1

22

2006/07 Budget Review:2006/07 Budget Review:

Presented by: Dawie RoodtPresented by: Dawie Roodt

16 February 200616 February 2006

A Missed OpportunityA Missed Opportunity

33

Dawie RoodtDawie RoodtChief EconomistChief Economist

Efficient GroupEfficient Group81 Dely Road81 Dely RoadHazelwoodHazelwood

00810081

Tel: (012) 460-9580Tel: (012) 460-9580Cell: 082 456 0204Cell: 082 456 0204

Email: dawie@efgroup.co.zaEmail: dawie@efgroup.co.za

44

ContentsContents

Some BackgroundSome Background Some Fiscal BackgroundSome Fiscal Background Review of 2005/06Review of 2005/06 Fiscal 2006/07 – The Main IssuesFiscal 2006/07 – The Main Issues Asset AllocationAsset Allocation

55

Some Background…Some Background…

66

Economic OverviewEconomic Overview

20062006 EfficientEfficient BudgetBudget

Prime (full year)Prime (full year) 10.0%10.0%

M3 (end of year)M3 (end of year) 12.8%12.8%

PSCE (adj. end of year) PSCE (adj. end of year) 17.2%17.2%

CPIX (average)CPIX (average) 4.5%4.5% 4.5%4.5%

Current Account: GDPCurrent Account: GDP - 4.4%- 4.4% -4.3%-4.3%

R/$ (end of year)R/$ (end of year) 6.396.39 6.276.27

GDP (full year)GDP (full year) 4.6%4.6% 4.9%4.9%

77

Political OverviewPolitical OverviewPresident President

Challenges:Challenges: PovertyPoverty UnderdevelopmentUnderdevelopment Marginalization – emphasis on Marginalization – emphasis on

authoritiesauthorities

88

Political OverviewPolitical Overview

ASGISA ASGISA Sectors identified:Sectors identified:

- Business Process Outsourcing- Business Process Outsourcing- Tourism- Tourism- Chemicals- Chemicals- Bio-fuels- Bio-fuels- Metals and metallurgy- Metals and metallurgy- Wood, pulp and paper- Wood, pulp and paper- Agriculture- Agriculture- Creative industries- Creative industries- Clothing and textiles- Clothing and textiles

Particular attentionParticular attention: : - Scarce skills- Scarce skills- Supply side drivers- Supply side drivers- Authorities- Authorities

99

Some Fiscal Background…Some Fiscal Background…

1010

BackgroundBackground

Revenue & Expenditure:GDP

20

21

22

23

24

25

26

27

28

29

30

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

%

Gold

Trevor’s reign!

Zero?

1111

BackgroundBackground

Deficit:GDP

-8

-7

-6

-5

-4

-3

-2

-1

0

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

%

GoldZero?

1212

BackgroundBackground

State Debt:GDP

27

30

33

36

39

42

45

48

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

%

Good/Stable

Debt Trap Recovery

1313

2005/06 in Review…2005/06 in Review…

1414

2005/06 in Review:2005/06 in Review:RevenueRevenue

R bnR bn Budget Budget ’05’05

Budget Budget ’06’06 ExpectedExpected Diff. Diff. (%)(%)

Income TaxIncome Tax 201.0201.0 228.7228.7 234.6234.6 33.6 33.6 (16.7%)(16.7%)

IndividualIndividual 116.9116.9 125.8125.8 127.4127.4 10.5 10.5 (9.0%)(9.0%)

CompanyCompany 68.768.7 84.984.9 90.090.0 21.3 21.3 (31.0%)(31.0%)

STCSTC 8.78.7 11.911.9 11.911.9 3.2 3.2 (36.8%)(36.8%)

OtherOther 6.76.7 6.26.2 5.35.3 -1.4 -1.4 (-20.9%)(-20.9%)

VATVAT 106.0106.0 115.0115.0 113.0113.0 7.0 7.0 (6.6%)(6.6%)

Excise DutyExcise Duty 14.514.5 14.614.6 14.214.2 -0.3 -0.3 (-2.1%)(-2.1%)

Fuel LevyFuel Levy 20.720.7 20.720.7 20.220.2 -0.5 -0.5 (-2.4%)(-2.4%)

OtherOther 27.927.9 32.132.1 32.032.0 4.1 4.1 (14.7%)(14.7%)

TotalTotal 370.1370.1 411.1411.1 414.0414.0 43.9 43.9 (11.9%)(11.9%)

1515

Revenue Sources (1994)

39%

13% 26%

5%

8%

9%

Individual Tax

Company Tax

VAT

Excise Duties

Fuel Levy

Other

Contribution to FiscusContribution to Fiscus

Revenue Sources (Est.)

