Deloitte presentation on investment opportunities in South Africa offered by the business rescue process

1. Foreign & local
investment
opportunities in SA
offered by the BR
process
Werksmans
Seminar
Wanya du Preez
7 August 2014
Analysing the current macro- and micro-economic
landscape in SA and identifying those sectors of the
market which are ripe for distressed investing

2. Senior Manager, Restructuring Services
South Africa
Tel: +27 (11) 209 6126
Mobile: +27 (0) 83 272 0892
Office: Deloitte, Johannesburg
Email: wdupreez@deloitte.co.za
Wanya du Preez
Introductions
2 SA Investment opportunities using Business Rescue
Career summary:
• Wanya completed her articles with Deloitte in Durban where she
qualified as a Chartered Accountant in 2006. She completed a JIT
assignment in the USA as well as a secondment to Deloitte Athens
on an international assignment.
• Thereafter she worked on an 18 month assignment in Deloitte UK
and returned to Johannesburg in 2009.
• Following a period in Deloitte Consulting in 2012, she joined
Corporate Finance in February 2014.
• Wanya recently completed her MBA with a specialisation in
Business Rescue in South Africa. Her dissertation was entitled:
“The status of post-commencement finance for Business Rescue in
South Africa.”
• Her current role involves the following:
– Independent business reviews, including the preparation and
review of short term cash flow forecasts
– Reviews of distressed investments on behalf of debt providers
– Turnaround strategy and implementation
– Preparation and review of short term cash flow forecasts
– Business Rescue focus
• Team of 9 professionals, across all
industries:
• 2 Directors -1 Associate Director
• 2 Senior Managers - 4 Staff
Key service areas:
Detailed analysis
and review of
company
business plans
Providing
options advice
Assisting with
turnaround plans
Running a
distressed M&A
process
Providing debt
advisory and
restructuring
services
Reviewing and
assisting with
the preparation
of short term
cash flow
forecasts

3. Brief macro
economic overview
SA Investment opportunities using Business Rescue3

4. Global prospects are less gloomy
• The world economy will grow faster in 2014, spurred by recovery in the United
States and most European countries
• In Europe, the debt crisis has been replaced by the risk of deflation, while
events in the Ukraine are more likely to cost Russia dear than result in war or
impact trade
• Slower growth in China was anticipated but fresh investment on railway
construction and social housing could bode well for South Africa.
Not in glowing health, but certainly recovering
Source: Monitor Deloitte analysis; The Economist Intelligence Unit
1.41.1
-0.4
1.51.51.5
2.63.0
1.9
4.5
4.03.6
6.97.37.7
2.8
20152014
2.9
2013
2.0 China
World
Sub-Saharan Africa
US
Japan
Euro area
Real GDP (% change y-o-y)

5. − Gross Domestic Product (GDP) of the region
is expected to grow by 4-6% in next few
years, based on the rising household
spending and expansion in domestic markets.
− Growth is forecasted to vary across
subregions and individual states due to the
political stability variations across these
regions.
Sub-Saharan Africa is considered an attractive
investment region fuelled by its economic growth
0
2
4
6
8
10
12
14
16
Angola
Cameroon
Ethiopia
Ghana
Kenya
Mozambique
Nigeria
SouthAfrica
Tanzania
Sub-SaharanAfrica
US
World
2010 2011 2012 2013 2018
-2
0
2
4
6
8
10
2010
2011
2012
2013
2014
2015
2016
2017
2018
GDP Private Consumption
Gross Fixed Investment Consumer Prices
Real GDP Growth (%, 2010–2018)
Sub-Saharan Africa key metrics % change
(%, 2010–2018)
Source: Economic Intelligence Unit
%%
Source: Economic Intelligence Unit

6. South Africa and Nigeria account for more than
64% of the GDP of the region
Nominal GDP (US$B, 2013)
Source: Economic Intelligence Unit
Angola,
14%
Cameroon,
3%
Ethiopia, 4%
Ghana, 5%
Kenya, 5%
Mozambique
, 2%Nigeria, 29%
South Africa,
35%
Tanzania,
3%
Nominal GDP % of Total Sub-Saharan Africa (%,
2013)
Source: Economic Intelligence Unit
0
200
400
600
800
1,000
1,200
Angola
Cameroon
Ethiopia
Ghana
Kenya
Mozambiqu
e
Nigeria
South
Africa
Tanzania
Sub-
Saharan…
US$’bn
Tanzania
• Stringent government
regulations, corruption,
and less transparent
policy making are few of
the challenges of the
country
Kenya
• The economy is well
supported by local
financial markets and a
relatively efficient labor
market
Ethiopia
• It requires significant
improvement in the
areas of infrastructure,
higher education, and
technological readiness
Cameroon
• Political stability, robust
and investment-
supportive government
reforms and
infrastructure
development is required
drive the growth
South Africa
• Politically stable
business environment
• Biggest opportunity,
size, growth prospect,
and growing domestic
demand
• Fastest growing
financial market in the
region
• County’s strong ties to
advanced economies
supports the foreign
investment scenario
Mozambique
• Low macroeconomic
stability, and need of
significant change in
reforms and regulations
are needed in the
country
Ghana
• Infrastructure
development is required
to drive growth as
compared to other
countries in region
• Downward trend of
macroeconomic
indicators
Angola
• Economy with the
fastest growing GDP in
past decade within the
region
• Strong macroeconomic
fundamentals
Nigeria
• Delivery of reforms is
required
• Growth prospects in
medium-term depends
on the political stability

