The new Keynesian world and the MTBPS A presentation by Dawie Roodt

2 STEP 1: RE-FOCUS? Dawie Roodt 1/13/2016

What went wrong? The excuses: +Insufficient regulation +Greed +Speculators The truth: +Loose monetary policy +Political interference Dawie Roodt3 1/13/2016

Its all about your approach Dawie Roodt4 1/13/2016 Monetary ↑M3 → ↑Inflation → ↑Currency Price stability Keynesian Demand driven Gov intervention Currency stability Classical Let it be! Prices adj. to demand & supply

Fed Printing money Dawie Roodt5 1/13/2016 US Economy US Fed Buying Bonds / TB’s Fund $ Some economic activity Resource prices ↑ Emerging Markets

The driving forces 1.Euro under threat: ↓ Euro 2.Dollar under threat: ↓ $ 3.↑Renminbi 4.↑ Commodity Prices 5.Strong Rand (for now) Dawie Roodt6 1/13/2016

7 THE “NEW” ECONOMIC GROWTH PLAN Dawie Roodt 1/13/2016

The plans: Dawie Roodt8 1/13/2016 +HOP GEAR Asgisa The new Growth Plan ↓Poverty & ↓Unemployment = ↑ Economic Growth “ Apartheid ” Macro economic stability Harvard group

New growth plan targets Dawie Roodt9 1/13/2016 +Stringent Fiscal policy focused on savings +Smaller Current Account deficit +Lower interest rates +Competitive currency +Lower unemployment

Creating jobs according to NGP & MTBPS Dawie Roodt10 1/13/2016 +Labour market strengthening & skills development +Further help from development finance institutions for infrastructure development +IPAP2 +Improve competitiveness +Improve public service delivery & management

Will companies expand sufficiently? Dawie Roodt11 1/13/2016

Some limitations: Dawie Roodt12 1/13/2016 Barriers to entry Red tape FICA, FAIS, RICA, NCR etc. Tax registration Licences Labour Law Zim. example Access to capital High tax Forex control regulations Political uncertainty - Property rights Companies

Dawie Roodt13 WHAT ABOUT OUR CURRENCY? 1/13/2016

The Rand since 1977 Dawie Roodt14 1/13/2016 9/11 Financial crisis of ‘08 Source: I-net Bridge & Efficient Group forecast

The Rand & Relative PPP Dawie Roodt15 1/13/2016 Source: I-net Bridge & Efficient Group forecast using World bank PPP

The Rand & Relative PPP Dawie Roodt16 1/13/2016 Source: I-net Bridge & Efficient Group forecast using World bank PPP

The Rand & Relative PPP Dawie Roodt17 1/13/2016 Source: I-net Bridge & Efficient Group forecast using World bank PPP

The Rand & Relative PPP Dawie Roodt18 1/13/2016 Source: I-net Bridge & Efficient Group forecast using World bank PPP

The Rand & Absolute PPP Dawie Roodt19 1/13/2016 Source: I-net Bridge & Efficient Group forecast using World bank PPP

The Rand & Absolute PPP Dawie Roodt20 1/13/2016 R7.13 R5.03 Source: I-net Bridge & Efficient Group forecast using World bank PPP

The Rand & Absolute PPP Dawie Roodt21 1/13/2016 Source: I-net Bridge & Efficient Group forecast

The Rand & Portfolio inflows since 1985 Dawie Roodt22 1/13/2016 Large outflows → Weakening of the Rand Source: SARB

So…what can be done? Dawie Roodt23 1/13/2016 ↑ReservesEXPENSIVE!!

SA’s solution Dawie Roodt24 1/13/2016 SA Economy SARB Buying $$$ Rands TB’s & Debentures

So…what can be done? Dawie Roodt25 1/13/2016 ↑ReservesEXPENSIVE!! ↓ Interest rates What about inflation? Tobin Tax Shrug off investors Forex control regulations ↑ % possible

Another solution Dawie Roodt26 1/13/2016 SA Economy SARB Buying $$$ Rands Excess revenue & cash deposits Treasury SARB owes R135bn!!

27 STEP 2: RE-EVALUATE? Dawie Roodt 1/13/2016

Is the PIT burden shifting? YES! Dawie Roodt28 1/13/2016 Source: Tax statistics 2008/09, National Treasury & Efficient Group est. for 2010

Income distribution Dawie Roodt29 1/13/2016 SA’s Gini = 57.8 Cumulative share of income Cumulative share of population Source: SA Survey, Employment & income 2009 & Efficient Group graph, World HDI report 2009.

Income distribution Dawie Roodt30 1/13/2016 Source: World HDI report 2009.

Income distribution reloaded Dawie Roodt31 1/13/2016 Source: Efficient Reseach

Who pays and who receives? Dawie Roodt32 1/13/2016 Source: SA Survey 2008/09, Employment and Income & Efficient Group est.

How do we spend? Dawie Roodt33 1/13/2016 Social services = 44.2% Source: & Feb National Budgetwww.budget.gov

How do we compare? Dawie Roodt34 1/13/2016 Well done SA!

Is our state saving? Dawie Roodt35 1/13/2016 NO! Source: Feb National Budget – Consolidated budget data, Efficient Research calculation

How do we spend on capital? Dawie Roodt36 1/13/2016 FIFA PREP Source: SARB

37 STEP 3: RE-THINK? Dawie Roodt 1/13/2016

The main numbers… Dawie Roodt38 1/13/2016 Source: Feb Budget & Efficient Research

MTBPS summary Dawie Roodt39 1/13/2016 +Synergy between growth plan & budget +Better economic growth outlook +Better revenue & expenditure than budgeted +Reinforcing infrastructure & investment growth – R811bn over MTEF +Forex control reforms +Regulatory reforms +NHI

Will the NHI really work ? Dawie Roodt40 1/13/2016 Source: World Bank development indicators 2009

Will the NHI really work ? Dawie Roodt41 1/13/2016 Source: World Bank development indicators 2009 * Efficient Group estimates $164 p/c = R52Bn p/y

Is this really necessary? Dawie Roodt42 1/13/2016 Source: Efficient Research

Our problems… Dawie Roodt43 1/13/2016 +Unemployment +Poverty +Collusion +Greed +“Do more” +Too many cars

The solution Dawie Roodt44 1/13/2016 Economic growth Employment Poverty alleviation Better income redistribution Creating wealth

45 QUESTIONS? Dawie Roodt 1/13/2016

Contact us on This Report is confidential and for the information of clients only. Information and sources in this document are from sources believed to be reliable, but cannot be guaranteed due to the nature thereof. Information contained in the report should not be construed as financial advice. Professional financial advice should be sought before any course of action is pursued. Efficient Group (Pty) Ltd shall not be responsible and disclaims all liability for any loss, liability, damage (whether directly or consequential) or expense of any nature whatsoever which may be suffered as a result of or which may be attributable, directly or indirectly, to the use or of reliance upon any information contained in this report. The company, directors and staff may from time to time have interests in the shares mentioned in this report. Authorised Financial Services Provider FSP No: 859 Dawie Roodt46 1/13/2016