A country renewed with hope but not yet reformed.

Good and the bad & some context• Context international and local economy

– Growth improves World vs SA

• SA Myths about debt and assets.

• Vanity, Sanity and reality.

• The normal suspects

• Some predictions.

India and China race ahead while commodity producers struggle.

3

Emerging Markets are still racing ahead. SA lagging.

Business surveys strongest in over a decade

World Trade is growing but at a vastly slower rate!!Container throughput in 85 harbours.

6

Change since 2011 (ties into commodity cycle).

Copyright economistscoza (#)

CONSUMER AND BUSINESS SIDE OF ECONOMY.

SA Assets are good and consumer debt is declining.

9

Longest decline will also now be biggest decline in household debt to household income.

10

11

Value of houses Owned by population group in 2016.

African Coloured Asian White

Value of houses

owned of total 55.6% 6.8% 5.1% 32.5%

Source: StatsSA General Household Survey. Middle values taken for value calculation by race. Owner own estimate.

63% of SA households own their own home. This is amongst the highest 40 countries in the worldSimilar to the UK 37th and Denmark 39th and a little lower than the USA but higher than Germany.6% stay on traditional land and can be converted to full title deed.About another 20% stay in RDP houses that can also be transferred.22% of African household own a second home five times the American rate.

SA assets in world context 2017.

Nominal $ terms.• Total assets for the country South Africa is in 34th in nominal dollar terms.

– More assets than Portugal but less than Saudi Arabia.– One third of ALL African assets.

• Average Assets of $21 849 less than Barbados but more than Turkey or Brazil. 59th place in the World– Other than Barbados SA has richest African majority population country in the

world!

• A median wealth of $5 136– That is 78th place in the world. Higher than Turkey lower than Serbia.– Other than the 2 islands of Mauritius; Seychelles & Gabon; the highest in

Africa!

• These Assets are Net assets and exclude vehicles, cows etc.• In PPP terms would be far higher than 34th place perhaps 25th or so.

Source: Credit Suisse

Vanity Sanity and reality

Burdens; profits and growth indicators.

Vanity is growing above inflation

This is why the money stays in the bank and not into new projects.

Reality is however very positive – even after inflation.

Tax to GDP burden compared over time.

10

12

14

16

18

20

22

24

26

28

30

1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015

Euro area World South Africa

SA is going has gone past 29% and close to 30% now!

SA invests more in other countries than they do here.

Copyright economistscoza (#)

The normal suspects

Some economic indicators for the property sector

Growth history & forecast from SARB.Private sector average for this year is 1,7% and 2% next

Copyright economistscoza 21

Per capita income SA vs. World:

22

Rand influences inflation. Many importers price R/$ at R15 anyway

Copyright economistscoza (#)

Retail sales growth. VAT; fuel and sugar taxes hurt

% change foreign tourists on year ago.(visitors staying overnight)

-10%

-5%

0%

5%

10%

15%

20%

25%M

ar-1

0

Jul-

10

No

v-1

0

Mar

-11

Jul-

11

No

v-1

1

Mar

-12

Jul-

12

No

v-1

2

Mar

-13

Jul-

13

No

v-1

3

Mar

-14

Jul-

14

No

v-1

4

Mar

-15

Jul-

15

No

v-1

5

Mar

-16

Jul-

16

No

v-1

6

Mar

-17

Jul-

17

No

v-1

7

Mar

-18

Visitors-Overnight (tourists)

Number of employers.Indication of need for commercial space?

600

650

700

750

800

850

900

Tho

usa

nd

s

Employers have gone from 2,5% of adults to 2,2%. This is a concern if SA wants to address unemployment

SO WHAT NOW?

Some quick predictions and thoughts on the economy future

Summary for 2018• World Growth best in three years.

– Slowing down now?

• SA business is doing alright but would get more confidence and real positive action would ignite a barrage of investment.

• SA consumer is better off as she has Assets and lower debt – Bounce back could be very good.

• Inflation slowly moving up so rate changes on hold for say 18 months.• Growth will be slower than expected OK for 2018 as VAT hike and

confidence are stumbling blocks.– Despite VAT increase Inflation should average below 6%. (5,1% average)

• SOE delivery on efficient delivery will take time.

2019 / 2020• 2019 SA may get to 2% growth but due to Eskom & Rand; inflation will increase to

around 6% - no rate relief• Consumer may start coming back near 2nd half of the year.• Unemployment will increase to closer to 30% by end 2019 or early 2020.• Many strikes and other protests to continue.

• 2020 should see better growth but with a slower world economy SA may only get say 2,5% or so.

• Inflation should fall back rate start to decline say 50 to 100 basis points.• SA should be addressing more issues such as getting low hang fruit such as tourism.

– SOE’s should be preforming better but some like SAA may no longer be what they are today.

• The building blocks will be getting into place.

It looks like the turn around has been made but the fruits will take time to ripen

The disaster of the last decade will take time and effort to undo. It is not clear that SA will just get higher growth. But SA

has some very hard & honest people working in all sectors and levels. We need to remain supportive of those and know that

crooks do not leave willingly.