australia and Nigeria.

Lower crude oil prices towards the end of 2006 have resulted in a moderation in
global headline inflation, while core inflation has generally stabilised. The US
Federal Open Market Committee (FOMC) raised its target for the federal funds
rate by 25 basis points at seventeen consecutive meetings since the start of the
US tightening cycle in June 2004, but kept it unchanged at 5,25 per cent from
June 2006. The Bank of Japan increased the uncollateralised overnight call rate
further by 25 basis points to 0,50 per cent in February 2007. The European
Central Bank (ECB) raised interest rates seven times from late 2005 to 3,75 per
cent in March 2007. According to the ECB, price developments in the euro area
are still subject to upside risks resulting from a stronger- than-expected
pass-through of previous oil price increases and the possibility of further
increases in administered prices, indirect taxes and oil prices.

Since October 2006, monetary policy has also been tightened by central banks
increasing official interest rates in countries such as Australia, Denmark,
Hungary, New Zealand, Sweden, Switzerland, Taiwan and the United Kingdom, while
China, India and Korea increased the banks' required reserve ratios. By
contrast, Brazil, Chile, Israel, Russia and Thailand lowered official rates.

CURRENT ACCOUNT(2)

The South African economy has been in an upward phase of the business cycle from
September 1999. Not surprisingly for a developing country, gross domestic
expenditure has consistently exceeded national disposable income since 2003. In
the fourth quarter of 2006 exceptionally strong import demand for crude oil and
capital equipment, along with comparatively moderate export growth, resulted in
a substantial widening of the deficit on the trade account of the balance of
payments. Although sizeable trade deficits were recorded in each of the first
three quarters of the year, the trade deficit more than doubled from the third
to the fourth quarter of 2006. For the year as a whole, the shortfall on the
trade account came to R42,5 billion, substantially more than the deficit of R7,7
billion registered in 2005.

BALANCE OF PAYMENTS ON CURRENT ACCOUNT
R billions, seasonally adjusted and annualised
--------------------------------------------------------------------------------

2005 2006
---------------------------------------------------
Year 1st qr 2nd qr 3rd qr 4th qr Year
---------------------------------------------------

Merchandise exports ................ 325,1 326,1 369,7 425,7 472,6 398,5
Net gold exports ................... 27,0 29,3 33,7 39,4 39,5 35,5
Merchandise imports ................ -359,8 -386,4 -444,4 -497,7 -577,7 -476,5
Trade balance ...................... -7,7 -31,0 -41,0 -32,6 -65,6 -42,5
Net service, income and current
transfer payments .................. -50,7 -68,6 -60,8 -67,3 -77,4 -68,6
Balance on current account ......... -58,4 -99,6 -101,8 -99,9 -143,0 -111,1
As percentage of gross
domestic product ................ -3,8 -6,1 -6,1 -5,7 -7,8 -6,4

--------------------------------------------------------------------------------
A significant rise in net service and income payments to the rest of the world
from the third quarter of 2006 to the fourth quarter furthermore contributed to
the widening of the

(2) Unless stated to the contrary, the current-account flows referred to in
this section are seasonally adjusted and annualised.

--------------------------------------------------------------------------------
20 Quarterly Bulletin March 2007

South African Reserve Bank
--------------------------------------------------------------------------------

deficit on the current account in the final quarter of 2006. The current-account
deficit accordingly expanded from R99,9 billion in the third quarter of 2006 to
R143,0 billion in the fourth quarter, equal to 7,8 per cent of gross domestic
product. For 2006 as a whole, the current-account deficit widened to R111,1
billion, having amounted to R58,4 billion in 2005. Relative to gross domestic
product, the deficit came to 6,4 per cent in 2006 compared with 3,8 per cent in
2005.

The value of merchandise exports increased unabatedly from the first to the
third quarter of 2006 and advanced by a further 11 per cent in the fourth
quarter. The higher export earnings in the fourth quarter of 2006 mainly
reflected a 9 1/2-per-cent increase in the physical quantity of exported
goods. Firm economic growth abroad, not least in China and India, boosted the
demand for South African-produced mining products such as iron ore, platinum,
diamonds and metals over the period. The improved performance of the mining
sector was, however, partly countered by a decline in the volume of exported
manufactured products destined for Europe and the United States. As a ratio of
real gross domestic product, real merchandise exports surged from 18,6 per cent
in the first quarter of 2006 to 22,1 per cent in the fourth quarter, i.e. close
to the most recent high of 22,3 per cent recorded in the fourth quarter of 2000.
Export volumes rose by 6 per cent in 2006 compared with 2005. For 2006 as a
whole, the value of merchandise exports advanced by about 22 1/2 per cent
largely as a result of the sustained buoyancy of the global economy and the
depreciation of the rand.

RATIO OF CURRENT-ACCOUNT BALANCE TO GROSS DOMESTIC PRODUCT

[GRAPHIC OMITTED]

International commodity prices which had peaked in US dollar terms in the second
quarter of 2006, dropped in both the third and fourth quarters of the year.
However, the average level of the nominal effective exchange rate of the rand
declined over the period, causing the rand prices of merchandise exports to rise
by about 1 1/2 per cent in the fourth quarter. The level of export prices in
rand in the fourth quarter of 2006 was 17 per cent higher than in the
corresponding period of 2005.

After having increased for six consecutive quarters, the average realised rand
price of gold exports moved broadly sideways from the third to the fourth
quarter of 2006 when a decline in the dollar price of gold was fully offset by
the depreciation of the rand. Due to a marginal increase in the physical
quantity of gold exports, the value of gold exports rose by 1/2 a per cent
over the period.

--------------------------------------------------------------------------------
Quarterly Bulletin March 2007 21

South African Reserve Bank
--------------------------------------------------------------------------------

The dollar price of gold on the London market rose by no less than 36 per cent
from an annual average of US$445 per fine ounce in 2005 to US$605 per fine ounce
in 2006 - the highest annual average to be recorded since 1980. Due to the
decline in the exchange value of the rand, the average realised rand price
advanced by 44 1/2 per cent over the same period. Extending the downward trend
of the past three years, the physical quantity of gold exports receded further
by 9 per cent in 2006. The export earnings of South African gold producers,
however, rose by 31 1/2 per cent in 2006 mainly due to the expansionary effect
of the decline in the exchange value of the rand.

The solid demand for imported goods which characterised the South African
economy in the first three quarters of 2006 continued in the fourth quarter when
the value of merchandise imports surged by about 16 per cent to R577,7 billion.
Although increases were noted in the value of most import categories, the value
of mineral imports rose by an extraordinary 78 1/2 per cent due to the higher
volume of imported crude oil. Earlier on, the volume of crude oil imports
contracted in the third quarter of 2006 due to the scheduled shutdown of major
oil refineries during the period, and inventories had to be rebuilt in the
fourth quarter of the year. In the category for manufactured imports,
significant increases were recorded in the subcategory for machinery and
electrical equipment and vehicle and transport equipment in the final quarter of
2006.

REAL IMPORTS AND EXPORTS

[GRAPHIC OMITTED]

The volume of merchandise imported, which had increased by 3 per cent in the
third quarter of 2006, increased by no less than 14 per cent in the fourth
quarter. Excluding crude oil imports in the fourth quarter of 2006, the volume
of imports would have increased by 7 per cent over the period. Buoyant imports
in the fourth quarter of 2006 elevated the increase in the volume of imported
goods to 20 per cent for the year as a whole. Consequently, the import
penetration ratio of South Africa rose from 24 per cent in the first quarter of
2006 to 29 per cent in the fourth quarter, which increased the import
penetration ratio from 23,9 per cent in 2005 to 26,4 per cent in 2006. Although
the rand price of merchandise imports rose by 2 per cent in the fourth quarter
of 2006, an increase of 10 per cent was recorded for the year as a whole on
account of higher international crude oil prices.

The deterioration in the current account of the balance of payments was further
intensified by an increase in the deficit on the net service, income and current
transfer

--------------------------------------------------------------------------------
22 Quarterly Bulletin March 2007

South African Reserve Bank
--------------------------------------------------------------------------------

account, which widened from R67,3 billion in the third quarter of 2006 to R77,4
billion in the fourth quarter. The widening of the imbalance could mainly be
ascribed to a reduction in investment income receipts in the fourth quarter of
2006, notwithstanding the weaker rand. In addition, the services account was
also adversely affected by larger net payments for transportation related to the
high merchandise imports. These higher payments were, however, only partially
countered by a contraction in investment income payments and an increase in
travel receipts for services rendered to non-residents. Receipts from foreign
tourists increased by 7 per cent in the fourth quarter of 2006, consistent with
the increase in the number of non-resident arrivals over the period.
Furthermore, net payments in the category "other services" improved slightly
over the same period partially on account of higher net receipts for financial
services, although net payments for royalties and licence fees also rose
somewhat.

For 2006 as a whole, the deficit on the net service, income and current transfer
account payments increased to R68,6 billion or 4 per cent of gross domestic
product, from R50,7 billion or 3,3 per cent of gross domestic product in 2005.

South Africa's terms of trade deteriorated slightly further in the fourth
quarter of 2006 as import prices rose at a somewhat faster pace than export
prices.

FINANCIAL ACCOUNT

Similar to other emerging markets, South Africa continued to benefit from excess
liquidity and low yields in industrialised countries when the country registered
the largest net annual capital inflow to date on the financial account of the
balance of payments in 2006, amounting to R140,8 billion or 8,2 per cent of
gross domestic product. Sizeable financial inflows in the first half of the year
gained further momentum in the second half as non-resident investors increased
their investment in the country.

NET FINANCIAL TRANSACTIONS NOT RELATED TO RESERVES
R billions
--------------------------------------------------------------------------------

2005 2006
-------------------------------------------------
Year 1st qr 2nd qr 3rd qr 4th qr Year
-------------------------------------------------

Change in liabilities
Direct investment............. 39,9 8,4 3,8 -0,3 -14,0 -2,1
Portfolio investment.......... 36,1 52,9 36,0 23,9 31,5 144,3
Other investment.............. 26,9 15,2 27,5 17,4 1,0 61,1
Change in assets
Direct investment............. -6,0 -2,2 -9,1 -35,0 1,1 -45,2
Portfolio investment.......... -6,0 -3,4 -3,3 -2,5 -4,5 -13,7
Other investment.............. -22,3 -44,0 -16,9 14,9 2,9 -43,1
TOTAL FINANCIAL TRANSACTIONS*.... 92,6 32,3 28,5 35,4 43,0 140,8

--------------------------------------------------------------------------------
* Including unrecorded transactions

The surge in capital inflows in the second half of 2006 originated in the
category for net other investment capital, which switched from an outflow of
R18,2 billion in the first half of 2006 to an inflow of R36,2 billion in the
second half. Net portfolio inflows moderated from R82,2 billion to R48,4 billion
over the same period. In contrast, direct investment recorded a net outflow of
R48,2 billion in the second half of the year following a marginal inflow in the
first half.

--------------------------------------------------------------------------------
Quarterly Bulletin March 2007 23

South African Reserve Bank
--------------------------------------------------------------------------------

FOREIGN-OWNED ASSETS IN SOUTH AFRICA

Foreign direct investment capital flows into South Africa switched from an
inflow of R12,2 billion in the first two quarters of 2006 to capital outflows of
R0,3 billion and R14,0 billion in the third and fourth quarters, respectively.
The capital outflow in the fourth quarter of 2006 mainly reflected the sale of a
non-resident direct investor's equity stake in a domestic gold-mining company to
a South African entity.

Foreign portfolio investors, who had increased their holdings of both South
African equities and debt securities by a sizeable R88,9 billion in the first
half of 2006, acquired domestic portfolio assets to the value of R23,9 billion
in the third quarter and R31,5 billion in the fourth quarter. The acquisition of
debt securities through the Bond Exchange of South Africa (BESA) in the final
quarter of 2006 was furthermore supplemented by the issuance of a R1,7 billion
convertible bond by a domestic healthcare group. The South African government
redeemed a Yankee bond to the value of US$300 million over the same period. The
country's portfolio liabilities, on balance, increased by a record amount of
R144,3 billion in 2006 compared with an inflow of R36,1 billion in 2005.

Other investment liabilities rose on account of an inflow of R17,4 billion in
the third quarter and a further inflow of R1,0 billion in the fourth quarter of
2006. These developments resulted in a net inflow of R18,4 billion in the second
half of the year compared with an inflow of R42,7 billion in the first half. The
repayment of short-term foreign loans by the private banking sector and a
long-term loan by a South African telecommunications company was more than
offset by foreign loan finance extended to a South African gold-mining company
for the purchase of a domestic mine, as well as a foreign loan extended to a
newly established foreign-owned South African company in the hotel and leisure
industry.

SOUTH AFRICAN-OWNED ASSETS ABROAD

Following the accumulation of foreign direct investment assets to the value of
R9,1 billion and R35,0 billion in the second and third quarters of 2006,
respectively, South African direct investor companies repatriated direct
investment assets amounting to R1,1 billion in the fourth quarter of 2006. For
the calendar year 2006, the outflow of capital related to accumulation of
foreign direct investment assets came to R45,2 billion, substantially more that
the capital outflows of R6,0 billion registered in 2005.

South African institutional investors steadily increased their holdings of
foreign equity and debt securities throughout 2006. Portfolio investment abroad
declined to R2,5 billion in the third quarter before picking up again to R4,5
billion in the fourth quarter of 2006. The steady outflow of capital probably
reflected the diversification of investment portfolios in the search for higher
yields.

Other outward investment from South Africa declined from an inflow of R14,9
billion in the third quarter of 2006 to an inflow of R2,9 billion in the fourth
quarter. The capital inflow mainly comprised a decline in foreign-currency
deposits of the South African banking sector. For 2006 as a whole, other
investment outflows amounted to R43,1 billion which was more than double the
outflow of R22,3 billion registered in 2005.

FOREIGN DEBT

South Africa's total outstanding foreign debt remained unchanged at US$55,1
billion from the end of the second quarter of 2006 to the end of the third
quarter. A further

--------------------------------------------------------------------------------
24 Quarterly Bulletin March 2007

South African Reserve Bank
--------------------------------------------------------------------------------

increase in the country's outstanding foreign-currency denominated debt was
fully neutralised by a decline in rand-denominated debt over the period.

FOREIGN DEBT OF SOUTH AFRICA
US$ billions at end of period
--------------------------------------------------------------------------------
2005 2006
---------------------------------
4th qr 1st qr 2nd qr 3rd qr
---------------------------------
Foreign-currency denominated debt ... 28,1 29,7 33,1 35,4
Bearer bonds...................... 9,1 10,1 10,7 10,5
Public sector..................... 4,6 4,5 4,6 4,8
Monetary sector................... 7,9 8,6 10,1 10,7
Non-monetary private sector....... 6,5 6,5 7,7 9,4
Rand-denominated debt................ 18,1 23,3 22,0 19,7
Bonds............................. 6,3 6,5 6,0 6,3
Other............................. 11,8 16,8 16,0 13,4
Total foreign debt................... 46,2 53,0 55,1 55,1

--------------------------------------------------------------------------------
The country's outstanding foreign-currency denominated debt, which had increased
steadily from US$27,9 billion at the end of September 2005 to US$33,1 billion at
the end of June 2006, amounted to US$35,4 billion at the end of September. Over
the four quarters to September 2006, South Africa's outstanding foreign-currency
denominated debt accordingly rose by almost 27 per cent. The increase in the
third quarter of 2006 was largely due to an increase in long-term loans of the
private non-banking sector as well as increased borrowings by the private
banking sector. The decline in rand-denominated foreign debt in the third
quarter of 2006 could primarily be ascribed to the substitution of a foreign,
rand-denominated loan extended to the private sector by a domestic loan.

Measured in rand, South Africa's foreign debt increased from R393 billion at the
end of June 2006 to R424 billion at the end of September. The increase in rand
terms could primarily be attributed to the decline in the nominal effective
exchange rate of the rand over the period.

INTERNATIONAL RESERVES AND LIQUIDITY

The widening negative imbalance on the current account of the balance of
payments continued to be sufficiently financed by net financial inflows from the
rest of the world. In fact, South Africa's overall balance-of-payments position
recorded a surplus of R7,7 billion in the fourth quarter of 2006 compared with a
surplus of R7,1 billion in the third quarter. For 2006 as a whole the country's
overall balance of payments registered a surplus of R29,8 billion, somewhat
short of the surplus of R34,3 billion recorded in 2005.

Measured in US dollar, the value of the gross gold and other foreign reserves of
the South African Reserve Bank (i.e. the international reserves before
accounting for reserve-related loans) increased from US$24,7 billion at the end
of September to US$25,6 billion at the end of December 2006 and further to
US$26,3 billion at the end of February 2007. From the end of 2005 to the end of
2006 the country's official international reserves rose by US$5,0 billion. The
Bank's outstanding short-term liabilities declined from US$3,3 billion at the
end of September 2006 to US$2,8 billion

--------------------------------------------------------------------------------
Quarterly Bulletin March 2007 25

South African Reserve Bank
--------------------------------------------------------------------------------

at the end of December. This reduction could be attributed to the prepayment of
US$500 million of a 3-year US$1 billion syndicated loan entered into by the Bank
in 2004.

BALANCE OF PAYMENTS: OVERALL BALANCE

[GRAPHIC OMITTED]

The Bank's international liquidity position improved steadily from US$21,2
billion at the end of September 2006 to US$23,0 billion at the end of December
and US$23,7 billion at the end of February 2007.

EXCHANGE RATES

After declining by 2,0 per cent in 2005, the weighted average exchange value of
the rand, on balance, decreased further by 15,4 per cent in 2006 - the largest
annual decline since 2001. However, after weakening during the second and third
quarters of 2006, the nominal effective exchange rate of the rand strengthened
by 7,7 per cent in the fourth quarter. The rate of increase in the last quarter
was more prominent during November and December 2006 when the exchange value of
the rand increased by 3,8 per cent and 2,6 per cent, respectively. The
macroeconomic factors which supported the movement in the rand were, among other
things, the higher gold price, weaker US dollar, widening of the interest rate
differential and strong global equity markets.

--------------------------------------------------------------------------------
26 Quarterly Bulletin March 2007

South African Reserve Bank
--------------------------------------------------------------------------------

EXCHANGE RATES OF THE RAND
Percentage change
--------------------------------------------------------------------------------
31 Mar 2006 30 Jun 2006 30 Sep 2006 29 Dec 2006
to to to to
30 Jun 2006 30 Sep 2006 29 Dec 2006 28 Feb 2007
-----------------------------------------------------
WEIGHTED AVERAGE*.... -16,2 -7,2 7,7 -3,8
Euro ................ -17,2 -7,0 6,2 -4,0
US dollar............ -13,2 -7,3 10,5 -3,9
British pound........ -17,6 -9,2 5,2 -3,5
Japanese yen......... -15,2 -4,6 11,3 -4,1

--------------------------------------------------------------------------------
* Against a basket of 13 currencies

The positive sentiment towards emerging markets turned negative at the beginning
of 2007 when plans for the nationalisation of private-sector assets in certain
oil-producing emerging-market economies were announced. This, together with
concerns about the outlook of South Africa's current-account deficit,
contributed to the weakening of the rand during the first two months of 2007.
The nominal effective exchange rate of the rand retreated somewhat at the
beginning of 2007, declining by 3,3 per cent in January. While the rand
initially recovered during February, it declined towards the end of the month
following a decline in Chinese share prices and increased investor caution
towards emerging markets.

EXCHANGE RATE OF RAND AND LONDON GOLD PRICE

[GRAPHIC OMITTED]

The real effective exchange rate of the rand declined by 10,7 per cent from
December 2005 to December 2006, leading to increased profit margins for South
African exports in international markets over this period.

The average daily turnover in the domestic market for foreign exchange increased
marginally from US$14,5 billion in the third quarter of 2006 to US$14,6 billion
in the fourth quarter as non-resident investors' interest in the South African
equity and debt markets continued its buoyant trend. The value of transactions
in which non-residents participated remained roughly unchanged at US$10,6
billion per day over the same period.

