Organisation of Asset and Liability Management in
South Africa – Coordination of Institutions
Workshop on Asset and Liability Management
Presenter: Johan Redelinghuys | Chief Director, National Treasury | 2 October 2013
national treasury
Department:
National Treasury
REPUBLIC OF SOUTH AFRICA
Content
• Legal framework enabling Asset and Liability Management (ALM) in
South Africa
• ALM coordination framework between main economic policy areas
2
Legal framework enabling ALM in South Africa
• Constitution of the Republic of South Africa
- Section 216 (1) provides for the establishing of a National Treasury and to
prescribe measures to ensure transparency and expenditure, central in each
sphere of Government by introducing amongst others generally recognised
accounting practice
• Public Finance Management Act and Regulations
- Section 8 (1) (a) requires the National Treasury to compile consolidated financial
statements annually in accordance with generally recognised accounting practice
- Section 40 (1) (b) determines that departments must prepare financial
statements in accordance with generally recognised accounting practice
•
•
•
•
Municipal Finance Management Act (MFMA) and Regulations
Finance and Financial Adjustments Acts Consolidations Act
South African Reserve Bank Act
Gold and Foreign Exchange Contingency Reserve Account (GFECRA)
Defrayal Act
3
ALM coordination framework within following
economic policy areas
Debt Management Policy
Fiscal Policy
Monetary Policy
4
Fiscal Policy Monetary Policy
Debt Management Policy
Bilateral
(Minister of Finance and Governor)
Standing Committees
(Reserve Bank and National Treasury Officials)
Macroeconomic
International
Relations
Banking and
Financial Markets
Banking
Subcommittee
Financial Markets
Subcommittee
Working
Committees
Public Debt
Working Group
Financial and
Regulatory
Financial Stability
Oversight
Committee
Financial Regulatory
Reform Steering
Committee
5
Debt Management
Policy
Fiscal Policy
• Formal structure between areas contributing to Fiscal Framework
Debt Management
Tax Revenue
Expenditure path
Fiscal Framework
Committee
Expenditure
allocation/monitoring
Macroeconomic
• Informal engagements on debt service cost/total debt
66
Coordination within Fiscal Policy areas
• National Treasury organisational structure
Minister
Deputy Minister
Director-General
Budget Office
Tax and Financial
Sector Policy
Public Finance
International and
Regional Economic
Policy
Asset and
Liability
Management
Intergovernmental
Relations
Corporate
Services
Office of the
Accountant
General
Specialist
Functions
Economic Policy
7
Coordination within Fiscal Policy areas (cont)
• To improve coordination within National Treasury formal groups were
established:
Director-General
International
Public Finance
COO/Office of the
DG
Corporate service
Intergovernmental
Relations
Tax and Financial
Sector Policy
Office of the
Accountant-General
Economic Policy
Specialist Functions
Budget Office
Asset and Liability
Management
Corporate Office
Fiscal and
Budget Group
Economics and
Financial
Markets Group
Financial
Management
Group
8
Coordination within Fiscal Policy areas (cont)
• Revenue Analysis Committee
–
–
–
–
National Treasury
Reserve Bank
Statistics South Africa
South African Revenue Service
• Expenditure Budget Process
– Medium Term Expenditure
Committee
– Minister’s Committee on the Budget
– Cabinet
• Provincial Government oversight
– Technical Committee on Finance
– Budget Council
– One on One meetings
• Local Government Oversight
– Budget Forum
– South African Local Government
Association
– One on One meetings
9
Coordination within Debt Management
Policy areas
• ALM Division’s organisational structure
ALM Division
Financial
Operations
Liability
Management
Strategy and Risk
Management
SOE Governance
and Financial
Analysis
Sectoral
Oversight
• Specific engagements with Reserve Bank:
– Roles and responsibilities (slides 11 and 12)
– Coordination with Reserve Bank’s money market liquidity management (slide 13)
– Monthly statistical information report (slide 17)
10
Reserve Bank’s roles and responsibilities
• Announce and execute Treasury bill and bond auctions (primary
issues, switches and buy-backs)
• Settlement of auctions
• Central Security Depository Participant for Treasury bills
• Surveillance of Primary Dealers
• Issue foreign loans for foreign reserve purposes
• Manage money market liquidity
• Banker to government
11
National Treasury’s roles and responsibilities
• Formulate debt management and annual funding strategies
• Notify Reserve Bank of weekly funding strategy
• Registrar of domestic bonds
• Manage state debt cost budget
• Appoint primary dealers
• Issue foreign loans for financing purposes
• Maintain investor relations
12
Coordination, money market liquidity management
• Reserve Bank’s liquidity management tools:
•
•
– Debentures;
– Repurchase agreements using own government bond portfolio;
– Currency swaps; and
– Notes and coin flows
