institutions in the region, on board in this exercise of preparation for the year 2000 electronic switch - over. the financial systems of the world are today in most countries entirely based on electronic data processing technology, and any major hitch in these systems will obviously have serious implications for financial markets, and therefore for total economic activity. i referred to possible knock - on or chain effects in the global financial system, and the danger of global contagion from one or more infected centre. this danger of contagion is of course, equally important in the case of any domestic financial system. because of the inter - dependence of financial institutions in any closed system, care must be taken that all the financial institutions in each country will be compliant by the end of this year. the programme that must be followed in this process of preparation provides no room for competition amongst individual institutions, but surely requires a high degree of co - operation. this provides a further reason why financial regulators have a major part to play. problems must be overcome, not only by institutions within the financial system, but also by all the major clients of the financial institutions, such as government departments, public authorities, and major non - financial private sector corporations. 4. the responsibility of central banks in the y2k problem central banks hold a pivotal position in domestic and international financial markets. they must obviously take a leading role in preparing their financial systems for this major event. – 3 – the south african reserve bank started at a very early stage in identifying all problem areas in its own information technology and communication systems. in terms of our programme, all electronic technology in use in the bank must be in full compliance by 31 march 1999. some parts of the internal system have already been tested. the crucially important samos system for clearing and settlement transactions is to be tested and must be certified as fully compliant by all participants by mid - april 1999. the bank has also established a financial system risk evaluation committee which is tasked with identifying indirect exposures to the central bank and the financial system, and with developing contingency measures. the committee is, for example, providing for additional stocks of bank notes to be available at all centres for an expected increase in demand around the dates of the switch - over, and is looking at a possible need from banking institutions for additional financial liquidity over this short transition period. the south african government last year also established the national year 2000 decision support centre to co - ordinate and provide advice on a national scale for the

however, as mminele ( 2007 ) notes, because the level of its gross reserves were fairly low, averaging around usd3, 8 billion between 1990 and the end of 1997, the bank funded its intervention through the forward market, and in the process built up an oversold forward book which, at tits highest level in 1995, amounted to usd29 billion. this exceeded the level of net reserves by a considerable margin, leaving a negative net open foreign currency position ( nofp ) which reached a peak of usd23, 2 billion in august 1998 ; a number which is still mentioned only in hushed tones by those reserve bank staff who can recall those momentous times! in 1998, the sarb ceased its intervention in the foreign exchange market, abandoned its attempts to influence the level of the exchange rate and, in addition, made a public commitment to eliminate the negative nofp and to close out the oversold forward book. and this had the desired result. in september 1998, the level of gross reserves, at us $ 5, 3 billion was still very small in absolute terms and relative to the net oversold forward book of approximately us $ 18 billion. by may 2003, the nofp was marginally positive ; but by february 2004, the positions in the oversold forward book were balanced and gross reserves had started to increase. at the time of writing, the template on international reserves and foreign currency liquidity, which is available to all who may be interested at www. reservebank. co. za, indicates that the approximate market value of the official reserve assets as at end of march 2008 was us $ 34, 384 billion. chart 1, beloved of those sarb directors and staff who speak in public, illustrates these developments. in summary, then : the sarb now has reserves to manage. this was not always the case, for during some periods prior to 1998 what needed to be managed were negative net reserves. second, the sarb has made a public commitment not to participate in the market for foreign exchange in an attempt to influence or to determine the nominal exchange rate. third, exchange controls have been liberalised significantly. south africa does not appear now to be too different from its peers among emerging market economies. 2. 2 how? the implications for communication of the afore - going narration were and remain challenging. in a situation of economic vulnerability, such as characterised south africa at various moments in its past, the need was for the bank to maintain a sense of calm.