In South Africa, despite positive signs of economic recovery, high levels of unemployment continued to place a damper on activity in the domestic financial system. Nevertheless, the banking and insurance sectors maintained high-quality capital and liquidity buffers well above the minimum prudential requirements, and remained profitable. Gross loans and advances increased in December 2010 compared to a year ago, albeit at a moderate pace.
Although the danger of a hollowing-out of domestic industries has been an issue many times since the Plaza Accord in 1985, experience dictates that the expansion of overseas production has not resulted in a long-lasting overall negative impact on the domestic economy.