32%

21%28%

4%

5%

10%

Individual Tax

Company Tax

VAT

Excise Duties

Fuel Levy

Other

1616

RevenueRevenueWhat happened to the What happened to the

“surplus”“surplus” R44bnR44bn

SARB R36bn – long term depositSARB R36bn – long term deposit FundingFunding

1717

2005/06 in Review:2005/06 in Review:ExpenditureExpenditure

R bnR bn Budget Budget ’05’05

Budget Budget ’06’06

ExpecteExpectedd

Diff. Diff. (%)(%)

Voted AmountsVoted Amounts 223.9223.9 226.3226.3 225.9225.9 2.02.0 (0.9%) (0.9%)

Central Gov.Central Gov. 27.627.6 24.424.4 27.727.7 0.10.1 (0.4%) (0.4%)

Fin. & Admin.Fin. & Admin. 15.315.3 17.917.9 15.315.3 0.00.0 (0.0%) (0.0%)

Social ServicesSocial Services 81.481.4 81.181.1 87.687.6 6.26.2 (7.6%) (7.6%)

Justice & Justice & Protect.Protect. 65.265.2 68.268.2 63.163.1 -2.1-2.1 (-3.2%) (-3.2%)

Eco. & Eco. & Infrastruc.Infrastruc. 31.831.8 34.734.7 32.232.2 0.40.4 (1.3%) (1.3%)

State Debt CostState Debt Cost 53.153.1 51.251.2 50.650.6 -2.5-2.5 (-4.7%) (-4.7%)

Transfer Transfer ProvincesProvinces 134.7134.7 135.3135.3 134.7134.7 0.00.0 (0.0%) (0.0%)

OtherOther 6.16.1 6.26.2 6.06.0 -0.1-0.1 (-1.6%) (-1.6%)

TotalTotal 417.8417.8 419.0419.0 417.2417.2 -0.6-0.6 (-0.1%) (-0.1%)

1818

Spending PrioritiesSpending Priorities

Expenditure: Functional Classification (1994)

7%

17%

14%

17%2%

21%

8%

4%

10%

43%

Central Gov

Justice and Prot.

Eco. & Infra.

State Debt Cost

Other

Education

Social Dev.

Other Social Serv.

Health

Expenditure: Functional Classification (Est.)

6%

16%

13%

12%1%

19%

17%

5%

11%

52%

Central Gov

Justice and Prot.

Eco. & Infra.

State Debt Cost

Other

Education

Social Dev.

Other Social Serv.

Health

1919

2005/06 in Review:2005/06 in Review:FundingFunding

R bnR bn Budget Budget ’05’05

Budget Budget ’06’06

ExpecteExpectedd

Diff.Diff.

ExtraordinaryExtraordinary -5.5-5.5 -2.4-2.4 -2.6-2.6 2.92.9

TB’sTB’s 5.05.0 5.95.9 5.25.2 0.20.2

BondsBonds 25.825.8 23.323.3 22.622.6 -3.4-3.4

Foreign LoansForeign Loans 12.012.0 0.70.7 0.50.5 -11.5-11.5

Use of balancesUse of balances 10.610.6 -19.6-19.6 -22.5-22.5 -33.1-33.1

Total FundingTotal Funding 48.048.0 7.97.9 3.23.2 -44.8-44.8

2020

Summary 2005/06Summary 2005/06

R bnR bn Budget Budget ’05’05

Budget Budget ‘06‘06

ExpecteExpectedd

Diff.Diff.

