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

; or reduce the cost of producing the cash, while at the same time enhancing the security and durability of the currency. a new challenge for central banks is the requirement that all key business areas should be included in effective contingency plans. high profile incidents around the world have highlighted the importance of central banks having in place, considered and tested plans, to deal with outages due to everything from supplier problems to natural disasters. generally, central banks source their banknotes from one, or a small number of international companies. currency managers need to weigh - up the importance of price against considerations, such as time of delivery, quantity of order and quality of product. they also need to consider if more than one supplier for, say ink, could be beneficial for operational risk concerns. procurement from external suppliers is expensive, complex and may span several years. as with any outsourcing arrangement, production and quality, a standard needs to be monitored. the impact of technical innovations for the distribution of cash or payment mechanisms is developing at a rapid pace, especially for the under - banked. the use of mobile phone technology to transfer money is becoming a popular method due to efficiency and the lower cost associated with this payment mechanism. a further consideration by central banks is the cost that security features add to the banknote production process. we all appreciate the need for security features to avoid the counterfeiting of banknotes, but the question is at what cost and whether these costs can be optimised? these issues will be presented and debated upon during the next few days by all the participants and hopefully assist central banks with their deliberations in this regard. the objective is, through the diverse nature of attendees at this conference, to improve the understanding of the issues for those involved in providing and managing banknotes ; coins and other secure documents and at the same time improving the understanding of the consumers ’ needs by the suppliers. the conference has set out to achieve this with a mixture of presentations, workshops and panel discussions that touch on the latest developments and technologies in the industry and allow adequate time for discussion and dialogue. you are all encouraged to seek answers by asking questions and discussing the issues. the overall aim is to improve understanding through education – africa has some catching - up to do, compared with the rest of the world. this is our attempt to start that ball rolling strongly in the field of banknotes, coins, id and other security documents and to position this great continent as a producer, as well