The SA Economy and Lessons from Africa Presented by: Dawie Roodt 30 October 2006

Real Economy

GDP

Relative size to GDP, 2006 Q2

Fiscal Policy

State Finances

Monetary Policy

Inflation

Inside The Economist’s Head  Constructing Econometric Models:  Economic theory  Obtaining the data  Statistical significance (Tests)  Long Term Trend  Short Term Trend  Construct model  Forecasting properties

Economic Theory  Theoretic Drivers of Inflation:  Fuel prices  Interest rates  Exchange rates  Private credit  Consumer spending  Cost of production

Efficient Inflation Model

MonthActualEfficient ModelDifference January February March April May June July August September

Interest rates

Capital Expenditure InstituteTime HorizonPlanned Capital Expenditure Sasol2006R20.0bn Eskom2011R97.0bn World Cup 2010: Gautrain Acsa Stadiums R20.0bn R3.0bn R5.0bn Transnet2009R32.7bn State (National Budget)2009R372.0bn

Economic Impact of the 2010 FIFA World Cup  Direct expenditure of R12,7 billion;  Contribute R21,3 billion to the GDP of South Africa;  Generate the equivalent of annual jobs  Additional R7,2 billion will be paid to Government in taxes. Source: Gauteng Tourism Authority

Debt Levels

Credit Extension

Household debt to disposable income Source: SARB

Savings to disposable income of households Source: SARB

Balance of Payments

Trade: Imports and Exports per origin, 2005

A comparison Retail Trade Sector

Percentage of World GDP ‘04 Source: UNAIDS

4% of African area 23% of African GDP 21.2% of African Exports

GDP Source: UN

Countries Compared to Provinces Source: UN

AIDS Source: UNAIDS

Mistakes made in Africa  Private Property Rights  Regulated Prices  Idolise Leaders  Marketing Boards  Nepotism  Incompetence  Corruption  Poor Fiscal Discipline  Poor Monetary Policy  Unrealistic Projects ??????????

The Zim disaster

Development Data & Statistics 2004WorldSouth AfricaZimbabwe GDP (current US$, bn) GNI per capita (current US$) Life expectancy (years) Population, total (millions) Population growth (annual %) Surface area (000, sq km) Source: World Bank

Zimbabwe: GDP Source: IMF

Zimbabwe: GDP Source: IMF

Zimbabwe: Inflation Source: IMF

Zimbabwe GDP, Current Prices, Zim$ 2000 Zim$361.4 bn 2005 Zim$75,421.1 bn +20,798.0%

Zimbabwe GDP, Current Prices, US$ 2000 $8.1bn 2005 $4.5bn Source: IMF -44.0%

Commodity Analysis

Changes in Energy Sources

Largest Populations Source The economist Pocket word in figures , Mil2004, Mil2050, Mil 1. China5501. China India India3582. India China USA1583. USA2973. USA Russia1034. Indonesia2234. Pakistan Japan845. Brazil1815. Indonesia285

Biggest Economies, $bn PPP Source The economist Pocket word in figures USA China Japan India Germany2 336

Energy Use, million tons oil equivalent USA China Russia639 4.India553 5.Japan * 1.India China USA Russia443 5.Japan436 *Assuming China and India use same energy per capita as the USA currently, remainder constant per capita use Source The economist Pocket word in figures 2007

Some Commodity Facts: Top producers Gold (tonnes) 1.South Africa Australia USA258.0 Platinum (tonnes) 1.South Africa154 2.Russia26 3.North America10 Palladium (tonnes) 1.Russia127 2.South Africa78 3.North America23 Source The economist Pocket word in figures 2007

Some Commodity Facts: Coal Top Producers 1.China USA Australia India South Africa Russia Indonesia Poland69.8 Top Consumers 1.China USA India Japan Russia South Africa Germany Poland57.7 Source The economist Pocket word in figures 2007

Some Commodity Facts: Aluminum Top Producers 1.China Russia Canada USA Australia Brazil Norway South Africa864 Top Consumers 1.China USA Japan Germany South Korea Russia Italy987 8.India861 Source The economist Pocket word in figures 2007

Asset Allocation

Reason Equities Demand/Rand/International BondsInflation/Supply CashShort Interest rates PropertyProperty Cycle – Heavy Overweight – Overweight – Neutral – Underweight – Heavy Underweight

Local Equities, 2006 Economic Sector MCEAAJSE Sector Mining and Quarrying32%33%Mining, Platinum, Gold, Coal Finance, prop and bus. serv30%25% Banks, Insurance, Life Ass, Media & Pht, IT, Property, Support Serv Manufacturing12%16% Auto, Basic Ind, Beverages, Chem, Elect, IT Hard, Pharm & Bio, Steel & Other Personal Service6%5% Cyc Serv, Health, Leisure Ent, Non-cyc Serv, Person Care Transport, storage and comm.6%7%Telecomm, Transport Trade, hotels and restaurants6%4% Cyc Cons, Food & Drug, Gen Retail, House Goods, Non-cyc Cons Electricity, gas and water4%3%Oil & Gas Agri, Forestry and Fishing3%1%Food Prod Construction2%6%Const & Build 100%