RevenueRevenue 370.3370.3 411.1411.1 414.0414.0 43.743.7

ExpenditureExpenditure 418.3418.3 419.0419.0 417.2417.2 -1.1-1.1

Deficit/SurplusDeficit/Surplus 48.048.0 -7.9-7.9 -3.2-3.2 -44.8-44.8

% of GDP% of GDP 3.0%3.0% 0.5%0.5% -0.3%-0.3%

2121

Expansion vs. ContractionExpansion vs. Contraction

Deficit:Deficit: Changes in deficit – Contr.Changes in deficit – Contr. Level – Contr.Level – Contr.

DebtDebt Changes in Debt – Contr.Changes in Debt – Contr. Level – Contr.Level – Contr.

Mix of expenditure and revenue – Very Exp.Mix of expenditure and revenue – Very Exp.

2222

FISCAL FISCAL 2006/07…2006/07…

2323

TAXESTAXES

2424

Current Effective Tax RatesCurrent Effective Tax Rates

Effective Tax

0

5

10

15

20

25

30

35

40

0 250 500 750 1,000 1,250 1,500 1,750 2,000

'000

%

Individuals Small Companies Large Companies

STC

2525

RedistributionRedistributionRand Rand InIn : Rand Out Ratio : Rand Out Ratio 2005/062005/06

32 22232 222 18.4018.40

74 00074 000 3.543.54

115 000115 000 1.451.45

155 000155 000 0.730.73

195 000195 000 0.490.49

270 000270 000 0.290.29

1 000 0001 000 000 0.050.05

2626

Fiscal Redistribution Fiscal Redistribution 2005/062005/06

Redistribution Graph (% Income)

0

20

40

60

80

100

120

140

1000 R32 222 R74 000 R115 000 R155 000 R195 000 R270 000 R1 000 000

%%

0

20

40

60

80

100

120

140

2727

Low SavingLow Saving

Personal saving rate decline when tax burden Personal saving rate decline when tax burden increase increase

Tax cuts accrued to those with least capacity to Tax cuts accrued to those with least capacity to savesave

2828

Trevor’s Gift ParcelTrevor’s Gift Parcel

ONLYONLY R 19.1 bn!R 19.1 bn!

2929

The Good , the Bad, and the The Good , the Bad, and the Terrible Terrible

GoodGood BadBad TerribleTerribleRSC - R7bn cutRSC - R7bn cutSMME tax reliefSMME tax reliefRetirement tax Retirement tax relief - 9%relief - 9%Transfer duties – Transfer duties – R500 000R500 000Tax amnestyTax amnestyTraining Training allowance and allowance and R&DR&D

Personal tax – Personal tax – R13.5bnR13.5bnCompany taxCompany taxRAFRAF

STCSTCSASOLSASOL

3030

Changes to TaxesChanges to TaxesTAXTAX ChangeChange (R bn) (R bn)

Companies & Companies & STCSTC

Exemption R40k, Middle bracket up to Exemption R40k, Middle bracket up to R300k Top rate down to 28% R300k Top rate down to 28% (29%)(29%)

-3.3/-3.3/-0.4-0.4

Personal Personal Income TaxIncome Tax

Increase Brackets (Lowest bracket R10k Increase Brackets (Lowest bracket R10k R20kR20k, Middle brackets R20k , Middle brackets R20k R40kR40k, Top , Top

brackets R30k brackets R30k R100kR100k) Reduce all (except ) Reduce all (except first bracket) by 1% first bracket) by 1% no changeno change Increase Increase

Rebate by R900 Rebate by R900

-18.5/-18.5/-12.1-12.1

Excise DutiesExcise Duties +10%+10% 1.0/1.0/1.41.4

Fuel Levy/RAFFuel Levy/RAF +5c/l each +5c/l each Only RAFOnly RAF 1.0/1.0/0.00.0

VATVAT UnchangedUnchanged 0.0/0.0/--0.10.1

OtherOther -10.2/-10.2/-7.9-7.9

TOTALTOTAL -30.0/-30.0/-19.1-19.1

3131

Tax TableTax TableEfficient 2006/07Efficient 2006/07 Budget 2006/07Budget 2006/07

Taxable Inc (R) Taxable Inc (R) Rates of TaxRates of Tax Taxable Inc (R) Taxable Inc (R) Rates of TaxRates of Tax

