1. Impact of financial liberalisation on South Africa Seeraj Mohamed IDEAS Conference Chennai, 25 January 2010

2. Introduction Democracy provided opportunity for addressing legacy of apartheid & weak industrial structure dominated by mining and minerals industry Inadequate regulation of finance has –Obstructed governments attempts to redress socio- economic problems inherited from apartheid past –Led to massive misallocation of capital –Supported deindustrialisation and made the economy more dependent on mining & minerals –Supported the wrong type of growth based on speculation and debt-driven consumption –Increased financial fragility and dependence on short- term capital flows

4. Credit extension to Private sector increased about 22% from 2000-08 BUT Private business investment increased by only 5%

5. Growth in household consumption

9. Increased use of derivatives: increase financial systemic risks in SA

10. Allocation of capital by private sector: - mostly for credit cards, car finance &mortgages; - mostly for short-term and collaterised debt

11. And, even fixed investment is misallocated

13. Services Employment

14. Manufacturing Employment

15. Dependence on MEC sectors intensifies from 1990s Chart: Value added, 1970-2007 (Source: Quantec)