the faults in our stars goolam ballim. the outlook for the global and african economies

The Faults in our StarsGoolam Ballim

The outlook for the global and African economies

STANDARD BANK GROUP STRATEGY / PAGE 3 /

Index: 1995 = 100

Untangling structural and cyclical patterns

Central & Eastern Europe

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140

120

240

360

480

600

720

LATAM & the Caribbean

Developing Asia

World

Real GDP index

SSA


GDP growth: index, 1995 = 100

Broad-based gains; “reformers” most prosperous

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140

100

200

300

400

500

600

Real GDP index

S6 - Bfs, Eth, Moz, Rwa, Tnz, Uga

Select 6

Oil exporters

Low income

SSA

Middle incomeFragile countries


0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 40

1

Sudan

0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0

Angola

Ghana

Kenya

Zambia

Ethiopia

Uganda

Tanzania

4.5

Nigeria (7.9m)

S.Sudan, 2030

Ethiopia, 2030

Tanzania, 2030

Uganda, 2030

Mozambique, 2030

Zambia, 2030

Kenya, 2030

Angola, 2030 Sudan, 2030

Ghana, 2030

Nigeria, 2030 (20.4m)

Total middle-class households (including lower-middle class, mn (2014, 2030)

Middle-class households (including lower-middle class) as a share of total HHs (2014, 2030), %

0

5

2520

15

10

45

40

35

30

50

Middle-income gains by 2030


Global

In China’s grip


Earlier Chinese growth was robust, buoyed by credit…

Mar-03

Jun-03

Sep-03

Dec-03

Mar-04

Jun-04

Sep-04

Dec-04

Mar-05

Jun-05

Sep-05

Dec-05

Mar-06

Jun-06

Sep-06

Dec-06

Mar-07

Jun-07

Sep-07

Dec-07

Mar-08

Jun-08

Sep-08

Dec-08

Mar-09

Jun-09

Sep-09

Dec-09

Mar-10

Jun-10

Sep-10

Dec-10

Mar-11

Jun-11

Sep-11

Dec-11

Mar-12

Jun-12

Sep-12

Dec-12

Mar-13

Jun-13

Sep-13

Dec-13

Mar-14

Jun-14

Sep-14

Dec-14

Mar-15

0

10

20

30

40

Percent year-on-year

Total social financing

Nominal GDP growth


… now, a structural slowdown has been unmasked…

Jan-10

Feb-10

Mar-10

Apr-10

May-10

Jun-10

Jul-10

Aug-10

Sep-10

Oct-10

Nov-10

Dec-10

Jan-11

Feb-11

Mar-11

Apr-11

May-11

Jun-11

Jul-11

Aug-11

Sep-11

Oct-11

Nov-11

Dec-11

Jan-12

Feb-12

Mar-12

Apr-12

May-12

Jun-12

Jul-12

Aug-12

Sep-12

Oct-12

Nov-12

Dec-12

Jan-13

Feb-13

Mar-13

Apr-13

May-13

Jun-13

Jul-13

Aug-13

Sep-13

Oct-13

Nov-13

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Jan-15

Feb-15

Mar-15

Apr-15

May-15

Jun-15

Jul-15

45.0

47.5

50.0

52.5

55.0

57.5

2

6

10

14

18

22

China PMI – left scale

China industrial production – right scale

Index Percent year-on-year


... and China is a large global risk

China now EM at risk now Asia 1997 Peripheral Europe 20110

3.6

7.2

10.8

14.4

18

Share of world GDP (PPP weights)


EM growth is highly correlated to China

Pol

and

Indi

a

Bra

zil

Hon

g K

ong

SA

R

Sou

th A

fric

a

Cze

ch R

epub

lic

Tai

wan

Pro

vinc

e of

Chi

na

Chi

le

Rus

sia

Per

u

Tur

key

Ital

y

Isra

el

Ger

man

y

Sw

eden

Fra

nce

Spa

in

Japa

n

Rom

ania

Mex

ico

Aus

tral

ia

Kor

ea

Tha

iland

Den

mar

k

Indo

nesi

a

Uni

ted

Kin

gdom

Phi

lippi

nes

Uni

ted

Sta

tes

Nor

way

New

Zea

land

Can

ada

Hun

gary

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

EM average

DM average

Correlation coefficient: overall (2000-present)


Like most EMs, key African economies are tied to China…

Angola South Africa Nigeria Zambia Uganda Kenya Ethiopia Tanzania Mozambique0.00

0.20

0.40

0.60

0.80

1.00Correlation coefficient: overall (2000-present)


… with commodity-centric nations most vulnerable…

Guinea

26%

86%

Botswana

27%

92%

Zambia

13%

73%

Rep of Congo

74%%

76%

Cameroon

24%

51%

Nigeria

14.4%

97%

Gabon

66%

84%

Namibia

27%

39%

Angola

56%

97%

Cote d’Ivoire

20%

15%

LEGEND

Mining (% of GDP)

Fuel, Minerals & Metals (% of Exports)

Ghana

17%

46%

(South) Sudan

60%

78%

Hydro carbon exporters

Non-oil resources


… as already evinced by floundering exports…

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140

20

40

60

80

100

120

African imports from China

African exports to China

USD billion


... and across product types…

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140

2

4

6

8

10

0

10

20

30

40

50

60

Iron ore

Crude oil – right scale

Copper

Platinum

USD billion


… with oil economies most exposed…

Sudan (North + South)