7. SA presents most attractive investment
destination to invest in distressed companies
-2
-1
0
1
2
3
4
5
6
0
100
200
300
400
500
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Nominal GDP Real GDP
Real GDP growth and nominal GDP (US$, 2009–
2018)
Source: Economic Intelligence Unit
Overview
• Real GDP growth is expected to decline to 1.7% in 2014,
driven by modest global recovery.
• Growth will accelerate in 2015-17, spurred by consumption
and investment, before tailing off in 2018 as their might be
global and local interest rates rise. Politically stable
environment is driving the country to a consolidated
economic growth.
• The current-account deficit (CAD)is forecasted to be
narrow in 2014-15, as export earnings growth quickens
although the CAD will widen from 2015 onwards, reaching
6.5% of GDP in 2018, due to rise in imports.
Government policies and recommended
outlook
• A new Infrastructure Development Bill proposes several
initiatives to speed up major infrastructure projects.
• The government will need to make tough choices in the
face of persistent pressure to spend more on
infrastructure, social welfare, and wages.
• South Africa’s ruling African National Congress emerged
victorious from elections in 2014, but uncertainty and non-
clarity about its economic direction may hamper the
sentiments of investor eyeing the country.
Challenges
• The main challenge during the next few years for the policy
makers in the country will be to expedite faster growth by
tackling long-standing structural constraints, such as skills
shortages, inadequate infrastructure, and high
unemployment.
• Sound policies, sluggish consumer demand, and spare
industrial capacity will help to keep tab on inflation,
although their might be upward pressure from expected
rise in electricity tariffs and wages along with currency
depreciation.
• High unemployment, income inequality, and poor service
delivery are likely to pose challenges for the country’s
medium- term growth.
NominalGDP$bn
RealGDP(%)
SOUTH AFRICA

8. Northern Cape
Western Cape
Eastern Cape
Free State
Kwa-zulu Natal
North West
Gauteng
Mpumalanga
Northern Province
Painting the South African Economic Landscape
Why South Africa?
1. Key investment location, both for
market opportunities in SA and the rest
of Africa, especially through the special
International Headquarter Company
(IHQ) regime.
2. South Africa was admitted to the BRIC
group of countries of Brazil, Russia,
India and China (now called BRICS)
in 2011.
3. A wealth of natural resources
(including coal, platinum, coal, gold, iron
ore, manganese nickel, uranium and
chromium).
4. World-class infrastructure, exciting
innovation, research and development
capabilities and an established
manufacturing base.
5. Sophisticated financial, legal and
telecommunications sectors.
6. Has political and macro-economic
stability, an abundant supply of
semiskilled and unskilled labour.
SA Investment opportunities using Business Rescue8 © 2014 Deloitte Touche Tohmatsu Limited

9. South African Economic Overview
Global Competitiveness
SA Investment opportunities using Business Rescue9

10. South African Economic Overview (cont)
Global Competitiveness
10 SA Investment opportunities using Business Rescue
South Africa’s high ranking areas
• Strength of auditing and reporting standards (1st)
• Efficacy of corporate boards (1st)
• Protection of minority shareholders’ interests (1st)
• Regulation of securities exchanges (1st)
• Legal rights index, 0–10 (best) (1st)
• Availability of financial services (2nd)
• High accountability of its private institutions (2nd)
• Financial market development (3rd)
• Soundness of banks (3rd)
• Quality of air transport infrastructure (11th)
• Affordability of financial services (13th)
• Extent of staff training (17th)
• Intellectual property protection (18th)
• Property rights (20th)
• Efficient market for goods and services (28th)
• The quality of its institutions (41st)
Gross fixed investment as a % of GDP (%, 2013)
0
5
10
15
20
25
30
35
40
45
50
Angola
Kenya
Nigeria
South
Africa
Sub-
Saharan
Africa
India
China
0
1
2
3
4
5
6
7
8
9
Angola
Kenya
Nigeria
SouthAfrica
UK
Germany
France
Spain
Switzerland
2009-2013
2014-2018
Business environment score (2009-13, 2014-18)

