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 Sept 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: 29 Of which, 15 from Nigeria, 10 from South Africa, and 4 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 Sept 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 however increased in the last quarter. Global Trends Sept 2017 Outlook Country Business Optimism Index Country / Region Own-Firm Business Optimism Index CFOs in Latin America have become less optimistic about financial conditions in their home countries, with the average declining by approximately 10 points on a 100 point scale Latam CFOs no longer most optimistic in world Latam optimism has fallen below that in Asia and now equals US optimism Latam optimism still higher than in Europe and Africa Mexican CFOs are most optimistic Among Latam CFOs, those in Mexico, Peru, and Chile are most optimistic Brazilian optimism has fallen almost as low as in Argentina CFOs are relatively optimistic about the futhre for their own firms in Latin America and elsewhere around the world, with own firm optimism equalling about 65 on a 100 point scale Slide edge in emerging own-firm optimism CFO optimsm about their own firms is highest in Asian, Latin America, and in Africa US and European own-firm optimsm is not far behind Own firm-optimism highest in Mexico, Chile, Peru CFOs in Brazil are fairly optimistic about their own firms CFOs in Argentina, Eduador, and Colombia are less optimistic 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 Sept 2017

Changes in the African Business Optimism Index Optimism about the domestic economy in South Africa remains low, lower than the rest of Africa. Nigerian CFOs are more optimistic about their domestic economy relative to the rest of Africa. South Africa Optimism Trend CFOs remain pessimistic about the domestic economy 60% of South African CFOs are “less optimistic” this quarter, same as last quarter Nigerian Optimism Nigerian optimism increases 100% of surveyed CFOs from Nigeria have become “more optimistic”, and none of them is “less optimistic” African Business Outlook Duke University / SAICA / AIA / CFO Magazine Sept 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 became less optimism about their own companies compared to last quarter, from 44% to 40%. More South African CFOs are growing pessimistic (40%) about their companies than CFOs from Nigeria about their own companies (0%). Nigerian Own-Company Optimism Compared to last quarter, Nigerian CFOs have become more optimistic 100% of surveyed Nigerian CFOs have grown more optimistic about their own companies’ prospects this quarter. African Business Outlook Duke University / SAICA / AIA / CFO Magazine Sept 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 Corruption/White Collar Crime are pressing concerns. Currency Risk is still a concern, but not as high as last quarter. South Africa Nigeria Corruption and white collar crime Economic uncertainty Access to capital Government policies Volatility of political situation Commodity prices Difficulty attracting / retaining qualified employees Weak demand for your products/services Employee productivity Currency risk Regulatory requirements Employee morale Reliability and cost of electricity Ranking – from most pressing to least pressing African Business Outlook Duke University / SAICA / AIA / CFO Magazine Sept 2017

Most pressing concerns for African companies Nigerian CFOs rank Access to capital and economic uncertainty as the top 2 most pressing concerns for their team, while South African CFOs rank corruption, economic uncertainty, volatility of political situation and government policies as their most pressing concerns. African Business Outlook Duke University / SAICA / AIA / CFO Magazine Sept 2017

Expected Product Price Inflation Africa inflationary expectations increased back to Q1 ‘17 levels this quarter, climbing to the top of global expectations. Global Trends Sept 2017 Outlook Product Prices Inflation expectations highest in Nigeria Nigeria has higher inflationary expectations (6%) compared to South Africa and other responding African countries. Inflationary expectations highest in Africa African CFOs expect highest price increases among all the regions CFOs in Asia for two quarters in a row expect the lowest inflation Notes: Presented data are the mean or median values for each region or country. African Business Outlook Duke University / SAICA / AIA / CFO Magazine Sept 2017

Expected Growth in Sales Revenue Overall, CFOs in Africa expect the most rapid increase in revenue over the next year. Global Trends Sept 2017 Outlook Revenue African outlook brightens as CFOs expect higher sales revenue this quarter LatAm Revenue expectations increase from last quarter Asian revenue growth expectations remain low Expectations of revenue growth varies in Africa Overall African revenue growth dampened by South Africa’s outlook. Nigerian 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 Sept 2017

