Finding opportunities in slow growth and the impact of further credit rating downgrades.

2. South Africa is Flirting With
Recession and Credit Downgrade
An Economic Update

3. 3.2 2.7 3.1 2.8
0.2
-3.4
3.1
1.7 1.2 1.1
1.8 2.0 1.8
-4
-3
-2
-1
0
1
2
3
4
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
%y/y
Developed Markets GDP Annual Growth Rate

4. 7.5 7.3
8.2 8.7
5.8
3.1
7.5
6.3
5.2 5.0 4.6
3.8 3.6
2
3
4
5
6
7
8
9
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
%y/y
Emerging Markets GDP Annual Growth Rate

5. -5
-4
-3
-2
-1
0
1
2
3
4
5
6
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
%q/q
US Real GDP Growth – 4-Quarter Average

6. -3
-2
-1
0
1
2
3
4
5
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
%q/q
US Real Consumer Spending Growth
(4-Quarter Average)

7. 2.00
2.25
2.50
2.75
3.00
3.25
3.50
3.75
4.00
4.25
4.50
2011
2012
2013
2014
2015
2016
$/gallon
US Gasoline Price (National Weekly Average)
-46%

8. US Vehicle Miles Travelled
2940000
2960000
2980000
3000000
3020000
3040000
3060000
3080000
3100000
3120000
3140000
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Millions of Miles, 12-month moving average

9. Percentage points, 4-quarter moving average
US Contribution of Government Spending
to GDP Growth
-0.8
-0.6
-0.4
-0.2
0.0
0.2
2011
2012
2013
2014
2015

10. Percent of total employment
US Government Employment as % of Total
15
16
17
18
19
20
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015

11. 1.03
1.05
1.07
1.09
1.11
1.13
1.15
1.17
1.19
1.21
1.23
1.25
1.27
1.29
1.31
1.33
1.35
1.37
1.39
2014
F
M
A
M
J
J
A
S
O
N
D
2015
F
M
A
M
J
J
A
S
O
N
D
2016
USD
US Dollar per Euro
-22%

12. -25
-20
-15
-10
-5
0
5
10
15
20
25
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
%y/y
US Monthly Growth in Exports

13. -16
-14
-12
-10
-8
-6
-4
-2
0
2
4
6
8
10
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
%y/y
US Industrial Production

14. 5
7
9
11
13
15
17
19
21
23
25
27
29
31
33
35
37
39
1939
1941
1943
1945
1947
1949
1951
1953
1955
1957
1959
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
%
US Manufacturing Employment
As % Of Total Employment

15. US Oil Rig Count
Number of rigs
500
600
700
800
900
1000
1100
1200
1300
1400
1500
1600
1700 2012
2013
2014
2015
2016

16. -0.5
0.0
0.5
1.0
1.5
2.0
2.5
2014
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
2015
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
2016
%y/y
US Consumer Inflation
Headline inflation
Core inflation

17. 0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
%
US Official Interest Rates
FOMC is expecting four hikes of 0.25% each in 2016
Market is expecting two hikes of 0.25% each in 2016

18. 18
20
22
24
26
28
30
32
34
36
38
40
42 2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
% of world GDP
Emerging Economies % of World GDP

19. -5
-4
-3
-2
-1
0
1
2
3
4
5
6
7
8
9
10
2007
2008
2009
2010
2011
2012
2013
2014
2015
%y/y
Brazil GDP Growth
Brazil GDP

20. 60
70
80
90
100
110
120
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Index
Brazil Business And Consumer Confidence
Consumer confidence
Business confidence

21. 50
52
54
56
58
60
62
64
66
68
2011
2012
2013
2014
2015
2016
% of GDP
Brazil Gross Government Debt as % of GDP

22. 1
2
3
4
5
6
7
8
9
10
11
2011
2012
2013
2014
2015
2016
% of GDP
Brazil Government Overall Deficit as % of GDP

23. -3
-2
-1
0
1
2
3
4
5
6
7
8
05 06 07 08 09 10 11 12 13 14 15
%y/y
South Africa Real GDP Growth Year-on-Year

24. South Africa - Manufacturing Production
-17
-15
-13
-11
-9
-7
-5
-3
-1
1
3
5
7
05 06 07 08 09 10 11 12 13 14 15
%y/y, 12-month moving average
The combination of:
Agriculture, Mining, Manufacturing,
Construction
Electricity, and water in recession

25. SA Agricultural Districts Declared Drought Disaster
Areas

26. -5
-3
-1
1
3
5
7
9
11
13
15
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
%y/y
South Africa Retail Sales – 12 Month Moving Ave

27. South Africa Food Cereal Inflation
-20
0
20
40
60
80
2013 2014 2015 2016
% y/y

28. South Africa Headline CPI Forecast
2
3
4
5
6
7
8
9
2009
2010
2011
2012
2013
2014
2015
2016
% y/y

29. SA Becoming Investment Grade After 1994
In 1994 SA had to overcome a number of important constraints before
attaining an investment grade rating:
➜ High degree of political uncertainty
➜ Rapid increase in government debt
➜ Extremely low level of foreign exchange reserves
➜ Double digit inflation

30. SA Government Gross Loan Debt as % of GDP
20
25
30
35
40
45
50
55
88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09
%

31. 0
5
10
15
20
25
30
35
40
45
50
55
$bn
SA Foreign Exchange Reserves

32. SA Prime Interest Rate
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
90
91
92
93
94
95
96
97
98
99
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
%, Inflation target introduced in February 2000

33. SA Government Gross Loan Debt as % of GDP
10
15
20
25
30
35
40
45
50
55
88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18
%

34. SA Budget Deficit as % of GDP
-0.8
-2.5 -1.9
-0.6
1.2 1.7
-1.1
-6.5
-4.3
-3.6 -4.1 -3.8 -3.6 -3.9
-3.2 -2.8 -2.4
-7
-6
-5
-4
-3
-2
-1
0
1
2
3
'02/03
'03/04
'04/05
'05/06
'06/07
'07/08
'08/09
'09/10
'10/11
'11/12
'12/13
13/14
14/15
15/16
16/17
17/18
18/19
% Fiscal years

35. SA Primary Budget Balance as % of GDP
-1.5
-0.9
-1.3
-0.7
-0.4 -0.6
0.4
0.7
1.2
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
10/11
11/12
12/13
13/14
14/15
15/16
16/17
17/18
18/19
% Fiscal years

36. SA Government Net Domestic Long-term Bonds
issued
-20
0
20
40
60
80
100
120
140
160 89/90
90/91
91/92
92/93
93/94
94/95
95/96
96/97
97/98
98/99
99/00
00/01
01/02
02/03
03/04
04/05
05/06
06/07
07/08
08/09
09/10
10/11
11/12
12/13
13/14
14/15
15/16
16/17
17/18
18/19
Rbn Fiscal years

37. Growth in Fixed Investment Spending
by Private Sector
-20
-15
-10
-5
0
5
10
15
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
%q/q, 4-quarter moving average