The SA Economy and

Lessons from Africa

Presented by:Dawie Roodt30 October 2006

Real Economy

GDP

GDP

-3

-2

-1

0

1

2

3

4

5

6

7

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

%

GDP

GDP per capita '00

20000

21000

22000

23000

24000

25000

26000

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

R

Relative size to GDP, 2006 Q2

2% 6%

16%

2%

3%

14%

10%

21%

12%

5%

9%

Agri, forestry and fishing Mining and quarrying Manufacturing Electricity, gas and waterConstruction Wholesale and retail Transport, storage Finance, real estate General gov services Personal services Taxes less subsidies

Fiscal Policy

State Finances

Revenue/Expenditure:GDP

20

21

22

23

24

25

26

27

28

29

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

%

State Finances

State Debt:GDP

25

30

35

40

45

50

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

%

Debt trapRecovery

Normal Normal

Monetary Policy

Inflation

CPI & CPIX

0

3

6

9

12

15

18

21

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

%

Inside The Economist’s Head

Constructing Econometric Models: Economic theory Obtaining the data Statistical significance (Tests)

Long Term Trend Short Term Trend

Construct model Forecasting properties

Economic Theory

Theoretic Drivers of Inflation: Fuel prices Interest rates Exchange rates Private credit Consumer spending Cost of production

Efficient Inflation Model

120

122

124

126

128

130

132

134

2003

M01

2003

M03

2003

M05

2003

M07

2003

M09

2003

M11

2004

M01

2004

M03

2004

M05

2004

M07

2004

M09

2004

M11

2005

M01

2005

M03

2005

M05

2005

M07

2005

M09

2005

M11

2006

M01

2006

M03

2006

M05

Actual Efficient Model

Efficient Inflation Model

Month Actual Efficient Model Difference

January 4.0 4.0 0.0

February 3.9 4.1 -0.2

March 3.4 3.6 -0.2

April 3.3 3.5 -0.2

May 3.9 4.2 -0.3

June 4.9 4.6 0.3

July 5.0 5.1 -0.1

August 5.4 5.3 0.1

September 5.3 5.6 -0.3

Interest rates

Prime

9

11

13

15

17

19

21

23

25

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

%

De Kock

Stals

Mboweni

Interest rates

Prime

10.0

10.5

11.0

11.5

12.0

12.5

13.0

2005 2006 2007

%

Oil?

Capital Expenditure Institute Time Horizon Planned Capital Expenditure

Sasol 2006 R20.0bnEskom 2011 R97.0bnWorld Cup 2010:GautrainAcsaStadiums

201020092010

R20.0bnR3.0bnR5.0bn

Transnet 2009 R32.7bnState (National Budget) 2009 R372.0bn

Economic Impact of the 2010 FIFA World Cup

Direct expenditure of R12,7 billion; Contribute R21,3 billion to the GDP of South Africa; Generate the equivalent of 159 000 annual jobs Additional R7,2 billion will be paid to Government in taxes.

Source: Gauteng Tourism Authority

Debt Levels

Credit Extension

Private Sector Credit Extension excl Bill & Investments

8

10

12

14

16

18

20

22

24

26

28

Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07

%

Household debt to disposable income

Household debt to disposable income of households

40

45

50

55

60

65

70

75

1970 1975 1980 1985 1990 1995 2000 2005

%

Source: SARB

Savings to disposable income of households

Ratio of saving by households to disposable income of households

0

2

4

6

8

10

12

1970 1975 1980 1985 1990 1995 2000 2005

%

Source: SARB

Balance of Payments

Balance of Payments

Current Account vs Financial Account

-8

-6

-4

-2

0

2

4

6

8

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

% GDPBarclays/Absa

De Beers delisting

Sanctions liftedDebt Standstill

Trade: Imports and Exports per origin, 2005

0

20

40

60

80

100

120

140

AFRICA EUROPE AMERICA ASIA OCEANIA OTHERUNCLASSIFIED

GOOD

Rbn

Imports Exports

A comparison

Retail Trade Sector

Change in retail trade sales and Prime

-2

0

2

4

6

8

10

12

Jan-0

0Ju

l-00

Jan-0

1Ju

l-01

Jan-0

2Ju

l-02

Jan-0

3Ju

l-03

Jan-0

4Ju

l-04

Jan-0

5Ju

l-05

Jan-0

6Ju

l-06

Jan-0

7Ju

l-07

%

10

11

12

13

14

15

16

17

%

Percentage of World GDP ‘04

1%

33%

2%2%

4%5%5%

7%

11%

2%

28%

South Africa Rest of the World Brazil IndiaUK China France GermanyJapan Russia USA

Source: UNAIDS

4% of African area

23% of African GDP

21.2% of African Exports

GDP

Africa, South Africa, World GDP per Capita

0

1000

2000

3000

4000

5000

6000

7000

1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004

$

Source: UN

Countries Compared to Provinces

Country and Province GDP 2004 ($ Bn)

0 20 40 60 80 100 120 140 160 180 200 220

South AfricaEgypt

AlgeriaNigeria

GautengMorocco

KwaZulu-NatalWestern Cape

TunisiaAngolaSudan

Libyan ArabEastern CapeCote d'Ivoire

CameroonMpumalanga

KenyaLimpopo

North-WestFreestateTanzania

GhanaBotswana

EthiopiaUgandaSenegal

GabonDRC

MozambiqueMauritius

NamibiaZambia

Northern CapeMali

ZimbabweBurkina Faso

CongoBenin

MadagascarChad

GuineaSmallest 20

Source: UN

AIDS

People infected with Aids

20%

68%3%1%

4%

4%

Asia Africa Eastern Europe & Central Asia Caribbean Latin America High Income Countries

Source: UNAIDS

Mistakes made in Africa Private Property Rights Regulated Prices Idolise Leaders Marketing Boards Nepotism Incompetence Corruption Poor Fiscal Discipline Poor Monetary Policy Unrealistic Projects

?

