At its July Expanded Lekgotla, we (the South African government) decided to set up a joint national-
provincial Task Team, chaired by Deputy President Phumzile Mlambo-Ngcuka, to make recommendations
focused on getting our economy onto a sustained higher level of growth.

The Lekgotla was convinced that we can achieve this sustained higher level of growth. Accordingly,
the brief of the Task Team is to recommend the steps that should be taken to realise this goal, 
and not to waste its time answering the question whether we can.

A national consensus has developed around the view that one of the central tasks facing our 
nation is the eradication of poverty and underdevelopment. For its part, our movement conducted 
its 2004 election campaign under the general slogan and theme - A People's Contract to Create 
Work and Fight Poverty.

These objectives can only be achieved if we put our economy on the higher growth path being 
elaborated by the Mlambo-Ngcuka Task Team. That higher level of growth means that we are 
determined to ensure that our economy generates the larger volumes of wealth we need to defeat 
the scourge of poverty and underdevelopment.

The enormity of our task in this regard is visible to the naked eye. Everywhere in our country, 
in both urban and rural areas, we can see the persisting and endemic poverty and underdevelopment
we inherited from our racist past.

The stark contrast between the historically white and the historically African areas of our 
country tells the incontestable story that to bridge the yawning chasm between the two will take
time, considerable resources, patience, persistence and correct policies and programmes.

This has led some people to entertain serious doubts that we can in fact succeed to eradicate 
this legacy, and therefore that we can so restructure and build our economy that it is able to 
help us achieve this objective.

This pessimistic mood is of course also fed by the regular news reports of the work that needs 
to be done to eradicate the legacy of colonialism and apartheid. In many instances this news is 
presented in a manner that suggests that we could have achieved this objective in the mere 11 
years of democratic rule, and therefore that the legacy of the past is a product of the 
democratic order. Even external observers of our country, however sympathetic they may be to 
our efforts fundamentally to transform our country for the better, do not seem to tire of telling
us the obvious, that the legacy of the 350 years of racism remains a distinguishing feature of 
present-day South Africa, 11 years after its liberation.

Quite correctly, during her recent visit to our country, the First Deputy Managing Director of 
the International Monetary Fund (IMF), Ms Anne O. Krueger, once more reminded us of the 
structural faults that continue to define our country.

On 10 June 2005, she said: "I was delighted to have had the chance to visit South Africa, 
especially at such an auspicious time. The country's recent economic achievements are laudable...
The (socio-economic) progress we have seen (in South Africa) is welcome. But important challenges
remain. Unemployment is high by any standard, poverty is widespread, and large disparities in 
income and wealth remain."

In its latest, 1 August 2005, rating of our country, the international rating agency, Standard 
and Poor's (S&P), said: "The ratings on South Africa are further constrained by severe structural
weaknesses, against a background of social inequality. Income disparities, poverty, very high 
unemployment, and the incidence rate of the unfolding HIV/AIDS pandemic, distinguish the 
sovereign unfavourably among peers."

Relative to these international observers, we are in the fortunate position that we are South 
Africans. We engaged in a protracted and costly struggle for liberation precisely to create the 
political conditions that would enable us to address the severe structural weaknesses to which 
Standard and Poor's referred.

Accordingly, our policies and programmes since we assumed power in 1994 have been focussed on the 
task to address these severe structural weaknesses. What is critically important in determining 
the future of our country is not the constant and correct refrain that the past continues to define 
the present. What is centrally important is what we have done and are doing to ensure that we build 
a new South Africa that is no longer defined by its past.

Ms Krueger reflected on the progress we have made in this regard. She said:

"South Africa is making impressive progress. Achievement of macroeconomic stability has resulted
in higher growth rates and low inflation. As a result the living standards of many South Africans
have risen. These achievements are remarkable; all the more so given that this economic progress
has been made during a period of unprecedented political and social transformation.

"Recent economic performance has been strong and the short-term outlook remains favourable. For 
2005, we expect real GDP [Gross Domestic Product] to grow by about 4 percent and for inflation 
to remain comfortably within the target range. We also expect a further rise in employment...

"The successful implementation of monetary policy has strengthened the credibility of the 
inflation targeting regime: inflation is now widely expected to remain within the target band - 
an important achievement. The build-up of international reserves has enhanced the ability of the
authorities to respond to adverse external shocks. And the authorities' efforts to make it 
possible for disadvantaged groups to gain access to financial services are starting to bear 
fruit.

