a changing economy – should policymakers act? speech at the new year ’ s reception of the cologne chamber of industry and commerce 09. 01. 2020 | cologne | claudia buch 1 economic activity and monetary policy 2 structural changes 3 role of economic policy 4 conclusion dr gorg, ladies and gentlemen, thank you for your kind welcome and for inviting me to cologne. it gives me great pleasure to be able to speak to you today – and the subject of my speech, entitled “ a changing economy – should policymakers act? ” couldn ’ t be better suited to cologne. cologne has been in a constant state of change throughout history, and has reinvented itself time and again. • as a former hanseatic city and an important trade fair location, cologne represents cosmopolitanism and integration. • however, it is also renowned for education – the university of cologne is among the most prestigious educational establishments in germany, not least in the field of economics. • last but not least, cologne is characterised by its successful economic transition. barely any other city has so fully mastered the shift towards service provision and the media industry – it isn ’ t just the wdr public broadcasting institution and the rtl television channel that make cologne a key media hub today. but as i ’ m sure you ’ re all aware, economic success doesn ’ t come out of nowhere. a certain rhenish pragmatism in the spirit of “ es kutt wie es kutt ” ( which roughly translates as “ what will be, will be ” ) and “ et hatt noch emmer joot jejange ”, or “ if it worked out yesterday, it will work out again tomorrow ” never hurt anyone. that said, economic success is also the result of good planning on the basis of reliable facts. the challenges set out for the new decade certainly haven ’ t grown fewer in number. three trends, in particular, are set to fundamentally change the economic environment : • demographics, • decarbonisation, and • digitalisation. all of you here today must perceive change, manage it, and make the right decisions in an uncertain economic environment. but that alone is not enough. it is also essential that policymakers set the right course and the right regulatory policy framework. this is because functioning markets are a driver of growth and of societal prosperity. yet there are also areas in which we cannot rely on private market forces alone, and where political action is necessary if the markets are to function

fund managers are usually given slightly more freedom, in terms of credit and currency allocations for example, than internal portfolio managers. our external fund management programme is also aimed at diversifying reserves into asset classes which we do not have the required resources to manage internally, in terms of both systems and human capital. this includes specialist asset classes such as corporate bonds, asset - backed securities and mortgage - backed securities. in line with our most recent saa review, which started in 2016, we also decided on a different approach to enhance the way in which we selected our external fund managers. this time around, we decided to focus more intensely on the value proposition and value - add the fund manager presented on a specific investment mandate. while the final selection was based on the value proposition in managing a specific mandate, capacity building remained a key consideration in our fund manager selection. page 8 of 13 we have maintained our three - stage selection process. in the first step, a ‘ request for information ’ is used to survey the landscape of fund managers and to identify those fund managers that have sufficient experience in the required asset classes as well as in the management of central - bank portfolios. the second stage, which takes the form of a ‘ request for proposal ’, is considerably more detailed. here, we conduct an indepth investigation of fund manager suitability with regards to organisational capabilities in areas such as risk management and organisational stability. we also request participants to select the mandate or mandates which suit their strongest skill set. importantly, we ask them to submit detailed performance track records in those areas. these track records are then analysed in detail by our risk managers. the subsequently shortlisted candidates are asked to present only on the mandates that they had proposed as their strongest and where we felt, given their track record, they could add the most value. in the panel interviews, the candidates are asked to present their value proposition in their respective mandate in very specific terms, and also to comment on and commit to an outperformance target within a proposed risk limit. this approach has been followed to enhance the efficiency of our selection process and to expose ourselves to those managers who have real and verifiable specialities. this is important not only in terms of optimising performance, but also in terms of skills transfer between the external fund managers and ourselves. the south african reserve bank ’ s current strategic asset allocation framework as i ’ ve mentioned, the most recent appointment of external fund managers was concluded with