Manufacturing Bulletin Q Presentation : Media Briefing 8 December 2011 By Dr Iraj Abedian Pan-African Investment & Research Services(Pty) Ltd.

Slide # 2 Outline 1. Introduction 2. Overall Manufacturing Business Confidence 3. Current South African Manufacturing Trends 4. Manufacturing Survey Results: Q Concluding Remarks

Slide # 3 Introduction: Q Manufacturing Circle Survey Profile of Survey Participants

Overall Manufacturing Business Confidence

Current South African Manufacturing Trends

Rebound in Q Manufacturing Output Source: Statistics South Africa, Q GDP  Manufacturing activity rebounded to -1.9% q/q in Q3 2011, up from -8.8% in Q  This was driven by the tentative global economic environment and the disruptions in production caused by the prolonged strike action in Q  However, the sharp depreciation in the rand since August prevented a steep decline continuing into Q3. Manufacturing Output

Manufacturing Employment in Q Source: Statistics South Africa, Q Quarterly Labour Force Survey  Employment levels rose marginally in Q3 2011, as the sector created an additional 2000 jobs. Employment Trends in the Manufacturing Sector

Manufacturing Outlook Remains Hesitant Source: Bureau for Economic Research  Activity in the manufacturing sector is expected to remain sluggish on the back of a depressed global economic environment and moderating domestic demand. Kagiso Purchasing Manager’s Index

Manufacturing Survey: Q3-2011

Demand Conditions: Export-Orientation Profile  The ratio of domestic sales to total sales still outweighed that of exports, with 83% (previously 88%) of manufacturers shifting 60% or more of their allocations to the domestic market.

Demand Conditions: Domestic vs. Exports Sales

Supply Conditions: Input Costs and Ratio of Components  There was a significant acceleration in production costs as 94% of survey respondents recorded growth of up to 15% in total input costs. The key driver was a rapid increase in imported input costs (94% of manufacturing CEOs saw their imported input costs rise further in Q3).  This significant rise is in tandem with the rapid acceleration in producer prices.

Employment Conditions  Employment levels amongst the manufacturers surveyed improved in in Q The share of respondents who increased their employment levels by between 1 and over 5% rose from 30% in Q to 40% in Q  The skills set in the industry remains mediocre.

Labour Productivity and Regulatory Environment  On the balance labour productivity levels remained unchanged during Q  Even though the regulatory environment remained largely the same, there was a slight pick-up in survey respondents who were optimistic about the regulatory environment.

Financial Conditions  There was a slight widening in profit margins during Q in tandem with the increase in manufacturing sales.  The share of respondents who recorded a profit change of 15% and more doubled from the preceding quarter, to 16%.  There was a small increase in the number of respondents registering a debt to equity ratio of 65% or more.

Financial Conditions  There was a 10% increase in the share of respondents accessing finance at between JIBAR plus 3% and JIBAR plus 6%.

Concluding Remarks:  The manufacturing sector continues to face serious bottlenecks;  Based on the survey results, the domestic manufacturing sector should see further improvement during Q  However, the unfavourable global economic environment and moderating domestic demand will keep the growth in the sector contained.

Slide # 18 Thank you for your attention