Sterilisation assistance provided by government to the Reserve Bank on request:
– Government deposits with the Reserve Bank to facilitate accumulation of FX reserves;
and
– Short-term cash deposits/withdrawals from government accounts at the Reserve Bank
Government’s cash flows should not impact on market liquidity:
– Revenue collections not flowing to the Reserve Bank (tax and loan accounts);
(slide 14)
– Government’s local currency payments made by the Reserve Bank, sterilised through
transfer of money from commercial banks; and (slide 15)
– Foreign exchange borrowing/purchases not converted to local currency but deposited
with the Reserve Bank for future use (slide 16)
13
Tax revenue receipt cycle
Commercial Bank
Tax collecting agency’s deposit accounts
Customs
duty
Value added
tax
Income tax
Fuel levy
Roll-up over night
Tax and Loan
Account
Treasury investment account
Loan receipts
Borrowing by
Treasury
14
Daily settlement of local currency expenditure
Debit balance
cleared
Transfer to clear
debit balance
Departments/
spending
agencies
Accounts
Departmental
revenue
Tax revenue
Tax and loan
accounts
(investments)
Credit balance
cleared
Surplus invested
Commercial
banks
Reserve
bank
Departmental
expenditure
Loan receipts
(Borrowing)
15
Daily settlement of foreign currency expenditure
Departmental
foreign
expenditure
Foreign
loans
Reserve Bank
Departments/
spending
agencies
accounts
Foreign
currency
investment
account
Domestic
foreign
currency
purchases
Utilise Fx investments to meet
Fx expenditure
16
Reserve Bank’s monthly statistical
information report
• Provides information on foreign currency operations performed on
behalf of Government
• Official gold and foreign reserve position
– Gross reserves;
– Forward position; and
– International Liquidity Position (ILP)
• Currency composition of net foreign reserves
• Reserve accumulation progress
• Money market and long-term foreign exchange swap transactions
• Detailed analysis of the GFECRA
17
Coordination within Debt Management
Policy areas (cont)
• Public Sector Borrowers Forum
• Contributing to market development:
– Transparency;
– Investor relations programme;
– Appropriate funding strategy;
– Contribute to money and bond markets advisory committees; and
– Drive structural changes (electronic trading platform)
•
Participate in Financial Regulatory Reform Steering Committee
• Cash Management Operations:
– Alignment of tax revenue/expenditure flows; (including interest/redemptions)
– Maintain appropriate cash buffer and bridging finance facilities (to enable
stable funding plan);
– Onlending to Provinces; and
– Coordination of broader public sector cash (slide 19)
18
Coordination of broader public sector cash
Reserve Bank
Invest
Sub- National
Governments
Subsidiary
Bridging finance
borrowing
Invest
Corporation for
Public Deposits
State-Owned
Companies
Bridging finance
borrowing
National
Government
Invest
19
Coordination within Debt Management
Policy areas (cont)
• Contingent Liability Management
– Fiscal Liability Committee
– Specific reporting rules for Departments/Public Entities
– Central Guarantee register
• Development/implementation of annual debt management strategy
– Funding Strategy Committee
– Public debt analytical tool (moving to formal system)
– Weekly funding monitoring committee meeting (National/Public Companies
borrowing)
– Consolidated public sector auction calendar (slide 21)
– Consolidated public sector maturity profile (slide 22)
20
Consolidated auction calendar of National
Government and SOEs
Apr-13
S
May-13
M
T
W
T
F
S
1
2
9
16
23
30
3
10
17
24
4
5
12
19
26
6
7
8
14
15
21
22
28
29
11
18
25
S
M
13
5
6
20
12
13
27
19
20
26
27
Jun-13
T
W
T
F
S
2
9
23
3
10
17
24
4
7
14
21
28
1
8
15
22
29
30
31
16
S
M
T
W
T
F
11
2
3
6
18
9
10
5
12
19
26
27
7
14
21
28
25
S
1
16
17
23
24
4
11
18
25
13
20
8
15
22
29
30
July 2013
S
Aug-13
M
T
W
T
F
S
1
3
4
6
10
17
24
31
11
5
12
19
26
7
8
14
21
15
22
28
29
2
9
16
23
30
S
M
T
W
T
F
S
2
3
5
9
16
23
30
10
4
11
18
25
18
25
S
M
T
13
4
20
11
12
27
18
19
25
26
6
13
20
27
S
M
T
5
Oct-13
6
7
13
14
20
21
27
28
1
8
15
22
29
S
M
T
12
19
26
6
13
20
27
7
14
21
28
7
14
21
28
Sep-13
T
F
S
S
M
T
W
T
F
1
3
1
2
5
10
8
9
15
16
24
22
23
11
18
25
12
17
3
10
17
24
4
22
2
9
16
23
26
6
13
20
27
29
30
31
29
30
T
F
S
S
M
T
W
T
F
2
1
5
8
15
16
23
22
23
11
18
25
12
16
3
10
17
24
4
9
2
9
26
6
13
20
27
31
8
15
Nov-13
17
24
12
3
4
19
10
11
26
17
18
24
25
5
12
19
26
S
M
T
31
Jan-14
5
W
W
T
F
S
6
7
13
20
27
14
21
1
8
15
22
28
29
30
29
30
T
F
S
S
M
1
2
3
10
17
24
31
4
T
W
T
F
8 9
15 16
22 23
29 30
8
2
5
6
15
9
22
16
3
4
10 11
17 18
24 25
31
12
19
26
13
20
7
14
21
28
W
19
2
18
9
25
16
23
3
10
17
24
4
11
18
25
5
6
12
19
26
13
20
27
7
14
21
28
NT & RAND WATER
Eskom Holiday
28
S
7
14
21
28
S
1
23
30
NT
21
Mar-14
1
11
7
14
Dec-13
Feb-14
W
19
S
27
8
15
22
29
Transnet
DBSA
Actual bonds and amounts to be auctioned will be published on announcement dates.
Issued by National Treasury
21
Consolidated maturity profile of National
Government and SOEs
22
Thank you
23