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

3. Real Economy

4. GDP

6. Fiscal Policy

7. State Finances

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

11. Monetary Policy

12. Interest rates

14. Inflation

16. Exchange rates Rand

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

18. Financial

19. Disposable income of households Source: SARB

20. Household debt to disposable income Source: SARB

21. Savings to disposable income of households Source: SARB

22. Debt Servicing Cost

23. Commodity Prices

25. Balance of Payments

28. 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

29. SA Business Cycle 44193551423382+1521(months)

30. SA Business Cycle 44193551423382+1521(months)

31. 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

32. Comparison 2003 -2005

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

34. Asset Allocation Reason Equities Demand/Rand/International BondsInflation/Supply CashShort Interest rates PropertyProperty Cycle – Heavy Overweight – Overweight – Neutral – Underweight – Heavy Underweight

35. 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 100100%

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