--------------------------------------------------------------------------------
Quarterly Bulletin March 2007 27

South African Reserve Bank
--------------------------------------------------------------------------------

MONETARY DEVELOPMENTS, INTEREST RATES AND FINANCIAL MARKETS

MONEY SUPPLY(3)

Growth in the broadly defined money supply, M3, fluctuated at very high rates
throughout 2006, aligned with robust real economic activity, strong turnover in
the financial markets and positive wealth effects associated with the rising
prices of real- estate and financial assets. The increases in short-term
interest rates following the tightening of the monetary policy stance starting
in June 2006 may also have contributed to the brisk rates of increase recorded
by M3, reflective of the precautionary and yield-seeking motives for holding
monetary assets.

GROWTH IN M3

[GRAPHIC OMITTED]

The average rate of growth in M3 accelerated from 13,3 per cent in 2004 to 16,2
per cent in 2005 and further to 22,9 per cent in 2006. During 2006, the
annualised quarterly growth in M3 fluctuated within a wide band, ranging from
16,7 per cent to 31,4 per cent. The narrower monetary aggregates displayed
growth broadly similar to that of M3, except for the significant deceleration in
M1 growth in the fourth quarter of 2006, as shown in the accompanying table.

GROWTH IN THE MONETARY AGGREGATES
Per cent at seasonally adjusted annualised rates
------------------------------------------------
2006
---------------------------------
Component 1st qr 2nd qr 3rd qr 4th qr
---------------------------------
M1A ..... 22,4 19,3 11,2 13,8
M1 ...... 12,8 31,6 27,9 5,3
M2 ...... 17,6 25,8 19,9 18,4
M3 ...... 25,5 31,4 16,7 20,6

------------------------------------------------

(3) The quarter-to-quarter growth rates referred to in this section are
seasonally adjusted and annualised.

--------------------------------------------------------------------------------
28 Quarterly Bulletin March 2007

South African Reserve Bank
--------------------------------------------------------------------------------

Throughout 2006, twelve-month growth in M3 remained above the twenty-per-cent
level and amounted to 26,8 per cent in February 2006, the highest rate on record
since April 1981. In December 2006 and January 2007, growth decelerated mainly
on account of a brisk accumulation of government deposits - government deposits
do not form part of the monetary aggregates - and a high base set a year
earlier.

The overall increase in M3 in 2006 amounted to R253 billion compared with R182
billion in 2005. In 2006 the corporate sector's deposits with the monetary
system increased by no less than R206 billion, or 27,3 per cent, representing a
significantly higher rate than in 2005. Within the corporate sector, the
non-bank financial institutions raised their deposit holdings very strongly in
2006, surpassing the previous year's record increase on yet further strength of
financial-market turnover and high asset prices. Deposits held by the household
sector rose at a more pedestrian pace, increasing by R47,5 billion or 13,8 per
cent in 2006.

The statistical counterparts of this increase are presented in the accompanying
table.

COUNTERPARTS OF CHANGE IN M3
R billions
--------------------------------------------------------------------------------
2006
--------------------------------------
1st qr 2nd qr 3rd qr 4th qr Year
--------------------------------------
Net foreign assets ................... 37,6 29,0 -10,0 1,5 58,0
Net claims on the government sector... 0,5 -13,7 -7,5 -9,6 -30,2
Claims on the private sector ......... 76,4 49,3 96,0 73,1 294,2
Net other assets and liabilities ..... -8,7 -35,2 -31,7 6,3 -81,6
TOTAL CHANGE IN M3 ................... 105,8 29,4 46,8 71,3 240,4

--------------------------------------------------------------------------------
Mainly reflecting robust growth in total loans and advances, claims on the
private sector continued to dominate the statistical counterparts of M3 during
the fourth quarter of 2006. This effect was partly neutralised by the decline in
net claims on the government sector as government deposits with the monetary
sector increased substantially.

Annualised growth in nominal gross domestic product fell short of growth in M3
by 6,1 percentage points during the fourth quarter of 2006. Accordingly, the
income velocity of circulation of M3 declined to 1,39 in the fourth quarter of
2006.

CREDIT EXTENSION

Despite the cumulative effect of increases in lending rates as monetary policy
was tightened in successive steps from June 2006, growth in total loans and
advances(4) extended to the private sector remained robust throughout the year.
The sluggish adjustment in demand for credit to increases in lending rates
partly reflected the relatively low level of debt servicing costs, rising income
and employment levels, high consumer and business confidence levels, and
stronger balance sheets which have benefited from positive wealth effects.

Growth in total loans and advances would have been somewhat higher but for the
increase in securitisation transactions during 2006. From inception to December
2006, a cumulative amount of R18,7 billion in traditional securitisation of the
banks' instalment

(4) Total loans and advances to the domestic private sector consist of
instalment sale credit, leasing finance, mortgage advances, overdrafts,
credit card and general advances. The first three categories are referred
to as asset-backed credit, while the last three categories together are
referred to as other loans and advances.

--------------------------------------------------------------------------------
Quarterly Bulletin March 2007 29

South African Reserve Bank
--------------------------------------------------------------------------------

sale credit and leasing finance books was recorded, and a further R15 billion
involving banks' mortgage advances books. The bulk of the transactions was
effected during 2006, with four securitisations amounting to R12 billion
involving instalment sale credit and leasing finance books, and three
securitisations worth R8,1 billion involving mortgage advances books.
Accordingly, the gap between growth in the conventional measure of total loans
and advances and the measure adjusted for the cumulative effect of
securitisation transactions widened noticeably during 2006, as shown in the
accompanying graph.

TOTAL LOANS AND ADVANCES EXTENDED TO THE PRIVATE SECTOR

[GRAPHIC OMITTED]

Twelve-month growth in the conventional measure of total loans and advances
remained above the twenty-per-cent level from April 2005 and amounted to 27,1
per cent in January 2007. On a quarterly basis, growth during 2006 fluctuated
between annualised rates of 25 per cent and 29 per cent, somewhat higher than in
2005.

Sustained brisk increases in mortgage advances buoyed the growth in credit
extension throughout 2006. The monthly increases in mortgage advances generally
exceeded R12 billion from February 2006 and recorded an all-time high of R15,9
billion in October 2006. Mortgage advances growth accordingly straddled
twelve-month rates of 30 per cent throughout 2006, reflecting the prolonged
favourable conditions in the real-estate market.

Growth in instalment sale credit and leasing finance remained strong during
2006, consistent with expenditure on motor vehicles and other durable goods.
Twelve-month growth in the conventional measure of such credit extension
decelerated during the course of the year. Nevertheless, when adjusted for the
cumulative effect of securitisation transactions, growth fluctuated between 19
and 20 per cent during 2006.

--------------------------------------------------------------------------------
30 Quarterly Bulletin March 2007

South African Reserve Bank
--------------------------------------------------------------------------------

BANK LOANS AND ADVANCES TO THE DOMESTIC PRIVATE SECTOR
--------------------------------------------------------------------------------
Outstanding balance
--------------------
End 2005 End 2006 Percentage
R bn R bn change
--------------------------------
Mortgage advances ........................... 527 685 30,0
Instalment sale credit and leasing finance... 179 208 15,8
Other loans and advances .................... 347 452 30,2
Overdrafts ............................... 84 107 27,3
Credit card advances ..................... 31 44 41,9
General advances ......................... 217 301 38,7
TOTAL LOANS AND ADVANCES .................... 1 054 1 344 27,5
Of which: To household sector ............... 586 727 24,2
To corporate sector ................... 468 617 31,8

--------------------------------------------------------------------------------
Twelve-month growth in other loans and advances rebounded from a low point in
May 2006, accelerating from 13,5 per cent at that time to 28,2 per cent in
January 2007 - a growth rate similar to that of mortgage advances. Increased use
of bank-intermediated funding by the corporate sector was the main driver of the
strong growth in other loans and advances.

While the household sector continued to account for the larger share of credit
extended to the private sector, the corporate sector's demand for
bank-intermediated funding nevertheless grew significantly during 2006 alongside
rising capital formation and corporate restructuring activity.

Non-performing loans as a percentage of total loans and advances remained at low
levels during the course of 2006.

INTEREST RATES AND YIELDS

The Monetary Policy Committee (MPC) raised the repurchase rate by 50 basis
points on each occasion at four consecutive meetings from June 2006 to a level
of 9,00 per cent in December 2006, amid uncertainties with regard to the
inflation outlook. At its February 2007 meeting, however, the MPC kept rates
unchanged, sensing a more benign inflation environment and projecting continued
adherence to the inflation target over the period to the end of 2008. The
December 2006 and February 2007 MPC statements discussing the developments
underlying the respective decisions are reproduced in full elsewhere in this
Bulletin.

The prime overdraft rate and predominant rate on mortgage loans of the
private-sector banks were raised to 12 1/2 per cent in December 2006 and
subsequently remained at that level, consistent with the repurchase rate of the
Bank.

Other money-market interest rates also adjusted upward during the third and
fourth quarters of 2006, partly in response to and in anticipation of further
increases in the repurchase rate. For instance, the three-month Johannesburg
Interbank Agreed Rate (Jibar) increased by 44 basis points from 8,76 per cent at
the beginning of November 2006 to 9,20 per cent by the end of January 2007. The
rate amounted to 9,09 per cent on 9 March 2007.

Similarly, the tender rate on 91-day Treasury bills trended higher during the
final quarter of 2006, from 8,22 per cent on 3 November 2006 to 8,49 per cent on
29 December. Subsequently, the 91-day Treasury bill rate rose further to 8,87
per cent on 26 January

--------------------------------------------------------------------------------
Quarterly Bulletin March 2007 31

South African Reserve Bank
--------------------------------------------------------------------------------

MONEY-MARKET RATES

[GRAPHIC OMITTED]

2007 and came to 8,82 per cent on 2 February. The amount of 91-day Treasury
bills on offer at the weekly tender was increased by R0,15 billion to R2,3
billion on 5 January 2007 in an effort by government to raise funds ahead of the
redemption of the first tranche of the R194 government bond at the end of
February 2007. This rate amounted to 8,28 per cent on 9 March 2007.

Rates on forward rate agreements (FRAs) rose during November 2006, reflecting
the expected increase in the repurchase rate, but receded from the latter half
of December 2006 partly emulating exchange rate movements. For instance, the
3x6-month FRA rate increased to an end-November level of 9,24 per cent before
decreasing to 9,19 per cent at the end of December. In early March the FRA
market indicated expectations of a fairly stable monetary policy stance for the
remainder of 2007.

FORWARD RATE AGREEMENTS AND EXCHANGE RATE

[GRAPHIC OMITTED]

--------------------------------------------------------------------------------
32 Quarterly Bulletin March 2007

South African Reserve Bank
--------------------------------------------------------------------------------

The predominant rate on twelve-month fixed deposits of the private-sector banks
increased from 6,2 per cent in April 2006 to 8,5 per cent in January 2007, its
highest level since July 2003, and remained at that level in February. The real
return before tax on twelve-month fixed deposits, using historical year-on-year
increases in CPIX to adjust the nominal rate, gradually improved from 1,4 per
cent in June 2006 to 3,0 per cent in January 2007 as the rise in nominal rates
generally exceeded the rise in inflation.

From a recent high of 8,89 per cent on 11 September 2006, the daily average
yield on the long-term R157 government bond (maturing in 2015) declined to 7,62
per cent on 4 January 2007, coinciding with, among other things, the
strengthening in the exchange value of the rand during this period, projections
of lower-than-previously-anticipated supply of government bonds announced in the
October 2006 Medium Term Budget Policy Statement, record high net purchases of
bonds by non-residents in November 2006, and declining bond yields in major
financial centres from October to early December. The decline in bond yields was
interrupted in mid-January 2007 when the exchange value of the rand depreciated,
but yields then resumed a downward bias on renewed strength in the exchange
value of the rand, the release of better-than-expected inflation figures and the
unchanged monetary policy stance in February 2007. On 9 March 2007, the yield on
the R157 bond came to 7,63 per cent.

The moderation in domestic inflation expectations towards the end of 2006 is
evidenced by the progressive inversion of the yield curve. During the first half
of 2006, the level of the yield curve initially moved upwards and steepened at
the short end, as bond yields with longer outstanding maturities rose in
response to inflation concerns. The yield curve then flattened in the wake of
the tightening of the monetary policy stance in June and August 2006.
Subsequently, following further increases in the repurchase rate in October and
December, the curve became downward sloping. The progressive inversion of the
curve was also characterised by declining yields for intermediate and longer
maturities. This was probably influenced by a projected lower supply of bonds,
the appreciation in the exchange value of the rand and expectations that
inflation will remain contained over the longer term.

YIELD CURVES

[GRAPHIC OMITTED]

--------------------------------------------------------------------------------
Quarterly Bulletin March 2007 33

South African Reserve Bank
--------------------------------------------------------------------------------

The break-even inflation rate, calculated as the difference between the nominal
yield on conventional government bonds and the real yield on inflation-linked
government bonds within the six-year maturity range, fell from levels exceeding
6 per cent in September 2006 to 4,97 per cent on 8 February 2007. The stronger
exchange value of the rand from October and inflation figures which came in at
the low end of market expectations contributed to a narrowing of the gap between
the nominal yield on conventional bonds and the real yield on inflation-linked
government bonds. The narrowing occurred mainly as a result of declining yields
on conventional bonds, while real yields on inflation-linked government bonds
displayed little movement from late 2006 to early 2007. Subsequently, this proxy
for expected inflation fluctuated in a narrow range and came to 4,85 per cent on
9 March, suggesting that market participants expect inflation to remain
reasonably benign.

BREAK-EVEN INFLATION RATE

[GRAPHIC OMITTED]

The appreciation of the exchange value of the rand and the return of investor
confidence towards investment in emerging markets during the second half of 2006
contributed to a narrowing of the currency risk premium on South African
government bonds (measured as the differential between South African government
bond yields on rand-denominated debt in the nine-to-ten-year maturity range
issued in the domestic market, and dollar-denominated debt issued in the United
States market) from a high of 274 basis points in August 2006 to 197 basis
points in January 2007. The narrowing occurred mostly as a result of a more
significant decline in bond yields in the domestic market, than in the
equivalent yields on foreign-issued South African bonds over the same period.
The currency risk premium, however, widened again to 214 basis points in
February as the yields on foreign-issued South African bonds declined more
significantly than the yields on domestic-issued bonds.

Due to the return to a more favourable global financial environment, the yield
differential of the JP Morgan Emerging Markets Bond Index (EMBI+)(5) declined to
a record-low differential of 169 basis points in December 2006, before
increasing moderately to 185 basis points in February 2007. The sovereign risk
premium on South Africa's foreign-currency denominated bonds trading in
international markets

(5) EMBI+ indicates total returns for external-currency denominated debt
instruments of the emerging markets.

--------------------------------------------------------------------------------
34 Quarterly Bulletin March 2007

South African Reserve Bank
--------------------------------------------------------------------------------

also declined alongside the general reduction of emerging-market external debt
spreads. The spread on the ten-year South African government US
dollar-denominated bond, issued at 195 basis points above United States federal
government securities of similar maturity at the end of May 2004, declined from
115 basis points in July 2006 to 77 basis points in February 2007.

YIELDS ON LONG-TERM GOVERNMENT BONDS

[GRAPHIC OMITTED]

MONEY MARKET

Money-market conditions remained fairly stable during the fourth quarter of 2006
and the first two months of 2007. The actual daily liquidity requirement of the
private-sector banks varied between R10,6 billion and R15,9 billion, and the
amounts on offer at the weekly main refinancing auctions varied between R11,3
billion and R14,7 billion over the review period. Banks continued to utilise
their cash reserve accounts on a frequent basis, rarely accessing the standing
facilities to square off their positions.

The accompanying table shows the major flows in money-market liquidity from
October 2006 to February 2007.

MONEY-MARKET LIQUIDITY FLOWS
R billions (easing +, tightening -)
--------------------------------------------------------------------------------

Oct - Dec 2006 Jan - Feb 2007
-------------- --------------

Notes and coin in circulation........................... -7,0 6,4
Required cash reserve deposits.......................... -2,1 -1,8
Money-market effect of SARB foreign-exchange
transactions......................................... 11,3 6,4
Government deposits with SARB........................... -5,7 -3,2
SARB holdings of government bonds....................... 0,0 -0,1
Use of liquidity management instruments................. 3,7 -4,1
Reverse repurchase transactions...................... 2,4 -2,2
SARB debentures...................................... 1,3 -1,9
Other items net......................................... 0,6 -5,0
Banks' liquidity requirement (decrease +, increase -)... 0,8 -1,4

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Quarterly Bulletin March 2007 35

South African Reserve Bank
--------------------------------------------------------------------------------

The Bank gradually increased its foreign-exchange reserves, and in doing so
expanded liquidity by R17,7 billion in the five months to February 2007. This
was mainly counteracted by an increase in government deposits with the Bank. The
significant improvement in the net reserves of the Bank over this period
included a reduction in foreign loans resulting from the prepayment of US$250
million on a 3-year US$1 billion syndicated loan entered into in 2004.

The graph below shows the accumulation of cash balances on government's tax and
loan accounts with the private banks from October 2006 to late February 2007,
and also reflects the payment of an aggregate amount of R34,2 billion in coupon
interest and capital redemption on the first tranche of the R194 government bond
- namely the R007 - at the end of February 2007. Similar patterns were observed
around the payments on the three tranches of the R150 government bond in
February 2004, 2005 and 2006.

GOVERNMENT DEPOSITS IN THE TAX AND LOAN ACCOUNTS

[GRAPHIC OMITTED]

The outstanding amount of reverse repurchase transactions and SARB debentures
was curtailed from R7,3 billion at the end of the third quarter of 2006 to R3,6
billion at the end of the fourth quarter, partly to avoid undue tightening in
liquidity conditions over the festive season. The amounts of outstanding
interest-bearing liquidity-draining instruments rose to R6,9 billion at the end
of January 2007 and increased to R7,7 billion at the end of February 2007.

On balance, notes and coin in circulation outside the Reserve Bank rose by R7,0
billion during the fourth quarter of 2006, tightening liquidity in the money
market. The value of notes and coin in circulation rose in its usual seasonal
fashion to a peak of R65,1 billion during December 2006 but declined to R63,6
billion at the end of the month. The downward trend continued during January
2007, thereby easing liquidity conditions and assisting the Bank in its effort
to avoid undue tightening in the private banks' liquidity position.

--------------------------------------------------------------------------------
36 Quarterly Bulletin March 2007

South African Reserve Bank
--------------------------------------------------------------------------------

NOTES AND COIN IN CIRCULATION OUTSIDE THE SARB
R million
--------------------------------------------------------------------------------
Change, end Nov
Year Peak date Peak level Year-end level to end Dec
-----------------------------------------------------------
2001........ 27 December 37 995 36 138 2 764
2002........ 24 December 42 058 39 488 2 150
2003........ 24 December 47 766 44 671 2 087
2004........ 17 December 52 387 48 831 305
2005........ 23 December 57 445 54 236 395
2006........ 22 December 65 108 63 575 4 029

--------------------------------------------------------------------------------
BOND MARKET

Strong tax revenue made it possible for the authorities to reduce the weekly
supply of government bonds made available on auction from an average of R600
million from April to October 2006 to R300 million from November. Total net
issues of fixed-interest securities in the domestic primary bond market
accordingly declined from R23,8 billion in 2005 to R18,0 billion in 2006. In
January and February 2007 net redemptions amounted to R20,1 billion. In the
Budget of national government, presented in February 2007, an amount of R9,0
billion was projected to be redeemed in fiscal 2007/08 through net redemption of
domestic fixed-income bonds.