0 – 90 0000 – 90 000 18%18% 0 – 100 0000 – 100 000 18%18%

90 001 – 150 90 001 – 150 000000

R16 200 + R16 200 + 24%24%

100 001 – 160 100 001 – 160 000000

R18 000 + R18 000 + 25%25%

150 001 – 200 150 001 – 200 000000

R30 600 + R30 600 + 29%29%

160 001 – 220 160 001 – 220 000000

R33 000 + R33 000 + 30%30%

200 001 – 270 200 001 – 270 000000

R45 100 + R45 100 + 34%34%

220 001 – 300 220 001 – 300 000000

R51 000 + R51 000 + 35%35%

270 001 – 330 270 001 – 330 000000

R65 500 + R65 500 + 37%37%

300 001 – 400 300 001 – 400 000000

R79 000 + R79 000 + 38%38%

330 001 – 330 001 – R91 400 + R91 400 + 39%39%

400 001 –400 001 – R117 000 + R117 000 + 40%40%

RebatesRebates RebatesRebates

PrimaryPrimary 7 2007 200 PrimaryPrimary 7 2007 200

Tax Threshold Tax Threshold Tax Threshold Tax Threshold

Below 65Below 65 40 00040 000 Below 65Below 65 40 00040 000

3232

Effects of Tax ChangesEffects of Tax Changes

IncomeIncome Budget Budget TaxTax

Efficient Efficient TaxTax

Benefit Benefit (% (% Inc.)Inc.)

BenefitBenefit (% (% Inc)Inc)

35 00035 000 00 00 0 0 (0.0%)(0.0%) 0 0 (0.0%)(0.0%)

50 00050 000 1 8001 800 1 8001 800 900 900 (1.8%)(1.8%) 900 900 (1.8%)(1.8%)

75 00075 000 7 2007 200 6 3006 300 900 900 (1.2%)(1.2%) 900 900 (1.2%)(1.2%)

100 000100 000 10 80010 800 11 40011 400 1 700 1 700 (1.7%)(1.7%) 2 300 2 300 (2.3%)(2.3%)

175 000175 000 30 30030 300 30 65030 650 3 450 3 450 (2.0%)(2.0%) 3 100 3 100 (1.8%)(1.8%)

225 000225 000 45 55045 550 46 40046 400 4 950 4 950 (2.2%)(2.2%) 4 100 4 100 (1.8%)(1.8%)

300 000300 000 71 80071 800 72 80072 800 6 900 6 900 (2.3%)(2.3%) 7 900 7 900 (2.6%)(2.6%)

500 000500 000 149 800149 800 150 200150 200 9 500 9 500 (1.9%)(1.9%) 9 900 9 900 (2.0%)(2.0%)

1 000 1 000 000000

349 800349 800 345 200345 200 14 500 14 500 (1.5%)(1.5%) 9 900 9 900 (1.0%)(1.0%)

3333

New Effective Tax RatesNew Effective Tax Rates

Effective Tax

0

5

10

15

20

25

30

35

40

0 250 500 750 1,000 1,250 1,500 1,750 2,000

'000

%

Individuals Small Companies Large Companies

STC

3434

RedistributionRedistributionRand Rand InIn : Rand Out Ratio : Rand Out Ratio 2006/072006/07

32 22232 222 17.8617.86

74 00074 000 3.553.55

115 000115 000 1.471.47

155 000155 000 0.750.75

195 000195 000 0.510.51

270 000270 000 0.300.30

1 000 0001 000 000 0.050.05

3535

Tax Redistribution 2006/07Tax Redistribution 2006/07

Redistribution Graph (% Income)

0

20

40

60

80

100

120

140

1000 R32 222 R74 000 R115 000 R155 000 R195 000 R270 000 R1 000 000

%%

0

20

40

60

80

100

120

140

3636

IndividualsIndividuals

3737

AllowancesAllowances

Travel allowances tightened Travel allowances tightened YesYes

Home office expenditures deductible? Home office expenditures deductible? NoNo

3838

Medical Medical

Help poor and nail richHelp poor and nail rich First two members R500, thereafter R300 First two members R500, thereafter R300 NoNo Health department proposal (4,5% payroll tax) Health department proposal (4,5% payroll tax) NoNo