DRC

Congo

Angola

Eq.Guinea

Egypt

Africa (total)

Ghana

Gabon

Cameroon

Libya

Chad

Algeria

Nigeria

0 10 20 30 40 50 60 70 80 90 100

Crude oil exports to China as a share of crude oil exports to the world (%), 2014


… resulting in mixed GDP growth prognosis

EthiopiaMozam-biqu

eTanza-niaKenya

ZambiaGhana

Uganda

NigeriaAn-golaSouth

Africa

0 2.2 4.4 6.6 8.8 11

10.8

7.3

6.45

5.19

7.6

7.32

6.95

7.39

10.13

3.01

8.37

7.46

7.13

7.02

7.1

6.36

5.61

4.99

4.52

2.17

Percent

3-year forecast2005-2014 average


Slowing international trade


… resulting in a structural world trade slowdown

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20130

4000

8000

12000

16000

20000

USD billion

Exports

Imports


South Africa: waiting to exhale


SA stands on rating precipice…

'94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14

S&P

Moody’s

Fitch

B+

BB-

BB

BB+

BBB-

BBB

BBB+

A-

A

A+

B

B1

Ba3

Ba2

Ba1

Baa3

Baa2

Baa1

A3

A2

A1

B2

Non-investment grade


… with market pricing signaling concern

2004 - 2014 Aug-15 H2:16 est0

100

200

300

400

500

600

700

800

900

1000

341

216290

142

238

273

345 366

375

Basis points

ZAR risk premium

Credit risk premium

Risk free rate


Poor GDP growth blights SA’s status…

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015f 2016f-2

0

2

4

6

GDP growth, annual percent

2% average

4.8% average

1.3% aver-age


… but, corporate SA outperforms…

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 20154

8

12

16

20

24

-34

-17

0

17

34

51

Annual percent Annual percent

3136 38

35

18

13.5 11

14.5

10

7.5Nominal GDP growthEarnings per share growth – ALSI (RHS)


… VAT is resilient…

2011

28 Feb 2011

31 Mar

2011

30 Apr

2011

31 May 2011

30 Jun 2011

31 Jul 2011

31 Aug 2011

30 Sep 2011

31 Oct

2011

30 Nov 2011

31 Dec 2011

2012

29 Feb 2012

31 Mar

2012

30 Apr

2012

31 May 2012

30 Jun 2012

31 Jul 2012

31 Aug 2012

30 Sep 2012

31 Oct

2012

30 Nov 2012

31 Dec 2012

2013

28 Feb 2013

31 Mar

2013

30 Apr

2013

31 May 2013

30 Jun 2013

31 Jul 2013

31 Aug 2013

30 Sep 2013

31 Oct

2013

30 Nov 2013

31 Dec 2013

2014

28 Feb 2014

31 Mar

2014

30 Apr

2014

31 May 2014

30 Jun 2014

31 Jul 2014

31 Aug 2014

30 Sep 2014

31 Oct

2014

30 Nov 2014

31 Dec 2014

2015

28 Feb 2015

31 Mar

2015

-8

0

8

16

24

5

7

9

11

13

Value-added tax collections - left scale

Nominal household spending growth – right scale

Percent year-on-year, smoothed


… and personal income tax is buoyant …

2011

28 Feb 2011

31 Mar

2011

30 Apr

2011

31 May 2011

30 Jun 2011

31 Jul 2011

31 Aug 2011

30 Sep 2011

31 Oct

2011

30 Nov 2011

31 Dec 2011

2012

29 Feb 2012

31 Mar

2012

30 Apr

2012

31 May 2012

30 Jun 2012

31 Jul 2012

31 Aug 2012

30 Sep 2012

31 Oct

2012

30 Nov 2012

31 Dec 2012

2013

28 Feb 2013

31 Mar

2013

30 Apr

2013

31 May 2013

30 Jun 2013

31 Jul 2013

31 Aug 2013

30 Sep 2013

31 Oct

2013

30 Nov 2013

31 Dec 2013

2014

28 Feb 2014

31 Mar

2014

30 Apr

2014

31 May 2014

30 Jun 2014

31 Jul 2014

31 Aug 2014

30 Sep 2014

31 Oct

2014

30 Nov 2014

31 Dec 2014

2015

28 Feb 2015

31 Mar

2015

4

8

11

15

18

Percent year-on-year, smoothed

Nominal Personal disposable income

Personal income tax


Summary


Summary

• Global: China and world trade subsidence

• Rest of Africa: reformers will be resilient

• South Africa: private sector is the nation’s scaffolding

5 Simmonds Street Johannesburg 2001 / P O Box 7725 Johannesburg 2000Tel +27 (0)11 636 9112 / Fax +27 (0)11 636 6299 / Mobile +27 (0)00 000 000

standardbank.com

ThankYou


End of commodities super-cycle…

1970s 1980s 1990s 2000s 2010s 2020s 2030s 2040s 2050s 2060s 2070s0

1

EM

EM

EM

Commodities(Energy, maize,

meat, copper)

Low-enddurables

(Stove, cars)

High-enddurables (Luxurycars, satellite TV)

Services(Tourism, insurance,

advertising)

EM

the faults in our stars goolam ballim. the outlook for the global and african economies

Documents

oil economies

em growth

chinese growth

sbruntangling structural

structural slowdown

lowermiddle class

key african economies

resilientsouth africa