The R007 - the first of the three tranches of the R194 government bond to be
repaid -was redeemed on 28 February 2007. The capital redemption value of the
bond amounted to R24,1 billion and coupon payments on these and other
outstanding government bonds put a further R10,1 billion in cash in the hands of
investors. The remaining two tranches of the R194 bond, namely the R195 and the
R196, mature in 2008 and 2009, respectively.

Contrary to the lower supply of government bonds, the issuance of private
corporate bonds gained momentum in 2006 and the first months of 2007.
Private-sector loan stock, including commercial paper, listed on the BESA
increased by R69,9 billion in 2006, compared to an increase of R42,2 billion in
2005. The buoyant private corporate bond market and the reduction in the supply
of government bonds contributed to a

PUBLIC AND PRIVATE-SECTOR BONDS IN ISSUE

[GRAPHIC OMITTED]

--------------------------------------------------------------------------------
Quarterly Bulletin March 2007 37

South African Reserve Bank
--------------------------------------------------------------------------------

change in the composition of debt in issue over the past five years. At the end
of 2006, the outstanding nominal value of private-sector bonds in issue amounted
to R205 billion, accounting for nearly 30 per cent of total bond issuance
compared to 5 per cent at the end of 2001. Nearly half of the private-sector
funding in 2006 was through the securitisation of assets, with residential
mortgage-backed securitisations accounting for 37 per cent. In the first two
months of 2007 the outstanding amount in issue of listed private-sector bonds
increased by a further R0,2 billion and the value of commercial paper decreased
by R0,8 billion.

After a flurry of activity in the first months of 2006, public and
private-sector borrowers refrained from raising funds in the international bond
markets from May to December 2006. However, the R12,1 billion raised in the
first four months of 2006 exceeded the R8,9 billion raised in the international
bond markets in the whole of 2005.

After recording net redemptions of R400 million in the first seven months of
2006, investors' interest in rand-denominated bonds in the European bond markets
rebounded from August. In total, the net issuance of such instruments amounted
to R5,0 billion in 2006, slightly less than the net amount of R6,5 billion
raised in 2005. In the first two months of 2007 net issues by non-residents of
rand-denominated bonds amounted to R2,5 billion.

The issuance of rand-denominated bonds by foreign borrowers in the Japanese
Uridashi market also slowed during 2006. The total nominal value of issues
nearly halved from R8,8 billion in 2005 to R4,8 billion in 2006. In the two
months to February 2007, new issues by foreign borrowers amounted to R1,8
billion.

Brisk trade characterised the domestic secondary bond market in 2006, as
investors adjusted their bond portfolios in response to inflation concerns and
the subsequent tightening in monetary policy from June. Turnover on BESA
averaged nearly R55 billion in value traded per day in 2006 and included a
record-high daily average turnover of R67 billion in June and R66 billion in
October. In total, the value of trade in 2006 amounted to R13,6 trillion,
exceeding the turnover of R9,8 trillion in 2005 by 39 per cent. Turnover of R2,7
trillion, at an average of around R66 billion in value traded per day, was
recorded in the first two months of 2007.

TURNOVER IN THE SECONDARY BOND MARKET

[GRAPHIC OMITTED]

--------------------------------------------------------------------------------
38 Quarterly Bulletin March 2007

South African Reserve Bank
--------------------------------------------------------------------------------

Non-resident investors showed keen interest in the South African secondary bond
market in 2006, after they had predominantly been net sellers of bonds since
2000. Non-residents' net sales of bonds of R10,7 billion in 2005 reverted to the
highest ever recorded annual net purchases of R34,1 billion in 2006 and included
record-high monthly net purchases of R11,8 billion in July and R12,8 billion in
November. Non-resident participation in trading on BESA, measured as the sum of
their purchases and sales as a percentage of total purchases and sales of bonds,
increased from an average of around 16 per cent in 2005 to 19 per cent in 2006.
Cumulative net sales of bonds to the value of R8,1 billion were recorded by
non-residents in the first two months of 2007.

NET PURCHASES OF SHARES AND BONDS BY NON-RESIDENTS

[GRAPHIC OMITTED]

SHARE MARKET

After nearly doubling in 2005, the total value of equity capital raised in the
domestic and international primary share markets by companies listed on the JSE
increased by a more subdued 7 per cent to R87,8 billion in 2006. The amount
raised was nearly equally distributed between companies with primary listings on
the JSE and companies with primary listings on foreign bourses and secondary
listings on the JSE. Equity financing amounted to R16,0 billion in the first two
months of 2007, mainly raised by companies with primary listings on the JSE.

Trading activity in the secondary share market remained lively in 2006, with
some heightened activity during May and June when investors globally reassessed
their investment in emerging markets. Total trade on the JSE in 2006 amounted to
R2,1 trillion, or 66 per cent higher than in 2005. From a record-high daily
average turnover of R10,7 billion in June 2006, turnover receded to R7,1 billion
in December. In 2007, turnover again improved to R8,4 billion in value traded
per day in January as share prices continued to rise, and reached an average of
R10,7 billion in trade per day in February.

Turnover on Alt(x) amounted to R1,2 billion in 2006, a multiple of the R300
million traded in 2005. In the first two months of 2007, turnover on this
exchange amounted to R689 million.

--------------------------------------------------------------------------------
Quarterly Bulletin March 2007 39

South African Reserve Bank
--------------------------------------------------------------------------------

The listing of companies on the JSE's alternative exchange gained popularity in
2006, as the market capitalisation of this exchange increased from R1,9 billion
in December 2005 to a new record high of R11,9 billion in February 2007.
However, the market capitalisation of Alt(x) remains small in comparison to the
main board of the JSE.

The total market capitalisation of the JSE increased by 48 per cent from R3 586
billion in December 2005 to an all-time high of R5 294 billion in February 2007.
Market liquidity, measured by the annualised turnover as a percentage of market
capitalisation, averaged 49 per cent in 2006, exceeding the average of 43 per
cent recorded in 2005. After reaching a record high of 65 per cent in June 2006,
market liquidity fell somewhat and came to 50 per cent in February 2007.

Interrupted by nervousness in global financial markets, non-residents' net
purchases of shares fell back from R56,5 billion in the first half of 2006 to
net purchases of R17,2 billion in the second half of the year. Record-high net
purchases of R73,7 billion were nonetheless recorded for the year 2006,
substantially exceeding the net purchases of R50,2 billion recorded in 2005. In
the first two months of 2007, non-residents' cumulative net purchases of shares
amounted to R19,1 billion.

The daily all-share price index increased by 38 per cent in 2006, slightly less
than the increase of 43 per cent recorded in 2005. After declining from early
May 2006 to mid-June when investors globally reassessed their exposure to
emerging markets, the all-share index fluctuated higher to reach new highs early
in 2007, buoyed by the robust economy, upbeat global equity markets, an
improvement in commodity prices and positive growth in company profits. A new
all-time high was reached on 26 February 2007, representing an increase of 47
per cent from the recent low on 13 June 2006. Subsequently, the all-share price
index declined by 4 per cent to 9 March when share markets globally receded as
optimism gave way to caution, led by a decline in share prices in China.

SHARE PRICES AND PRICE-EARNINGS RATIO

[GRAPHIC OMITTED]

--------------------------------------------------------------------------------
40 Quarterly Bulletin March 2007

South African Reserve Bank
--------------------------------------------------------------------------------

Resources shares generally led the bull-run in the share market in 2006 and
early 2007, although growth was fairly widespread across the various sectors.
The resources index increased by 41 per cent in 2006 and exceeded the growth in
industrial shares of 39 per cent, while financial shares lagged behind with
growth of 31 per cent. Expectations of accelerating growth in economic activity
and sustained increases in consumer demand continued to benefit industrial
shares. This is evidenced by the sharp recovery in the consumer services share
price index during the second half of 2006. The consumer services index, a
subcategory of the industrial index which, inter alia, includes general
retailers, improved by 52 per cent from 26 June 2006 to the end of February
2007. Proposed private equity deals also benefited the share prices of the
general retailers in the early months of 2007. In the first two months of 2007,
industrial and financial share prices rose by 4 per cent, while prices of
resources shares increased by 3 per cent.

The performance of the South African share market generally exceeded those of
developed markets during 2006 and early 2007. In dollar terms, the all-share
price index increased by 31 per cent from 13 June 2006 to 9 March 2007. This
outperformed the Standard & Poor's 500 composite index, which increased by 15
per cent over the same period.

The dividend yield on all classes of shares receded from 2,5 per cent in
September 2006 to 2,2 per cent in February 2007. The dividend yield has been on
a declining trend since 2003, as share prices generally increased. The strong
rise in share prices since 2003 also resulted in an increase in the
price-earnings ratio of all classes of shares from 9,7 in April 2003 to 16,2 in
February 2007. Price-earnings ratios exceeding 16 were previously experienced in
the period 1994 to mid-1998. Buoyed by the current robust economic growth,
investors apparently continue to remain positive about the future earnings
growth of companies.

MARKET FOR EXCHANGE-TRADED DERIVATIVES

The buoyant conditions that prevailed in the financial derivatives market in
2006 continued into the first months of 2007. Financial futures remained the
instrument of choice, spurred on by the continued strength of the underlying
share market. In a world ranking by the World Federation of Exchanges the JSE
was placed second, after the National Stock Exchange of India, for the number of
individual equity futures traded in 2006. Turnover in derivatives on the JSE for
the first two months of 2007 is indicated in the accompanying table.

DERIVATIVES TURNOVER ON THE JSE, JANUARY TO FEBRUARY 2007
--------------------------------------------------------------------------------
Change over one year
---------------------
R billions Per cent
---------------------
Financial futures and options on futures ............... 379 37
Warrants ............................................... 1 -55
Agricultural commodity futures and options ............. 37 57
Interest rate derivatives .............................. 7 101

--------------------------------------------------------------------------------
In addition to the JSE, BESA also facilitates trading in certain derivative
instruments. Turnover of listed derivatives on BESA amounted to R4,7 billion in
2006. In January and February 2007, trade in these instruments amounted to R4
million.

--------------------------------------------------------------------------------
Quarterly Bulletin March 2007 41

South African Reserve Bank
--------------------------------------------------------------------------------

REAL-ESTATE MARKET

The deceleration in the rate of increase in residential real-estate prices over
the past two years paused towards the end of 2006. The twelve-month rate of
increase in medium-sized residential property prices, as measured by Absa,
decelerated uninterruptedly from 35,6 per cent in September 2004 to 14,4 per
cent in September 2006, before increasing to 15,4 per cent in February 2007.
Month-on-month growth in house prices similarly decelerated from 2,9 per cent in
January 2004 to 0,9 per cent in July 2006, before increasing to 1,1 per cent in
February 2007.

MORTGAGE INTEREST RATES AND THE HOUSING MARKET

[GRAPHIC]

The slower growth in property prices, together with rising mortgage interest
rates from June 2006, contributed to some moderation in construction activity in
the residential property market. Year-on-year growth in the value of residential
buildings completed averaged 25 per cent in 2006, significantly less than growth
rates of more than 40 per cent experienced in the previous two years.

--------------------------------------------------------------------------------
42 Quarterly Bulletin March 2007

South African Reserve Bank
--------------------------------------------------------------------------------

PUBLIC FINANCE

NON-FINANCIAL PUBLIC-SECTOR BORROWING REQUIREMENT(5)

The cash surplus of the non-financial public sector narrowed in the first nine
months of the current fiscal year when compared with the same period in the
previous fiscal year, as major public corporations forcefully stepped up their
net investment in non-financial assets. National government, provincial
governments as well as extra-budgetary institutions and social security funds
all recorded cash surpluses.

NON-FINANCIAL PUBLIC-SECTOR BORROWING REQUIREMENT
R billions
--------------------------------------------------------------------------------
Level of government 2005/06* 2006/07*
-------------------
National government ...................................... 4,0 -3,5
Extra-budgetary institutions ............................. -1,9 -2,8
Social security funds .................................... -3,2 -4,6
Provincial governments ................................... -10,4 -8,5
Local governments ........................................ 6,1 5,5
Non-financial public enterprises and corporations ........ -8,1 2,0
Total** .................................................. -13,5 -11,8
--------------------------------------------------------------------------------
* April - December of each fiscal year. Deficit +, surplus -

** Individual amounts may not add up to the total due to rounding

The activities of the non-financial public sector resulted in a cash surplus of
R8,7 billion in the October-December quarter of 2006 - R0,5 billion more than
the cash surplus recorded in the corresponding quarter of 2005. This brought the
surplus for the first nine months of fiscal 2006/07 to R11,8 billion or 0,9 per
cent of gross domestic product, down from 1,1 per cent in the first nine months
of fiscal 2005/06.

INVESTMENT IN NON-FINANCIAL ASSETS BY NON-FINANCIAL PUBLIC-SECTOR ENTERPRISES
AND CORPORATIONS

[GRAPHIC OMITTED]

(5) Calculated as the cash deficit of the consolidated central government,
provincial governments, local governments and non-financial public
enterprises and corporations.

--------------------------------------------------------------------------------
Quarterly Bulletin March 2007 43

South African Reserve Bank
--------------------------------------------------------------------------------

The non-financial public enterprises and corporations recorded a cash deficit
amounting to R2,0 billion for the period April - December 2006, compared with a
cash surplus of R8,1 billion recorded over the same period in the previous
fiscal year. As indicated by the graph on the previous page, net investment in
non-financial assets by the major non-financial public enterprises amounted to
R28,6 billion in the first nine months of fiscal 2006/07, a growth rate of no
less than 60,9 per cent when compared to the same period a year earlier. This
spending already by far surpassed the amount recorded in the previous fiscal
year as a whole.

The financial activities of the national government resulted in a cash surplus
of R3,5 billion in the first nine months of fiscal 2006/07, compared with the
cash deficit of R4,0 billion recorded in the same period of the previous fiscal
year. The turnaround from a deficit to a surplus was mainly the result of the
higher-than-budgeted revenue collections, while expenditure outcomes remained at
levels in line with budget projections.

Preliminary data on the finances of extra-budgetary institutions and social
security funds indicated cash surpluses for both public-sector categories in the
first nine months of fiscal 2006/07. Extra-budgetary institutions recorded a
cash surplus amounting to R2,8 billion in April - December 2006, compared with a
surplus of R1,9 billion in the same period a year earlier. Social security funds
recorded a surplus amounting to R4,6 billion in the period under review, which
was higher than the surplus of R3,2 billion recorded in the same period of the
previous fiscal year.

The provincial governments recorded a cash deficit of R1,6 billion in the
October-December quarter of 2006, which lowered their cumulative cash surplus
for the first nine months of fiscal 2006/07 to R8,5 billion. This was R1,9
billion less than the surplus recorded in the same period of the previous fiscal
year. The decline in the surplus can partly be attributed to the significant
increase in provinces' net acquisition of non-financial assets for the first
nine months of fiscal 2006/07 which grew at a rate of 29,1 per cent when
compared with the same period a year earlier. The Provincial Budgets and
Expenditure Review 2002/03 - 2008/09 published on 17 October 2006 estimated a
small surplus of R0,2 billion for fiscal 2006/07 as a whole.

The deposits of provincial governments with the private-sector banks increased
slightly from R8,4 billion at the end of March 2006 to R8,6 billion at the end
of December, while their overall indebtedness rose slightly to R0,3 billion.
Their deposits with the Corporation for Public Deposits (CPD) rose significantly
from R2,2 billion to R9,5 billion over the same period.

BUDGET COMPARABLE ANALYSIS OF NATIONAL GOVERNMENT FINANCE

Expenditure by national government in the first nine months of fiscal 2006/07
progressed in line with the originally budgeted expectations, while revenue
exceeded the initial projections by a considerable margin.

Expenditure by national government in the first nine months of fiscal 2006/07
amounted to R341 billion, or 14,3 per cent more than in the corresponding period
of the previous fiscal year. This was closely aligned with the initially
budgeted increase of 13,4 per cent for the full fiscal year. As a ratio of gross
domestic product, national government expenditure amounted to 25,9 per cent,
compared with 25,3 per cent recorded in the same period a year earlier. Interest
payments on national government debt increased at a year-on-year rate of 5,0 per
cent, whereas the equitable share transfers to provinces rose by 11,9 per cent
over the same period under review.

After allowing for cash-flow adjustments (i.e. transactions recorded in the
government accounting system but not yet cleared in the banking system, and late
departmental requests), cash-flow expenditure in the first nine months of fiscal
2006/07 amounted to

--------------------------------------------------------------------------------
44 Quarterly Bulletin March 2007

South African Reserve Bank
--------------------------------------------------------------------------------

R339 billion, representing an increase of 13,4 per cent when compared with the
corresponding period of the previous fiscal year.

National government revenue in the first nine months of fiscal 2006/07 amounted
to R348 billion, representing an above-budgeted year-on-year rate of increase of
17,4 per cent. This increase was double the estimated 8,6 per cent for fiscal
2006/07 as a whole which was contained in the Budget Review 2006. National
government revenue as a ratio of gross domestic product amounted to 26,4 per
cent compared with 25,2 per cent recorded in the same period a year earlier.

REVENUE OF NATIONAL GOVERNMENT

[GRAPHIC OMITTED]

As shown in the accompanying table, taxes on income, profits and capital gains,
the main contributor to total revenue, recorded an increase of more than 20 per
cent in the first nine months of fiscal 2006/07 when compared with the same
period a year earlier. This increase was mainly the result of strong growth in
corporate income tax collections, signalling the increased profitability of
companies as well as continued improvements in tax-collection efficiency.

NATIONAL GOVERNMENT REVENUE IN FISCAL 2006/07
--------------------------------------------------------------------------------

Originally budgeted Actual Apr - Dec 2006
------------------------------------------------
Percentage
change Percentage
Revenue source R billons Full year R billions change*
------------------------------------------------

Taxes on income, profits and capital gains ..... 245,8 6,5 200,5 20,1
Payroll taxes .................................. 5,6 14,9 4,1 12,1
Taxes on property .............................. 8,9 -19,9 7,6 -6,9
Domestic taxes on goods and services ........... 171,7 14,0 124,2 15,9
Taxes on international trade and transactions .. 23,6 29,7 17,9 31,1
Other revenue .................................. 10,5 8,7 8,4 17,8
Less: SACU** payments .......................... 19,7 39,6 14,8 42,0
TOTAL REVENUE .................................. 446,4 8,6 347,8 17,4

--------------------------------------------------------------------------------

* April - December 2005 to April - December 2006

** Southern African Customs Union

--------------------------------------------------------------------------------
Quarterly Bulletin March 2007 45

South African Reserve Bank
--------------------------------------------------------------------------------

Taxes on property continued to show the effect of the reduction in transfer
duties announced in the 2006 Budget. Revenue collections derived from domestic
taxes on goods and services such as value-added tax continued to reflect strong
domestic demand. Taxes on international trade and transactions grew strongly,
reflecting the high volume of imports.

The net result of these developments in revenue and expenditure was a cash book
surplus of R7,0 billion in the first nine months of fiscal 2006/07, compared
with a deficit of R1,9 billion in the same period a year earlier. The previous
surplus recorded over the same period was in 2002 when it amounted to R1,8
billion, as revenue then exceeded the budgetary expectations by a considerable
margin. The Budget Review 2006 projected a national government deficit of R26,4
billion in fiscal 2006/07 as a whole, but this estimate was revised downward to
R7,8 billion in the Adjusted Estimates of National Expenditure 2006.

CUMULATIVE BALANCE OF NATIONAL GOVERNMENT

[GRAPHIC OMITTED]

The cash-flow surplus before borrowing and debt repayment amounted to R9,0
billion in the first nine months of fiscal 2006/07, compared with a deficit of
R2,8 billion recorded in the corresponding period of the previous fiscal year.
Extraordinary payments included a partial payment for the Saambou Bank liability
to the amount of R3,8 billion carried forward from fiscal 2005/06. Extraordinary
receipts amounting to R2,5 billion in the first nine months of fiscal 2006/07
included proceeds from the foreign-exchange amnesty dispensation, special
dividends paid by Telkom and the Airports Company of South Africa, Limpopo
Minerals Trust proceeds as well as proceeds received due to the Agricultural
Debt Account surrender. After taking into account these extraordinary
transactions, the surplus amounted to R6,8 billion in the first nine months of
fiscal 2006/07, compared with a net borrowing requirement of R4,5 billion
recorded a year earlier.

