2. Investment Opportunities: Balancing Act Presented by: Dawie Roodt 6 March 2008

3. “…The global economy grew by 5 per cent from 2003 to 2007. It was a period of robust expansion but also of widening international imbalances. Now there are storm clouds ahead...” - Minister Trevor Manuel, 2008 budget presentation

4. In This Presentation: 1.South African Economic Trends 2.Investment and the Business cycle 3.Balancing risk and return 4.Balanced portfolio

5. South African Economic Trends

6. Economic Trends Threats  More volatile Rand  Inflation pressure  Electricity crisis (effect on GDP?)  Low savings  Politics  Sub-USA crisis Opportunities  Commodity cycle  Export stocks  Infrastructure development  Manufacturing

7. 200620072008 M3 (end of year)23.1%23.7%19.8% PSCE (adj. end of year)27.6%22.2%16.6% CPIX (average)4.6%6.5%8.1% Prime (end of year)12.5%14.5% Current Account: Nom-R111.0bn-R138.2bn-R145.1bn Current Account: GDP-6.4%-7.0%-6.5% R/$ (end of year)7.046.848.40 GDP (full year)5.4%5.1%3.5% Economic Overview Financials - Banks Financials Retailers Positive for equity Negative for bonds Neutral equities Positive bonds (short term) Negative bonds (long term) Positive for rand hedges Negative for importers Negative for bonds Positive rand hedges Positive exporters Negative importers Negative bonds Negative equities Positive bonds

8. South Africa: GDP

9. GDP at Market Prices Source: StatsSA and own calculations

10. Monetary Policy

11. Pressure on the Rand… Inflation bracket Source: SARB and own calculations 9/11 Aftermath - Bull run -Stability - Emerging Market Appetite -US troubles - Emerging Market Risk rising - Global Inflation - Politics - Eskom

12. Inflation Inflation bracket Source: StatsSA and own calculations CPIX Ave: 5.9%

13. Interest rates Toothless SARB Source: SARB and own calculations

14. Debt Levels

15. Private Sector Credit Extension Source: SARB and own calculations

16. Household debt to disposable income Source: SARB and own calculations 44.5% 50.2% 56.9% 59.4%

17. Savings to disposable income of households Source: SARB and own calculations 9.2% 5.4% 2.6% 0.5%

18. Balance of Payments

19. Source: SARS and own calculations

20. Fiscal Policy

21. Background Gold Deficit Surplus

22. Investments and the Economic Cycle

23. Consumption Expenditure Source: South African Reserve Bank Positive for retailers and consumer goods

24. Gross Fixed Capital Formation Source: South African Reserve Bank Infrastructure boom

25. Total Exports and Imports Source: South African Reserve Bank Trade Account Deficit

26. Balancing Risk and Return

27. Resources Pro’s –Value of sales –Boom in commodity prices –Global demand for resources –Weaker rand inflates income Cons –Production problems (labour, electricity, deep gold mines, input costs) –Sustainability of high precious metal prices? –High P/E-ratio

28. Mining and Quarrying GDP at Market Prices Source: StatsSA and own calculations

29. Mining Value of Sales Inflation bracket Source: StatsSA Bull Run

30. Contribution of mineral groups to total value of mineral sales, 2006 Mining divisionPercentage contribution PGMs34.5% Gold18.7% Coal18.7% Iron Ore4.9% Nickel4.5% Copper2.7% Chromium1.1% Manganese Ore1.0% Other13.9% Total100.0%

31. Resources: Price and PE Inflation bracket Source: I-net

32. Industrials Pro’s – Infrastructure development – Manufacturing drive (auto industry, etc) – Weaker rand support exports Cons – Electricity supply – Slower growth?

33. Manufacturing GDP at Market Prices Source: StatsSA and own calculations

34. Manufacturing Value of Sales Inflation bracket Source: StatsSA

35. Contribution to total value of manufactured product sales, 2006 Manufacturing divisionPercentage contribution Basic iron and steel, metal products and machinery 22.2% Petroleum, chemical products, rubber and plastic 20.5% Food and beverages17.2% Motor vehicles, parts, accessories and other transport equipment 15.4% Wood and wood products, paper, publishing and printing 8.6% Other16.1% Total100.0% Source: StatsSA

36. Industrials: Price and PE Inflation bracket Source: I-net

37. Financials Pro’s –Interest rate cycle (Domestic and global) –Global competitive institutions –Value for money (P/E basis) Cons –Sub-USA crisis –Pessimism towards sector –Uncertainty

38. Finance, Real Estate and Business Services, GDP at Market Prices Source: StatsSA and own calculations

39. Financials: Price and PE Inflation bracket Source: I-net

40. Construction Pro’s –Infrastructure boom (2010) –Interest rate cycle (Domestic and global) Cons –Supply constraints –Electricity

41. Construction GDP at Market Prices Source: StatsSA and own calculations

42. Construction and Material: Price and PE Inflation bracket Source: I-net

43. Asset Allocation

44. Investment Options

45. Balanced Portfolio Asset ClassPortfolio WeightingAnalysis EquitiesNeutral (Sector specific) - Resources: strong but overvalued -Industrials: Electricity? -Financials: Uncertainty continues, undervalued - Construction: New projects? BondsUnder- Weaker rand - Inflation - Supply (Fiscal Surplus) CashNeutral - Interest rates

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