African Business Outlook Part of the Global Business Outlook A joint survey effort between Duke University, The South African Institute of Chartered Accountants, Africa Investment Advisors and CFO magazine African Business Outlook Duke University / SAICA / AIA / CFO Magazine June 2017

CFO Global and African Business Outlook – Overview Global Business Outlook Duke University has surveyed CFOs around the world every quarter since 1996, most of those years jointly with CFO magazine. The survey takes the pulse of the business community and has a strong record of predicting future economic activity. The results are relied upon by Central Bankers, Analysts, Investors, and are widely reported in the press. SAICA, AIA, and the African Business Outlook SAICA joined the survey in 2013, helping to found the African Business Outlook, with an initial focus on the South African economy. Nigeria was added to the survey sample in late 2015. African Investment Advisors joined the survey team in Spring 2016, with an objective of solidifying participation by Nigerian CFOs and also expanding into Kenya. The analysis in this report will enable participating firms to make important business decisions as they can benchmark themselves against their global peers and also aid investors interested in Africa. Key Survey Facts Survey Respondents: 41 Of which, 13 from Nigeria, 26 from South Africa, and 2 from other parts of Africa. Unless otherwise stated, the analysis represents responses from across Africa. Sample includes CFOs from both public and private companies representing a broad range of industries, including: Retail/Wholesale, Mining/Construction, Manufacturing, Transportation/Energy, Communications/Media, Technology, and Banking/Finance/Insurance. Certain questions are constant each quarter, to capture trends in corporate optimism, expected hiring and capital investment plans, inflation, wages, and many other categories. Other questions change each quarter to examine topical economic issues and newsworthy business or political events that may affect the corporate finance landscape. African Business Outlook Duke University / SAICA / AIA / CFO Magazine June 2017

African Business Optimism Compared to the Rest of the World African CFOs have been and continue to be the least optimistic in the world about their countries’ economic outlook. Optimism about their companies’ outlook has also declined in the last quarter. Global Trends June 2017 Response Country Business Optimism Index Country / Region Own-Firm Business Optimism Index Own Company Notes: Presented data are the mean value for each region or country, Scale from 0-100 African Business Outlook Duke University / SAICA / AIA / CFO Magazine June 2017

Changes in the African Business Optimism Index Optimism about the domestic economy in South Africa remains low, lower than the rest of Africa. Even so, the South African Optimism Index improved to 42.3. Nigerian CFOs are more optimistic about their domestic economy relative to the rest of Africa. South Africa Optimism Trend CFOs remain less optimistic about the domestic economy 60% of South African CFOs have become “less optimistic” this quarter, versus 50% last quarter There was a marginal increase in the number of CFOs who have become “more optimistic” this quarter as compared to last quarter Nigerian Optimism Nigerian optimism increases Over 80% of CFOs from Nigeria have become “more optimistic”, and none of them is “less optimistic” African Business Outlook Duke University / SAICA / AIA / CFO Magazine June 2017

Changes in Own Company Sentiment South African CFOs optimism about their own companies increased this quarter South African Own-Company Optimism CFOs are more optimistic about their own companies than the general economy South African CFOs optimism about their own companies has appreciated compared to last quarter, from 39% to 44%. South African CFOs are more optimistic about their own companies (44%) than about the general South African economy (28%). More South African CFOs are growing pessimistic (32%) about their companies than CFOs from Nigeria about their own companies (7.7%). Nigerian Own-Company Optimism Compared to last quarter, Nigerian CFOs have become more optimistic 84.6% of Nigerian CFOs have grown more optimistic about their own companies’ prospects this quarter, compared to 7.7% that have grown less optimistic. Last quarter, 65% of CFOs had grown more optimistic about their own companies’ prospects. African Business Outlook Duke University / SAICA / AIA / CFO Magazine June 2017

What Keeps CFOs Awake at Night? (Most Pressing Concerns of CFOs) CFOs in South Africa and Nigeria feel that Government policies, Economic Uncertainty, and Currency Risk are pressing concerns. Nigerian CFOs remain concerned with Inflation. South Africa Nigeria Economic uncertainty Currency risk Volatility of political situation Inflation Government policies Regulatory requirements Weak demand for your products/services Cost of borrowing Unrest in the general population Corruption and white collar crime Ranking – from most pressing to least pressing African Business Outlook Duke University / SAICA / AIA / CFO Magazine June 2017

