The Economic Environment and Investments Presented by: Dawie Roodt 13 July 2006

Real Economy

GDP

Fiscal Policy

State Finances

Results  Lower interest payments  More social expenditure  Better ratings  Strong demand

Monetary Policy

Interest rates

Inflation

Exchange rates Rand

Rand Valuation Gold $800 Rubicon Stock exchange crash ANC, Reds fall Election Exchange controls Asian crises Wakefordgate Rus, Zim, Arg Fin Rand NOFP + NOFP -

Financial

Disposable income of households Source: SARB

Household debt to disposable income Source: SARB

Savings to disposable income of households Source: SARB

Debt Servicing Cost

Commodity Prices

Balance of Payments

Results  Interest rates climbing  Inflation jumps slightly  Large current account deficit  Commodity prices – effect on businesses and inflation outlook  Currency exposed to global volatility  Alarming increase in PSCE  Stellar household debt/disposable income  Lack of ‘savings culture’ by households

SA Business Cycle (months)

SA Business Cycle (months)

SA Business Cycle  Longest upwards phase on record (Sept ’99 - ?)  Business cycle phases since 1945 (Post war):  Upward phases (15)  Duration in months: 441  Downward phases (14)  Duration in months: 285

Comparison

BondsEquityPropertyCashRand Expected Return      Risk  ?  Liquidity     Cost 

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 Quarrying3234%Mining, Platinum, Gold, Coal Finance, prop and bus. serv 3024% Banks, Insurance, Life Ass, Media & Pht, IT, Property, Support Serv Manufacturing 1214% Auto, Basic Ind, Beverages, Chem, Elect, IT Hard, Pharm & Bio, Steel & Other Personal Service 65% Cyc Serv, Health, Leisure Ent, Non-cyc Serv, Person Care Transport, storage and comm. 67% Telecomm, Transport Trade, hotels and restaurants 64% Cyc Cons, Food & Drug, Gen Retail, House Goods, Non-cyc Cons Electricity, gas and water 43% Oil & Gas Agri, Forestry and Fishing 31% Food Prod Construction 28% Const & Build %