The issuance of debt instruments in the domestic and foreign capital markets was
used to increase cash balances, partly in preparation for large interest and
redemption payments as well as transfers to tertiary education institutions in
early 2007. Domestic short-term instruments were sold at an average rate of 7,6
per cent per annum, whereas domestic long-term funding was obtained at an
average rate of 8,0 per cent per annum in the first nine months of fiscal
2006/07.

--------------------------------------------------------------------------------
46 Quarterly Bulletin March 2007

South African Reserve Bank
--------------------------------------------------------------------------------

The National Treasury introduced two new fixed-income bonds during the period
under review, i.e. the R208 and R209 bonds with various maturities, yielding
R5,3 billion to the National Revenue Fund. The average maturity of national
government's domestic marketable bonds decreased from 98 months at the end of
March 2006 to 96 months at the end of December 2006.

Net issues and use of foreign bonds and loans in the first nine months of fiscal
2006/07 amounted to R2,8 billion. A new foreign bond which matures in 2016 was
issued in April 2006 and yielded R5,5 billion to the National Revenue Fund. This
was, however, partly offset by the redemption of a foreign bond to the amount of
R3,3 billion in May 2006. The average outstanding maturity of government's
foreign bonds increased from 68 months at the end of March 2006 to 72 months at
the end of December 2006. Net foreign funding included amounts drawn on the
export credit facility which had been arranged for the financing of the
Strategic Defence Procurement Programme to the amount of R3,1 billion.
Government announced the early redemption of a foreign bond in early February
2007, to the amount of R2,3 billion.

FINANCING OF NATIONAL GOVERNMENT DEFICIT
R billions
--------------------------------------------------------------------------------

Originally Actual Actual
budgeted Apr - Dec Apr - Dec
Item or instrument Fiscal 2006/07 2006 2005
--------------------------------------

DEFICIT.............................................. 26,4 -9,0* 2,8*
Plus: Extraordinary payments......................... 0,0 3,7 4,5
Cost on revaluation of maturing foreign debt... 1,4 1,0 0,0
Less: Extraordinary receipts......................... 0,2 2,5 2,8
NET BORROWING REQUIREMENT**.......................... 27,6 -6,8 4,5
Treasury bills....................................... 5,8 5,1 3,9
Domestic government bonds............................ 10,2 26,9 37,8
Foreign bonds and loans.............................. 3,8 2,8 1,9
Changes in available cash balances***................ 7,8 -41,6 -39,1
TOTAL NET FINANCING.................................. 27,6 -6,8 4,5

--------------------------------------------------------------------------------

* Cash-flow deficit +, surplus -

** Deficit +, surplus -

*** Increase -, decrease +

Total debt of national government increased from R527 billion at the end of
March 2006 to R575 billion at the end of December 2006. As a ratio of gross
domestic product, total debt of national government remained broadly unchanged
at 33,3 per cent between these respective dates.

THE BUDGET FOR THE FISCAL YEARS 2007/08 TO 2009/10

The Minister of Finance tabled the 2007 Budget in Parliament on 21 February. The
Budget announced the first main budget surplus ever in history, the repeal of
the retirement fund tax, moderate tax relief and a positive economic outlook
over the medium term. The successful turnaround of economic performance over the
past 10 years and the healthy state of public finances were reflected in the
anticipated budget surpluses in fiscal 2006/07 and 2007/08. Sound management of
the public finances had also created room for increased spending on health,
education and economic infrastructure, as well as other growth-enhancing areas.
The improved budget stance also provided a stable platform for government to
respond appropriately in the event of adverse economic conditions.

The 2007 Budget proposed substantial allocations for investment in
infrastructure, thus contributing to increased capacity to deliver social and
economic services. Buoyant

--------------------------------------------------------------------------------
Quarterly Bulletin March 2007 47

South African Reserve Bank
--------------------------------------------------------------------------------

consumer demand and corporate profitability were expected to boost revenue
growth. Over the next three years the public sector's contribution to gross
fixed capital formation was projected to maintain an upward trend in order to
support the Accelerated and Shared Growth Initiative of South Africa (ASGISA).

The tax proposals in the 2007 Budget were aimed at encouraging long-term
savings, including provision for retirement. An important part of strengthening
retirement savings was the abolishment of the tax on retirement funds with
effect from 1 March 2007. The Budget also proposed steps to further reform the
social security system, aimed at greater income security and reduced
vulnerability of households while also contributing towards savings. The
introduction of a wage subsidy was under consideration, as it could promote job
creation at the low-wage end of the labour market.

FISCAL PROJECTIONS: NATIONAL GOVERNMENT
--------------------------------------------------------------------------------

2006/07 2007/08 2008/09 2009/10
----------------------------------------------------------------------
Revised estimate Medium-term estimates
----------------------------------------------------------------------
Annual Annual Annual Annual
change change change change
R Per R Per R Per R Per
billions cent billions cent billions cent billions cent
----------------------------------------------------------------------

EXPENDITURE ................................... 470,6 12,9 533,9 13,4 594,2 11,3 650,3 9,4
State debt cost* ........................... 52,2 2,5 52,9 1,4 53,0 0,1 50,9 -3,9
Current payments ........................... 85,5 12,5 97,4 13,9 105,7 8,5 116,1 9,9
Transfers and subsidies .................... 327,2 15,7 373,9 14,3 420,5 12,5 462,3 9,9
Payments for captial assets ................ 5,7 -18,8 6,6 16,8 7,0 5,7 8,0 13,6
Contingency reserve and unallocated funds .. -- 3,0 8,0 13,0
Expenditure as ratio of GDP ................... 26,8% 27,5% 27,7% 27,3%
REVENUE ....................................... 475,8 15,6 544,6 14,5 591,2 8,6 641,5 8,5
Revenue as ratio of GDP ....................... 27,1% 28,1% 27,6% 27,0%
BUDGET BALANCE** BEFORE
BORROWING AND DEBT REPAYMENT ............... 5,2 10,7 -3,0 -8,8
Deficit (-)/surplus (+) as ratio of GDP ....... 0,3% 0,6% -0,1% -0,4%
Deficit (-)/surplus (+) as
ratio of GDP: October 2006 MTBPS*** ........ -0,4% 0,5% 0,2% -0,4%
----------------------------------------------------------------------------------------------------------------------

* Includes interest, management cost and the cost of raising loans

** Deficit (-), surplus (+)

*** Medium Term Budget Policy Statement

Expenditure by national government was estimated to amount to R534 billion in
fiscal 2007/08, representing a year-on-year rate of increase of 13,4 per cent.
It was estimated that national government expenditure would increase at an
average rate of 11,4 per cent per annum over the three-year budget period. As a
ratio of gross domestic product, it was projected that national government
expenditure would increase slightly from 26,8 per cent in fiscal 2006/07 to 27,5
per cent in fiscal 2007/08.

State debt cost was budgeted to amount to R52,9 billion in fiscal 2007/08, or
9,9 per cent of the total expenditure of national government. This represented a
year-on-year rate of increase of 1,4 per cent compared with the revised estimate
for 2006/07. State debt cost

--------------------------------------------------------------------------------
48 Quarterly Bulletin March 2007

South African Reserve Bank
--------------------------------------------------------------------------------

as a ratio of estimated gross domestic product was projected to decrease from
3,0 per cent in 2006/07 to 2,1 per cent in the final year of the medium-term
period. This decline was due to a lower-than-anticipated debt stock and stable
interest rates, thereby freeing additional resources for productive expenditure.

The revised estimate indicated that expenditure excluding state debt cost would
increase from R418 billion in fiscal 2006/07 to R599 billion in 2009/10, or at
an average rate of 12,7 per cent per annum over the medium term. Real
non-interest spending was estimated to increase by 7,7 per cent per annum over
the medium term.

Total infrastructure spending by the public sector was estimated to amount to
R416 billion over the MTEF period, which was R6,1 billion higher than the
estimate in the Medium Term Budget Policy Statement 2006. This increase was due
to additional allocations to public transport, water and sanitation.

Government's recognition of the critical role that provinces and municipalities
play in the delivery of social and household services was evident as these two
spheres would receive 64 per cent of the additional R89,5 billion allocated in
the 2007 Budget.

The accompanying graph illustrates the continuing shift in the functional
classification of expenditure towards expenditure on social and economic
services as well as general government services. Government continues to incur
the bulk of its expenditure on social services. Spending on social services
(which includes health, education and other social services) was expected to
increase at an average annual rate of 11,4 per cent over the three-year budget
period. As a ratio of total expenditure, spending on social services was
estimated to increase from 50,8 per cent in fiscal 2003/04 to 53,1 per cent in
fiscal 2007/08. Conversely, as a ratio of total expenditure, government spending
on interest was estimated to decrease from 13,3 per cent in fiscal 2003/04 to
9,5 per cent in fiscal 2007/08 and to 7,5 per cent in fiscal 2009/10.

FUNCTIONAL CLASSIFICATION OF BUDGETED GOVERNMENT EXPENDITURE*

[GRAPHIC OMITTED]

* Consolidated national and provincial government and social security funds

Over the medium-term period social grants expenditure would average 3,2 per cent
of the estimated gross domestic product. Government also proposed to introduce a

--------------------------------------------------------------------------------
Quarterly Bulletin March 2007 49

South African Reserve Bank
--------------------------------------------------------------------------------

broad-based social security framework over the 2007-2010 period as a further
step in strengthening labour market institutions and sharing the fruits of
economic progress.

The total revised revenue of national government was estimated to increase by
14,5 per cent from fiscal 2006/07 to fiscal 2007/08, decelerating to an increase
of 8,5 per cent in fiscal 2009/10. As a ratio of gross domestic product,
national government revenue was estimated to average 27,6 per cent over the
medium term.

As a result of high import volumes, customs duty revenue was expected to exceed
original budgetary expectations in fiscal 2006/07 by R300 million. Transfers to
the Southern African Customs Union (SACU) partners would amount to R25,2 billion
in 2006/07, which was R5,4 billion higher than the 2006 Budget estimate, and
reflected strong growth in imports in 2004/05.

The tax proposals in the 2007 Budget were aimed at encouraging long-term
savings, including provision for retirement, not least through the proposed
abolishment of the tax on retirement funds. Secondary tax on companies would be
replaced with a dividend tax, reducing the rate from 12,5 per cent to 10 per
cent and broadening the base of this instrument. The income tax reduction
amounted to R8,4 billion for individuals. The tax proposals would render net tax
relief of R12,4 billion in fiscal 2007/08.

Netting the budgeted revenue and expenditure of national government for the
2007/08 fiscal year would result in an estimated surplus before borrowing and
debt repayment of R10,7 billion. As a ratio of gross domestic product, the
surplus would amount to 0,6 per cent. It was envisaged that this ratio would
revert to deficits of 0,1 per cent in fiscal 2008/09 and 0,4 per cent in fiscal
2009/10. The primary balance (i.e. the deficit before borrowing excluding state
debt cost) for 2006/07 was expected to amount to a surplus of 3,3 per cent of
estimated gross domestic product, trending lower to 1,8 per cent in fiscal
2009/10.

As indicated in the accompanying table, the revised net borrowing requirement of
national government for fiscal 2007/08 was determined after providing for
certain extraordinary receipts and payments. Included in the extraordinary
payments was an amount of R400 million relating to Saambou Bank.

FINANCING OF NATIONAL GOVERNMENT DEFICIT
R billions
--------------------------------------------------------------------------------

Item or instrument Revised estimate Medium-term estimates
----------------------------------------------
2006/07 2007/08 2008/09 2009/10
----------------------------------------------

Budget balance(1) .................... -5,2 -10,7 3,0 8,8
Plus: Extraordinary payments ......... 4,2 0,4 -- --
Cost on revaluation of maturing
foreign debt ................... 1,8 0,5 2,4 2,9
Less: Extraordinary receipts ......... 2,5 0,3 0,3 0,3
Net borrowing requirement(1) ......... -1,7 -10,1 5,1 11,4
Treasury bills ....................... 5,8 5,8 5,8 5,8
Domestic government bonds issued(2) .. 2,3 -8,1 2,3 11,0
Foreign bonds and loans(3) ........... 2,5 -2,1 -2,7 -3,9
Changes in available cash balances(4) -12,3 -5,7 -0,3 -1,5
Total net financing .................. -1,7 10,1 5,1 11,4

--------------------------------------------------------------------------------

(1) Deficit (+), surplus (-)

(2) Including premiums and book profits resulting from debt restructuring
previously included in revenue

(3) Excluding revaluation of maturing foreign loans

(4) Increase (-), decrease (+)

Originally an amount of R1,7 billion was provided for extraordinary receipts in
fiscal 2006/07. This amount included premiums of R1,5 billion for bonds which
were issued

--------------------------------------------------------------------------------
50 Quarterly Bulletin March 2007

South African Reserve Bank
--------------------------------------------------------------------------------

to finance the borrowing requirement, as well as the transfer of R200 million to
the National Revenue Fund from the Agricultural Debt Account held with the
Corporation for Public Deposits. On revision, these receipts were expected to
increase due to special dividends of R828 million from Telkom and R668 million
from the Airports Company of South Africa, respectively.

Government's debt management strategy seeks to enhance liquidity in an
environment of declining borrowing requirements. As a result of sound economic
policy and prudent management of the national debt portfolio, the net borrowing
requirement continues to decline. It was envisaged that financing through the
issuance of fixed-income bonds would remain the principal means of financing for
national government over the medium term. Fixed-income bonds would constitute
73,7 per cent of total issuance, whereas inflation-linked bonds and floating
rate bonds were expected to contribute 19,5 per cent and 6,8 per cent,
respectively. It was expected that on a net basis domestic long-term bonds would
be redeemed in fiscal 2007/08. In the subsequent two years, net issuance of
domestic long-term bonds would be resumed.

NATIONAL GOVERNMENT DEBT SUSTAINABILITY INDICATORS

[GRAPHIC OMITTED]

It was estimated that national government gross loan debt would increase
slightly from R550 billion at the end of fiscal 2006/07 to R552 billion at the
end of March 2008, and further to R578 billion in the final year of the medium
term. As a ratio of gross domestic product, gross loan debt was expected to
decrease from 31,3 per cent at the end of fiscal 2006/07 to 28,4 per cent at the
end of fiscal 2007/08 and eventually to 24,3 per cent at the end of fiscal
2009/10.

Forward cover profits on the Gold and Foreign Exchange Contingency Reserve
Account (GFECRA) were estimated to amount to R26,8 billion at the end of March
2007. No provision for any profits or losses on the GFECRA was made for the
subsequent years.

--------------------------------------------------------------------------------
Quarterly Bulletin March 2007 51

South African Reserve Bank
--------------------------------------------------------------------------------

The public-sector borrowing requirement as a ratio of gross domestic product was
projected to record a turnaround from a surplus of 0,7 per cent in fiscal
2006/07 to a borrowing requirement of 0,3 per cent in fiscal 2007/08, widening
to 1,4 per cent in fiscal 2009/10. The borrowing requirement is expected to grow
over the medium term driven by large-scale public-sector investment.

NON-FINANCIAL PUBLIC-SECTOR BORROWING REQUIREMENT

[GRAPHIC OMITTED]

PUBLIC-SECTOR BORROWING REQUIREMENT*
R billions
--------------------------------------------------------------------------------

Revised
Level of government estimate Medium-term estimates
--------------------------------------
2006/07 2007/08 2008/09 2009/10
--------------------------------------

National government ................................. -4,4 -11,6 1,8 7,5
RDP Fund ............................................ -0,2 -0,2 -0,2 -0,2
Extra-budgetary institutions ........................ -2,9 -2,0 -1,9 -2,0
Social security funds ............................... -4,9 -5,7 -6,7 -7,1
Provincial governments .............................. 0,2 0,3 -1,3 -2,9
Local authorities and local government enterprises .. 8,5 10,8 12,2 13,5
General government borrowing** ...................... -3,6 -8,5 3,8 8,8
Per cent of gross domestic product .................. -0,2% -0,4% 0,2% 0,4%
Non-financial public enterprises .................... -7,8 13,6 21,0 23,5
Public-sector borrowing requirement** ............... -11,4 5,1 24,7 32,3
Per cent of gross domestic product .................. -0,7% 0,3% 1,2% 1,4%

--------------------------------------------------------------------------------

* Deficit (+), surplus (-)

** Calculations may not add up due to rounding

Over the medium term, infrastructure and other capital expenditure at all levels
of government were expected to accelerate, and part of this would be financed
through an increase in the claims by the public sector on the capital markets.
Some public entities were improving their balance sheets, enabling them to
finance part of their capital programme through borrowing.

--------------------------------------------------------------------------------
52 Quarterly Bulletin March 2007

South African Reserve Bank
--------------------------------------------------------------------------------

STATEMENT OF THE MONETARY POLICY COMMITTEE
07 December 2006

Issued by Mr T T Mboweni, Governor of the South African Reserve Bank, at a
meeting of the Monetary Policy Committee in Pretoria

INTRODUCTION

Inflation has continued its upward trend but is still within the inflation
target range. Credit extension and domestic demand remain strong, and there are
only tentative signs that household consumer demand may be responding to the
tighter monetary policy stance. The recent revisions of the gross domestic
product (GDP) data show that the economy has been growing at a faster rate than
previously estimated. Reflecting the strong economy, the equity market has
reached new highs.

The outlook for the international economy remains somewhat mixed with good
growth performances in Europe and Asia, and some weakness in the United States
economy. The resultant weakening of the US dollar against some of the major
currencies and the rebounding of investor confidence in emerging markets has
influenced the rand and other currencies.

RECENT DEVELOPMENTS IN INFLATION

Year-on-year inflation as measured by the consumer price index for metropolitan
and other urban areas excluding the interest cost on mortgage bonds (CPIX)
declined to 5,0 per cent in October 2006 from 5,1 per cent in September. The
outcome, however, was higher than expected following the R0,50-per-litre
reduction in the petrol price in October. Petrol and diesel prices increased at
a year-on-year rate of 0,2 per cent in October, compared to 22,1 per cent in
August. The lower petrol price inflation, combined with continued sizeable
declines in the prices of clothing and footwear, contributed to the moderation
in goods price inflation from 6,0 per cent in August to 5,1 per cent in October.
However, this favourable development was offset by the increase in services
inflation from 3,5 per cent in August to 4,6 per cent in October.

The food category remained the main inflation driver. Food price inflation
increased from a year-on-year rate of 7,2 per cent in August 2006 to 7,9 per
cent and 9,4 per cent in September and October, respectively. Meat prices
increased at a year-on-year rate of almost 20 per cent in October, while the
prices of fish and other seafood increased by 11,0 per cent. The significance of
the meat price developments is illustrated by the fact that if this subcategory
were excluded, CPIX inflation would have measured approximately 3,8 per cent in
October. Housing services were primarily responsible for the increase in
services inflation in September and October. Administered prices excluding
energy increased at a year-on-year rate of 5,5 per cent in October, up from 4,2
per cent in August.

Production price inflation continued to increase markedly and across a broad
spectrum of categories. Measured year on year, production price inflation had
declined to 9,0 per cent in September 2006 from 9,2 per cent the previous month.
However, in October the year-on-year increase was 10,0 per cent. Imported goods
inflation measured 10,4 per cent in October compared to 8,2 per cent in
September. Domestically produced goods

--------------------------------------------------------------------------------
Quarterly Bulletin March 2007 53

South African Reserve Bank
--------------------------------------------------------------------------------

inflation increased to 9,9 per cent compared to 9,2 per cent in the previous
month. The categories displaying the highest year-on-year increases included
agricultural products, manufactured food and electricity, gas and water.

