African Business Outlook Part of the Global Business Outlook A joint survey effort between Duke University, The South African Institute of Chartered Accountants and CFO magazine 1

CFO Global and African Business Outlook – Overview 2 African Business Outlook Duke University / SAICA / CFO Magazine June 2014 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 and the African Business Outlook SAICA joined the survey in 2013, helping to found the African Business Outlook. South African results are highlighted in the analysis, as are results from Nigeria and the rest of Africa, enabling SAICA and other survey partners to share key insights about the African economy with members of the Institute and others focusing on Africa. The analysis in this report will assist companies to make important business decisions as they can benchmark themselves against their global peers. The long run goal is to develop a large and steady set of responding African firms. Key Survey Facts  Survey Respondents: 65  Of which, 50 from South Africa, 6 from Nigeria and 9 from the rest of Africa  The small number of respondents may skew some results outside of South Africa  Sample includes CFOs from both public and private companies representing a broad range of industries  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 landscape of corporate finance.

Sentiment Regarding Domestic Economy 3 African Business Outlook Duke University / SAICA / CFO Magazine June 2014 When ranked on a 100 point scale, the African Optimism Index (for the economic prospects of the continent over the next year) decreased from 54.7 in Q to 50.2 in Q2 (South Africa: 49, Nigeria: 73, ROA: 42). Though not shown on this graph, Africa is the least optimistic region of the world. South African CFOs are slightly optimistic, Nigerian CFOs more optimistic, compared to last quarter Trends in South African Optimism CFOs are less optimistic about the domestic economy, continuing a downward trend  More than 60% S.A. CFOs reported being less optimistic about the domestic economy this quarter despite the recent election Sentiment towards domestic economy  Nigerian CFOs report being more optimistic about their domestic economy this quarter  Similar to South Africa, CFOs surveyed in the Rest of Africa are less optimistic about their domestic economies

4 African Business Outlook Duke University / SAICA / CFO Magazine June 2014 On average, African CFOs are more optimistic about their own companies, despite being less optimistic about the overall economy; optimism is especially high in Nigeria Own company optimism has decreased over the past year in South Africa  Although South African CFOs remain optimistic for their own companies on average, a pattern of decreasing optimism has emerged Own Company Sentiment Despite the relative positivity, when ranked on a 100 point scale, the Own-Company African Optimism Index (for the economic prospects over the next year of each CFO’s own company) dropped from 66.2 in Q to 61.5 in Q2 (South Africa: 62.2, Nigeria: 66.7, ROA: 55) All surveyed Nigerian CFOs have grown more optimistic about their company this quarter compared to last  Throughout the rest of Africa however, CFOs are less optimistic about their own companies then they were three months ago

African Business Optimism Compared to Rest of World 5 African Business Outlook Duke University / SAICA / CFO Magazine June 2014 African Business Optimism fell dramatically this quarter and is the lowest in the world. Although African CFOs are more optimistic about their own firms than they are about the continent overall, they are the second least optimistic in the world  Relative to end of 2013, own company optimism decreased in all regions except for the United States Over the past few quarters, African CFOs have become increasingly less optimistic about their domestic economies  Economic optimism in the USA and Asia increased, while optimism in Africa and Latin America has decreased over the last four quarters Business Optimism Index (by Continent)Own-Firm Business Optimism Index

Top 10 Corporate Concerns for African CFOs 6 African Business Outlook Duke University / SAICA / CFO Magazine June 2014 Across the continent, African CFOs are very concerned about Government Policies. South AfricaNigeriaRest of Africa 1) Government Policies1) Currency Risk1) Employee Morale/ Productivity 2) Economic Uncertainty2) Government Policies2) Government Policies 3) Currency Risk3) Cost of Borrowing3) Wages and Salaries 4) Regulatory Requirements4) Attracting and Retaining Employees4) Economic Uncertainty 5) Input or Commodity Costs5) Employee Morale/ Productivity5) Input or Commodity Costs 6) Wages and Salaries5) Input or Commodity Costs6) Attracting and Retaining Employees 6) Attracting and Retaining Employees7) Regulatory Requirements7) Currency Risk 8) Inflation7) Underlying Demand for Products7) Inflation 9) Underlying Demand for Products9) Access to Borrowing9) Underlying Demand for Products 10) Cost of Benefits10) Cost of Benefits10) Cost of Benefits Top 10 Corporate Concerns