"On the social policy front, the HIV/AIDS program is an important step towards dealing with the 
epidemic that, one way or another, affects the lives of all South Africans. Progress is also 
being made with the government's programs for black economic empowerment and land reform. Success
in this area should reduce social disparities, foster greater social cohesion, and pave the way 
for further - and sustainable - social and economic progress...Progress thus far has been 
remarkable."

Despite its comments about our country's severe structural weaknesses, S&P said it had "raised 
its long-term foreign and local currency sovereign credit ratings on the Republic of South Africa
to BBB+ from BBB, and to A+ from A, respectively, on improved macroeconomic stability."

The rating agency said, "The upgrade reflects South Africa's strong track record of macroeconomic
management and improved prospects of sustainable higher GDP growth rates...Consistently prudent 
macroeconomic policies have succeeded in reducing the fiscal deficit, stabilising debt levels, 
and lowering inflation and interest rates.

"By 2005, the sound track record of macroeconomic stability and economic management has created 
the favourable conditions to lift and sustain higher growth rates in the medium term...Earlier 
austerity and fiscal reforms have made room for a more expansionary but still prudent fiscal 
stance...

"South Africa stands out among its peers due to its democratic and transparent institutions and 
entrenched political stability, the strength of its capital markets and financial sector, its 
monetary policy framework, and the independence of the South African Reserve Bank."

Ms Krueger drew attention to the fact that what our government and country have done during the 
last 11 years of democracy have created the conditions "for further - and sustainable - social 
and economic progress". S&P said that the work we have done "has created the favourable conditions
to lift and sustain higher growth rates in the medium term".

Independently, our movement and government had reached the same conclusion -that now, on the 
basis of what we achieved during our First Decade of Liberation, it is possible "to lift and 
sustain higher growth rates".

We reached this conclusion on the basis of objective reality, having earlier resisted the 
temptation to succumb to a populist urge to attempt what would have been an adventurist and 
disastrous "great leap forward". Objectively the economy is communicating the unequivocal 
message that the July Expanded Lekgotla was correct to take the decision that the moment had 
come for us to plan for a sustainable higher growth rate.

When we took power in 1994, our economy was in terminal decline. By this year, StatsSA could 
report that, "The seasonally adjusted real value added at basic prices for all industries...
increased by an annualised rate of 3,5 percent in the first quarter of 2005 compared with the 
fourth quarter of 2004. The seasonally adjusted real value added at basic prices for all 
industries increased by annualised rates of 4,0 percent, 4,6 percent, 5,7 percent and 4,1 
percent during the four quarters of 2004 compared with the fourth quarter of 2003 and the first 
three quarters of 2004 respectively."

For a long time, certainly since the 1980s, our economy has been characterised by rising levels 
of unemployment. But in March this year, StatsSA could report that, "The unemployment rate d
eclined to 26,2% in September 2004 from 27,9% in March 2004...The number of employed persons 
rose from 11.4 million in March 2004 to 11.6 million in September 2004 and 11.9 million in March
2005." In other words, the economy created 500,000 net new jobs in the 12 months from March 2004
to March 2005!

Last year the automobile industry accounted for 7,2% of our GDP. It also contributed to the 
positive employment figures reported by StatsSA. In its second quarter 2005 report, the National
Association of Automotive Manufacturers of South Africa reported that the number of people 
employed in vehicle assembly is now at its highest for the last seven years.

Earlier, the vehicle assembly sector had shed jobs as plants installed more modern equipment to 
improve their capacity radically to increase their output. In turn, that expanded production has
resulted in a greater demand for labour than would have been the case if the earlier and lower 
levels of production had been maintained.

Reflecting the buoyancy in the economy, StatsSA also reported on a significant decline in company
liquidations. It said: "The total number of liquidations recorded for the second quarter of 
2005 decreased by 6,4% compared with the first quarter of 2005. Furthermore, the total number of
liquidations recorded for June 2005 decreased by 12,0% compared with June 2004.

"The decrease of 6,4%...for the second quarter of 2005 compared with the first quarter of 2005 
was due to a decrease of 23,0% in compulsory liquidations. The decrease of 12,0%...for June 2005
compared with June 2004 was due to a decrease of 60,3% in compulsory liquidations."

The business buoyancy is also reflected in the rapid growth in the sale of commercial vehicles -
vans, trucks and buses. It seems clear that sales of vehicles of over 3,500 kg are going to set 
new records. The June 2005 sales figures were 15.86% up on the July 2004 numbers for Medium 
Commercial Vehicles. The respective figures for Heavy, Extra Heavy Commercial Vehicles and buses
were 56.1%, 28.9%, and 152.7%.