?

?

?

?

The Zim disaster

Development Data & Statistics

2004 World South Africa Zimbabwe

GDP (current US$, bn) 41 365.8 214.7 4.7

GNI per capita (current US$) 6 338.0 3 670.0 620.0

Life expectancy (years) 67.3 44.6 37.2

Population, total (millions) 6 363.2 45.5 12.9

Population growth (annual %) 1.2 -0.7 0.6

Surface area (000, sq km) 133 940.9 1 219.1 390.8

Source: World Bank

Zimbabwe: GDP

Zimbabwe: GDP

-12

-10-8

-6-4

-20

24

68

10

1990 1992 1994 1996 1998 2000 2002 2004 2006

%

Source: IMF

Zimbabwe: GDP

Zimbabwe GDP per capita, Constant Prices

20000

22000

24000

26000

28000

30000

32000

34000

36000

38000

1990 1992 1994 1996 1998 2000 2002 2004 2006

Zim $

Source: IMF

Zimbabwe: Inflation

Zimbabwe: Inflation

0100200300400500600700800900

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

%

Source: IMF

Zimbabwe GDP, Current Prices, Zim$

2000

Zim$361.4 bn2005

Zim$75,421.1 bn

+20,798.0%

Zimbabwe GDP, Current Prices, US$

2000

$8.1bn

2005

$4.5bnSource: IMF

-44.0%

Commodity Analysis

Changes in Energy Sources

Largest Populations

Source The economist Pocket word in figures 2007

1950, Mil 2004, Mil 2050, Mil1. China 550 1. China 1313 1. India 15932. India 358 2. India 1081 2. China 13923. USA 158 3. USA 297 3. USA 3954. Russia 103 4. Indonesia 223 4. Pakistan 3055. Japan 84 5. Brazil 181 5. Indonesia 285

Biggest Economies, $bn PPP

Source The economist Pocket word in figures 2007

1. USA 11 6512. China 7 6423. Japan 3 7374. India 3 3905. Germany 2 336

Energy Use, million tons oil equivalent

2004

1. USA 2 2802. China 1 4093. Russia6394. India 5535. Japan 517

2050*

1. India 12 2312. China 10 6923. USA 3 0334. Russia4435. Japan 436

*Assuming China and India use same energy per capita as the USA currently, remainder constant per capita use•Source The economist Pocket word in figures 2007

Some Commodity Facts: Top producers

Gold (tonnes)

1. South Africa 340.42. Australia 259.03. USA 258.0

Platinum (tonnes)

1. South Africa 1542. Russia 263. North America 10

Palladium (tonnes)

1. Russia 1272. South Africa 783. North America 23

Source The economist Pocket word in figures 2007

Some Commodity Facts: Coal

Top Producers

1. China 989.82. USA 567.23. Australia

199.44. India 188.85. South Africa 136.96. Russia 127.67. Indonesia 81.48. Poland 69.8

Top Consumers

1. China 956.92. USA 564.33. India 204.84. Japan 120.85. Russia 105.96. South Africa 94.57. Germany

85.78. Poland 57.7Source The economist Pocket word in figures 2007

Some Commodity Facts: Aluminum

Top Producers

1. China 6 6892. Russia 3 5943. Canada 2 5924. USA 2 5175. Australia 1 8956. Brazil 1 4577. Norway 1 3228. South Africa 864

Top Consumers

1. China 6 0432. USA 5 8003. Japan 2 3194. Germany 1

7955. South Korea 1 1186. Russia 1 0207. Italy 9878. India 861Source The economist Pocket word in figures 2007

Asset Allocation

Asset Allocation Reason

Equities Demand/Rand/International

Bonds Inflation/Supply

Cash Short Interest rates

Property Property Cycle

– Heavy Overweight

– Overweight

– Neutral

– Underweight

– Heavy Underweight

Local Equities, 2006Economic Sector MC EAA JSE Sector

Mining and Quarrying 32% 33% Mining, Platinum, Gold, Coal

Finance, prop and bus. serv 30% 25%Banks, Insurance, Life Ass, Media & Pht, IT, Property, Support Serv

Manufacturing 12% 16%Auto, Basic Ind, Beverages, Chem, Elect, IT Hard, Pharm & Bio, Steel & Other

Personal Service 6% 5%Cyc Serv, Health, Leisure Ent, Non-cyc Serv, Person Care

Transport, storage and comm. 6% 7% Telecomm, Transport

Trade, hotels and restaurants 6% 4%Cyc Cons, Food & Drug, Gen Retail, House Goods, Non-cyc Cons

Electricity, gas and water 4% 3% Oil & Gas

Agri, Forestry and Fishing 3% 1% Food Prod

Construction 2% 6% Const & Build

100% 100%

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