The Reserve Bank has repeatedly stressed that its role in making South Africa more attractive for foreign capital is to curb the rate of growth in the money supply, avoid excessive reliance on an inflationary expansion of bank credit with a view to sustaining economic growth, maintain realistic interest rates, increase the foreign exchange reserves and ensure that the exchange rate was stable
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It is Reserve Bank policy to allow the trade-weighted Rand to depreciate by the inflation differential between South Africa and its major trading partners (currently about 8 percent). Since the end of 1985 the average annual depreciation has been just under 7 percent. The longer-term policy objective is to bring South Africa's inflation rate down to the same level as that of its trading partners. .
Since 1989 good progress has been made in combating inflation through restrictive monetary policies. In 1993 average inflation reverted to single digits for the first time since 1973, remaining below 10 percent for most of 1994. The outlook for the economy over the coming 12 months will be principally determined by the demand for South African exports, particularly agricultural and mining commodities, the country's access to external funds, a broadcasting of private sector investment spending activity, and the ability of local and provincial governments of effectively spending funds set aside for housing and other socioeconomic projects as well as constructively utilising the various foreign aid packages available to the country.
In addition, the successful abolition of the financial Rand, as a first and important step in the scrapping of exchange control, should boost investor confidence both locally and abroad. .
Structure of the economy.
As a developing country South Africa's economy is well diversified. The table shows how the relative importance of manufacturing and services has increased to the detriment of the agricultural and mining sectors.