The South African Economy – Are We Making Progress? Presented by: Dawie Roodt 3 September 2008

4% of African area 23% of African GDP 22% of African Exports 20% of African Imports

Countries Compared to Provinces Source: UN

Is SA the next Zimbabwe???

Zim - The Swartskaap.. Source: UN Human Development Report, April 2008 Down & Out?

Destruction of Institutions Democracy: New Leader Appointed Ecstatic! Change Economic Policy: More ‘democratic’ Take from the “Haves” (non-supporters) Give to the “Have-Nots” (supporters) Negative Impact on Investment Savings Confidence IGNORES Private Property Rights UNDERMINES Economy

Destruction of Institutions Democracy: New Leader Appointed Ecstatic! Change Economic Policy: More ‘democratic’ Take from the “Haves” (non-supporters) Give to the “Have-Nots” (supporters) Negative Impact on Investment Savings Confidence Media & Press: Report on Disapproval and Objections by Public BANS Freedom of Press Court & Legal System: Public tries to find Justice through legal system DESTROYS Independent Judiciary Start to Print Money Capital Dwindles…. DESTROYS Independence Central Bank IGNORES Private Property Rights UNDERMINES Economy Inflation: 11,200,000%

Destruction of Institutions Democracy: New Leader Appointed Ecstatic! Change Economic Policy: More ‘democratic’ Take from the “Haves” (non-supporters) Give to the “Have-Nots” (supporters) Negative Impact on Investment Savings Confidence Media & Press: Report on Disapproval and Objections by Public BANS Freedom of Press Court & Legal System: Public tries to find Justice through legal system DESTROYS Independent Judiciary Start to Print Money Capital Dwindles…. DESTROYS Independence Central Bank IGNORES Private Property Rights Voting System: Public tries to vote dictator out DESTROYS Democratic Process UNDERMINES Economy Democracy: Mugabe-Style 1 Man, 1 Vote, 1 Candidate!

Destruction of Institutions Democracy: New Leader Appointed Ecstatic! Change Economic Policy: More ‘democratic’ Take from the “Haves” (non-supporters) Give to the “Have-Nots” (supporters) Negative Impact on Investment Savings Confidence Media & Press: Report on Disapproval and Objections by Public BANS Freedom of Press Court & Legal System: Public tries to find Justice through legal system DESTROYS Independent Judiciary Start to Print Money Capital Dwindles…. DESTROYS Independence Central Bank IGNORES Private Property Rights Voting System: Public tries to vote dictator out DESTROYS Democratic Process UNDERMINES Economy

Destruction of Institutions in SA? Private Property Rights 2008: Land Expropriation Bill

Freedom of Press Destruction of Institutions in SA? “Mbeki received R30m”

Independent Judiciary Destruction of Institutions in SA? Zuma’s Mauritius Papers

Independence Central Bank Destruction of Institutions in SA? interest rate SARB Hikes 10 Times!

Democratic Process POLOKWANE Destruction of Institutions in SA?

ZimBOBwean Economy: Breakdown

South African Economy: Breakdown Source: StatsSA, Q108

South Africa:

Economic Overview M3 (average)23.1%23.7%20.7% PSCE (average)27.6%22.2%18.2% CPIX (average)4.6%6.5%11.6% Prime (end of year)12.5%14.5%15.5% Current Account: Nom-R111.0bn-R138.2bn-R164.0bn Current Account: GDP-6.4%-7.3%-7.2% R/$ (end of year)R7.04R6.84R7.80 GDP (full year)5.4%5.1%3.0% Budget Surplus/(Deficit): GDP (0.3%)0.7%0.3%

Private Sector Credit Extension Source: SARB and own calculations

Household debt to disposable income Source: SARB and own calculations 44.5% 50.2% 56.9% 59.4% Q108: 78.2%

Savings to disposable income of households Source: SARB and own calculations 9.2% 5.4% 2.6% 0.5%

Economic Overview M3 (average)23.1%23.7%20.7% PSCE (average)27.6%22.2%18.2% CPIX (average)4.6%6.5%11.6% Prime (end of year)12.5%14.5%15.5% Current Account: Nom-R111.0bn-R138.2bn-R164.0bn Current Account: GDP-6.4%-7.3%-7.2% R/$ (end of year)R7.04R6.84R7.80 GDP (full year)5.4%5.1%3.0% Budget Surplus/(Deficit): GDP (0.3%)0.7%0.3%

