SA’s finances

Building for flexibility Source: BCA

Transmission channels: Collateral damage Transmission channels: Investment flows Remittances Donor flows Trade (prices/volumes)

Resources friction Source: BCA

Sectoral trends: revenue and employment risks 6% 22% Per cent year-on-year (real) 21% 16% 6% Sources: SARB, Statistics South Africa, Standard Bank Group

State finances: credible and consistent Per cent of GDP 1993/1994 2008/2009 Total net loan debt 41.9 20.8 Budget balance -10.1 0.1 State debt costs 4.0 2.3 Non-interest expenditure (percent of total expenditure) 82.0% 91.5% Sources: National Treasury, Standard Bank Group

Favorable judgment (until recently) Source: South African Reserve Bank

Fragile underlying fiscal health Cyclical component Actual budget balance Structural budget balance Source: South African Reserve Bank

End to public sector investment strike… Sources: SARB, Standard Bank Group

Short-term multiplier Multiplier thrust Fiscal multipliers Short-term multiplier Long-term multiplier Personal income tax relief 0.6 0.5 Non-wage consumption 0.7 0.3 Investment 0.9 1.8 Source: Standard Bank Group

End to public sector investment strike… Source: National Treasury

Global: South Africa: demand crunched; creative destruction (Sharp) interruption in secular growth trend Public finances face “under-delivery” risk Budget balanced for cohesion and growth

This document does not constitute an offer, or the solicitation of an offer for the sale or purchase of any investment or security nor the agreement to enter into any transaction. This is a commercial communication and recipients hereof are required to obtain their own independent advice as to the contents and implications hereof. Should the information lead you to consider entering into any transaction in relation to a financial product you must take note of the following: There are intrinsic risks involved in transacting in any products. No guarantee is provided for the investment value in a product. Any forecasts based on hypothetical data are not guaranteed and are for illustrative purposes only. Returns may vary as a result of their dependence on the performance of underlying assets and other variable market factors. Past performances are not necessarily indicative of future performances. Unless a financial needs analysis has been conducted to assess the appropriateness of the product, investment or structure to your unique particular circumstances, the Standard Bank Group Limited (“SBG”), cautions you that there may be limitations on the appropriateness of the information for your purposes and you should take particular care to consider the implications of entering into the transaction, either on your own or with the assistance of an investment professional. There may be various tax implications to consider when investing in the product and you must be aware of these implications before investing. SBG does not accept liability for the tax treatment by any court or by any authorities in any jurisdiction in relation to any transaction based on the information. It is strongly recommended that individual tax advice be sought before entering into any such transaction. Whilst every care has been taken in preparing this document, no representation, warranty or undertaking (express or implied) is given and no responsibility or liability is accepted by the Standard Bank Group Limited (“SBG”), its subsidiaries, holding companies, affiliates directors, employees or professional advisors as to the accuracy or completeness of the information contained herein. All opinions and estimates contained in this report may be changed after publication at any time without notice. Members of SBG, its directors, officers and employees may have a long or short position in currencies or securities mentioned in this report or related investments, and may add to, dispose of or effect transactions in such currencies, securities or investments for their own account and may perform or seek to perform advisory or banking services in relation thereto. SBG, its holding companies, subsidiaries, shareholders, directors, employees and professional advisors shall not be liable for any claims, liability, damages (whether direct or indirect, actual or consequential), loss, penalty, expense or cost of any nature whatsoever which you may sustain as a result of you entering into any proposed transaction/s, or acting upon any information, set out in this document. This document is not intended for the use of private customers. This document must not be acted on or relied on by persons who are private customers. Any investment or investment activity to which this document relates is only available to persons other than private customers and will be engaged in only with such persons. In European Union countries this document has been issued to persons who are investment professionals (or equivalent) in their home jurisdictions. Neither this document nor any copy of it nor any statement herein may be taken or transmitted into the United States or distributed, directly or indirectly, in the United States or to any U.S. person except where those U.S. persons are, or are believed to be, qualified institutions acting in their capacity as holders of fiduciary accounts for the benefit or account of non U.S. persons. The distribution of this document and the offering, sale and delivery of securities in certain jurisdictions may be restricted by law. Persons into whose possession this document comes are required by SBG to inform themselves about and to observe any such restrictions. You are to rely on your own independent appraisal of and investigations into (a) the condition, creditworthiness, affairs, status and nature of any issuer or obligor referred to and (b) all other matters and things contemplated by this document. Any pricing set out herein is only indicative and SBG shall not be bound to any such pricing. This document has been sent to you for your information and may not be reproduced or redistributed to any other person. By accepting this document, you agree to be bound by the foregoing limitations. Unauthorised use or disclosure of this document is strictly prohibited. Copyright 2005 Standard Bank Group. All rights reserved. "The Standard Bank of South Africa Limited (Reg.No.1962/000738/06). Authorised Financial Services Provider"

End