Johannesburg - For the first time in the SA Reserve Bank's history a portion of reserves will be invested in the Chinese interbank bond market, SARB deputy governor Daniel Mminele said on Tuesday.
“South Africa was the first African central bank to be granted an investment quota for the Chinese onshore market,” he said in a speech prepared for delivery.
“The Chinese bond market is the world's fifth largest, continues to grow rapidly in both depth and liquidity, and the onshore market provides more favourable yields.”
Mminele said an agreement between the bank and the People's Bank of China allowed the SARB to invest approximately US1.5 billion (around R15bn), which was about three percent of South Africa's official gold and foreign exchange reserves.
Mminele was speaking at the Standard Bank fifth African Central Bank Reserves Management Conference in Johannesburg.
He said the SARB had taken steps to invest in new asset classes and new currencies other than the renminbi - the official currency of the People's Republic of China.
“The bank will be diversifying into currencies such as the Korean Won, Australian Dollar and New Zealand Dollar.
“New asset classes that the bank has begun to invest in include covered bonds and mortgage-backed securities, and we have recently begun trading in bond futures to mitigate the potentially negative impact of rising bond yields on the reserves as well as for more efficient portfolio management,” Mminele said.
Investing in these instruments demanded better-skilled staff and more sophisticated information technology and risk systems.
The SARB had gained a lot of training through external fund managers, including two official sector fund managers - the Bank of International Settlements and the World Bank.
The bank had been part of the World Bank's Reserves Advisory and Management Programme (Ramp) since 2006.
“Through this engagement bank staff not only received extensive training but are now also in a position to provide training and engage in knowledge transfer with other central banks within the SADC (Southern African Development Community) region.
“Being a member of the Ramp programme has greatly enhanced our efficiency in managing reserves,” said Mminele.
The SARB had made changes to the proportion of funds managed internally and externally and was currently reviewing the custodial arrangements it had in place.
The bank had also embarked on a comprehensive systems renewal project to upgrade its IT and risk management systems.
“We hope to make final decisions for the systems renewal later this year and hopefully be in a position to start implementing whichever system is chosen by the end of the year or early in 2014.
“The decision regarding custodial arrangements we also hope to make early next year,” Mminele said. - Sapa