1. © 2011 Trade Intelligence South African Economic Indicators November 2011

2. © 2011 Trade Intelligence Index Economic Growth (GDP)Economic Growth (GDP)3 Exchange RateExchange Rate5 Input PricesInput Prices7 InflationInflation13 Interest RatesInterest Rates18 EmploymentEmployment20 Household DebtHousehold Debt22 Consumer ConfidenceConsumer Confidence24 Retail SalesRetail Sales26 Market Overview

3. © 2011 Trade Intelligence Fig 1: GDP Growth Updated 01 December 2011 Market Overview Source: StatsSA 2008/2009 Recession Period of recovery Double dip? Boom period Economic Growth (GDP)

4. © 2011 Trade Intelligence Market Overview COMMENTARY GDP ticked up slightly from 1.3% in Q2 of 2011 to 1.4% in Q3 2011, coming in at lower than expected Growth forecasts for the rest of the year have been revised downward even further to 3.0%, and in some cases even lower The persistent climate of stagflation currently being experienced in South Africa means the country is slipping closer and closer to a point where activity could border on a recession, leading many analysts to believe there is a good chance of a rate cut being announced as early as January 2012. While an interest rate cut would stimulate activity, it will not however represent a quick fix for the economy – demand in exports is coming down due to problems in the Euro zone (South Africa’s biggest trading partner), unemployment remains high as does inflation, all factors contributing towards a shaky outlook. Economic Growth (GDP)

5. © 2011 Trade Intelligence Fig 1: Exchange Rate Updated 01 December 2011 Market Overview Source: StatsSA Euro officially launched 2008/2009 Recession & election uncertainty Rand fallout Euro debt crisis Exchange Rate

6. © 2011 Trade Intelligence Market Overview COMMENTARY The rand (along with other emerging market currencies) continues to weaken against all majors, reaching its lowest level in two and a half years against the US$ in late November The rand has depreciated by about 20% against the dollar, the euro and the pound so far this year This has the dual effect of keeping exports cheaper, but at the same time pushing inflation higher South Africans have been labeled as quite “schizophrenic” regarding their reaction to the rand. When it is strong, there are calls to weaken it in order to make exports cheaper, and when it is weak, we are dissatisfied because it puts pressure on inflation. Unfortunately, local policy makers have little control over the fate of the rand. It will wax and wane with the global environment. According to RMB, the trouble is not so much the level of the rand, but its volatility. In 2011 it fluctuated between R6,56/$1 and R8,58/$1, making international trade and long-term investment decisions more difficult to make, hurting business sentiment. Exchange Rate

7. © 2011 Trade Intelligence Fig 1: Oilseed Market Trends Updated 01 December 2011 Market Overview Source: FNB Prices drop due to larger than expected supplies in international markets Prices rise due to cut in US supply forecast Input Prices: Oilseed

8. © 2011 Trade Intelligence Fig 2: Cereal Market Trends Updated 01 December 2011 Market Overview Source: FNB Prices of yellow maize & white maize increased by ± 28% and 35% during 2011 Surplus of grains in international markets knocks prices Input Prices: Cereals (Maize, Wheat)

9. © 2011 Trade Intelligence Fig 3: Beef and Poultry Market Trends Updated 01 December 2011 Market Overview Source: FNB Prices rise due to increase in prices at producer level Input Prices: Beef & Poultry

10. © 2011 Trade Intelligence Fig 4: Vegetable Market Trends Updated 01 December 2011 Market Overview Source: FNB Prices dip due to increase in volumes Supplies decrease due to black frost in central and northern regions, pushing up prices Vegetable prices have historically been subject to volatility Input Prices: Vegetables

11. © 2011 Trade Intelligence Fig 5: Fuel Market Trends – Petrol, Diesel, Paraffin Updated 01 December 2011 Market Overview Source: FNB Decline in oil reserves, Middle East tension & oil price speculation Demand for energy drops due to recession Unrest in African oil producing countries Fuel price increase due to weak rand Input Prices: Fuel

12. © 2011 Trade Intelligence Market Overview COMMENTARY Electricity prices continue to impact businesses and consumers Vegetable prices experienced a dip across the board, with the prices of tomatoes, potatoes, carrots and cabbage decreasing Maize prices saw a slight drop in November According to the United Nations, food prices have doubled over the past five years indicating that the trend is an rising one. In the short-term, food inflation has mainly been attributed to the rise in the price of maize, and it is believed that the full effect of the maize price has not yet filtered down completely to influence meat and dairy prices due to production cycles. Input Prices

13. © 2011 Trade Intelligence Fig 1: CPI, CPIX and Food Inflation Updated 01 December 2011 Market Overview Source: StatsSA Fuel, electricity & food price increases 2008/2009 Recession Effects of lower demand Inflation

14. © 2011 Trade Intelligence Fig 1: CPI for Food, Personal Care, Alcoholic Beverages and Electricity and other Fuels Updated 01 December 2011 Market Overview Source: StatsSA Fuel and electricity price hikes push food prices up Alcoholic beverage prices remain stable Inflation