THE OUTLOOK FOR INFLATION

The most recent central forecast of the Bank's forecasting model indicates a
moderate improvement in the inflation outlook compared to the forecast
considered at the October meeting of the Monetary Policy Committee (MPC). CPIX
inflation is expected to breach the upper level of the inflation target range in
the second quarter of 2007. Thereafter, CPIX inflation is expected to follow a
downward path to just above 5 per cent at the end of the forecast period in
2008. The more favourable outlook is as a result of the previous monetary
adjustments, and a consolidation of oil prices at around US$60 per barrel.

Inflation expectations have shown a slight deterioration in the fourth quarter
of 2006. According to the latest survey conducted on behalf of the Bank by the
University of Stellenbosch-based Bureau for Economic Research (BER),
expectations increased marginally by 0,1 percentage points in respect of both
2006 and 2007. However, the forecast for 2008 shows a significant upward
adjustment of 0,4 percentage points. The survey results indicate that CPIX
inflation is now expected to average 5,4 per cent in both 2007 and 2008. In the
previous survey the forecasts were 5,3 per cent and 5,0 per cent, respectively.
Although expectations for all forecast years are within the inflation target
range, the upward trend in expectations observed over the past two quarters is a
source of some concern to the MPC.

The yield curve became more inverted in October and November 2006. Rather than
necessarily reflecting expectations of a drastic slowing in the economy,
technical factors are partly responsible for the inversion of the curve. The
shorter end of the curve reflects expectations of higher interest rates, while
the longer end of the curve is influenced by among other things, demand and
supply conditions in the bond market and positive expectations regarding future
inflation outcomes.

Notwithstanding the slight improvement in the forecast, the MPC still views the
risks to the outlook to be on the upside, with continued pressures on inflation
emanating from a number of sources.

There is a mixed picture with respect to the responsiveness of household
consumer demand to the cumulative 150-basis-point increase in the repo rate
since June. The growth in household consumption expenditure declined moderately
from 7,8 per cent in the second quarter of 2006, to 7,2 per cent in the third
quarter, with a marked decline in the growth of spending on durable and
non-durable goods. Motor vehicle sales trends may indicate a possible impact of
the increased interest rates on sales. In November, new motor vehicle sales
increased at a modest year-on-year rate of 2,3 per cent, and declined by 3 per
cent on a month-on-month basis. The FNB/BER Consumer Confidence Index, however,
rose marginally in the fourth quarter following a decline in the third quarter,
indicating continued resilience in consumer demand.

Despite tentative signs of moderation in consumer demand, private-sector credit
extension remains at high levels. Growth in total loans and advances extended to
the private sector has maintained a rate of around 26 per cent since August 2006
despite some securitisation transactions. Mortgage advances remained the main
source of credit growth. The higher rates of credit extension have contributed
to the further increase in household indebtedness which in the third quarter of
this year rose to 73 per

--------------------------------------------------------------------------------
54 Quarterly Bulletin March 2007

South African Reserve Bank
--------------------------------------------------------------------------------

cent of household disposable income, while the cost of servicing this debt has
also increased marginally. Insolvencies have remained at low levels.

Food price inflation continues to pose a threat to the inflation outlook and is
likely to maintain its strong trend in the coming months. Wheat and maize price
increases have fed through to food prices at the production price level and a
further pass-through to CPIX can be expected. Prices of grain products in CPIX
have increased further, and in October, grain product inflation had risen to 5,5
per cent. The futures prices of maize suggest that some respite could be on the
way during the first half of next year.

The risk to the inflation outlook arising from oil price developments appears to
have abated somewhat. For most of October and November, North Sea Brent crude
oil traded at prices between US$55 and US$60 per barrel in the international
market. Towards the end of November, prices began to edge up amid fears of
further OPEC quota cuts. The oil prices displayed a far lower degree of
volatility than was the case during the earlier parts of 2006. The current
international oil price levels, and the more recently appreciated rand exchange
rate, have led to a R1,14-per-litre decline in domestic petrol prices during the
past four months. Nevertheless, the oil price is still considered to pose an
upside risk to the inflation outlook, given the sensitivity of oil prices to
geopolitical events and the continued tight supply and demand conditions in the
oil market.

During the period since the previous meeting of the MPC, the exchange rate of
the rand has displayed a degree of volatility. The related uncertainty therefore
also poses a risk to the inflation outlook. The rand is currently trading at
around R7,10 to the US dollar compared to R7,70 at the time of the October
meeting of the MPC. Part of the recent appreciation of the rand against the US
dollar can be attributed to the recent 6-per-cent decline in the value of the US
dollar against the euro and pound sterling. Against the euro, the rand is
currently trading at levels similar to those at the previous MPC meeting. On a
trade-weighted basis, the rand has therefore appreciated by about 2,8 per cent
since 12 October.

Balance-of-payments developments indicate that the deficit on the trade account
narrowed in the third quarter of this year, and has contributed to the decline
in the ratio of the current-account deficit to GDP from a revised 5,7 per cent
in the second quarter of 2006 to 5,2 per cent in the third quarter. The
current-account deficit continues to be adequately financed by capital inflows
which are largely attracted by the positive growth prospects of the South
African economy. This year to date, non-resident purchases of South African
bonds and equities have exceeded R100 billion, compared to R41 billion for 2005
as a whole. Official gross gold and other foreign-exchange reserves stood at
US$25 billion at the end of November 2006 and the international liquidity
position amounted to US$22,2 billion.

The South African economy has sustained its strong growth momentum and grew at
revised annualised rates of 5,0 and 5,5 per cent in the first two quarters of
this year, respectively. Growth in the third quarter, however, moderated to 4,7
per cent. This decline is not viewed as being indicative of a widening of the
output gap, and there are few signs of significant underutilisation of capacity
in the economy. The forward-looking indicators also remain favourable. The
Investec/BER Purchasing Managers Index declined in November, but nevertheless
still indicates a strong performance in the manufacturing sector. Similarly, in
the fourth quarter of this year, the RMB/BER Business Confidence Index remained
at the high levels seen over the past two years, while the BER manufacturing
survey showed a marked improvement in manufacturing business confidence in the
fourth quarter of this year.

--------------------------------------------------------------------------------
Quarterly Bulletin March 2007 55

South African Reserve Bank
--------------------------------------------------------------------------------

On the positive side from an inflation-outlook perspective, wage settlement
levels appear to be moderate, although there is evidence of a slight upward
trend. According to Andrew Levy Employment Publications, the average level of
wage settlements in collective bargaining agreements increased marginally from
6,2 per cent in the nine months ending September 2005 to 6,4 per cent over the
same period in 2006. Settlements ranged from 4,6 per cent in the retail sector
to 8,9 per cent in the mining sector. These settlements remain in line with the
inflation target if allowance is made for a moderate increase in labour
productivity over time.

Fiscal policy continues to be supportive of monetary policy. In the October
Medium Term Budget Policy Statement, the government has continued to demonstrate
its commitment to prudent fiscal management.

International inflation developments are generally seen to be relatively
favourable. Global inflation fears appear to have subsided somewhat in the wake
of tighter monetary policies by a number of central banks. However, in recent
weeks there have been indications of a possible slowdown in the United States
economy which have contributed to the uncertainties and volatility in the
international financial markets. It is still too early to tell how these
developments will play themselves out in the coming months.

MONETARY POLICY STANCE

The MPC has decided to adjust the existing monetary policy stance by increasing
the repo rate by 50 basis points to 9,0 per cent per annum with effect from
Friday, 8 December 2006. As always, the MPC will continue to monitor all
relevant developments in the economy and will not hesitate to act to ensure that
the monetary policy stance remains consistent with achieving the inflation
target.

--------------------------------------------------------------------------------
56 Quarterly Bulletin March 2007

South African Reserve Bank
--------------------------------------------------------------------------------

STATEMENT OF THE MONETARY POLICY COMMITTEE
15 February 2007

Issued by Mr T T Mboweni, Governor of the South African Reserve Bank, at a
meeting of the Monetary Policy Committee in Pretoria

INTRODUCTION

Since the meeting of the Monetary Policy Committee (MPC) in December 2006, the
outlook for inflation has, on balance, improved. Inflation outcomes, with
respect to both consumer and producer prices, have been below expectations,
mainly as a result of moderating food price inflation and lower international
oil prices. Nevertheless, some longer-term risks to the outlook remain. There
are still only tentative signs that consumer demand growth is abating. Credit
extension has continued to grow at a robust rate. The challenge for monetary
policy is to weigh up the perceived medium to long-term risks against the more
favourable outlook. In the past few meetings, the MPC has consistently seen
these risks to be firmly on the upside.

RECENT DEVELOPMENTS IN INFLATION

Year-on-year inflation as measured by the consumer price index for metropolitan
and other urban areas excluding the interest cost on mortgage bonds (CPIX)
remained constant at 5,0 per cent for the three months to December of 2006. In
2006 as a whole, CPIX inflation averaged 4,6 per cent compared to 3,9 per cent
in 2005. In December, goods price inflation was unchanged from November at 5,2
per cent, while services price inflation increased to 4,8 per cent from 4,6 per
cent in November driven mainly by higher rates of increase in housing services
and medical services.

Food price inflation, which has been a major driver of CPIX inflation over the
past few months, has shown some signs of moderation. In December food price
inflation measured 7,7 per cent, compared to the peak of 9,4 per cent in October
2006. Meat prices, which remain the main contributor to food price inflation,
increased by 16,6 per cent in December compared to rates of increase of just
below 20 per cent in the previous two months. The petrol price increased at a
year-on-year rate of 5,8 per cent in December, despite the R0,07 price decrease
in that month. Prices of clothing and footwear fell by almost 12 per cent in
December compared to the previous year.

Production price inflation also shows signs that it may have peaked. Having
measured 10,0 per cent in both October and November 2006, production price
inflation declined to 9,3 per cent in December. Imported goods inflation
measured 9,1 per cent compared to domestically produced goods inflation of 9,4
per cent. The contribution of food to production price inflation moderated in
December which suggests that pressure on food prices at the consumer level could
be further contained.

THE OUTLOOK FOR INFLATION

The most recent central forecast of the Bank's forecasting model indicates an
improvement in the inflation outlook compared to the forecast considered at the
December meeting of the MPC. CPIX inflation is no longer expected to breach the
upper end of the target, but is now expected to peak at an average rate of
around 5,6 per cent in the second quarter of this year and to average 4,7 per
cent by the fourth quarter of

--------------------------------------------------------------------------------
Quarterly Bulletin March 2007 57

South African Reserve Bank
--------------------------------------------------------------------------------

2008. In terms of the model, the improved outlook is primarily the result of the
change in the monetary policy stance last year and the improved outlook with
regard to expected international oil price developments.

There are a number of additional developments contributing to this positive
outlook. There is some evidence of an improvement in market expectations of
inflation since the previous MPC meeting. The yield curve has inverted further,
reflecting in part an improvement in inflation expectations. The break-even
inflation rates as suggested by the yield differential between inflation-linked
bonds and conventional government bonds indicate that inflation expectations
have improved significantly since September when yields at shorter maturities
exceeded 6 per cent. Since then, break-even inflation rates across all
maturities have declined.

Inflation expectations are also reflected to some extent in wage settlements in
the economy. Recent nominal wage developments are indicative of inflation
expectations remaining under control despite a slight upward trend. In the third
quarter of 2006, unit labour costs increased at a year-on-year rate of 5,3 per
cent, compared to a second-quarter increase of 3 per cent. According to Andrew
Levy Employment Publications, nominal wage settlements averaged 6,5 per cent in
2006 compared to 6,3 per cent in 2005. Although wage settlements were slightly
higher in 2006, the inflation rate was higher than in the previous year. If
allowance is made for a moderate increase in labour productivity, these
increases are consistent with the inflation target.

The domestic economy shows signs that the growth momentum has been maintained at
rates around potential. Capacity utilisation levels remain high, particularly in
construction and electricity generation, although they are below the peak
reached in the second quarter of 2006. Growth in the mining and manufacturing
sectors continued to display upward trends in 2006. Seasonally adjusted total
mining production increased by 5,5 per cent in the three months ending December
2006, compared with the previous three months, while manufacturing sector output
increased by 2,1 per cent over the same period. The positive trend in
manufacturing is expected to be sustained as reflected in the Investec/BER
Purchasing Managers Index which reached a level of 57,2 in January 2007.

The exchange rate of the rand has been relatively stable and averaged R7,14 to
the US dollar since the previous MPC meeting when it was trading at around
R7,10. During this period, it fluctuated in a range of between R6,93 and R7,40
to the US dollar. The rand is currently trading at around R7,20. On a
trade-weighted basis, the rand is relatively unchanged since the previous
meeting. Much of the volatility observed since the previous meeting has been due
to movements of the US dollar against other currencies, fluctuations in
commodity prices and generally illiquid conditions in the local foreign-exchange
market at the end of the year.

Balance-of-payments developments suggest that the deficit on the current account
might have widened significantly in the fourth quarter of 2006 following an
increase in the trade deficit. Preliminary estimates indicate that the deficit
on the trade account of the balance of payments more than doubled from the third
to the fourth quarter of 2006. In the fourth quarter, the value of merchandise
imports increased by about 17 per cent from the third quarter, while the value
of merchandise exports increased by about 8,5 per cent. Much of the import
momentum in the fourth quarter, however, can be ascribed to the 140-per-cent
increase in the volume of oil imports compared to the third quarter. This
inventory build-up appears to be exceptional and oil imports are unlikely to be
sustained at these levels.

--------------------------------------------------------------------------------
58 Quarterly Bulletin March 2007

South African Reserve Bank
--------------------------------------------------------------------------------

We have emphasised on a number of occasions that the MPC does not have a target
for the current account, nor does the MPC view deficits on the current account
to be inflationary in themselves. The mandate of the Bank is to maintain
inflation within the target range of 3 to 6 per cent. The risk to inflation
arises if the market perceives a particular level of the current account to be
unsustainable, which could have implications for the exchange rate and,
consequently, for the inflation rate. To date the current-account deficit,
including that in the fourth quarter, has been adequately financed. Current
developments appear to indicate that the current-account deficit will continue
to be adequately financed given the coherent macroeconomic policy framework of
the country and positive growth prospects. Non-resident purchases of South
African bonds and equities totalled R108 billion in 2006 as a whole, compared to
R41 billion for 2005. This year to date, the non-residents have been net buyers
of bonds and equities to the value of around R5,1 billion. Official gross gold
and other foreign-exchange reserves stood at US$25,9 billion at the end of
December 2006 and the international liquidity position amounted to US$23,3
billion.

Fiscal policy has remained supportive of monetary policy. International factors
also provide a benign backdrop to the inflation outlook. Global growth prospects
generally remain positive, with most regions expected to experience sustainable
growth rates. The global interest rate cycle appears to have peaked in most
regions, and world inflation is expected to remain under control.

International oil price developments have impacted positively on inflation
outcomes. The price of North Sea Brent crude oil, which was above US$62 per
barrel at the time of the December meeting, reached a 20-month low of around
US$51 per barrel in January following the unseasonably warm winter in the
northern hemisphere. However, a further reduction in output quotas by OPEC,
effective from 1 February 2007, and colder weather in Europe and the US resulted
in prices rising again towards US$60 per barrel. In the past few days the price
of Brent crude has declined to around US$56 per barrel as fears of further OPEC
cuts abated. Domestic petrol prices increased by R0,06 per litre in January, but
were reduced by R0,23 cents per litre in February. This recent relative
stability in the oil market has reduced the risk posed to inflation from this
source. Nevertheless, given the tight supply and demand conditions in the
market, oil prices remain vulnerable to geopolitical developments.

As has been the case at the past few meetings, the central concern of the MPC
was the continued strong pace of household consumption expenditure growth and
its potential impact on inflation. It is recognised that there are lags in the
adjustment to interest rate changes, and the question facing the Committee was
the extent to which further reactions to interest rate changes can still be
expected. This is a difficult judgement call to make in the light of the
inevitable lags in data collection. Consumer demand, however, still appears to
be growing robustly despite the 200-basis-point increase in the repo rate last
year. Real retail sales growth increased at a year-on-year rate of 12,3 per cent
in November but moderated somewhat to 7,2 per cent in December. On a seasonally
adjusted month-on-month basis a decline of 2,1 per cent was recorded. It is
still premature to tell whether this is the beginning of a new trend. There are
also tentative signs that demand for motor vehicles may be declining.

Household consumption expenditure has been underpinned by the continued asset
price growth which has contributed to the sustained strength in household
balance sheets. Share prices on the JSE Securities Exchange have continued to
reach new highs. The all-share index increased by 38 per cent during 2006 and,
since the previous meeting of the MPC, has increased by 9 per cent. House prices
have also continued to

--------------------------------------------------------------------------------
Quarterly Bulletin March 2007 59

South African Reserve Bank
--------------------------------------------------------------------------------

increase at a brisk pace. According to the Absa house price index, house prices
are still growing at year-on-year rates of almost 15 per cent.

Twelve-month growth in banks' loans and advances extended to the private sector
increased by almost 28 per cent in December, although the annualised quarterly
growth showed some sign of moderation, declining from 28,6 per cent in the third
quarter to 26,6 per cent in the fourth quarter. Mortgage advances grew at rates
of around 30 per cent for much of 2006, while instalment sale credit and leasing
finance recorded year-on-year growth of 15,8 per cent in December. These
increases were despite further securitisation transactions on the part of the
banks. Of significance is the fact that growth in total loans and advances to
the corporate sector increased from 27,6 per cent in October to 31,8 per cent in
December, whereas growth of credit extended to the household sector declined
from 26,1 per cent in October to 24,3 per cent in December.

MONETARY POLICY STANCE

On the basis of the foregoing analysis, the MPC is satisfied that the inflation
outlook has improved somewhat and expects inflation to remain within the target
range for the forecast period. As the mandate of the Bank is to keep inflation
within the inflation target range, the MPC has decided to leave the repo rate
unchanged for now at 9 per cent per annum. However, risks to the inflation
outlook remain and the MPC will continue to closely monitor developments with a
view to adjusting the monetary policy stance as and when required.

--------------------------------------------------------------------------------
60 Quarterly Bulletin March 2007

South African Reserve Bank
--------------------------------------------------------------------------------

NOTE ON FLOWS OF FUNDS IN SOUTH AFRICA'S NATIONAL FINANCIAL ACCOUNTS FOR THE
YEAR 2005

by Z Nhleko and D H Meyer(1)

INTRODUCTION

The flow-of-funds accounts, presented as an addendum to this note and on pages
S-44 and S-45 of this issue of the Quarterly Bulletin, summarise the financial
interrelationships that run through the monetary and financial statistics,
national accounts, balance of payments and government finance statistics.

All institutional sectors in the South African economy generate income, incur
expenditure and adjust their balance sheets on a continuous basis. The national
financial accounts provide an overview of these transaction flows in an
integrated framework. By eliminating valuation changes in asset values to
reflect only transaction flows, this note analyses both the real and financial
flow-of-funds activities in the economy for the year 2005.

Surveys and other sources of information available to the Research Department of
the South African Reserve Bank are used to compile the flow-of-funds accounts.
Twenty-one institutional sectors are balanced individually and consolidated into
eleven economic sectors by way of contra-entry accounting in two-dimensional
tables(2).

