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

3. 4% of African area 23% of African GDP 22% of African Exports 20% of African Imports

4. Countries Compared to Provinces Source: UN

5. Is SA the next Zimbabwe???

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

7. 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

8. 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%

9. 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!

10. 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

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

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

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

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

15. Democratic Process POLOKWANE Destruction of Institutions in SA?

16. ZimBOBwean Economy: Breakdown

17. South African Economy: Breakdown Source: StatsSA, Q108

18. South Africa:

19. Economic Overview 200620072008 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%

20. Private Sector Credit Extension Source: SARB and own calculations

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

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

23. Economic Overview 200620072008 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%

24. Source: StatsSA and own calculations CPIX Average: 2008 11.6% Inflation

25. Producer Price Pressure Source: StatsSA and Efficient Research

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

27. Source: StatsSA and own calculations CPIX Average: 2008 11.6% Inflation

28. International Monetary Policy Source: Efficient Research, Aug 2008

29. Super Cheap Money! Source: Efficient Research, Aug 2008

30. Economic Overview 200620072008 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%

31. Economic Overview 200620072008 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%

32. Economic Overview 200620072008 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%

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

34. 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%

35. Fixed Capital Investment Source: SARB, 2008

36. 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

37. Economic Overview 200620072008 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%

38. Background Gold Deficit Surplus

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

40. Spending Priorities Social Spending

41. Social Grants Beneficiary Numbers Grant Type (‘000) 2003200620072008 (projected) % Change 2003-2008 Old Age Grant2,0222,1442,1952,22510% Disability Grant9531,3191,4221,40947.8% War Veterans Grant4322-50.0% Foster Care Grant138313400446223.2% Care Dependency Grant (disabled) 58949811089.7% Child Support2,6307,0457,8638,208212.1% Total5,80810,91811,99112,402106.5% Source: 2008 Budget 2007: 11,9m recipients 26.0% of SA population

42. Correlation? Excise Duties vs. Social Grants 1% Increase in Social Grants = 0.49% increase in Excise Duties R-squared = 0.966 (small sample) Source: 2007 Budget, SARB Quarterly Bulletin; Efficient Research

43. Redistribution Estimation: R1 in = R? out Rand In : Rand Out Ratio 199720032007 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

44. Aiming For Equality Source: Efficient Research

45. Aiming For Equality Source: Efficient Research

46. Aiming For Equality Source: Efficient Research

47. From those who give….more will be taken

48. Any Upside?

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

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

51. www.efgroup.co.za Authourised Financial Services Provider – FSP No: 859