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 CFO Magazine

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: 53 Of which, 16 from Nigeria, 27 from South Africa, and 10 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 Optimism Compared to the Rest of the World African CFOs continue to be the least optimistic in the world about their countries’ economic outlook. CFO Optimism about Nigerian companies’ outlook has declined in the last quarter, while South Africa remains flat. Global Trends Dec 2017 Outlook Sep 2017 Outlook Country Business Optimism Index Country / Region Country / Region Own-Firm Business Optimism Index Own Company Own Company Notes: Presented data are the mean value for each region or country, Scale from 0-100

Changes in 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 outlook relative to the rest of Africa. South Africa Optimism Trend CFOs remain pessimistic about the domestic economy Over 60% of South African CFOs have grown “less optimistic” this quarter, similar to last quarter Nigerian Optimism Nigerian optimism decreases 75% of surveyed CFOs from Nigeria have become “more optimistic” and 19% of them are “less optimistic” Notes: Presented data are the mean or median values for each region or country.

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 have grown more optimistic about their own companies compared to last quarter, from 40% to 48%. Proportion of South African CFOs growing pessimistic (40%) stays the same as last month – and higher than CFOs from Nigeria about their own companies (13%). Nigerian Own-Company Optimism Compared to last quarter, Nigerian CFOs more optimistic about own firms 75% of surveyed CFOs from Nigeria have become “more optimistic”, compared to 100% last quarter; 13% are “less optimistic”

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 Risks are pressing concerns. South Africa Nigeria Economic uncertainty Government policies Currency risk Volatility of political situation Access to capital Difficulty attracting /retaining qualified employees Regulatory requirements Difficulty attracting / retaining qualified employees Ranking – from most pressing to least pressing

Most pressing concerns for African countries Nigerian CFOs rank economic uncertainty, currency risk and access to capital as the top 3 most pressing concerns for their team, while South African CFOs rank economic uncertainty, access to capital and currency risk as their most pressing concerns.

Expected Product Price Inflation Africa inflationary expectations decrease from 4.2% last quarter to 3.5% this quarter, still above the rest of the world. Sep 2017 Outlook Global Trends Dec 2017 Outlook Product Prices Product Prices Inflationary expectations highest in Africa African CFOs expect the highest price increases among all the regions CFOs in Europe expect the lowest inflation Inflation expectations highest in South Africa Nigeria has lower inflationary expectations (2.8%) compared to South Africa and (3.8%) with Africa at a 3.5% average. Notes: Presented data are the mean or median values for each region or country.

Expected Growth in Sales Revenue Overall, CFOs in Africa expect the most rapid increase in revenue over the next year. Sep 2017 Outlook Global Trends Dec 2017 Outlook Revenue Revenue African CFOs expect higher sales revenue in 2018 Revenue expectations decrease slightly from last quarter for Latam and Europe Slight increases expected in the United States and Asia 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, compared to the 18% expectation from last quarter. Notes: Presented data are the mean or median values for each region or country.

Capital Spending Plans African capital spending expectations continue to decline this quarter Sep 2017 Outlook Global Trends Dec 2017 Outlook Capital Spending Capital Spending Modest capital spending plans Latin American CFOs expect business spending growth Business spending is softening in US and Europe Business spending varies within Africa South African CFOs expect a slight decline in spending, likely a result of their bleak economic outlook Notes: Presented data are the mean or median values for each region or country.

Expected Change in Earnings Earnings are expected to decline slightly in Africa, compared to last quarter’s increase. Sep 2017 Outlook Global Trends Dec 2017 Outlook Earnings Earnings Positive earnings trends expected across most regions Asia has the lowest earnings expectations for 2018 Latam expects the highest earnings growth, rebounding from very low levels Earnings growth expected in Africa South Africa continues to expect an increase of 11% in earnings this quarter, a slight increase compared to 10% forecasted last quarter. Nigerian CFOs expect 12% earnings growth in 2018. Notes: Presented data are the mean or median values for each region or country.

