MEFMI / UNCTAD / SA National Treasury Joint Workshop on ALM Applauded

United Nations Conference on Trade and Development (UNCTAD)’s Development Finance Branch, the National Treasury of South Africa and MEFMI held a joint regional workshop on sovereign Assets and Liabilities Management (ALM). The workshop, funded by UNCTAD, took place at the Organization for Economic Cooperation and Development (OECD) Centre for African Public Debt Management and Bond Markets, in Midrand, South Africa, from 30 September to 3 October 2013.

The workshop was one of the activities of an UNCTAD project which seeks to strengthen capacity for effective ALM in public debt management offices (DMOs). The project focuses on  capacitating developing countries from Africa, Latin America and the Caribbean regions to enhance the management of their public debt within an ALM framework.

The workshop followed an earlier regional ALM meeting held in Harare, Zimbabwe, in 2012 as well as a recent study of contingent liabilities jointly conducted by the two institutions in Zambia in May 2013. The latter culminated in MEFMI, in collaboration with the OECD, launching a similar study on contingent liabilities in all MEFMI member States in order to collect information that can enable design of effective strategies for monitoring and managing contingent liabilities.

The workshop was officially opened by Mr. Munali Nare, a Chief Director from the South Africa National Treasury, while Prof. Alessandro Missale of UNCTAD and Mr. Cornilious Deredza, MEFMI Debt Management Programme Officer also made opening remarks. Mr. Nare highlighted the importance of integrated management of the sovereign balance sheet for more effective sovereign risk management. He also appreciated the partnership amongst UNCTAD, MEFMI and his Ministry.  He stressed that while South Africa had made considerable strides in ALM, the country also stood to benefit from sharing experiences with other African countries and the rest of the world.  

The objectives of the workshop were:
•    To train participants on the ALM approach and how it complements public debt management in monitoring fiscal risks and reducing debt vulnerabilities;
•    To impart knowledge on  the key concepts, definitions, objectives and instruments of sovereign ALM, including the related analysis from a public sector balance sheet perspective that also incorporates contingent liabilities; and
•    To share practical and pertinent ALM experiences and challenges, notably those of South Africa, including the actual instruments, tools, methods and procedures employed by the latter in ALM risk monitoring and mitigation.

The workshop was attended by senior-to-middle level officials from government DMOs responsible for risk monitoring, assessment and ALM portfolio analysis.  These included officials who use the outcomes of such activities for decision making. The workshop drew 34 participants (of whom 12 or 35% were female) from 18 Sub-Saharan African countries, of which eleven or 61% were MEFMI member States.

The workshop was facilitated mostly by senior South African National Treasury officials, UNCTAD staff and Mr. Cornilious Deredza, MEFMI Debt Management Programme Officer.
The workshop was delivered through a combination of PowerPoint presentations, follow-up discussions, and case studies mainly from South Africa which covered the following topics:

•    Benefits of ALM approach, including presentation of the key concepts, definitions and the typical sovereign balance sheet, as well as objectives of ALM;
•    Contingent liabilities monitoring, analysis and reporting for disclosure;
•    Monitoring local governments and state-owned corporations or enterprises (SOCs / SOEs), and sovereign asset management that focuses on foreign exchange reserves/funds management as well as cash management and forecasting;
•    ALM in South Africa, covering institutional and coordination framework, implementation processes, frameworks, techniques and tools,  as well as risk monitoring, management and benchmarking; and,
•    Experiences of participating countries, including opportunities and challenges for advancing ALM from current debt management efforts.

The key outcomes of the workshop included:

•    Enhanced knowledge of the building blocks of, and factors affecting ALM, including contingent liabilities management (CLM);
•    Exchange of regional and country experiences in ALM and CLM, notably exposure to the practical and relatively more advanced experiences of South Africa with ALM, including their processes, frameworks and tools; and
•    Awareness of the gaps/needs, constraints and pre-conditions for successful transition from mere public debt management to integrated ALM.
South African National Treasury officials shared their ALM frameworks and tools. This enabled other countries participating to appreciate the technicalities involved and benefits to be derived from the ALM approach while also getting exposed to South Africa’s operational frameworks and tools. The participation by a high number of MEFMI countries in the workshop should help to enhance the buy-in of the ALM framework by middle-to-senior officials who attended. Hopefully this will spur the gradual introduction of, and transition to ALM approach in the future.