11. Back home, the news is not entirely good
External factors will have a mixed impact on the South Africa economy in 2014,
while domestic drivers will continue to create downward pressure
Source: Monitor Deloitte analysis; IMF World Economic Outlook, April 2014
 Exports to China
 Fed tapering
 Industrial action
 High unemployment
 Election year causes
uncertainty
 Exports to US and
Europe
 A weaker rand
supporting international
competitiveness?

12. Monetary variables are not helping
The weak rand, slightly higher inflation and marginally higher interest rates may
have been factored in by economists, but possibly not by small businesses
Source: Monitor Deloitte analysis; Business Monitor International
Monetary
variables
are in a
vicious
cycle
Weak
rand
Higher
inflation
Interest rate
increases
0
2
4
6
8
10
12
2008 2010 2012 2014 2016 2018
Lending rates (average, %)
Producer inflation (y-o-y % change, eop)
Consumer inflation (y-o-y % change, average)
%
Outlook for interest rates and inflationInterest rates indirectly driving inflation

13. The impact of a weaker rand
A weaker rand is unlikely to boost competitiveness with respect to exports due to
the pattern of trade and is more likely to drive imported inflation
Source: Monitor Deloitte analysis; International Trade Centre, www.intracen.org, accessed 5th May 2014; The
Economist Intelligence Unit
-7
-27
-15
25
20
7
12
-6
ChinaUnited
States
Western
Europe
Other
SADC
2013 imports (% of total)
2013 exports (% of total)
Trade balance with key partners
10.30
13.84
0
2
4
6
8
10
12
14
2008 2010 2012 2014 2016 2018
Prognosis for the rand
R
R :US$
:€

14. The credit market is over-extended
Proportionately fewer credit-active consumers are in good standing than during the
financial crisis, suggesting little flexibility to cope with higher rates and prices
Source: Monitor Deloitte Analysis; National Credit Regulator, Credit Bureau Monitor – various years
10.710.610.4
9.99.910.3
10.7
5253545455
58
62
0
1
2
3
4
5
6
7
8
9
10
11
0
10
20
30
40
50
60
70
2013201220112010200920082007
# in good standing% in good standing
millions %
Credit standing of consumers at year-end

15. Survey Results -
Restructuring
Outlook 2014
15 SA Investment opportunities using Business Rescue

16. The South African Economy and Restructuring Industry
72% expect a stagnant economy driven by labour and political
unrest, and decreased consumer spending
18.8%
71.9%
9.4%
Outlook for the South African economy over the next
12 months
Recession Stagnant Growth
Recession: Negative growth in the economy for two consecutive quartere
Stagnant: No growth in economy for two consecutive quarters
Growth: Increased business activity for two consecutive quarters
8.5%
1.9%
1.9%
3.8%
3.8%
5.7%
5.7%
14.2%
15.1%
18.9%
20.8%
0.0% 5.0% 10.0% 15.0% 20.0% 25.0%
Other
The Euro crisis
Commodity prices
Low corporate growth
Growing current account deficit
Reluctance of corporates to reinvest
Availability of corporate funding
Exchange rate –
currency depreciation
Consumer spending and credit
Political uncertainty
Labour unrest
Reasons for outlook for the South African economy over the
next 12 months
“I believe we are entering a 10 year period of real
difficulty in South Africa, a lot of which will depend
on the elections.”
– Commercial Bank
“We are still to face challenges in the labour sector
as there is always unrest in an election year.”
– Commercial Bank
“Interest rate hikes by the Reserve Bank is
indicative of tough trading conditions.”
–Commercial Bank
SA Investment opportunities using Business Rescue16

17. The South African Economy and Restructuring Industry (cont)
Sectors at most risk of distress include manufacturing, retail,
construction and energy and resources
“Manufacturing is struggling due to the
price crunch and low volumes.
Construction has been affected by labour
strikes, delays in government payment
and penalty clauses.”
– Commercial Banker
“We are going to struggle, retailers…are
taking strain…due to exchange rate
depreciation.”
– Business Rescue Practitioner
"In the mining industry, commodity
prices are very low, and mining costs
are escalating.”
– Development Finance Institution
SA Investment opportunities using Business Rescue17 © 2014 Deloitte Touche Tohmatsu Limited

