Operating environment

In the six months to December 2011, an already fragile global economic recovery was negatively affected by a number of unprecedented events, including the downgrade of the USA’s credit rating and the Eurozone crisis. Sentiment was further depressed by heightened concern that China would experience a significant slowdown in growth. Developed markets continued to experience muted growth but generally have limited policy space to support further expansion. While lower inflation and the easing of monetary policy should support growth in emerging economies, some of these countries continue to face structural risks associated with their growth models. Africa’s economic recovery continued and sub-Saharan Africa (excluding South Africa) is expected to grow GDP by between 6% and 7% in the current financial year, making it one of the developing regions with the highest growth prospects.

Growth rates in South Africa moderated. The global slowdown was further amplified by local factors such as significant industrial action in the third quarter which depressed manufacturing and mining output. Supported by real income growth, households continued to drive the expansion, while capital investment and overall corporate activity remained subdued (albeit with pockets of moderate growth). Single digit growth in credit extension was below the increase in nominal GDP. The SARB maintained a monetary policy stance designed to stimulate economic activity.