- unlikely- unlikely Additional Medical Expenditures: Additional Medical Expenditures: YesYes

Younger than 65: expenditures in excess of 5% of Younger than 65: expenditures in excess of 5% of taxable income still deductible. Definition to exclude taxable income still deductible. Definition to exclude medical scheme contributions. 5% possibly increased to medical scheme contributions. 5% possibly increased to 7.5% including medical contributions7.5% including medical contributions

3939

CompaniesCompanies

4040

Corporate Tax Corporate Tax

Effective corporate tax rate (37.9%)Effective corporate tax rate (37.9%) 7.8% higher than global average7.8% higher than global average

STC : Perhaps – 10% STC : Perhaps – 10% NoNo- Lets hope 5%?- Lets hope 5%?

Corp. tax down - 28% Corp. tax down - 28% NoNo- Lets hope more!- Lets hope more!

Group taxes Group taxes NoNo

4141

Small BusinessesSmall Businesses

Currently complete 12 tax returnsCurrently complete 12 tax returns Increase turnover limit (R6mil. - last year) Increase turnover limit (R6mil. - last year) R14mil.R14mil. Increase payroll limit (last year R500k) Increase payroll limit (last year R500k) NoNo Increase tax threshold to R40k (R35k) Increase tax threshold to R40k (R35k) YesYes

4242

RSCRSC

Replaced by:Replaced by: VAT on property VAT on property NoNo Regional company tax Regional company tax NoNo Company licensing tariff Company licensing tariff NoNo Grant to municipalities Grant to municipalities YesYes Part of fuel levy Part of fuel levy NoNo Electricity levy Electricity levy NoNo Royalties to municipalities Royalties to municipalities NoNo

4343

Retirement IndustryRetirement Industry

Currently 18% on rent and interestCurrently 18% on rent and interest Cut to 15%?Cut to 15%? Perhaps 10%?Perhaps 10%?

9%9%

4444

VATVAT

4545

VATVAT

Certain state organizations no longer need to be Certain state organizations no longer need to be registered registered YesYes

More goods exempted – unlikely More goods exempted – unlikely NoNo Farmers with turnover of R1m - VAT returns Farmers with turnover of R1m - VAT returns

every six months - up to R5m? every six months - up to R5m? Yes R1.2mYes R1.2m

4646

GeneralGeneral

4747

TaxesTaxes

4848

Wet Blankets:Wet Blankets:Taxes Long UnchangedTaxes Long Unchanged

CGT:CGT: Exemption primary residence R1m, since 2001Exemption primary residence R1m, since 2001 Average price of medium house R2.2m in 2005Average price of medium house R2.2m in 2005 Up exemption to R2m? Up exemption to R2m? R1.5mR1.5m

Retirement Funds:Retirement Funds: Yearly deduction for pension fund and retirement Yearly deduction for pension fund and retirement

annuity, since 1980 on R1 750 per annum annuity, since 1980 on R1 750 per annum NoNo Single amount exemption on retirement annuity, Single amount exemption on retirement annuity,

provisional and-pension funds almost 20 years provisional and-pension funds almost 20 years fixed on R120 000 fixed on R120 000 NoNo

Single amount retirement gratification of the Single amount retirement gratification of the employer last changed in 1984, equals R30 000 employer last changed in 1984, equals R30 000 NoNo

Transfer duties:Transfer duties: Up limit to R210k (now R180k)Up limit to R210k (now R180k) R500k 0% R500k 0%

