Authorised Financial Services Provider – FSP No: 859

The Volatile Global Economy Where do we stand? Presented by: Dawie Roodt IEASA Conference 17 June 2009

Where did the Trouble Start?

Nasdaq Bubble U.S. Interest Rate Source: I-Net, Efficient Research, 2008 Subprime Market Emerges….

Subprime Housing Market ‘Subprime’ = –A loan that is offered at a rate above prime (0.1% - 0.6% higher) to individuals who do not qualify for prime rate loans. …… “NINJA” loans

It’s All In The Packaging Subprime Loan RISK CAPITAL Sell Re-sell Sell

Subprime Bubble Bursts Credit Crises Nasdaq Bubble U.S. Interest Rate Inflation Source: I-Net, Efficient Research, 2009

Consequences….. U.S. Institutions –Bear Sterns, Lehman Brothers, Merrill Lynch bankrupt or taken over –AIG, Fannie Mae, Freddie Mac bailed out U.K. & Europe –Northern Rock Iceland = Bankrupt! Credit Market Freeze……

Emergency Rescue Plans U.S. –$700bn bailout package –Cut interest rate to near zero –Fed doubles its auctions to banks ($900bn) –Quantitative Easing etc. –Huge fiscal stimulus – state debt soars U.K. & Europe –Purchase of preference shares in institutions –BOE & ECB Interest rate cut to historic lows & more to follow? –Guarantees private & retail deposits –Quantitative Easing in U.K. etc. –Huge fiscal stimulus – state debt soars G20 Meeting IMF Germany €400bn China Cuts i% $$$

Consequences.. Financial Markets Real Economy

Economic Growth Source: IMF World Economic Outlook, 2009 First Combined Recession since WWII

What About Us?

Economic Position; 2008 (PPP US$) Brazil, Russia, India Source: World Fact Book, 2008 Spain Canada “Other” – SA 30 th

Countries Compared to Provinces Source: UN

Slowing International Demand Source: SARS, 2008 Other 8.0% Recession Slower Growth

What Do We Export? Source: SARS, 2008 Mining Manufacturing

Important Indicators CA Balance: GDP -7.5%-4.8%

Source: SARB, 2009 C/A Deficit Funding “Hot Money” -DANGER- ??

Balance of Payments Source: SARS and own calculations

Important Indicators CA Balance:GDP-7.5%-4.8% Rand (end of yr) R9.52R9.00

Dollar Strength Source: I-Net, 2009

Rand Weakness Source: I-Net, 2009

Commodity Prices Source: I-Net, 2009 Mid-2002 level

Important Indicators CA Balance:GDP-7.5%-4.8% Rand (end of yr) R9.52R9.00 Inflation (CPI, average) 11.6%7.0% Interest Rate (Prime, end of yr) 15.0%10.5%

Source: StatsSA and own calculations CPI Average 2009: 7.0% Inflation

Source: StatsSA and own calculations Real Interest Rates

Source: Efficient Research, 2009 Zero

Important Indicators CA Balance:GDP-7.5%-4.8% Rand (end of yr) R9.52R9.00 Inflation (CPI, average) 11.6%7.0% Interest Rate (Prime, end of yr) 15.0%10.5% HH savings-0.4%0.1%

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

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

Important Indicators CA Balance:GDP-7.5%-4.8% Rand (end of yr) R9.52R9.00 Inflation (CPI, average) 11.6%7.0% Interest Rate (Prime, end of yr) 15.0%10.5% HH savings-0.4%0.1% Economic Growth (full year) 3.1%-1.5%

Die Recession Topic Source: StatsSA and Efficient Group forecast Technical Recession

GDP Sectors

Important Indicators CA Balance:GDP-7.5%-4.8% Rand (end of yr) R9.52R9.00 Inflation (CPI, average) 11.6%7.0% Interest Rate (Prime, end of yr) 15.0%10.5% HH savings-0.4%0.1% Economic Growth (full year) 3.1%-1.5% Fiscal Balance:GDP -1.2%-4.5%

Revenue and Expenditure

Spending Priorities

Social Grants Beneficiary Numbers Grant Type (‘000) Projected % Change Old Age Grant2,0222,2192, % Disability Grant9531,4131, % War Veterans Grant % Foster Care Grant % Care Dependency Grant (disabled) % Child Support2,6308,1969, % Total5,80812,37413, % Source: 2008 Budget 2009: 13,4m recipients 28.0% of SA population

Fiscal Balance Source: SARB Forecast: Efficient Group

State Debt Source: SARB Forecast: MTBPS, Efficient Domestic debt: R485.5bn Foreign debt: R81.9bn

Housing Trends

Source: Absa House Price Index, StatsSA and own calculation Low interest rates Asian Crises Pre-Election Uncertainty Rubicon Speech Gold Sub-Prime

Monthly Mortgage Repayments (Calculated over period of 20 years) Source: Absa Interest Rates and Property, May ’09 Household savings…?

Factors impacting the property market – Sellers’ View Source: FNB Property Barometer, Q109

How Hot is the Market…? Source: FNB Property Barometer, Q Q1: 86.0%

Source: FNB Property Barometer, Q109 5 months How Hot is the Market…? 1 month

Absa House Price Index Source: Absa House Price Index, May ’09 April 2009: -10.7% y/y (real)

Source: FNB Property Barometer, Q Q1: 15.0% Any Opportunities…?

Source: FNB Property Barometer, Q Q1: 11.0% Any Opportunities…?

Asset Classes

Performance: Different Asset Classes Source: Asset Performance Survey 2008, Credit Suisse Standard Securities

Authourised Financial Services Provider – FSP No: 859