Fulltime Employment Outlook African CFOs expect 3.5% increase in fulltime domestic employment over the next year. Sep 2017 Outlook Global Trends Dec 2017 Outlook # FT Employees # FT Employees Strengthening employment outlook in Latin America African CFOs expect stronger employment growth in 2018. Employment growth stays flat in the US compared to last quarter Employment growth is expected to flatline across Africa South Africa CFOs expect a slight increase in the number of fulltime employees. Expected increase in fulltime employees in Nigeria is 7% Notes: Presented data are the mean value for each region or country | #FT=Number of Fulltime Employees

Expected Wage and Salary Increases African wages and salaries are projected to increase by about 8% over the next year, an increase from 5% expectation last quarter. Sep 2017 Outlook Global Trends Dec 2017 Outlook Wages & Salaries Wages & Salaries Wage growth expectations vary across regions Africa expects wages to grow 8.0% in 2018, 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 or median values for each region or country.

Faster pace of innovation over the past 3 years During the last three years, has the pace of change / innovation become faster for firms in your industry? Country perspective Industry perspective Nigerian CFOs are experiencing the fastest pace of growth in their industries Across all industries, over 60% of CFOs agree that the pace of innovation has grown faster over the past three years

Pace of innovation: impact on capital spending Fast pace of innovation has propelled capital spending across all industries Country perspective Industry perspective Innovation is spurring capital spending growth in South Africa and Nigeria Capital spending growth is wide-spread

Pace of innovation: impact on R&D spending The fast pace of innovation has propelled research and development spending across all industries, albeit less than capital spending. Country perspective Industry perspective

Pace of innovation: impact on moon shot projects Fast pace of innovation has on average, increased spending on moon shot projects across all industries Country perspective Industry perspective

Pace of innovation: impact on planning horizon Fast pace of innovation has, on average, decreased the planning horizon and caused more emphasis on the short term Country perspective Industry perspective – focus on early years Across all industries, over 60% of CFOs agree that the pace of innovation has caused them to focus more on the early years in their planning horizon

Pace of innovation: impact on required payback period Has the faster pace of change/innovation in your industry reduced the required “payback period” on your investments? Country perspective Industry perspective

Pace of innovation: impact on investment horizon Has the faster pace of change/innovation in your industry shortened the horizon of your investment project? Country perspective Industry perspective

Pace of innovation: impact on investment decision making Has the faster pace of change/innovation in your industry changed the methods you use to make investment decisions? Country perspective Industry perspective Nigerian CFOs are changing their investment decision methods while South African CFOs are maintaining their existing methods

Inhibitors of long-term corporate investments Check if spending on the following items “crowds out” or hinders your firm's ability to spend on long-term corporate investment Country perspective Industry perspective Regulatory requirements in South Africa and Nigeria. Regulatory requirements are the leading source of capital drain from long-term corporate investments

African CFOs have favorable work-life balance During the time you are awake, what percentage of time, energy, and attention focused on work versus the percentage of time, energy, and attention focused on life outside of work. Country perspective Global perspective Latin American CFOs: work-life balance Current Work-Life Balance 80% work - 20% life 70% work - 30% life 60% work - 40% life 50% work - 50% life 40% work - 60% life 2.9% 26.5% 41.2% 23.5% 5.9% 0.0% 7.0% 40.4% 42.1% 10.5% 3.1% 15.6% 62.6% 8.3% 66.6% 25.0% Asian CFOs: work-life balance 80% work - 20% life 70% work - 30% life 60% work - 40% life 50% work - 50% life 40% work - 60% life 3.7% 30.6% 51.5% 14.2% 0.0% 5.6% 4.0% 31.5% 51.6% 7.3% 38.9% 47.2% 13.9% 72.8% 27.2% Work-life balance surplus. Africans CFOs have better work-life balance as compared to Asia and Latin America

African CFOs as critical decision makers At your firm, for which decisions is the CFO one of the two or three most important decision- makers? Top CFO decisions The top three decisions where the CFO is critical are cash and liquidity policy, risk management and overall firm strategy. Industry perspective Decisions where the CFO is a top decision maker are consistent across industries and match the country representation.

Expected return on assets African CFOs have the highest expectation of ROA in 2018, also representing the largest expected growth in ROA. Nigeria is expecting to rebound from lower than global-average ROA in 2018