4949

Minor Revenue Sources, R Minor Revenue Sources, R bnbn

Tax on retirementTax on retirement 2.22.2 2.42.4

STCSTC 13.913.9 13.913.9

Transfer DutiesTransfer Duties 6.06.0 6.26.2

Other Property TaxesOther Property Taxes 2.62.6 2.62.6

Other Taxes on GoodsOther Taxes on Goods 0.70.7 0.90.9

Other Taxes on Int. TransactionsOther Taxes on Int. Transactions 0.30.3 0.40.4

Stamp DutiesStamp Duties 0.90.9 1.01.0

Non-Tax RevenueNon-Tax Revenue 8.48.4 8.68.6

Other (Nine small fry)Other (Nine small fry) 7.67.6 7.57.5

TotalTotal 42.642.6 43.543.5

5050

ExpenditureExpenditure

5151

The Good , the Bad, and the The Good , the Bad, and the Dangerous Dangerous

GoodGood BadBad DangerousDangerousWorld Cup – World Cup – R3bnR3bnPolice – R5.4bn Police – R5.4bn Municipal infra. – Municipal infra. – R9.3bnR9.3bnMunicipal Grant Municipal Grant –RSC – R24bn–RSC – R24bnNational National road/rail – R3.5bnroad/rail – R3.5bnGautrain –Gautrain –R7.1bnR7.1bn

Social sector Social sector employment employment program – R4bnprogram – R4bnRAF – extra RAF – extra R2.7bnR2.7bn

Denel R2bnDenel R2bnChild support Child support grants & grants & Disability grantsDisability grants-Too many Too many dependantsdependants

5252

Expenditure: Functional Classification (Est.)

6%

16%

14%

11%1%

18%

16%

7%

11%

51%

Central Gov

Justice and Prot.

Eco. & Infra.

State Debt Cost

Other

Education

Social Dev.

Other Social Serv.

Health

Spending Priorities 2006/07Spending Priorities 2006/07

Should be stopped!

5353

Changes to Social GrantsChanges to Social Grants

CurrentCurrent ExpectedExpected BudgetBudget

Child Support (13)Child Support (13) R180R180 R190R190 190190

Old Age/DisabilityOld Age/Disability R780R780 R810R810 820820

Foster CareFoster Care R560R560 R585R585 590590

5454

OtherOther

Spending increases on: Spending increases on: YesYes Housing Housing Crime preventionCrime prevention Improving local government Improving local government TransportTransport EducationEducation Health Health Social welfareSocial welfare Upgrade all settlements Upgrade all settlements National roads is to be increased substantially National roads is to be increased substantially

5555

Special attentionSpecial attention More to provinces for schools, hospitals, social More to provinces for schools, hospitals, social

development and welfaredevelopment and welfare Increased investment in infrastructure Increased investment in infrastructure (World cup –(World cup –

R5bn)R5bn), support emerging farmers, support emerging farmers Investment in housing, municipal infrastructure, Investment in housing, municipal infrastructure,

water, public transport, community facilities water, public transport, community facilities Education, hospital revitalization, librariesEducation, hospital revitalization, libraries Communications infrastructure, national roadsCommunications infrastructure, national roads Courts, police and improved access to justiceCourts, police and improved access to justice Investing in public admin., including the Investing in public admin., including the

modernization of financial admin.modernization of financial admin. Denel’s to secure R5bn bail-out? Denel’s to secure R5bn bail-out? Yes R2bnYes R2bn

Total R29.3bnTotal R29.3bn

5656

Capital ExpenditureCapital Expenditure

General Government (Dis-) Saving

-30

-25

-20

-15

-10

-5

0

5

10

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

R bn

5757

FundingFunding

ExpectedExpected BudgetBudget EfficientEfficient DifferenceDifference

ExtraordinaryExtraordinary -1.0-1.0 1.71.7 1.71.7 0.00.0

Short Term Short Term DebtDebt

5.05.0 5.85.8 5.55.5 -0.3-0.3

Long Term Long Term DebtDebt

10.210.2 8.78.7 8.78.7 0.00.0

Foreign DebtForeign Debt 3.33.3 2.42.4 2.32.3 -0.1-0.1

Cash BalancesCash Balances 12.812.8 7.87.8 4.54.5 -3.3-3.3

TotalTotal 30.330.3 26.426.4 22.622.6 -3.7-3.7

5858

What happened to What happened to privatisation?privatisation?