During 2004, cement sales broke several records. The publication 'Engineering News' reported 
that last year, "Around R44-billion was invested on resident and non-residential buildings in 
South Africa, while R28-billion was spent on construction works, which included civil 
engineering, mining, harbours, airports and other infrastructural projects...While the sales of 
cement in 2004 were forecast to be up 5%, (they) actually increased by 17,4%...Sales to blenders
were up 29%... Sales to ready mixed concrete producers were up 21% and those to concrete product
manufacturers were up 18%...Cement manufacturers have already advised of plans to increase their 
manufacturing capacities."

For its part, the petroleum industry association, SAPIA, has reported that, "Notwithstanding 
prices being some 10% higher than in the previous year, the trend of improved growth in 
petroleum product sales that started in 2003 has continued in the first half of 2005, with 
sales in this period exceeding sales in the equivalent period of 2004 by 4,0%. (Sales in the 
first and second quarters of 2005 were each 4% up on the previous years equivalent quarter)... 
Sapia believes that this strong growth, in spite of increased prices, is a sign of the current 
strength of the South African economy.

"A comparison of the first half of 1997 and 2005 sales shows how diesel sales have very 
significantly out performed petrol sales over the past number of years, with petrol sales 
growing by 6% and diesel by 48%." (NB: diesel is essentially used for commercial vehicles, 
trains and power generation rather than private passenger transport.)

Between 2000 and 2004, bitumen production increased by 21%.

The steel and engineering employers' organisation, SEIFSA, reported that production of pig iron,
 ferro-alloys and silicon metals between 2000 and 2004 increased by about 20%. The figure for 
crude steel was 21%.

We have deliberately cited the various instances relating to commercial vehicles, cement, diesel,
 bitumen, iron and steel to substantiate the message conveyed by StatsSA that ours is a rapidly 
growing economy. The significant growth in the production and sale of these products serves as 
an indicator of the health of the economy as a whole.

This reality, which reflects the real economy, underlines the fact that the Expanded Cabinet 
Lekgotla was correct to reach the conclusion that we have indeed laid the basis for us to aim 
for and achieve sustained higher growth rates.

In her June 2005 statement issued as she left our country, IMF First Deputy MD, Ms Krueger, 
referred not only to the imperative for us to achieve higher rates of economic growth, but also 
the importance of such programmes as "black economic empowerment and land reform", to "reduce 
social disparities, (and) foster greater social cohesion".

Recently, on 4 August 2005, one of our largest companies, Old Mutual (and its subsidiaries), 
announced that it had "today completed their Black Economic Empowerment ownership plans...New o
rdinary shares (had therefore) been issued today...(to various new black shareholders)."

Two days earlier, on 2 August, yet another large company, Anglo American, had announced similar 
progress related to the fundamental transformation of our country, away from its colonial and 
apartheid past. It said that our Department of Minerals and Energy had granted "new order mining
 rights" to its subsidiary, AngloGold Ashanti, in terms of the new legislative regime that 
restores ownership of the wealth beneath the soil to the people, as stated in the Freedom Charter.

Commenting on this positive development, Lazarus Zim, Chief Executive of Anglo American South 
Africa said: "The granting of these mineral rights represents real progress in terms of the 
South African government's desire to achieve certainty for all stakeholders and demonstrates 
its commitment to broaden the participation by all of South Africa's people in the mainstream 
of our country's economic life."

Tony Trahar, Chief Executive of Anglo American plc said: "This represents a significant step 
forward for Anglo American in terms of our progress towards converting old order mineral rights 
to new order mining rights. We are greatly encouraged by this positive outcome which reflects 
the open and constructive dialogue between Anglo American's mining businesses and the South 
African government."

Our country is in the second year of its Second Decade of Liberation. We have taken the decision
that during this Decade we will make decisive advances towards the realisation of the goal of a 
better life for all, including the realisation of the Millennium Development Goals.

This means that we must achieve the sustained higher rates of growth for which our movement and 
the Expanded Cabinet Lekgotla called. It also means that our endeavours must result in the 
reduction of social disparities in our country, and the fostering of greater social cohesion, 
paving the way for further - and sustainable - social and economic progress.

We have to rebuild our country so that it overcomes its severe structural weaknesses. What we 
have achieved in the last 11 years gives us the confidence and optimism that we will achieve 
the goals we have set ourselves in this regard. The persisting and severe structural weaknesses 
that characterise our country stand out not as a cause for pessimism, but as a challenge to us 
to live up to the commitment we have made, that we joined the African National Congress the 
better to serve the people of South Africa.1