Capital Spending Plans African capital spending expectation declines after three quarters of continued rising Global Trends Sept 2017 Outlook Capital Spending Modest capital spending plans European and African CFOs expect less robust business spending Business spending is ramping up in United States, Latam and Asia compared to last quarter Business spending varies within Africa South African CFOs do not expect any growth in spending, likely a result of their bleak economic outlook Notes: Presented data are the mean or median values for each region or country. African Business Outlook Duke University / SAICA / AIA / CFO Magazine Sept 2017

Expected Change in Earnings Earnings are expected to increase in Africa, building on last quarter’s increase. Global Trends Sept 2017 Outlook Earnings Negative earnings trends expected across most regions Asian earnings are expected to grow more slowly this quarter Upward earnings trends expected in Europe and Latin America Earnings growth expected in Africa South Africa continues to expect an increase of ~10% in earnings this quarter. Outlook of Nigerian CFOs is much more optimistic than last quarter’s 5%, with earnings expected to grow by 15% 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 Sept 2017

Fulltime Employment Outlook African CFOs expect flatlined fulltime domestic employment over the next year. Sept 2017 Outlook Global Trends # FT Employees Weak employment outlook in Latin America Latin America CFOs expect an increase employment growth in 2017. Asia expectations continue to decline Employment growth dips slightly in US Employment growth is expected to flatline across Africa South Africa CFOs expect a 1% reduction in the number of fulltime employees. Expected increase in fulltime employees in Nigeria is 0.6% 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 Sept 2017

Expected Wage and Salary Increases African wages and salaries are projected to increase by about 5% over the next year, an increase from 3.6% expectation last quarter. Sept 2017 Outlook Global Trends Wages & Salaries Similar wage growth expectations cross all regions African surpasses US in highest expectation for wage 2017 growth Asia continues to expect the lowest wage growth Wage growth in Africa is positive All participating African countries expect substantial wage growth, with Nigeria leading the trend Notes: Presented data are the mean value for each region or country African Business Outlook Duke University / SAICA / AIA / CFO Magazine Sept 2017

Hurdle Rates and Investment Decisions What hurdle rate does your company use to evaluate investment projects? (blue line) Does your company pursue all NPV>0 projects? (green and orange bars) African Business Outlook Duke University / SAICA / AIA / CFO Magazine Sept 2017

Current Hurdle Rate Versus 2017 WACC Within Africa, South Africa has a more significant difference between hurdle rate and WACC African Business Outlook Duke University / SAICA / AIA / CFO Magazine Sept 2017

Shortage of Management time or expertise Does a shortage of management time or expertise prevent your firm from pursuing some NPV>0 projects that you would otherwise pursue? African Business Outlook Duke University / SAICA / AIA / CFO Magazine Sept 2017

Why not hire more managers? Among firm with a shortage of managers: Why doesn't your firm hire more managers? 85.7% of African CFOs with a shortage of managers use a higher hurdle rate to evaluate projects. African Business Outlook Duke University / SAICA / AIA / CFO Magazine Sept 2017

Unlike shortage of managers, shortage of non-management labor in African companies does not affect the pursuit of positive NPV projects Compared to other industries, Real Estate and Public Administration are the most held back by a lack of unskilled labour Does a shortage of non-management labor prevent your firm from pursuing some NPV>0 projects that you would otherwise pursue? Does your firm require that proposed projects earn a higher expected return (e.g., set a higher hurdle rate) because of a shortage of non-management labor? African Business Outlook Duke University / SAICA / AIA / CFO Magazine Sept 2017

Why not hire more non-management labor? African Business Outlook Duke University / SAICA / AIA / CFO Magazine Sept 2017

How many positive NPV projects are on the back burner? Compared to 3 years ago, has the number of NPV>0 projects that your firm has 'back-logged' changed? African Business Outlook Duke University / SAICA / AIA / CFO Magazine Sept 2017

Shortage of Technology Talent Does your company have difficulty attracting and retaining qualified technology employees? Nigerian CFOs are much more satisfied with their technology talent than are South African CFOs. Compared to other industries, Retail/Wholesale, Banking/Finance/Insurance and Services/Consulting are significantly impacted by technology talent shortage African Business Outlook Duke University / SAICA / AIA / CFO Magazine Sept 2017

Shortage of Technology Talent Which areas/aspects of your organization are currently adversely impacted by a technology talent shortage? African Business Outlook Duke University / SAICA / AIA / CFO Magazine Sept 2017