Authorised Financial Services Provider – FSP No: 859

The South African Economy...in a Nutshell Presented by: Dawie Roodt 21 August 2008

Is SA the next Zimbabwe???

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

Countries Compared to Provinces Source: UN

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%

Source: StatsSA and own calculations CPIX Average: % Inflation

“Behind the Curve” Source: StatsSA and own calculations

International Monetary Policy Source: Efficient Research, Aug 2008

Super Cheap Money! Source: Efficient Research, Aug 2008

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% Q108: -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%

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%

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%0.1%

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

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

Where did the Money Go? Poverty Relief Education ; The ‘Skills Debate’

To Stay or Not to Stay...?? Source: Documented Migration Publication, StatsSA IMD World Competitiveness Yearbook 2007: “SA’s brain drain is one of the worst in the world”

To Stay or Not to Stay...?? UKAustraliaCanadaSouth Africa Average Destination of Emigrants (%) 33%15%3% Eco Indicators Real Eco Growth (GDP, 2007,Q3) 2.4%4.3%2.9%4.7% Inflation (CPI, avg. 2008)2.1%3.2%1.9%7.2% Currency p US$£0.51$1.14CAN$1.02R7.10 Marginal Tax Rate40%48.5%29%40% Socio Indicators Life Expectancy at birth Adult Literacy rate (>15yr,%) UN HDI Rank16 th – th – rd th – Murders p capita, rank ( ) 46 th – th – th – nd – 49.6 Sources: Economic Indicators, Economist. UN HDI 2007/2008, 7 th UN Survey of Crime Trends 1998 – % of owners of medium to large privately held businesses wants to emigrate 82% of those said the main reason is crime - Grant Thornton IBR 2008

Importing Skills – A realistic solution..? US (1 st ) UK (7 th ) Australia (6 th ) Canada (3 rd ) India (17 th ) China (26 th ) South Africa (30 th ) Source: “Mapping Global Talent” - Heidrick&Struggles and The Economist Intelligence Unit, 2007

Education Expenditure Comparison Source: Human Development Report, 2006 (undp.org) Average: 4.7 Equatorial Guinea Zimbabwe South Africa (’06 & ’07) Lesotho

The Reading Literacy of Fourth Grade Students Source: US Department of Education, PIRLS 2006 HighIntermediateLowNone Russian Federation(565) United States (540) Macedonia (442) South Africa (302) Morocco (323) Qatar (353)

Matric Pass Rate and Exemptions Source: Department of Education, Matric Results Press Release, 2007

Matric Results: Maths and Science 2007 Maths HG 6.9%; Science HG 7.6% Source: Department of Education, Matric Results Press Release, 2007

The Two Complimentary E ’s: E ducation and E mployment EducationUnemployment Grade % Grade % NTC 1 to NTC % Dipl./Cert with Grade % Degree/Higher3.1% Source: Labour Force Survey Sept 2007, StatsSA

Any Upside?

Earnings Forecast: All Share Index Actual EarningsModel EarningsForward P/EPotential Price Change* 2007Q Q Q Q Q Q Q Q Q Q Q Q *Keeping price fix as at end 2008Q2 Source: I-net, Efficient Research

Earnings Forecast: Resources Index Actual Earnings: Resi Model Earnings: Resi Forward P/EPotential Price Change* 2007Q Q Q Q Q Q Q Q Q Q Q Q *Keeping price fix as at end 2008Q2 Source: I-net, Efficient Research

Authourised Financial Services Provider – FSP No: 859