Source: StatsSA and own calculations CPIX Average: % Inflation

Producer Price Pressure Source: StatsSA and Efficient Research

Price Feeding Through… Source: StatsSA and Efficient Research 26.0% in Basket

Source: StatsSA and own calculations CPIX Average: % Inflation

International Monetary Policy Source: Efficient Research, Aug 2008

Super Cheap Money! Source: Efficient Research, Aug 2008

Economic Overview M3 (average)23.1%23.7%20.7% PSCE (average)27.6%22.2%18.2% CPIX (average)4.6%6.5%11.6% Prime (end of year)12.5%14.5%16.0% Current Account: Nom-R111.0bn-R138.2bn-R164.0bn Current Account: GDP-6.4%-7.3%-7.2% R/$ (end of year)R7.04R6.84R7.80 GDP (full year)5.4%5.1%3.0% Budget Surplus/(Deficit): GDP (0.3%)0.7%0.3%

Economic Overview M3 (average)23.1%23.7%20.7% PSCE (average)27.6%22.2%18.2% CPIX (average)4.6%6.5%11.6% Prime (end of year)12.5%14.5%16.0% Current Account: Nom-R111.0bn-R138.2bn-R164.0bn Current Account: GDP-6.4%-7.3%-7.2% R/$ (end of year)R7.04R6.84R7.80 GDP (full year)5.4%5.1%3.0% Budget Surplus/(Deficit): GDP (0.3%)0.7%0.3%

Economic Overview M3 (average)23.1%23.7%20.7% PSCE (average)27.6%22.2%18.2% CPIX (average)4.6%6.5%11.6% Prime (end of year)12.5%14.5%16.0% Current Account: Nom-R111.0bn-R138.2bn-R164.0bn Current Account: GDP-6.4%-7.3%-7.2% R/$ (end of year)R7.04R6.84R7.80 GDP (full year)5.4%5.1%3.0% Budget Surplus/(Deficit): GDP (0.3%)0.7%0.3%

GDP at Market Prices Source: StatsSA and own calculations Average: 3.0%

Breakdown of GDP Sectors 2007Q108Q208 Finance, Real Estate & Business Services 8.3%4.9%2.3% Manufacturing 3.9%-1.0%14.5% Wholesale, Retail & Hotels & Restaurants 5.0%3.6%-2.2% Mining & Quarrying -0.6%-22.1%15.6% Electricity, Gas & Water 3.2%-6.2%-1.3% Construction 18.1%14.9%10.6% Agriculture 0.3%12.5%19.6% Transport & Communication 5.2%3.5% Government Services 3.4%4.6%1.1% Personal Services 4.1%3.9%

Fixed Capital Investment Source: SARB, 2008

Eskom: R343bn (5 yrs) Transnet: R78bn (3 yrs) 80 New Capital Projects – R336.1bn (2008 to June) 50% higher than 2007’s total R224bn Government’s Infrastructure Spend Source: Budget Review 2008/09; Nedbank, 2008

Economic Overview M3 (average)23.1%23.7%20.7% PSCE (average)27.6%22.2%18.2% CPIX (average)4.6%6.5%11.6% Prime (end of year)12.5%14.5%16.0% Current Account: Nom-R111.0bn-R138.2bn-R164.0bn Current Account: GDP-6.4%-7.3%-7.2% R/$ (end of year)R7.04R6.84R7.80 GDP (full year)5.4%5.1%3.0% Budget Surplus/(Deficit): GDP (0.3%)0.7%0.1%

Background Gold Deficit Surplus

Theory versus Practice FISCAL SURPLUS e x pa n sio n ary

Spending Priorities Social Spending

Social Grants Beneficiary Numbers Grant Type (‘000) (projected) % Change Old Age Grant2,0222,1442,1952,22510% Disability Grant9531,3191,4221, % War Veterans Grant % Foster Care Grant % Care Dependency Grant (disabled) % Child Support2,6307,0457,8638, % Total5,80810,91811,99112, % Source: 2008 Budget 2007: 11,9m recipients 26.0% of SA population

Correlation? Excise Duties vs. Social Grants 1% Increase in Social Grants = 0.49% increase in Excise Duties R-squared = (small sample) Source: 2007 Budget, SARB Quarterly Bulletin; Efficient Research

Redistribution Estimation: R1 in = R? out Rand In : Rand Out Ratio Family 1* (R20k)R4.29R13.94 (225%)R15.62 (12%) Family 2 (R43k)R1.36R2.10 (54%)R3.22 (53%) Family 3 (R100k)R0.30R0.61 (100%)R0.87 (43%) Family 4 (R300k)R0.80R0.14 (87%)R0.21 (44%) Family 5 (R500k)R0.04R0.08 (81%)R0.11 (37%) Family 6 (R1mil)R0.02R0.03 (77%)R0.04 (24%) *Average family consists of 4 people, aggregates taken per capita Source: Efficient Research

Aiming For Equality Source: Efficient Research

Aiming For Equality Source: Efficient Research

Aiming For Equality Source: Efficient Research

From those who give….more will be taken

Any Upside?

Earnings Forecast: All Share Index Source: Inet, Efficient Research Actual, 2008Q3

Earnings Forecast: Resources Index Source: Inet, Efficient Research Actual, 2008Q3

Authourised Financial Services Provider – FSP No: 859