FINANCING BALANCES

The saving-investment gap of individual sectors determines the extent to which a
sector will borrow from or lend funds to other sectors. In the expansion of the
country's infrastructure and productive capacity in general, building and
construction activity has accelerated considerably in South Africa, adding to
the need to augment domestic saving to meet the challenge. Accordingly, the
domestic saving-investment gap remains negative. Table 1 summarises the saving
and investment activity in South Africa for 2004

TABLE 1 FINANCING BALANCES(1,2), 2004 AND 2005
R millions Surplus units (+)/deficit units (-)
--------------------------------------------------------------------------------

2004 2005
-------------------------------------------------------------------------------
Gross Net lending (+)/ Gross Gross Net lending (+)/
Gross capital net saving capital net
saving formation borrowing (-) formation borrowing (-)
-------------------------------------------------------------------------------

Foreign sector (3) ..... 44 295 -- 44 295 58 191 -- 58 191
Financial intermediaries 39 676 7 357 32 319 30 399 5 396 25 003
General government ..... -16 086 36 430 -52 516 9 986 41 245 -31 259
Non-financial business
enterprises
Public .............. 44 751 40 972 3 779 38 737 30 062 8 675
Private ............. 102 380 126 247 -23 867 112 178 165 121 -52 943
Households(4) .......... 32 781 36 791 -4 010 31 425 39 092 -7 667
-------------------------------------------------------------------------------
TOTAL .................. 247 797 247 797 -- 280 916 280 916 --
----------------------------------------------------------------------------------------------------------

(1) Gross saving plus net capital transfers less gross capital formation. Gross
capital formation consists of total fixed-capital formation and total
changes in inventories, before providing for consumption (depreciation) of
fixed capital.

(2) A positive amount reflects a net lending position and by implication the
net acquisition of financial assets, whereas a negative amount reflects a
net borrowing position and by implication the net incurrence of financial
liabilities.

(3) A positive amount reflects a surplus for the rest of the world and is
therefore a deficit on South Africa's balance on current account of the
balance of payments. A negative amount represents a deficit for the rest of
the world and is a surplus on South Africa's balance on current account of
the balance of payments.

(4) Including unincorporated business enterprises and non-profit institutions
serving households.

(1) The views expressed are those of the authors and do not necessarily reflect
the views of the South African Reserve Bank. The Bank wishes to express its
sincere appreciation to all the reporting organisations -government
departments, financial market and other public and private-sector
institutions -for their co-operation in furnishing the data used for the
compilation of South Africa's financial accounts.

(2) Research Department flow-of-funds compilaton guides and notes. See also
Kock and Meyer.

--------------------------------------------------------------------------------
Quarterly Bulletin March 2007 61

South African Reserve Bank
--------------------------------------------------------------------------------

and 2005 across the main sectors, while Table 2 depicts the share of each sector
in gross saving and gross capital formation.

TABLE 2 GROSS SAVING AND GROSS CAPITAL FORMATION BY SECTOR, 2004 AND 2005
--------------------------------------------------------------------------------

2004 2005
---------------------------- ------------------------------
Capital Capital
Saving as formation as Saving as formation as
percentage of percentage of percentage of percentage of
------------------------------------------------------------
Total GDP Total GDP Total GDP Total GDP
------------------------------------------------------------

Foreign sector ......... 18 3 21 4
Financial intermediaries 16 3 3 1 11 2 2 1/2
General government ..... -7 -1 15 3 4 1 15 3
Non-financial business
enterprises
Public .............. 18 3 17 3 14 3 11 2
Private ............. 41 7 51 9 40 7 59 11
Households ............. 13 2 15 3 11 2 14 3
------------------------------------------------------------
TOTAL .................. 100 100 100 100
--------------------------------------------------------------------------------------

Private non-financial business enterprises were responsible for 40 per cent of
the total gross saving in 2005. However, the sector was a net borrower of funds
due to its large capital formation activity that amounted to 59 per cent of
total gross capital formation. Although general government remained a net
borrower of funds in 2005, its borrowing need was much less than in 2004 when it
was the largest net borrower of funds. Households were net lenders of funds in
the first half of the year, but closed the year as net borrowers of funds.
Financial intermediaries and public non-financial business enterprises were net
lenders of funds.

The accompanying diagram is a condensed sector-to-sector analysis of the net
flow of funds showing the financial relationships among the main sectors of the
South African economy. The net lending (+) or borrowing (-) positions of the
sectors are shown inside the boxes and the inter-sectoral flow of funds are
shown outside the boxes. The net lending or borrowing position of each sector is
calculated by treating inflows as negatives and outflows as positives. The net
lending position of the foreign sector mirrored the domestic shortage of R58
billion for the year 2005. The foreign sector received a further R22 billion
from financial intermediaries, allowing it to direct a net flow of R78 billion
to non-financial business enterprises. At the same time, a net flow of R46
billion was recorded from non-financial business enterprises to the general
government, enabling the latter to effect a net flow of R16 billion to financial
intermediaries.

--------------------------------------------------------------------------------
62 Quarterly Bulletin March 2007

South African Reserve Bank
--------------------------------------------------------------------------------

NET INTERSECTORAL FLOW OF FUNDS, 2005
R billions

[GRAPHIC OMITTED]

SECTORAL ANALYSIS

The lending and borrowing needs of individual sectors in 2005 and their usage of
the various categories of financial-market instruments are briefly reviewed in
this section.

FOREIGN SECTOR

The foreign sector represents all non-resident units that enter into
transactions with South African residents. In 2005 South Africa was a net
recipient of funds from the rest of the world, thereby financing the deficit of
R58,2 billion recorded on the current account of the balance of payments.

As shown in Table 3, domestic saving was augmented by inflows from the rest of
the world. The domestic economy's total incurrence of financial liabilities
exceeded its net acquisition of financial assets by an amount similar to the
current-account deficit. The main categories of inflows from the rest of the
world were increased holdings of domestic shares, and the extension of trade
credit and short-term loans to domestic sectors. The domestic economy increased
its exposure to foreign deposits, loans, shares and long-term loans while the
monetary authority increased its holdings of gold and foreign-exchange reserves.

TABLE 3 FLOW OF FUNDS: FOREIGN SECTOR AND COMBINED DOMESTIC SECTORS, 2005
R millions
--------------------------------------------------------------------------------
Domestic
institutional Rest of the
sectors world Total
------------------------------------
Gross saving ............................. 222 725 58 191 280 916
Gross capital formation .................. 280 916 -- 280 916
------------------------------------
Net lending (+)/net borrowing (-) ........ -58 191 58 191 --
------------------------------------
Net acquisition of financial assets ...... 622 464 129 270 751 734
Net incurrence of financial liabilities .. 680 655 71 079 751 734
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Quarterly Bulletin March 2007 63

South African Reserve Bank
--------------------------------------------------------------------------------

FINANCIAL INTERMEDIARIES

Financial intermediaries in South Africa are grouped into five subsectors and
consist of both banks and non-bank institutions. The five subsectors are the
monetary authority, other monetary institutions, the Public Investment
Corporation, insurers and retirement funds, and other financial institutions.
Financial intermediaries convert deposits and investments received into
financial instruments that meet the needs of borrowers. They therefore attract
financial flows from entities with surplus funds while meeting the financial
needs of those seeking funding. The various intermediaries are discussed
individually in the paragraphs below.

MONETARY AUTHORITY

The monetary authority sector consists of the South African Reserve Bank and the
Corporation for Public Deposits. This sector interacts mostly with other
monetary institutions, the central government and the foreign sector. In 2005
the monetary authority sector received deposits amounting to R38,5 billion,
mainly from banks and the central government. The monetary authority also
entered into transactions which increased its holdings of foreign-exchange
reserves by R36,8 billion in 2005. This sector contributed 6 per cent of total
financial-intermediary asset flows in 2005.

OTHER MONETARY INSTITUTIONS

The other monetary institutions sector comprises the consolidated accounts of
banks, mutual banks, the Land Bank and the Postbank. As depicted in Table 4,
other monetary institutions incurred financial liabilities of R216,7 billion in
2005, of which 90 per cent was monetary deposits. Other monetary institutions
played a major role in financing the debt of domestic sectors as almost 80 per
cent of their flow of funds to deficit sectors was through loans. In 2005
mortgage loans worth R115,0 billion and other bank loans and advances amounting
to R64,7 billion were extended to deficit sectors. Other monetary institutions
also increased their deposits with foreign institutions by R19,0 billion during
the year under review.

The steep increase in mortgage loans as well as other bank loans and advances in
2005 was consistent with the upbeat economic environment, the relatively low
cost of credit and the buoyant property market. It also strongly mirrored the
positive wealth effects arising from both financial and real-estate assets.

In 2005 other monetary institutions utilised 99 per cent of their total
resources to acquire financial assets, while the remainder was absorbed in their
own capital formation activity. This sector was the largest role player in the
intermediation process, accounting for close to 50 per cent of
financial-intermediary asset flows and almost a quarter of total asset flows.
Its total asset and liability flows amounted to 15 per cent of gross domestic
product in 2005, highlighting its importance in the economy.

--------------------------------------------------------------------------------
64 Quarterly Bulletin March 2007

South African Reserve Bank
--------------------------------------------------------------------------------

TABLE 4 FLOW OF FUNDS: OTHER MONETARY INSTITUTIONS, 2005
--------------------------------------------------------------------------------
Transaction items Sources/ Uses/
liabilities assets
R millions R millions
------------------------
Gross saving ........................................ 11 067
Gross capital formation ............................. 3 158

Net lending (+)/net borrowing (-) ................... 7 909
Net financial investment (+/-) ...................... 7 909

Net incurrence of financial liabilities.............. 216 705
Net acquisition of financial assets ................. 224 614

Monetary deposits ................................ 194 482 5 895
Deposits with other institutions.................. -- 17 009
Foreign ....................................... -- 18 984
Domestic ...................................... -- -1 975
Bank loans and advances .......................... -1 007 64 720
Bills, bonds and loan stock ...................... -903 -7 699
Mortgage loans ................................... -- 115 031
Other assets/liabilities ........ ................ 24 133 29 658

TOTAL SOURCES/LIABILITIES AND USES/ASSETS............ 227 772 227 772
------------------------
Per cent
--------
Percentage of total sources used for gross capital formation....... 1,0
Percentage of total sources used to acquire financial assets....... 99,0
Percentage of total asset flows ................................... 22,0
Percentage of total financial-intermediary asset flows ............ 48,0
Total asset/liability flows as percentage of GDP .................. 15,0
--------------------------------------------------------------------------------
PUBLIC INVESTMENT CORPORATION(4)

More than 90 per cent of investment funds received by the Public Investment
Corporation are from the government employees' pension and provident funds. The
corporation received inflows of R68,7 billion in 2005 and invested R28,2 billion
of this amount in domestic shares and R21,4 billion in government bonds.
Monetary deposits made by the corporation amounted to R11,8 billion. The Public
Investment Corporation accounted for 14 per cent of the total
financial-intermediary asset flows in 2005 compared with 12 per cent in 2004.

INSURERS AND RETIREMENT FUNDS

The net financing surplus of insurers and retirement funds has been declining in
recent years. In 2005 a net financing surplus of R4,9 billion was recorded,
compared with net financing surpluses of R7,9 billion in 2004 and R10,5 billion
in 2003. Insurers and retirement funds contributed 19 per cent to the total of
financial-intermediary flows in 2005. Table 5 indicates that the insurers and
retirement funds sector received the bulk of its funds through contributions by
members, which amounted to R53,8 billion in 2005.

Against the background of an extended bull-run in the equities market and the
risks attached to it and also given some takeover and restructuring activity
this sector, on balance, reduced its holdings of domestic shares. The sector
instead exhibited a preference for less risky investments such as monetary
deposits and fixed-interest securities. This sector's total asset and liability
flows amounted to 6 per cent of gross domestic product in 2005.

(4) The Public Investment Commissioners was corporatised in April 2005, and
renamed Public Investment Corporation in the flow of funds.

--------------------------------------------------------------------------------
Quarterly Bulletin March 2007 65

South African Reserve Bank
--------------------------------------------------------------------------------
TABLE 5 FLOW OF FUNDS: INSURERS AND RETIREMENT FUNDS, 2005
--------------------------------------------------------------------------------
R millions
----------
Financing balance ................................................. 4 859
Net incurrence of financial liabilities ........................... 84 237
Members' interest in the reserves of retirement and insurance
funds........................................................... 53 770
Other liabilities .............................................. 30 467

Net acquisition of financial assets ............................... 89 096
Monetary deposits .............................................. 15 803
Other deposits ................................................. 57 236
Public Investment Corporation ............................... 62 964
Foreign deposits ............................................ 309
Other ....................................................... -6 037
Bills and bonds ................................................ 24 997
Short-term government bonds ................................. 608
Long-term government bonds .................................. 21 033
Other ....................................................... 3 356
Other loan stock and preference shares ......................... 10 690
Domestic .................................................... 9 600
Foreign ..................................................... 1 090
Shares ......................................................... -29 850
Domestic .................................................... -47 655
Foreign ..................................................... 17 805
Other assets ................................................... 10 220

Per cent
----------
Percentage of total asset flows ................................... 8,0
Percentage of total financial-intermediary asset flows ............ 19,0
Total asset/liability flows as percentage of GDP .................. 6,0
--------------------------------------------------------------------------------
OTHER FINANCIAL INSTITUTIONS

Other financial institutions comprise collective investment schemes, trust
companies, finance companies and public financial enterprises. Collective
investment schemes, in turn, comprise unit trusts and participation bond
schemes. Unit trusts dominate the activities of the other financial institutions
sector, acquiring funds mainly through the sale of units in unit trusts and
investing the proceeds through the purchase of securities, lending and similar
activities. As shown in Table 6 on the following page, other financial
institutions received funds from investors amounting to R58,3 billion in 2005.
These funds were received mainly from institutional investors.

Other financial institutions preferred investment in monetary deposits, shares
and private-sector loan stock. This sector accounted for 13 per cent of the
total financial-intermediary asset flows in 2005. The total asset and liability
flows of other financial institutions amounted to 4 per cent of gross domestic
product in 2005.

CENTRAL AND PROVINCIAL GOVERNMENTS

The financing deficit of the central and provincial governments amounted to
R12,0 billion or almost 1 per cent of gross domestic product in 2005,
significantly less than the deficit of R27,0 billion recorded in 2004. The
deficit was financed by raising funds mainly in the domestic financial markets,
as shown in Table 7. Improvements in the government's financial position
resulted in a significantly lower issuance of government debt instruments as
compared to previous years, resulting in investors facing a declining
availability of so-called risk-free financial assets.

--------------------------------------------------------------------------------
66 Quarterly Bulletin March 2007

South African Reserve Bank
--------------------------------------------------------------------------------

Similar to previous years, the Public Investment Corporation and the insurers
and retirement funds were the two main sectors which took new issuances of bonds
in 2005.

TABLE 6 FLOW OF FUNDS: OTHER FINANCIAL INSTITUTIONS, 2005
--------------------------------------------------------------------------------
R millions
----------
Financing balance ................................................. 10 735
Net incurrence of financial liabilities ........................... 51 477
Deposits received .............................................. 58 307
Long-term loans ................................................ -884
Other liabilities .............................................. -5 986

Net acquisition of financial assets ............................... 62 212
Monetary deposits .............................................. 32 819
Other deposits ................................................. 1 862
Foreign deposits ............................................ 1 975
Other ....................................................... -113
Bills and bonds ................................................ 4 032
Short-term government bonds ................................. -2 311
Long-term government bonds .................................. 5 650
Other ....................................................... 693
Trade credit and short-term loans .............................. -4 252
Other loan stock and preference shares ......................... 7 077
Domestic .................................................... 4 545
Foreign ..................................................... 2 532
Shares ......................................................... 34 100
Domestic .................................................... 41 560
Foreign ..................................................... -7 460
Other assets ................................................... -13 426

Per cent
----------
Percentage of total asset flows ................................... 6,0
Percentage of total financial-intermediary asset flows ............ 13,0
Total asset/liability flows as percentage of GDP .................. 4,0
--------------------------------------------------------------------------------
TABLE 7 FLOW OF FUNDS: CENTRAL AND PROVINCIAL GOVERNMENTS, 2005
--------------------------------------------------------------------------------
R millions
----------
Financing balance ................................................. -11 991
Net acquisition of financial assets ............................... 28 227

Net incurrence of financial liabilities by financial instrument.... 40 218
Treasury bills ................................................. 4 678
Short-term government bonds .................................... 5 835
Long-term government bonds ..................................... 19 082
Non-marketable government bonds ................................ 2 502
Other ......................................................... 8 121

Financing by sector ............................................... 40 218
Foreign sector ................................................. 1 308
Public Investment Corporation .................................. 24 907
Insurers and retirement funds .................................. 21 710
Other financial institutions ................................... 9 314
Other domestic sectors ......................................... 6 004
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Quarterly Bulletin March 2007 67

South African Reserve Bank
--------------------------------------------------------------------------------
LOCAL GOVERNMENTS

Local governments recorded a financing deficit of R19,3 billion in 2005. This
deficit was financed by reducing their holdings of financial assets as well as
by increasing their usage of bank loans, trade credit and short-term loans from
both domestic and foreign financial institutions.

PUBLIC NON-FINANCIAL CORPORATE BUSINESS ENTERPRISES

In 2005 the public non-financial corporate business enterprises sector was able
to finance its gross capital formation of R30,0 billion and still retain excess
funds of R8,7 billion which it could channel to deficit sectors. Funds were
mainly channelled to deficit sectors through monetary deposits, the extension of
trade credit and short-term loans, and the acquisition of bills, bonds and loan
stock.

PRIVATE NON-FINANCIAL CORPORATE BUSINESS ENTERPRISES

Private non-financial corporate business enterprises recorded a financing
deficit of R52,9 billion in 2005, much higher than the deficit of R23,9 billion
recorded in 2004. The deficit was financed mainly by issuing shares, taking up
bank loans and issuing bonds.

TABLE 8 FLOW OF FUNDS: PRIVATE NON-FINANCIAL CORPORATE BUSINESS
ENTERPRISES, 2005
--------------------------------------------------------------------------------
Transaction items Sources/ Uses/
liabilities assets
R millions R millions
------------------------
Gross saving ........................................ 112 137
Capital transfers ................................... 73 32
Gross capital formation ............................. 165 121

Net lending (+)/net borrowing (-) ................... -52 943
Net financial investment (+/-) ...................... -52 943

Net incurrence of financial liabilities ............. 94 354
Net acquisition of financial assets ................. 41 411
Monetary deposits ................................ -- 71 347
Other deposits ................................... -11 259 47 974
Bank loans and advances .......................... 38 763 --
Trade credit and short-term loans ................ -4 395 -20 015
Bills, bonds and loan stock ...................... 15 604 -16 804
Shares ........................................... 56 343 4 065
Domestic ...................................... 6 013 2 593
Foreign ....................................... 50 330 1 472
Long-term and mortgage loans ..................... 27 326 -784
Other assets/liabilities ......................... -28 028 -44 372

Total sources/liabilities and uses/assets............ 206 564 206 564
------------------------
Per cent
----------
Percentage of total sources used for gross capital formation ...... 80,0
Percentage of total sources used to acquire financial assets ...... 20,0
Percentage of total asset flows ................................... 20,0
Gross capital formation as percentage of GDP ...................... 11,0
Total asset/liability flows as percentage of GDP .................. 13,0
--------------------------------------------------------------------------------
A portion of the excess funds was deposited with monetary institutions and
non-bank financial institutions. The sector also incurred a significant amount
of mortgage debt as

--------------------------------------------------------------------------------
68 Quarterly Bulletin March 2007

South African Reserve Bank
--------------------------------------------------------------------------------

real-estate acquisition and construction activity continued, spurred by the
protracted period of solid economic growth.

The sector's gross capital formation of R165,1 billion represented 59 per cent
of the total domestic gross capital formation in 2005 and, as such, underscored
its crucial role in domestic capital formation. The total asset and liability
flows of private non-financial business enterprises amounted to 9 per cent of
gross domestic product in 2005.

Households

Households, on balance, recorded a fairly limited financing deficit of R7,7
billion in 2005. However, the sector increased both its financial liabilities
and asset holdings by large amounts. Its build-up of liabilities was mainly in
the form of mortgage loans and other bank loans and advances. At the same time
households added substantially to their interest in retirement and life funds,
followed by monetary deposits. Investment with other financial institutions,
such as unit trusts, continued to grow, albeit at a slower pace than in 2004.

