Sequel to Long Walk to Freedom - Revision 3 - Chapter 9 Page 4

On the monetary policy front, the South African Reserve Bank has helped to improve the interest rate environment, another growth- positive factor, from the very high levels of 25,0% in the eighties to 13,75% in June 2001. The low or normalised interest rate levels are conducive to stronger fixed capital investment. The rate of inflation has come down significantly. From a level of 15,5% in the period 1985-1990 to 12,5% in the period 1990- 1994, inflation has maintained an average of 7,3% in the period 1994- 2000. Recognising the importance of price stability, the government and the South African Reserve Bank introduced an inflation-targeting framework, with an initial target of between 3-6% on average in 2002. Thus the prevailing inflation trend is downwards. A critical issue that faces many countries in transition is collection of taxes, one of the key hallmarks of governance. South Africa's young democracy faced an even greater challenge given that the African majority had resisted taxation (eg Bambata poll tax rebellion) as they were not willing to fund their own enslavement. Therefore the task was not only to bring millions of new taxpayers into the net, but also to ensure everyone paid their fair share. Tax reform was an integral part of the overall fiscal strategy. The success with regard to reorganising the entire tax system, including customs and cross-border management, has played a significant part in government being able to reduce its borrowing requirement, and hence also the budget deficit. It has enabled significant tax reform to take place. 18