18. South Africa
M&A market overview

19. Copyright © 2014 Deloitte Development LLC. All rights reserved.19 Sub-Saharan Africa M&A opportunity and challenges
Key observations
• The deal volume has been gradually increasing over the years after a dip in 2011 primarily due to the constant increase
in the investments returns, stabilizing economy, and boost in 'Middle Class' population.
• From a long-term perspective, the total deal value has increased due to the significant rise in investment from the
Asia/Pacific countries as they look to expand into regions with untapped natural resources.
• Inbound deal activity is driven by mineral wealth, strong demographics, low interest rates, low regulatory barriers, and
opportunities to acquire undervalued companies.
• The positive outlook provided by International Monetary Fund (IMF) indicates that the African region is forecasted to
achieve a GDP growth rate of 6% in 2014, which is likely to boost the deal activity.
M&A activity has been increasing although average deal
size declined marginally in 2013
0
200
400
600
800
1,000
1,200
2009 2010 2011 2012 2013
Disclosed Undisclosed
Number of deals — Total
(In numbers, 2009–2013)
Deal value — Total and average deal size
(In US$M, 2009–2013)
0
10
20
30
40
50
60
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
2009 2010 2011 2012 2013
Deal Value Average Deal SizeSource: Capital IQ Source: Capital IQ

20. Copyright © 2014 Deloitte Development LLC. All rights reserved.20 Sub-Saharan Africa M&A opportunity and challenges
South Africa, with presence of cash-rich corporates,
leads the M&A deal activity in the region
Key observations
• The deal activity in South Africa is expected to rise
further due to the presence of numerous cash-rich
corporates in the region and investors looking to invest
in a market that is well regulated and provides
opportunities to expand operations.
– However, due to some government regulations, such as
the new hydrocarbons law granting the state oil company
PetroSA a 20% free carry, the deal activity may deter in
the future.
• Nigeria is enjoying an increase in the inbound deal
activity as the investors are looking to take advantage of
the low interest rates in this region.
• The abundance of natural resources in Kenya is driving
the M&A deal activity with new oil discoveries happening
in the region.
• In Mozambique, the deal value in 2013 has boosted
primarily due to three multibillion dollar deals in the oil &
gas sector
Angola
6.4%
Cameroon
1.1%
Ethiopia
0.7%
Ghana
1.7%
Kenya
3.2%
Mozambique
3.5%
Nigeria
15.1%
South Africa
66.6%
Tanzania
1.7%
Deal value — By key countries
(In %, 2009–2013)
Source: Capital IQ
0
10,000
20,000
30,000
2009 2010 2011 2012 2013
Angola Cameroon Ethiopia
Ghana Kenya Mozambique
Nigeria South Africa Tanzania
Deal value — By key countries
(In US$M, 2009–2013)
Number of deals — By key countries
(in numbers, 2009–2013)
Source: Capital IQ
Source: Capital IQ
0
200
400
600
800
2009 2010 2011 2012 2013
Angola Cameroon Ethiopia
Ghana Kenya Mozambique
Nigeria South Africa Tanzania

21. Copyright © 2014 Deloitte Development LLC. All rights reserved.21 Sub-Saharan Africa M&A opportunity and challenges
Investments from Asia-Pacific countries have increased
as they look to achieve energy security
Key observations
• Asia Pacific leads the cross-border investments M&A
activity (by deal value) mainly due to the interest from
the Chinese investors, as they look to target the region’s
untapped natural resources.
– Further Chinese companies are investing to set up new
plants and facilities to cater to growing domestic demand
– Indian investments have also surged in the recent years
to reap the benefits of untapped natural reserves.
• From Europe, although the total deal value has
decreased in the recent times, the volume of the deals
has remained stable as these acquisitions in Africa
provide a way to generate growth during the sluggish
periods
• Inbound deal activity from North America, particularly the
U.S., has decreased due to lack of proper infrastructure.
However, U.S.’ is focusing on improving ties with the
African countries is likely to drive the growth in future
investments.
Deal value — By key countries
(In %, 2009–2013)
Source: Capital IQ
Deal value — By investor geography
(In US$M, 2009–2013)
Number of deals — By investor geography
(in numbers, 2009–2013)
Source: Capital IQ
Source: Capital IQ
North
America,
5.4%
South
America,
0.8%
Africa,
49.8%
Asia-Pacific,
19.7%
Europe,
16.7%
Middle East,
7.5%
0
200
400
600
800
1,000
1,200
2009 2010 2011 2012 2013
Africa Asia / Pacific Europe
Middle East North America South America
0
10,000
20,000
30,000
40,000
50,000
2009 2010 2011 2012 2013
Africa Asia / Pacific Europe
Middle East North America South America