Most pressing concerns for African companies Nigerian CFOs rank currency risk and inflation as the top 2 most pressing concerns for their team, while South African CFOs rank economic uncertainty, volatility of political situation and government policies as their top 3 most pressing concerns. African Business Outlook Duke University / SAICA / AIA / CFO Magazine June 2017

Expected Product Price Inflation Africa inflationary expectations decline in this quarter, with Latin America showing the highest expectation globally. Global Trends June 2017 Outlook Product Prices Inflationary expectations highest in Latin America Africa CFO’s expectation of inflation declined significantly in this quarter Expectations of inflation increases in Europe, while in Asia inflation is expected to be very low Inflation expectations highest in Nigeria Of responding countries, Nigeria has the highest inflationary expectations (over 8%) compared to South Africa and the rest of Africa. Notes: Presented data are the mean or median values for each region or country. African Business Outlook Duke University / SAICA / AIA / CFO Magazine June 2017

Expected Growth in Sales Revenue Overall, CFOs Africa expect a slight decline in revenue, beyond the expectation of other region. Global Trends June 2017 Outlook Revenue Africa outlook changes as CFOs expect softer sales revenue this quarter Around the globe, revenue expectations decreases from last quarter across, except in Asia Latin American revenue growth expectations trail Asia and Europe Expectations of revenue growth varies in Africa Overall African revenue growth dampened by South Africa’s outlook. Nigeria CFOs expect a significant increases in revenue, with part of the increase being driven by higher inflation. Notes: Presented data are the mean or median values for each region or country. African Business Outlook Duke University / SAICA / AIA / CFO Magazine June 2017

Capital Spending Plans African capital spending expectation continues to rise Global Trends June 2017 Outlook Capital Spending Modest capital spending plans Latin American CFOs expect flat business spending Business spending is ramping up in Africa, Europe and Asia compared to last quarter Business spending varies within Africa Nigeria anticipates a 2.3% growth in capital expenditures Expectations of increased spending in South Africa continue to bolster the expectations in the continent Notes: Presented data are the mean or median values for each region or country. African Business Outlook Duke University / SAICA / AIA / CFO Magazine June 2017

Expected Change in Earnings Earnings are expected to increase in Africa, building on last quarter’s increase. Global Trends June 2017 Outlook Earnings Negative earnings trends expected across most Regions Latin American earnings are expected to decrease this quarter Upward earnings trends expected in Africa and Asia Earnings growth expected in Africa South Africa expects an increase of over 10% in earnings this quarter. Outlook of Nigeria CFOs is less optimistic, with earnings expected to grow by less than 5% this quarter. Notes: Presented data are the mean public company value for each region or country. African Business Outlook Duke University / SAICA / AIA / CFO Magazine June 2017

Fulltime Employment Outlook African CFOs expect flatlined fulltime domestic employment over the next year. June 2017 Outlook Global Trends # FT Employees Weak employment outlook in Latin America Latin America and Africa CFOs expect no employment growth in 2017. Employment growth stays strong in US Employment growth is expected to flatline across Africa South Africa CFOs expect no change in the number of fulltime employees. Expected increase in fulltime employees in Nigeria is minimal Notes: Presented data are the mean value for each region or country #FT=Number of Fulltime Employees African Business Outlook Duke University / SAICA / AIA / CFO Magazine June 2017

Expected Wage and Salary Increases Africa wages and salaries are projected to increase by 3.6% over the next year, a decline from 7% expectation last quarter. June 2017 Outlook Global Trends Wages & Salaries Similar wage growth expectations cross all regions US expects wages to grow 4.1% in 2017, which is the highest among all regions Asia expects the lowest wage growth Wage growth in Africa is positive All participating African countries expect substantial wage growth, with South Africa leading the trend Notes: Presented data are the mean value for each region or country African Business Outlook Duke University / SAICA / AIA / CFO Magazine June 2017

How Uncertain is the Current Business Climate? Compared to the typical amount of uncertainty that your company faces, how would you rank the current level of uncertainty facing your firm? Global Business Outlook Duke University June 2017

How Uncertain is the Current Business Climate? Compared to the typical amount of uncertainty that your company faces, how would you rank the current level of uncertainty facing your firm? African Business Outlook Duke University / SAICA / AIA / CFO Magazine June 2017

As Sales Revenue increases, African CFOs face higher uncertainty than usual Compared to the typical amount of uncertainty that your company faces, how would you rank the current level of uncertainty facing your firm? African Business Outlook Duke University / SAICA / AIA / CFO Magazine June 2017

