However, at all times reserves managers must also remember that they are custodians of public funds, and have to be guided by prudent strategies, which implies that there must be a limit to “thinking outside the box” in the quest for ever higher returns. Dealing with these challenges will certainly require human capital that is appropriately skilled, and equipped with the right technology.
When a country is dependent on external financing, it requires an equilibrium interest rate that attracts foreign as well as domestic savings to finance investment. Indeed, the SARB’s models link the domestic neutral real interest rate to both its global counterpart and a South Africa-specific risk premium.