22. Copyright © 2014 Deloitte Development LLC. All rights reserved.22 Sub-Saharan Africa M&A opportunity and challenges
Key observations
• Investment in E&R sector continues to improve significantly, as there are new oil discoveries in resource-rich countries,
such as Kenya, Sierra Leone, and Domestic Republic of Congo.
• Financial services industry proved to be an area of growth because of the lack of such services for the rising middle-class
segment. The rise in investments is set to continue in the future, as well.
• Private equity investors across the world prefer longer-term investments in sectors, such as consumer, financial services
and pharmaceuticals and medical and biotech over capital intensive sectors, such as energy and mining, as these areas
offer high returns and far less capital and political risk than the extractive industries.
• The consumer business segment has grown significantly over the years due to the rise in Africa’s middle-class segment
and the increase in household spending in the region.
With new oil discoveries in the region, the deal activity
in the E&R sector has improved significantly
0
200
400
600
800
1,000
1,200
2009 2010 2011 2012 2013
CB E&R FSI LSHC Mfg TMT
Source: Capital IQ
Number of deals — By sector
(In No’s, 2009–2013)
Deal value — By sector
(In US$M, 2009–2013)
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
2009 2010 2011 2012 2013
CB E&R FSI LSHC Mfg TMT
Source: Capital IQ

23. Copyright © 2014 Deloitte Development LLC. All rights reserved.23 Sub-Saharan Africa M&A opportunity and challenges
M&A challenges
Generally, there is limited
financial disclosure, both
for listed and unlisted
companies operating in the
region, which means that
access to valid, accurate,
complete, and reliable
financial information can
fall short of investor
expectations. This lack of
information makes the due
diligence process difficult.
In Sub-Saharan Africa, it is
important to maintain awareness of
noteworthy events such as
elections and understand their
potential effect on the transaction
timetable. Investors are required to
have an understanding of the
political association of the major
stakeholders involved in the
transaction, both business partners
and regulators that may need to
approve the transaction.
Many countries have
adopted, or are in the
process of adopting
citizen empowerment
laws, which typically
require a minimum
percentage of local
shareholder
ownership. The
challenge though is
that local
shareholders are
often unable to raise
required funds
especially in capital-
intensive projects.
While this is important in most
transactions, it is especially critical
when the local partner is relied
upon to drive local relationships
and is likely to have a longer-term
involvement in the business.
Deficiency of such local partners
may act as a obstacle for the
investors.
It is equally important for investors
to work with advisors they know
and have trust, have local
knowledge and an on-the-ground
presence, which are vital for
implementing transactions.
Financial
Disclosure
and Due
Diligence
Understanding
Political
Environment
and Stability
Local
Ownership
Requirements
Right
Partner

24. Identifying the
opportunities
SA Investment opportunities using Business Rescue24

25. Moments that matter
Are companies displaying the following warning signs…
Declining cash flows as a
result of deteriorating trading
performance and uncertain
market conditions
Underperforming division or
subsidiary causing cash
pressure for the group
Incoherence amongst and major
changes in management team and
/ or board and struggling to
achieve a succession plan
Current or expected breach of
banking facilities and / or
covenants and facing a
tightening credit market
Lack of timely and insightful
financial reporting and Limited
visibility of cash requirements in
the business
Deteriorating working capital
trends, particularly stretching of
creditor terms
Significant underperformance
against budget and performing
below stakeholder expectations
Overleveraged balance sheet and
major upcoming debt repayments
Company
in distress
Deloitte Restructuring Survey25 © 2014 Deloitte Touche Tohmatsu Limited

26. Deloitte – Financial support
• Investor will work closely with the accountants who understand the financial aspects of a restructuring
and of the business rescue process and who can assist with –
− identifying that the company is in financial distress
− introducing Chinese investors to the company and its management
− appointing a competent and professional business rescue practitioner
− identifying the need for, and amount of, PCF
− reviewing and commenting on the business rescue plan that is voted on by the creditors and
shareholders (in some instances)
− ensuring the company comes out of business rescue with the investor having acquired the company
at heavily discounted prices – a cheap but valuable acquisition
SA Investment opportunities using Business Rescue26 © 2014 Deloitte Touche Tohmatsu Limited
Detailed analysis and
review of company
business plans
Reviewing and assisting
with the preparation of
short term cash flow
forecasts
Providing options
advice
Assisting with
turnaround plans
Running a distressed
M&A process &
negotiation with
creditors
Providing debt
advisory services and
sourcing alternative
funding

27. 27 SA Investment opportunities using Business Rescue
Thank you

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SA Investment opportunities using Business Rescue28