~58% of African CEOs are delaying or slowing down expansion due to uncertainty about government policies and/or economic conditions Compared to an average or normal amount of uncertainty, has the current amount of uncertainty about governmental policies and/or economic conditions led your firm to? African Business Outlook Duke University / SAICA / AIA / CFO Magazine June 2017

Mining/Construction and Services/Consulting industries are the most optimistic of government or economic uncertainties, with some CFOs proceeding more aggressively with projects. Compared to an average or normal amount of uncertainty, has the current amount of uncertainty about governmental policies and/or economic conditions led your firm to? African Business Outlook Duke University / SAICA / AIA / CFO Magazine June 2017

Economic Growth, Interest Rates and Regulatory Policy are the main areas of uncertainty holding up new Projects About which if any of the following items is uncertainty (about policy details or timing, etc.) holding back your company's plans for expansion and new projects? African Business Outlook Duke University / SAICA / AIA / CFO Magazine June 2017

Interest Rate Risk is only a concern of African CFOs with revenues less $100 million About which if any of the following items is uncertainty (about policy details or timing, etc.) holding back your company's plans for expansion and new projects? African Business Outlook Duke University / SAICA / AIA / CFO Magazine June 2017

15% is the median hurdle rate used by African CFOs to evaluate investment projects and only 32.5% of companies pursue all projects returning above the hurdle rate. What is the hurdle rate that your company uses to evaluate investment projects? Does your company pursue all projects that are expected to earn a return higher than the hurdle rate? African Business Outlook Duke University / SAICA / AIA / CFO Magazine June 2017

Shortage of resources and high uncertainty are the main drivers of unpursued projects What prevents you from pursuing all projects that are expected to earn a return higher than the hurdle rate? African Business Outlook Duke University / SAICA / AIA / CFO Magazine June 2017

80% of African CFO respondents use a hurdle rate greater than their cost of capital Industry Why is your hurdle rate (to evaluate investment projects) greater than your cost of capital? Agr, Forestry, Fishing To make a return on investment - this is not our main business. Bank/Fin/Insur/Real Est Provide a positive return in excess of expectations We want returns that exceed our cost of capital. Especially during high risk times such as these. Energy To take care of potential and unfactored uncertainties Mining/Construction A starting point. Need strong incentive to move from existing business Retail/Wholesale Risk Averse Services, Consulting Always a risk to take into account investment decisions driven by valuation Unspecified Industry Marginally higher re greenfield start of projects. To allow for overestimates of returns on new projects To compensate for extra risk African Business Outlook Duke University / SAICA / AIA / CFO Magazine June 2017

African CFO actual and expected ROA Expected ROA for 2017 is higher than 2016 ROA – indicates an optimistic view of 2017 What is your firm’s ROA? African Business Outlook Duke University / SAICA / AIA / CFO Magazine Dec 2016

Best Practices When Uncertainty is High What are the best practices for running a company when uncertainty is high about governmental policies and/or economic conditions? Stay the course Continue to pursue core strategies built on the companies’ strengths. For the most part, don’t expand into new projects that stretch the firm in new directions. Focus on what you can control Be cautious Many firms pull back and operate very cautiously, making changes slowly. Some cut existing projects or cancel new projects but this is the exception rather than the rule Focus on the short-term Focus on getting through the short-term, remain flexible, but don’t lose sight of long-run objectives Reduce costs Carefully study analyses and scenarios Have a plan and contingencies for how to react if various scenarios occur. Hire consultants or other experts Engage in risk management Be more active in risk management and hedging. Understand the economic outlook of various scenarios very well Accumulate liquid assets Reduce financial risk by accumulating liquid assets, especially cash. Don’t increase debt loads Take care of the customer Communicate more with, and take extra care of, key customers -The most common strategy is to “stay the course”. By this companies mean not to become frozen into inaction, but to continue to pursue core strategies built on the companies’ strengths, focusing on what is under their control. For the most part, when uncertainty is high, this also means don’t expand into new projects that stretch the firm in new directions -Focus on getting through the short-term, remaining flexible, without losing sight of long-run objectives -Many firms pull back and operate very cautiously, making changes slowly … some cut or cancel projects but this is the exception rather than the rule -Reduce costs, though continue to take care of the core -Be more active in risk management and hedging.  Understand the economic outlook of various scenarios very well. -Many firms highlight the need to reduce financial risk by accumulating liquid assets, especially cash. Try not to increase debt loads. African Business Outlook Duke University / SAICA / AIA / CFO Magazine June 2017