Growth in Revenue, Earnings, Spending, Other Budget Items 7 African Business Outlook Duke University / SAICA / CFO Magazine June 2014 South African CFOs expect mild growth in earnings and big growth in capital spending, Nigerian companies expect strong growth, other African CFOs anticipate declining performance this year South African CFOs anticipate mild growth in dividends, R&D spending, and Marketing; down from last quarter’s predictions  Significant growth is expected in Revenues, Tech and Capital Spending;  Increases in Earnings are expected to be stronger compared to last quarter. Significant fluctuations in expectations outside of South Africa  Outside of Nigeria and South Africa, Revenue and Earnings are expected to decrease significantly  Nigerian CFOs expect dramatic increases in Revenue, Earnings and Tech spend while reporting little change in R&D, Capital Spending, Marketing

Over 50% of African CFOs Anticipate Labor Unrest Over the Next Year 8 African Business Outlook Duke University / SAICA / CFO Magazine June 2014 Very few Nigerian CFOs expect labor unrest to affect their countries’ economies over the next 12 months. In contrast, 90% of South African CFOs expect problems with labor unrest Labor unrest in Africa is mainly driven by problems in the general economy, wage pressure, and income inequality Though not shown on this page, 75% of Latin American firms expect labor unrest to hurt their economies, which is in the news due to the World Cup

Does Lack of Public Trust Affect African Firms? 9 African Business Outlook Duke University / SAICA / CFO Magazine June 2014 Around the world, the public has shown increasing mistrust of governments and businesses. Here we assess the effect of these findings on the company and on the business environment In Nigeria and South Africa, CFOs report a larger effect of mistrust on the business environment than on the individual company. In fact, 50% of CFOs surveyed in Nigeria state that there is no effect of mistrust on the individual company Most CFOs surveyed in other regions of Africa believe that public mistrust leads to a moderate to great effect on both their individual company and their business environment How do African companies react to public mistrust? 58.4% of CFOs surveyed say that public mistrust affects their company’s business decisions However, only 12.3% agree that this lack of public trust results in lower revenue 26.1% believe this negative perception can be countered through marketing and PR

Cash Holdings on the Balance Sheet 10 African Business Outlook Duke University / SAICA / CFO Magazine June 2014 South African companies tend to hold cash and marketable securities as a greater percentage of their total assets then their counterparts in other African countries On average, African companies hold about 15% of assets in the form of cash  All companies are holding less cash as a percentage of total assets than they did one year ago  Nigerian firms hold the least amount of cash and marketable securities outside of their home country, despite reporting currency risk as their most pressing concern

Deployment of Cash Reserves over Next Year 11 African Business Outlook Duke University / SAICA / CFO Magazine June 2014 More than half of the African companies anticipate deploying cash reserves over the next year. South African companies anticipate a high likelihood of deploying cash reserves compared to Nigeria over the next 12 months  More than 50% of South African CFOs surveyed believe that their firms will begin to deploy cash reserves over the next 12 months  Among Nigerian CFOs, 33% believe the same  CFOs from the rest of Africa anticipate the highest likelihood of deploying cash. Those who believe cash reserves will likely be deployed cite acquisitions and capital investments as top uses. The two most cited reasons for firms that are unlikely to deploy are: Lack excess cash to deploy Need for cash as liquidity buffer

Do African Firms Set a Target for Their Amount of Cash Reserves? 12 African Business Outlook Duke University / SAICA / CFO Magazine June 2014 Survey shows that most African firms do not have a pre-defined / strict target for the amount of cash and marketable securities to hold Of all the firms surveyed, only a few, specifically in Nigeria, have a strict cash target Though not shown in the graph, companies in other emerging markets (Asia, Latin America) are much more likely to set a cash target. For African firms that set some kind of cash target, most agree that they quickly alter their cash holdings to meet the target set if they fall below – but hardly modify cash holdings when drifting above the target

What is the Primary Purpose of Holding Cash? 13 African Business Outlook Duke University / SAICA / CFO Magazine June % of African companies say that they primarily hold cash as a means to facilitate everyday transactions and manage expenses, followed by using cash as a source of funding future investments.

Would More Severe Russian Sanctions Hurt African Businesses? 14 African Business Outlook Duke University / SAICA / CFO Magazine June % of surveyed African firms do business with Russia Of those who work with Russia, 60% of CFOs expect to see a negative impact if the US and Europe were to impose severe financial sanctions on Russia While none of the firms have yet reduced Russian-related business, they do indicate that they are evaluating a reduction.