Telkom value – R30bnTelkom value – R30bn ACSA value – R40bnACSA value – R40bn SAA – just give it away, get Kulula as flag carrierSAA – just give it away, get Kulula as flag carrier

Two additional allocations:Two additional allocations: DenelDenel – R2bn capital investment– R2bn capital investment Road Accident Fund – R2.7bnRoad Accident Fund – R2.7bn

5959

Summary 2006/07Summary 2006/07

ExpectedExpected BudgetBudget EfficientEfficient DifferenceDifference

RevenueRevenue 440.3440.3 446.4446.4 450.8450.8 4.44.4

ExpenditureExpenditure 470.6470.6 472.7472.7 473.4473.4 0.70.7

DeficitDeficit -30.3-30.3 -26.3-26.3 -22.6-22.6 3.73.7

% of GDP% of GDP -2.0%-2.0% -1.5%-1.5% -1.4%-1.4%

6060

Foreign Exchange ControlForeign Exchange Control

Amnesty unit to tie up Amnesty unit to tie up – offshore individual – offshore individual allowance to R2m allowance to R2m Major relaxation for individualsMajor relaxation for individuals Perhaps abolishPerhaps abolish

Retirement funds to invest 20% abroad (15%)Retirement funds to invest 20% abroad (15%) Unit trusts to invest 30% abroad (20%)Unit trusts to invest 30% abroad (20%) FDI from 50% to 25% for SA corporates and FDI from 50% to 25% for SA corporates and

parastatals, investment in Africaparastatals, investment in Africa

6161

Asset AllocationAsset Allocation

6262

Local Equities, 2006Local Equities, 2006

Economic SectorEconomic Sector Q2 06 Q:QQ2 06 Q:Q Weighted Weighted AllocationAllocation

Asset Asset AllocationAllocation

Agri, Forestry and Agri, Forestry and FishingFishing 3.6%3.6% 1.5%1.5% 0.0%0.0%

Mining and Quarrying Mining and Quarrying 3.4%3.4% 3.4%3.4% 12.5%12.5%

ManufacturingManufacturing 5.0%5.0% 12.4%12.4% 10.0%10.0%

Electricity, gas and waterElectricity, gas and water 0.9%0.9% 0.3%0.3% 0.0%0.0%

ConstructionConstruction 10.8%10.8% 4.0%4.0% 5.0%5.0%

Trade, hotels, Trade, hotels, restaurantsrestaurants 5.9%5.9% 11.9%11.9% 10.0%10.0%

Transport, storage, Transport, storage, comm.comm. 6.1%6.1% 9.0%9.0% 10.0%10.0%

Finance, prop and bus. Finance, prop and bus. ServServ 5.0%5.0% 14.0%14.0% 17.5%17.5%

Personal ServicePersonal Service 5.1%5.1% 5.2%5.2% 5.0%5.0%

6363

Local Equities, 2006Local Equities, 2006Economic SectorEconomic Sector EAAEAA JSE SectorJSE Sector

Agri, Forestry and Agri, Forestry and FishingFishing 0%0% Food ProdFood Prod

Mining and Quarrying Mining and Quarrying 10%10% Mining, Platinum, Mining, Platinum, GoldGold, Coal, Coal

ManufacturingManufacturing 15%15% AutoAuto, , Basic IndBasic Ind, , BeveragesBeverages,, Chem Chem,, Elect, IT Elect, IT HardHard, , Pharm & BioPharm & Bio, , Steel & OtherSteel & Other

Electricity, gas and Electricity, gas and waterwater 0%0% OilOil & Gas & Gas

ConstructionConstruction 5%5% Const & BuildConst & Build

Trade, hotels and Trade, hotels and restaurantsrestaurants 7%7% Cyc Cons, Food & Drug, Gen Retail, House Cyc Cons, Food & Drug, Gen Retail, House

Goods, Non-cyc ConsGoods, Non-cyc Cons

Transport, storage Transport, storage and comm.and comm. 12%12% Telecomm,Telecomm, TransportTransport

Finance, prop and Finance, prop and bus. Servbus. Serv 15%15% BanksBanks, , Insurance, Life AssInsurance, Life Ass, , Media & PhtMedia & Pht, ,

ITIT, , PropertyProperty, , Support ServSupport Serv

Personal ServicePersonal Service 5%5% Cyc Serv, Health, Leisure Ent, Non-cyc Cyc Serv, Health, Leisure Ent, Non-cyc Serv, Person CareServ, Person Care

Total InvestmentTotal Investment 61%61%

64