BoB’s emerging markets’ shift pays off
Mbongeni Mguni - Lewanika Timothy | Monday August 4, 2025 06:00
BoB initially included emerging markets in 2017 and according to the BoB’s Annual Report for 2024 released recently, the total the number of eligible global markets where the foreign exchange reserves can be invested, rose from 22 to 27.
The new markets include Mexico, Indonesia, Colombia, Romania, and Hungary.
“In 2017, when we reviewed our resource management policies and guidelines, the board then decided to approve that we invest in emerging markets,” the BoB’s director of Financial Markets department, Baitshenotse Mmopelwa, told BusinessWeek during a briefing. “We took this decision as a diversification sort of, just because we were not in emerging markets for the longest time and we felt we're losing out in terms of the return that we could gain from this. “So we're investing in emerging markets, we're very selective, and we've had positive returns since investing in emerging markets.”
The BoB internally manages 50% of the foreign exchange reserves, with the balance managed by a custodian advisor. Of the 27 markets where the reserves can be invested, last year, the bank was present in 14, up from 13 in 2023.
“We're selective and we just choose by vision,” Mmopelwa said of the markets where the reserves are invested. “We don't just pick. “We're considering factors like the volatility or just the economic fundamentals in that economy. “We monitor them, of course, because by nature emerging markets are volatile. But that diversification factor is very, very necessary.”
Traditionally, the reserves have been invested in the United States, Eurozone, the United Kingdom as well as Australia and New Zealand.
Meanwhile, the BoB’s attempts to shift the strategic allocation of the reserves in terms of assets, was foiled last year by the higher frequency of withdrawals required for foreign currency requirements in the economy.
The foreign currency reserves are split between the long term portfolio, which is the Pula Fund, and the short term portfolio which caters for the ongoing foreign currency requirements of the economy.
Last year, the BoB had to make frequent withdrawals for short term currency requirements, because the downturn in diamonds caused a steep reduction in foreign currency inflows.
The Pula Fund had its SAA revised to 60:20:10:10 across equities, bonds, high-yield and unlisted infrastructure respectively, but these allocations were hampered by the frequent withdrawals, the Annual Report revealed.
Deputy governor, Lesego Caster Moseki explained the challenge to BusinessWeek.
“When we reviewed our policies, our reserves stood at around $7 billion or thereabouts. “It's like when you have $1 billion, then you will say, I'll buy a house, I'll buy a Mercedes-Benz, I'll buy a ranch, I'll take my kids to a private school. But then come the time of implementation, you only have $600,000 and you have to reoptimise. “You say, now I'm going to take my kids to government school and instead of a Benz, I'll buy a Hilux. “So when we did our policies, we had some ideas of where we want to invest but when the levels went down, then we had to prioritise providing foreign exchange to the markets, prioritise government spending. “We said, some of the things that we had planned to do, we will now postpone to a later date,” he said.
The BoB said it is keeping to its guidelines of foreign exchange reserve management which includes principles of safety, liquidity and returns.