SUMMARY AND CONCLUSION

Financial-market activity in 2005 was buoyed by positive economic prospects that
included benign inflation and lower interest rates. These conditions encouraged
economic sectors to alter their holdings of financial assets and their
incurrence of financial liabilities. Appetite for bank credit remained buoyant -
simultaneously contributing to and stimulated by the strong increases in
property prices. The analysis of South Africa's national financial accounts for
the year 2005 highlights several aspects:

o A continued net inflow of funds from the rest of the world, augmenting
domestic saving to finance accelerating capital formation and growth;

o the associated stronger pace of capital formation by non-financial business
enterprises in particular;

o a continued increase in the gold and foreign-currency holdings of both the
monetary authorities and other monetary institutions;

o the continued buoyancy of credit extended by banks to households, alongside
an expansion in mortgage loans extended to private non-financial corporate
business enterprises;

o the reduced availability of government securities in the domestic financial
markets due to improvements in the national government's financial
position;

o the continued importance of financial intermediaries as the funnel for
channelling funds to deficit sectors; and

o limited net borrowing by the household sector, as the incurrence of large
amounts of debt is offset by strong increases in households' interest in
retirement and life funds.

REFERENCES

Bomfim, A N. 2001. Optimal portfolio allocation in a world without treasury
securities. Finance and economics discussion series, November. Washington, DC:
Federal Reserve Board.

Center for capital flow analysis. 2007. (Accessed 1 February 2007) Available
[online]: http://capital-flow-analysis.info/index.html

Kock, M A and Meyer, D H. 2001: A note on flows of funds in South Africa's
national financial accounts for the year 1999. Quarterly Bulletin, No 219,
March. Pretoria: South African Reserve Bank.

Nhleko, Z and Meyer, D H. 2006. Note on flows of funds in South Africa's
national financial accounts for the year 2004. Quarterly Bulletin, No 239,
March. Pretoria: South African Reserve Bank.

--------------------------------------------------------------------------------
Quarterly Bulletin March 2007 69

South African Reserve Bank
--------------------------------------------------------------------------------

NATIONAL FINANCIAL ACCOUNT

FLOW OF FUNDS FOR THE FIRST QUARTER 2005(1)

R millions

------------------------------------------------------------------------------------------------------------------------------------
Financial intermediaries
Sectors -------------------------------------------------------------------------------
------- Public Insurers and Other
Foreign Monetary Other monetary Investment retirement financial
sector authority institutions(2) Corporation(3) funds institutions
-----------------------------------------------------------------------------------------------
Transaction items S U S U S U S U S U S U
------------------------------------------------------------------------------------------------------------------------------------

1. Net saving(4) .................. 10 734 319 6 085 2 106 2 094
2. Consumption of fixed
capital(4) ..................... 6 957 19 105
3. Capital transfers .............. 19 72
4. Gross capital formation(4) ..... 17 344 16 575
------------------------------------------------------------------------------------------------------------------------------------
5. Net lending (+)/net borrowing
(-) (S) ........................ 10 681 308 6 698 2 109 1 624
6. Net financial investment (+)
or (-) (U) ..................... 10 681 308 6 698 2 109 1 624
------------------------------------------------------------------------------------------------------------------------------------
7. Net incurrence of financial
liabilities
(Total S 9 - 32) ............... 11 380 - 2 407 38 713 23 670 26 511 17 358
8. Net acquisition of financial
assets
(Total U 9 - 32) ............... 22 061 - 2 099 45 411 23 670 28 620 18 982
------------------------------------------------------------------------------------------------------------------------------------
9. Gold and other foreign reserves 6 489 6 489
10. Cash and demand monetary(5)
deposits ....................... 4 606 - 4 416 2 803 12 610 1 145 - 1 235 925 8 179
11. Short/medium-term monetary(5)
deposits ....................... 11 097 16 490 - 1 166 1 603 221
12. Long-term monetary(5) deposits . 732 36 18 165 11 158 1 328 3 625
13. Deposits with other financial
institutions ................... - 3 138 -10 244 - 490 11 068
14. Deposits with other
institutions ................... 7 058 4 945 23 670 - 131 - 131 16 972 407
15. Treasury bills ................. - 347 - 3 359 1 998 1 099 - 520
16. Other bills .................... 5 528 3 687 - 477 - 384 - 2 569 1 30 163 - 3 066
17. Bank loans and advances ........ - 331 682 - 9 642 358 24 769 - 135 - 10
18. Trade credit and short-term
loans .......................... - 1 996 - 3 466 2 291 262 5 831 413 1 899 - 801 852 1 714
19. Short-term government bonds .... - 3 - 5 444 - 130 9 404 565 - 2
20. Long-term government bonds ..... - 1 278 - 12 330 - 5 065 532 148
21. Non-marketable government
bonds(6) ....................... 225 156
22. Securities of local governments 10 39 - 12 - 19 - 38
23. Securities of public
enterprises .................... - 131 - 69 779 2 322 339 - 835 599 560
24. Other loan stock and preference
shares ......................... - 3 384 123 - 176 - 6 834 - 65 - 648 623 8 - 128
25. Ordinary shares ................ 2 657 9 331 - 40 201 21 376 62 6 548 487
26. Foreign branch/head office
balances
27. Long-term loans ................ 528 2 670 4 - 41 - 1 222 710 1 139
28. Mortgage loans ................. 76 17 665 - 406 51
29. Interest in retirement and life
funds(7) ....................... 188 15 760
30. Amounts receivable/payable ..... - 5 371 - 4 432 - 409 - 4 - 3 622 10 931 136 2 528 7 318 1 702 6 199
31. Other assets/liabilities ....... 247 2 340 - 1 370 - 59 - 10 319 5 660 - 258 6 912 - 4 862 2 200 - 69
32. Balancing item ................. - 107 220 304 - 288 66 75
------------------------------------------------------------------------------------------------------------------------------------

S = SOURCES, i.e. net increase in liabilities at transaction value.

U = Uses, i.e. net increase in assets at transaction value.

KB230

(1.) A negative amount reflects a decrease in that item. In the case of
liabilities (sources) it denotes a reduction in the available sources of
funds and in the case of assets (uses) it indicates an additional source of
funds.

(2.) Including mutual banks and the Postbank.

(3.) Before April 2005 the Public Investment Commissioners.

(4.) As taken from the national income (and production) accounts.

(5.) Namely deposits with the SA Reserve Bank (including coin liabilities),
Corporation for Public Deposits, banks, the Land Bank, mutual banks and the
Postbank.

(6.) Non-marketable bonds and other Treasury bills.

(7.) Members' interest in the reserves of retirement and all insurance funds.

--------------------------------------------------------------------------------
70 Quarterly Bulletin March 2007

South African Reserve Bank
--------------------------------------------------------------------------------

NATIONAL FINANCIAL ACCOUNT (CONTINUED)
FLOW OF FUNDS FOR THE FIRST QUARTER 2005(1)

R millions

-------------------------------------------------------------------------------------------------------------------------------
General government Corporate business enterprises
Sectors ------------------------------------------------------------------
------- Central
and
provincial Local Public Private Households,
governments governments sector sector etc. Total
---------------------------------------------------------------------------------------------------
Transaction items S U S U S U S U S U S U
-------------------------------------------------------------------------------------------------------------------------------

1. Net saving(4) ......... - 4 210 - 5 912 421 968 3 658 16 263
2. Consumption of fixed
capital(4) ............ 4 156 2 813 5 652 25 343 6 297 45 348
3. Capital transfers ..... 4 116 2 131 1 065 38 7 954 12 4 207 4 207
4. Gross capital
formation(4) .......... 5 188 4 881 6 317 35 576 8 697 61 611
------------------------------------------------------------------------------------------------------------------------------
5. Net lending (+)/net
borrowing (-) (S) ..... - 9 358 - 5 849 821 - 9 234 2 200 -
6. Net financial
investment (+) or
(-) (U) ............... - 9 358 - 5 849 821 - 9 234 2 200 -
-------------------------------------------------------------------------------------------------------------------------------
7. Net incurrence of
financial liabilities
(Total S 9 - 32) ...... - 11 024 4 916 20 29 565 20 395 159 097
8. Net acquisition of
financial assets
(Total U 9 - 32) ...... - 20 382 - 933 841 20 331 22 595 159 097
-------------------------------------------------------------------------------------------------------------------------------
9. Gold and other foreign
reserves .............. 6 489 6 489
10. Cash and demand
monetary(5) deposits .. - 13 020 1 221 3 314 - 855 1 111 8 194 8 194
11. Short/medium-term
monetary(5) deposits .. 153 3 218 3 367 - 4 130 2 127 16 490 16 490
12. Long-term monetary(5)
deposits .............. 1 843 680 - 160 795 - 1 800 18 201 18 201
13. Deposits with other
financial institutions - 354 - 853 20 375 2 499 11 068 11 068
14. Deposits with other
institutions .......... 1 673 - 13 - 59 61 - 5 638 840 146 24 900 24 900
15. Treasury bills ........ 476 1 605 476 476
16. Other bills ........... 153 - 644 303 - 2 104 4 313 2 467 2 467
17. Bank loans and
advances .............. - 9 203 - 192 - 603 13 773 10 788 15 127 15 127
18. Trade credit and
short-term loans ...... 259 218 1 269 - 1 442 307 68 - 17 186 1 469 1 663 - 3 246 - 4 811 - 4 811
19. Short-term government
bonds ................. 4 580 - 3 60 152 - 19 4 580 4 580
20. Long-term government
bonds ................. - 17 192 - 53 133 742 - 21 - 17 192 - 17 192
21. Non-marketable
government bonds(6) ... 560 179 560 560
22. Securities of local
governments ........... - 12 5 27 - 4 - 2 - 2
23. Securities of public
enterprises ........... 2 16 1 413 315 10 2 660 2 660
24. Other loan stock and
preference shares ..... 34 209 106 - 3 601 - 1 457 6 - 7 592 - 7 592
25. Ordinary shares ....... 581 2 721 4 33 297 147 22 38 697 38 697
26. Foreign branch/head
office balances .......
27. Long-term loans ....... 187 257 685 - 12 2 428 118 - 1 874 - 754 - 178 245 2 445 2 445
28. Mortgage loans ........ - 83 - 70 17 881 - 660 17 227 17 227
29. Interest in retirement
and life funds(7) ..... - 205 1 980 13 797 15 760 15 760
30. Amounts receivable/
payable ............... 935 - 43 20 - 412 435 9 896 - 6 491 8 782 14 049 14 049
31. Other assets/
liabilities ........... 8 281 - 12 321 2 859 - 4 349 - 4 952 - 6 173 - 15 158 1 248 7 543 - 11 300 - 11 300
32. Balancing item ........ 93 122 287 207 - 318 - 57 279 325 604 604
--------------------------------------------------------------------------------------------------------------------------------

S = SOURCES, i.e. net increase in liabilities at transaction value.

U = USES, i.e. net increase in assets at transaction value.

KB231

(2.) Including mutual banks and the Postbank.

(3.) Before April 2005 the Public Investment Commissioners.

(4.) As taken from the national income (and production) accounts.

(5.) Namely deposits with the SA Reserve Bank (including coin liabilities),
Corporation for Public Deposits, banks, the Land Bank, mutual banks and the
Postbank.

(6.) Non-marketable bonds and other Treasury bills.

(7.) Members' interest in the reserves of retirement and all insurance funds.

--------------------------------------------------------------------------------
Quarterly Bulletin March 2007 71

South African Reserve Bank
--------------------------------------------------------------------------------
NATIONAL FINANCIAL ACCOUNT
FLOW OF FUNDS FOR THE SECOND QUARTER 2005(1)

R millions

---------------------------------------------------------------------------------------------------------------------------------
Financial intermediaries
Sectors ---------------------------------------------------------------------------------
------- Other Public Insurers and Other
Foreign Monetary monetary Investment retirement financial
sector authority institutions(2) Corporation(3) funds institutions
-------------------------------------------------------------------------------------------------
Transaction items S U S U S U S U S U S U
---------------------------------------------------------------------------------------------------------------------------------

1. Net saving(4) ............. 15 333 304 - 876 779 3 785
2. Consumption of fixed
capital (4) ............... 6 966 19 106
3. Capital transfers ......... 22 60
4. Gross capital
formation(4) .............. 25 1 058 7 454
---------------------------------------------------------------------------------------------------------------------------------
5. Net lending (+)/net
borrowing (-) (S) ......... 15 295 285 - 968 791 3 437
6. Net financial investment
(+) or (-) (U) ............ 15 295 285 - 968 791 3 437
---------------------------------------------------------------------------------------------------------------------------------
7. Net incurrence of financial
liabilities
(Total S 9 - 32) .......... 14 447 25 002 50 014 13 337 16 145 11 059
8. Net acquisition of
financial assets
(Total U 9 - 32) .......... 29 742 25 287 49 046 13 337 16 936 14 496
---------------------------------------------------------------------------------------------------------------------------------
9. Gold and other foreign
reserves .................. 19 090 19 090
10. Cash and demand
monetary (5) deposits ..... - 3 215 20 941 - 1 9 378 128 4 333 3 283 967
11. Short/medium-term
monetary (5) deposits ..... - 1 605 15 504 - 1 428 - 2 399 7 947
12. Long-term monetary(5)
deposits .................. - 1 186 54 12 471 - 1 848 2 083 7 322
13. Deposits with other
financial institutions .... 384 - 294 1 828 2 273 19 737
14. Deposits with other
institutions .............. - 4 178 - 4 570 13 337 5 5 11 509 217
15. Treasury bills ............ 308 2 033 - 722 358 481
16. Other bills ............... 7 499 7 603 - 1 627 701 - 1 037 - 1 - 71 - 245 4 760
17. Bank loans and advances ... - 77 - 2 440 - 5 489 - 183 9 363 4 121
18. Trade credit and
short-term loans .......... 385 9 672 1 493 - 342 9 637 176 590 - 117 - 1 689 - 9 712
19. Short-term government
bonds ..................... 4 806 61 1 505 828 - 4 609
20. Long-term government
bonds ..................... 1 937 4 288 2 400 4 981 5 335 643
21. Non-marketable government
bonds(6) .................. 178 - 148
22. Securities of local
governments ............... - 6 - 22 - 55 30 34
23. Securities of public
enterprises ............... 2 - 2 249 - 316 - 688 755 1 365 561 - 47
24. Other loan stock and
preference shares ......... 393 1 526 421 4 855 922 - 139 3 417 - 20 3 418
25. Ordinary shares ........... - 2 564 17 457 1 509 2 023 2 253 - 1 290 - 9 678 13 862
26. Foreign branch/head office
balances ..................
27. Long-term loans ........... 1 307 624 - 18 1 698 2 228 1 947
28. Mortgage loans ............ 784 29 943 - 213 25
29. Interest in retirement and
life funds(7) ............. 100 13 419
30. Amounts
receivable/payable ........ - 7 278 3 660 313 20 2 126 - 3 383 33 1 217 435 482 - 8 727
31. Other assets/
liabilities ............... -910 2 459 4 957 - 4 848 583 5 990 1 812 2 269 - 2 900 - 9 837 - 3 774
32. Balancing item ............ 195 330 89 - 300 - 279 - 258
---------------------------------------------------------------------------------------------------------------------------------

S = SOURCES, i.e. net increase in liabilities at transaction value.

U = USES, i.e. net increase in assets at transaction value.

KB230

(2.) Including mutual banks and the Postbank.

(3.) Before April 2005 the Public Investment Commissioners.

(4.) As taken from the national income (and production) accounts.

(5.) Namely deposits with the SA Reserve Bank (including coin liabilities),
Corporation for Public Deposits, banks, the Land Bank, mutual banks and the
Postbank.

(6.) Non-marketable bonds and other Treasury bills.

(7.) Members' interest in the reserves of retirement and all insurance funds.

--------------------------------------------------------------------------------
72 Quarterly Bulletin March 2007

South African Reserve Bank
--------------------------------------------------------------------------------
NATIONAL FINANCIAL ACCOUNT (CONTINUED)
FLOW OF FUNDS FOR THE SECOND QUARTER 2005(1)

R millions

-----------------------------------------------------------------------------------------------------------------------------------
General government Corporate business enterprises
Sectors -------------------------------- ----------------------------------
------- Central
and
provincial Local Public Private Households,
governments governments sector sector etc. Total
----------------------------------------------------------------------------------------------------
Transaction items S U S U S U S U S U S U
------------------------------------------------------------------------------------------------------------------------------------

1. Net saving(4) - 2 724 - 1 642 981 - 60 8 094 23 974
2. Consumption of fixed
capital (4) ............... 4 361 2 999 5 791 26 077 6 585 46 910
3. Capital transfers ......... 7 081 580 5 825 1 8 735 14 7 163 7 163
4. Gross capital
formation(4) .............. 4 995 5 052 7 202 42 740 9 351 70 884
------------------------------------------------------------------------------------------------------------------------------------
5. Net lending (+)/net
borrowing (-) (S) .........- 10 439 - 3 115 5 395 - 16 730 6 049 --
6. Net financial investment
(+) or (-) (U) ............ - 10 439 - 3115 5395 - 16 730 6 049 --
------------------------------------------------------------------------------------------------------------------------------------
7. Net incurrence of financial
liabilities
(Total S 9 - 32) .......... 22 856 683 - 11 071 - 358 28 377 170 491
8. Net acquisition of
financial assets
(Total U 9 - 32) .......... 12 417 - 2 432 - 5676 - 17 088 34 426 170 491
------------------------------------------------------------------------------------------------------------------------------------
9. Gold and other foreign
reserves .................. 19 090 19 090
10. Cash and demand
monetary (5) deposits ..... 9 276 1 056 595 4 178 9 719 30 319 30 319
11. Short/medium-term
monetary (5) deposits ..... 1 388 367 621 5 948 4 665 15 504 15 504
12. Long-term monetary(5)
deposits .................. 353 - 333 206 6 719 - 791 12 525 12 525
13. Deposits with other
financial institutions .... 79 781 9 972 4 714 19 737 19 737
14. Deposits with other
institutions .............. 1 166 13 13 - 1 006 - 231 62 8 171 8 171
15. Treasury bills ............ 4 500 2 042 4 500 4 500
16. Other bills ............... 233 - 387 68 1 247 - 5 771 6 486 6 486
17. Bank loans and advances ... - 8 376 1 792 55 4 550 8 428 3 874 3 874
18. Trade credit and
short-term loans .......... - 360 74 4 847 1 382 - 3 919 246 - 13 161 - 7 054 - 3 789 - 291 - 5 966 - 5 966
19. Short-term government
bonds ..................... 913 14 - 1 690 - 2 913 913
20. Long-term government
bonds ..................... 16 176 - 39 30 - 3 396 - 3 16 176 16 176
21. Non-marketable government
bonds(6) .................. 4 169 4 139 4 169 4 169
22. Securities of local
governments ............... - 189 6 - 195 7 - 195 - 195
23. Securities of public
enterprises ............... 3 13 - 1 455 - 362 2 - 1 208 - 1 208
24. Other loan stock and
preference shares ......... 15 48 23 11 190 - 2 283 11 893 11 893
25. Ordinary shares ........... 326 3 339 1 15 567 - 9 232 - 451 16 561 16 561
26. Foreign branch/head office
balances ..................
27. Long-term loans ........... 126 397 - 217 - 23 977 130 823 450 54 57 5 280 5 280
28. Mortgage loans ............ - 679 12 - 7 448 35 728 29 076 29 076
29. Interest in retirement and
life funds(7) ............. - 46 808 12 557 13 419 13 419
30. Amounts receivable/
payable ................... 2 094 1 495 - 262 - 2 914 - 230 - 11 902 - 15 271 - 5 844 - 21 968 - 21 968
31. Other assets/
liabilities ............... 3 461 - 1 970 - 5 216 - 3 952 - 6 630 - 7579 845 - 1 958 - 6 200 42- 16 678 - 16 678
32. Balancing item ............ 153 - 324 - 72 - 318 - 210 - 193 - 1 063 - 124 - 1 187 - 1 187
------------------------------------------------------------------------------------------------------------------------------------

S = SOURCES, i.e. net increase in liabilities at transaction value.

