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: 47 Of which, 17 from Nigeria, 27 from South Africa, and 3 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 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 March 2018 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 spiked significantly this quarter, leading optimism in Africa. Nigerian CFOs are less optimistic about their domestic economy relative to the rest of Africa. South Africa Optimism Trend Optimism about the South African economy has significantly improved 89% of South African CFOs are “more optimistic” this quarter, coinciding with Jacob Zuma’s resignation Nigerian Optimism Nigerian optimism increases Optimism about the economy has declined in Nigeria, with 70% of surveyed CFOs from Nigeria being “more optimistic”, smaller than last quarter 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, while Nigeran CFO Optimism declined South African Own-Company Optimism CFOs are more optimistic about their own companies than the general economy South African CFOs became more optimistic about their own companies compared to last quarter, from 48% to 59% Fewer South African CFOs became more pessimistic (15%) about their companies compared to last quarter (41%) Nigerian Own-Company Optimism Compared to last quarter, Nigerian CFOs have become less optimistic 81% of surveyed Nigerian CFOs are more optimistic about their own companies’ prospects this quarter, compared to 100% last quarter Nigerian CFOs are still more optimistic about their companies than about the economy

What Keeps CFOs Awake at Night? (Most Pressing Concerns of CFOs) CFOs in South Africa and Nigeria feel that Government Policies, Economic Uncertainty, and Volatility of Political Situation are pressing concerns. South Africa Nigeria Economic uncertainty Government policies Volatility of political situation Currency risk Regulatory requirements Access to capital Corruption and white collar crime Difficulty attracting /retaining qualified employees Commodity prices Employee productivity Cost of borrowing Inflation Ranking – from most pressing to least pressing

Most pressing concerns for African countries Nigerian CFOs rank Government policies and economic uncertainty as the top 2 most pressing concerns for their team, while South African CFOs rank volatility of political situation and economic uncertainty as their most pressing concerns.

Expected Product Price Inflation Africa inflationary expectations stayed relatively flat, compared to Asia, Europe and Latin America that have risen significantly Sep 2017 Outlook Global Trends March 2018 Outlook Product Prices Product Prices Inflationary expectations highest in Asia African CFOs expect 4% product price inflation CFOs in Europe expect the lowest inflation Inflation expectations lowest in Nigeria Nigeria has lower inflationary expectations (0%) compared to South Africa (5%) Notes: Presented data are the mean or median values for each region or country.

Expected Growth in Sales Revenue Overall, CFOs in Africa expect a smaller increase in revenue over the next year. Sep 2017 Outlook Global Trends March 2018 Outlook Revenue Revenue African outlook dims as CFOs expect lower sales revenue this quarter LatAm Revenue expectations increase from last quarter Asian revenue growth expectations also increase 4% to 6% revenue growth expected in Africa South Africa revenue expectations stayed flat compared to last quarter Nigerian CFOs expect similar revenue performance as South Africa and other CFOs on the continent Notes: Presented data are the mean or median values for each region or country.

Capital Spending Plans African capital spending expectation increases, after two quarters of continued decline Sep 2017 Outlook Global Trends March 2018 Outlook Capital Spending Capital Spending Capital spending plans rebound to moderate Latin American CFOs expect slow spending growth Business spending is ramping up in Europe, growing strong in US Business spending varies within Africa South African CFOs do not expect much growth in spending, likely a result of a weak underlying economy Notes: Presented data are the mean or median values for each region or country.

Expected Change in Earnings Earnings are expected to decline in Africa, driven by expectations of decline in South Africa. Sep 2017 Outlook Global Trends March 2018 Outlook Earnings Earnings Earnings expected to increase Asia continues to have the lowest earnings expectations for 2018 LatAm expects the highest earnings growth, rebounding from very low levels Earnings growth expected in Africa South Africa expectations lower to an increase of 5% in earnings this quarter compared to 10% last quarter Outlook of Nigerian CFOs stays the same as last quarter, at 15% growth in expected earnings Notes: Presented data are the mean or median values for each region or country.

Fulltime Employment Outlook African CFOs expect growth in domestic employment over the next year. Sep 2017 Outlook Global Trends March 2018 Outlook # FT Employees # FT Employees Weak employment outlook in Europe Asia, Africa and Latam CFOs expect rising employment growth in 2018. Employment growth stays strong in the US Employment growth is expected to continue in Africa South Africa CFOs expect an 8% increase in the number of fulltime employees Expected increase in fulltime employees in Nigeria is nearly 10%, boosting expectation for Africa 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 6% over the next year, from 8% expectation last quarter. Sep 2017 Outlook Global Trends March 2018 Outlook Wages & Salaries Wages & Salaries Wage growth expectations vary across regions Africa expects wages to grow 6.6% in 2018, which is the highest among all regions Europe expects the lowest wage growth Wage growth in Africa is positive All participating African countries expect substantial wage growth, with Nigeria leading the trend Expectations however are lower in both countries compared to last year Notes: Presented data are the mean or median values for each region or country.

Fintech/Blockchain Do you have a good understanding of the following technologies? % answering “I understand this technology well / I have a professional understanding”

Fintech/Blockchain Do you have a good understanding of the following technologies? % answering “I understand this technology well / I have a professional understanding”

Fintech/Blockchain Which of the following innovations will affect your company and its operations in the next 5 years?

Fintech/Blockchain Which of the following innovations will affect your company and its operations in the next 5 years?

Fintech/Blockchain Impact on Labor Outcome Do you anticipate that your company will reduce the number of employees in the finance function because of innovations in financial technology?

Attractive After-tax Returns on US Investment The U.S. reduced its corporate income tax rate from 35% to 21%. Does the reduced U.S. tax rate make it more or less attractive for your company to do business in the U.S.?

Corruption as a Risk Factor How big a risk factor is business corruption (fraud, bribery, other ethical violations) in the country where you are located?

Major Effect of Corruption To the extent that corruption exists, what would you say are its major effects?

Return on Assets (ROA) Profit growth Africa is strong March 2017: Argentina too high: 21.1 & 23.3 Profit margins are expected to increase in all regions CFOs in Africa expect profits to grow as measured by ROA