U = USES, i.e. net increase in assets at transaction value.

KB231

(2.) Including mutual banks and the Postbank.

(3.) Before April 2005 the Public Investment Commissioners.

(4.) As taken from the national income (and production) accounts.

(5.) Namely deposits with the SA Reserve Bank (including coin liabilities),
Corporation for Public Deposits, banks, the Land Bank, mutual banks and the
Postbank.

(6.) Non-marketable bonds and other Treasury bills.

(7.) Members' interest in the reserves of retirement and all insurance funds.

--------------------------------------------------------------------------------
Quarterly Bulletin March 2007 73

South African Reserve Bank
--------------------------------------------------------------------------------

NATIONAL FINANCIAL ACCOUNT
FLOW OF FUNDS FOR THE THIRD QUARTER 2005(1)

R millions

-----------------------------------------------------------------------------------------------------------------------------------
Financial intermediaries
Sectors ---------------------------------------------------------------------------------
------- Other Public Insurers and Other
Foreign Monetary monetary Investment retirement financial
sector authority institutions(2) Corporation(3) funds institutions
------------------------------------------------------------------------------------------------
Transaction items S U S U S U S U S U S U
-----------------------------------------------------------------------------------------------------------------------------------

1. Net saving(4) ............... 17 526 456 - 907 1 615 1 836
2. Consumption of fixed
capital (4) ................. 6 976 19 108
3. Capital transfers ........... 24 86
4. Gross capital formation(4) .. 11 604 10 554
----------------------------------------------------------------------------------------------------------------------------------
5. Net lending (+)/net
borrowing (-) (S) ........... 17 464 451 - 535 1 624 1 390
6. Net financial investment
(+) or (-) (U) .............. 17 464 451 - 535 1 624 1 390
----------------------------------------------------------------------------------------------------------------------------------
7. Net incurrence of financial
liabilities
(Total S 9 - 32) ............ 39 760 - 329 86 763 22 916 29 097 19 986
8. Net acquisition of
financial assets
(Total U 9 - 32) ............ 57 224 122 86 228 22 916 30 721 21 376
----------------------------------------------------------------------------------------------------------------------------------
9. Gold and other foreign
reserves .................... 4 607 4 607
10. Cash and demand
monetary (5) deposits ....... 3 180 8 472 55 47 480 378 476 1 528 6 051
11. Short/medium-term
monetary (5) deposits ....... 957 13 277 10 929 8 893 3 656
12. Long-term monetary(5)
deposits .................... - 2 083 - 54 - 5 822 - 9 755 - 1 676 2 407
13. Deposits with other
financial institutions ...... - 18 - 455 36 989 16 465
14. Deposits with other
institutions ................ 23 518 22 731 22 916 222 222 18 432 993
15. Treasury bills - 244 - 1 167 2 360 - 353 - 216
16. Other bills ................. - 771 - 90 4 388 - 294 - 808 200 742 - 3 3 448
17. Bank loans and advances ..... 2 054 - 3 963 - 89 - 115 13 370 - 4 132
18. Trade credit and
short-term loans 3 014 10 948 - 1 100 134 5 612 2 132 3 621 2 681 - 248 2 213
19. Short-term government
bonds ....................... - 5 - 140 - 1 319 - 1 662 - 806 - 476
20. Long-term government bonds .. - 2 664 4 533 9 466 8 460 896
21. Non-marketable government
bonds(6) .................... 1 205 - 121
22. Securities of local
governments ................. 13 19 27 43
23. Securities of public
enterprises ................. - 1 - 1 354 1 714 3 259 332 907 662 1 022
24. Other loan stock and
preference shares ........... 2 348 5 315 607 - 1 270 1 445 92 2 565 8 1 020
25. Ordinary shares 2 897 45 235 33 945 - 843 3 115 140 1 639 18 299
26. Foreign branch/head office
balances
27. Long-term loans ............. 1 790 1 252 2 004 - 7 079 - 3 070 888
28. Mortgage loans 54 34 615 218 - 351
29. Interest in retirement and
life funds(7) ............... 130 13 100
30. Amounts receivable/payable .. - 5 655 - 5 931 - 135 25 - 3 663 9 545 49 - 3 938 - 2 900 - 3 018 - 5 151
31. Other assets/liabilities .... 5 905 1 057 - 5 263 - 4 015 - 8 709 1 000 6 692 13 495 - 3 410 8 794 - 13 275
32. Balancing item .............. - 237 165 - 136 264 - 91
----------------------------------------------------------------------------------------------------------------------------------

S = SOURCES, i.e. net increase in liabilities at transaction value.

U = USES, i.e. net increase in assets at transaction value.

KB230

(2.) Including mutual banks and the Postbank.

(3.) Before April 2005 the Public Investment Commissioners.

(4.) As taken from the national income (and production) accounts.

(5.) Namely deposits with the SA Reserve Bank (including coin liabilities),
Corporation for Public Deposits, banks, the Land Bank, mutual banks and the
Postbank.

(6.) Non-marketable bonds and other Treasury bills.

(7.) Members'interest in the reserves of retirement and all insurance funds.

--------------------------------------------------------------------------------
74 Quarterly Bulletin March 2007

South African Reserve Bank
--------------------------------------------------------------------------------

NATIONAL FINANCIAL ACCOUNT (CONTINUED)
FLOW OF FUNDS FOR THE THIRD QUARTER 2005(1)

R millions

1. Net saving(4) ............ 802 - 5 485 2 390 7678 - 826 25 085
2. Consumption of fixed
capital(4) ............... 4 500 3 115 5 889 26 846 6 804 48 263
3. Capital transfers ........ 4 578 1 849 1 949 22 8 844 16 4 688 4 688
4. Gross capital
formation(4) ............. 5 384 4 939 8 195 43 380 10 271 73 348
-----------------------------------------------------------------------------------------------------------------------------------
5. Net lending (+)/net
borrowing (-) (S) ........ - 4 660 - 5 460 2 033 - 8 842 - 3 465 -
6. Net financial investment
(+) or (-) (U) ........... - 4 660 - 5 460 2 033 - 8 842 - 3 465 -
-----------------------------------------------------------------------------------------------------------------------------------
7. Net incurrence of -
financial liabilities
(Total S 9 - 32) ......... 14 365 1 667 - 7 720 20 678 24 985 252 168
8. Net acquisition of
financial assets
(Total U 9 - 32) ......... 9 705 - 3 793 - 5 687 11 836 21 520 252 168
-----------------------------------------------------------------------------------------------------------------------------------
9. Gold and other foreign -
reserves ................. 4 607 4 607
10. Cash and demand monetary
(5) deposits ............. 10 586 321 921 23 282 9 174 55 952 55 952
11. Short/medium-term
monetary(5) deposits ..... 3 609 - 1 196 - 5 547 - 5 222 - 2 802 13 277 13 277
12. Long-term monetary(5)
deposits ................. - 718 - 555 4 525 - 214 2 193 - 5 876 - 5 876
13. Deposits with other
financial institutions ... - 14 101 11 196 4 630 16 465 16 465
14. Deposits with other
institutions ............. - 389 73 - 449 - 4 009 1 145 35 42 720 42 720
15. Treasury bills ........... - 300 - 680 - 300 - 300
16. Other bills .............. - 560 - 126 836 2 555 2 969 6 243 6 243
17. Bank loans and advances .. 319 - 492 456 7 583 7 311 13 281 13 281
18. Trade credit and
short-term loans ......... 140 - 65 - 1 572 279 - 3 072 730 4 454 - 9 574 - 286 1 085 10 563 10 563
19. Short-term government
bonds .................... 43 267 4 191 - 7 43 43
20. Long-term government bonds 12 096 715 - 9 315 5 12 096 12 096
21. Non-marketable
government bonds(6) ...... - 2 773 - 3 857 - 2 773 - 2 773
22. Securities of local
governments .............. - 50 13 - 166 1 - 50 - 50
23. Securities of public
enterprises .............. 68 - 22 2 102 275 - 3 - 7 4 477 4 477
24. Other loan stock and
preference shares ........ 75 13 369 1 154 7 007 114 10 431 10 431
25. Ordinary shares .......... 13 025 1 15 812 - 1 766 139 65 819 65 819
26. Foreign branch/head office
balances
27. Long-term loans .......... 1 196 1 393 389 - 21 - 327 - 275 - 5 003 962 - 307 - 448 - 3 328 - 3 328
28. Mortgage loans ........... 510 31 8 733 26 174 34 992 34 992
29. Interest in retirement and
life funds(7) ............ 1 210 389 11 371 13 100 13 100
30. Amounts receivable
/payable ................. 274 30 - 184 - 8 801 - 5 334 6 394 - 13 526 - 4 467 - - 23 193 - 23 193
31. Other assets
/liabilities ............. 3 277 - 3 993 3 432 - 2 831 - 11 337 - 4 623 - 21 806 7 738 - 3 440 8 - 15 652 - 15 652
32. Balancing item ........... 93 - 331 144 - 277 - 113 - 207 - 1 042 316 - 726 - 726
------------------------------------------------------------------------------------------------------------------------------------

S = SOURCES, i.e. net increase in liabilities at transaction value.

U = USES, i.e. net increase in assets at transaction value.

KB231

(2.) Including mutual banks and the Postbank.

(3.) Before April 2005 the Public Investment Commissioners.

(4.) As taken from the national income (and production) accounts.

(5.) Namely deposits with the SA Reserve Bank (including coin liabilities),
Corporation for Public Deposits, banks, the Land Bank, mutual banks and the
Postbank.

(6.) Non-marketable bonds and other Treasury bills.

(7.) Members' interest in the reserves of retirement and all insurance funds.

--------------------------------------------------------------------------------
Quarterly Bulletin March 2007 75

South African Reserve Bank
--------------------------------------------------------------------------------

NATIONAL FINANCIAL ACCOUNT
FLOW OF FUNDS FOR THE FOURTH QUARTER 2005(1)

R millions

--------------------------------------------------------------------------------------------------------------------------------
Financial intermediaries
Sectors --------------------------------------------------------------------------------
------- Other Public Insurers and Other
Foreign Monetary monetary Investment retirement financial
sector authority institutions(2) Corporation(3) funds institutions
------------------------------------------------------------------------------------------------
Transaction items S U S U S U S U S U S U
--------------------------------------------------------------------------------------------------------------------------------

1. Net saving(4)............. 14 791 472 2 881 317 4 719
2. Consumption of fixed
capital(4)................. 7 985 20 109
3. Capital transfers.......... 25 65
4. Gross capital
formation(4)............... 23 1 152 2 544
--------------------------------------------------------------------------------------------------------------------------------
5. Net lending (+)/net
borrowing (-) (S).......... 14 751 456 2 714 335 4 284
6. Net financial investment
(+) or (-) (U)............. 14 751 456 2 714 335 4 284
--------------------------------------------------------------------------------------------------------------------------------
7. Net incurrence of
financial liabilities
(Total S 9 - 32)........... 5 492 4 442 41 215 8 730 12 484 3 074
8. Net acquisition of
financial assets
(Total U 9 - 32)........... 20 243 4 898 43 929 8 730 12 819 7 358
--------------------------------------------------------------------------------------------------------------------------------
9. Gold and other foreign
reserves................... 6 654 6 654
10. Cash and demand monetary(5)
deposits................... - 2 214 13 471 326 12 749 4 244 - 2 623 - 546 - 10 967
11. Short/medium-term
monetary(5) deposits ..... - 5 577 31 27 348 2 183 95 6 161
12. Long-term monetary(5)
deposits ................. 2 931 16 14 832 789 686 - 2 750
13. Deposits with other
financial institutions ... - 1 - 1 108 3 812 - 591 11 037
14. Deposits with other
institutions ............. - 7 414 - 6 097 8 732 4 4 8 142 245
15. Treasury bills ........... 165 1 201 - 1 790 87 233
16. Other bills .............. 44 245 - 3 333 - 702 856 498 - 295 - 4 427
17. Bank loans and advances .. - 792 - 8 517 - 1 052 - 1 067 17 218 - 1 1 239
18. Trade credit and
short-term loans ......... - 622 18 704 - 219 - 109 - 2 096 5 381 - 3 022 - 10 320 - 7 676 1 533
19. Short-term government
bonds .................... 481 136 4 955 21 2 776
20. Long-term government
bonds .................... - 816 - 500 - 681 - 466 6 706 3 963
21. Non-marketable government
bonds(6) ................. 471 10
22. Securities of local
governments .............. 6 85 - 376 59
23. Securities of public
enterprises .............. - 31 - 2 040 1 466 1 557 73 660 880 270
24. Other loan stock and
preference shares ........ 388 - 30 - 706 - 1 714 168 - 560 4 085 - 23 2 767
25. Ordinary shares .......... 7 681 14 291 291 - 2 295 1 510 39 - 28 359 1 452
26. Foreign branch/head office
balances .................
27. Long-term loans ........... - 904 1 750 - 9 5 574 - 712 - 186
28. Mortgage loans ............ 210 32 808 2 - 16
29. Interest in retirement and
life funds(7) ............. 139 11 491
30. Amounts receivable/
payable ................... - 2 676 - 1 172 251 11 - 2 613 - 6 098 - 1 - 32 5 814 14 730 775 3 793
31. Other assets/liabilities .. 2 948 - 6 193 - 2 026 - 1 364 - 3 892 - 8 - 1 - 709 - 1 578 12 389 - 2 335 2 339
32. Balancing item ............ - 298 2 - 192 129 - 111 113
--------------------------------------------------------------------------------------------------------------------------------

S = SOURCES, i.e. net increase in liabilities at transaction value.

U = USES, i.e. net increase in assets at transaction value.

KB230

(2.) Including mutual banks and the Postbank.

(3.) Before April 2005 the Public Investment Commissioners.

(4.) As taken from the national income (and production) accounts.

(5.) Namely deposits with the SA Reserve Bank (including coin liabilities),
Corporation for Public Deposits, banks, the Land Bank, mutual banks and the
Postbank.

(6.) Non-marketable bonds and other Treasury bills.

(7.) Members' interest in the reserves of retirement and all insurance funds.

--------------------------------------------------------------------------------
76 Quarterly Bulletin March 2007

South African Reserve Bank
--------------------------------------------------------------------------------

NATIONAL FINANCIAL ACCOUNT (CONTINUED)
FLOW OF FUNDS FOR THE FOURTH QUARTER 2005(1)

R millions

------------------------------------------------------------------------------------------------------------------------------------
General government Corporate business enterprises
Sectors ------------------------------ ---------------------------------
------- Central
and
provincial Local Public Private Households,
governments governments sector sector etc. Total
---------------------------------------------------------------------------------------------------
Transaction items S U S U S U S U S U S U
------------------------------------------------------------------------------------------------------------------------------------

1. Net saving(4)............... 18 007 - 4 713 1 136 - 2 355 - 9 553 25 702
2. Consumption of fixed
capital(4) ................. 4 570 3 165 5 959 27 640 6 916 49 371
3. Capital transfers .......... 4 293 1 692 1 679 12 9 975 16 4 383 4 383
4. Gross capital
formation(4) ............... 5 818 4 988 8 348 43 425 10 773 75 073
------------------------------------------------------------------------------------------------------------------------------------
5. Net lending (+)/net
borrowing (-) (S) .......... 12 466 - 4 844 426 - 18 137 - 12 451 --
6. Net financial investment
(+) or (-) (U) ............. 12 466 - 4 844 426 - 18 137 - 12 451 --
------------------------------------------------------------------------------------------------------------------------------------
7. Net incurrence of
financial liabilities
(Total S 9 - 32) ........... 14 021 2 347 - 2 678 44 469 36 382 169 978
8. Net acquisition of
financial assets
(Total U 9 - 32) ........... 26 487 - 2 497 - 2 252 26 332 23 931 169 978
------------------------------------------------------------------------------------------------------------------------------------
9. Gold and other foreign
reserves 6 654 6 654
10. Cash and demand
monetary(5) deposits ....... 20 849 5 007 5 131 6 942 71 26 220 26 220
11. Short/medium-term
monetary(5) deposits ....... 1 888 371 - 523 17 504 5 215 27 348 27 348
12. Long-term monetary(5)
deposits ................... - 2 028 - 575 - 832 16 400 227 14 848 14 848
13. Deposits with other
financial institutions ..... 985 241 6 411 1 288 11 037 11 037
14. Deposits with other
institutions ............... - 83 - 46 78 - 606 - 1 734 115 670 670
15. Treasury bills ............. 2 106 2 2
16. Other bills ................ - 309 67 - 1 825 - 3 711 22 - 6 435 - 6 435
17. Bank loans and advances .... 1 006 1 407 - 553 12 857 10 587 16 166 16 166
18. Trade credit and
short-term loans ........... - 95 273 - 1 614 - 1 080 1 052 891 21 498 - 4 856 2 495 - 716 9 701 9 701
19. Short-term government
bonds ...................... 299 9 26 - 8 103 - 2 299 299
20. Long-term government bonds 8 002 - 10 79 - 271 - 2 8 002 8 002
21. Non-marketable government
bonds(6) ................... 546 65 546 546
22. Securities of local
governments ................ - 251 60 - 76 3 - 245 - 245
23. Securities of public
enterprises ................ 84 - 1 756 - 33 - 12 559 559
24. Other loan stock and
preference shares .......... 55 - 193 2 319 - 1 051 3 021 352 4 439 4 439
25. Ordinary shares ............ 4 931 6 834 2 - 8 333 14 916 64 6 512 6 512
26. Foreign branch/head office
balances
27. Long-term loans ............ 363 - 1 138 - 258 - 20 - 952 50 7 048 - 1 442 26 14 4 602 4 602
28. Mortgage loans ............. 945 70 7 166 26 293 33 739 33 739
29. Interest in retirement and
life funds(7) .............. - 140 313 11 179 11 491 11 491
30. Amounts
receivable/payable ......... 4 208 - 59 4 125 - 9 807 - 4 593 6 222 - 3 301 - 3 019 3 279 3 279
31. Other assets/liabilities ... - 232 1 768 - 1 046 - 7 702 70 116 - 997 - 16 147 6 422 - 9 089 - 9 089
32. Balancing item ............. - 78 256 - 16 - 234 24 38 304 - 671 - 367 - 367
------------------------------------------------------------------------------------------------------------------------------------

S = SOURCES, i.e. net increase in liabilities at transaction value.

U = USES, i.e. net increase in assets at transaction value.

KB231

(2.) Including mutual banks and the Postbank.

(3.) Before April 2005 the Public Investment Commissioners.

(4.) As taken from the national income (and production) accounts.

(5.) Namely deposits with the SA Reserve Bank (including coin liabilities),
Corporation for Public Deposits, banks, the Land Bank, mutual banks and the
Postbank.

(6.) Non-marketable bonds and other Treasury bills.

(7.) Members' interest in the reserves of retirement and all insurance funds.

--------------------------------------------------------------------------------
Quarterly Bulletin March 2007 77

South African Reserve Bank
--------------------------------------------------------------------------------

NOTES TO TABLES

PUBLIC INVESTMENT CORPORATION - TABLE S-35

The balance sheet of the Public Investment Corporation, previously published at
book value, has been amended to reflect market values, effective from March
2002.

OFFICIAL PENSION FUNDS - TABLE S-41

The balance sheet of the official pension funds has been revised, effective from
March 2002, to reflect market values as reported by the Public Investment
Corporation. The Public Investment Corporation invests funds on behalf of
public-sector entities, including the Government Employees Pension Fund.

--------------------------------------------------------------------------------
78 Quarterly Bulletin March 2007