15. © 2011 Trade Intelligence Fig 1: CPI by Food Type Updated 01 December 2011 Market Overview Source: StatsSA Most food groups are experiencing inflation well above CPI levels of 6% Inflation: CPI by Food Type

16. © 2011 Trade Intelligence Fig 1: CPI by Province Updated 01 December 2011 Market Overview Source: StatsSA Only Gauteng and the Western Cape are experiencing inflation below CPI levels Inflation: CPI by Province

17. © 2011 Trade Intelligence Market Overview COMMENTARY CPI increased from 5.7% in September to 6% in October, its highest level since January 2010 PPI increased from 10.5% to 10.6% Food and non-alcoholic beverages inflation increased from 8.5% to 10.6% in October, its highest level since May 2009 The Reserve Bank expects inflation to peak at about 6,3% in the first quarter of 2012 before declining gradually and returning to within the target range in the final quarter October saw CPI reaching the Central Bank’s upper target of 6%. Analysts were of the opinion that the Bank may therefore start toying with the idea of cutting interest rates to boost the economy. Higher food and fuel costs have been driving the rise in prices, coupled with a rand exchange rate that has weakened close to 30% against the dollar this year. However Reserve Bank Governor Gill Marcus commented that “in the current climate we think we should watch (the breach) rather than respond to it”. It is therefore likely that the Reserve Bank will continue with its “wait and see approach” and consumers will have to deal with higher prices for a little while longer. NOTE: In January 2009, the official measure of inflation in South Africa switched from the CPIX, based on a basket of goods and services excluding bond repayments, to the CPI, which includes bond repayments, and is based on a basket which has been reweighted to be more representative of what the average South African household is spending its money on. Inflation

18. © 2011 Trade Intelligence Fig 1: Prime Lending Rate Updated 01 December 2011 Market Overview Source: South African Reserve Bank 2008/2009 Recession SARB takes aggressive steps to fight inflation SARB adopts ‘wait & see’ approach Interest Rates

19. © 2011 Trade Intelligence Market Overview COMMENTARY The prime lending rate remains at 9% as the Reserve Bank decided to leave the repo rate unchanged at 5.5% This is the lowest level since 1974 The prime interest rate is expected to stay unchanged at 9% until late next year due to global economic concerns and slow growth. This low interest rate environment has led to households reducing their debt to disposable income ratio from more than 81% three years ago to 75.9% in the second quarter of 2011. This means the cost of servicing debt as a percentage of disposable income of households also declined, leaving South African consumers with more disposable income. However, despite this positive shift, debt levels are still extremely high and this, coupled with high food and fuel prices will probably cause consumers to buy more non-durables, like food and clothing this Christmas, say analysts. While this is good news for South Africa’s major food retailers, it does mean that sales of higher margin goods such as general merchandise will probably be muted. Interest Rates

20. © 2011 Trade Intelligence Fig 1: Key Labour Market Components Updated 09 November 2011 Market Overview Source: StatsSA Expanded Public Works Programme introduced Effects of recession felt Employment

21. © 2011 Trade Intelligence Market Overview COMMENTARY The official unemployment rate went down from 25.7% to 25% in the third quarter of 2011 Restrictive labour laws and a lack of skills among the youth are two of the major problems currently facing the labour market today The number of persons in the labour force increased by 98,000 between Q2 2011 and Q3 2011 and formal sector employment increased by 238,000 jobs, while informal sector employment decreased by 53,000 jobs. It is hoped that the much discussed Youth Wage Subsidy will be implemented as planned on 1 April 2012, reducing chronic youth unemployment, aiding businesses which are struggling with high wage costs and increasing consumer spending. According to StatsSA, more than 72% of the officially unemployed population is younger than 34. Low levels of employment means fewer breadwinners in South African families and therefore lower disposable income. It is hoped though, that the country can build on the small improvement of the last quarter. Employment

22. © 2011 Trade Intelligence Fig 1: Percentage of Disposable Household Income Devoted to Debt Repayment Updated 09 November 2011 Market Overview Source: South African Reserve Bank Effects of low interest rates Boom period Household Debt

23. © 2011 Trade Intelligence Market Overview COMMENTARY Household debt dropped to 75.9% (Q2, 2011), meaning that for every R100 earned, households have R75.90 debt The level was described by Reserve Bank chief economist, Monde Mnyande as “relatively elevated” Q2 also showed a rise in YOY disposable income growth from 8.9% (Q1) to 9.9% Though the debt situation improved slightly in the second quarter, consumers are still experiencing high levels of financial vulnerability regarding debt. This is shown by the percentage of consumers with impaired records increasing from 46.4% (Q1) to 46.7% (Q2). Some analysts are of the opinion that although the ratio of household debt to disposable income is declining, this is taking place too slowly and as long as it remains relatively high, South Africans will continue to be in a vulnerable position and economic growth under threat. Household Debt

24. © 2011 Trade Intelligence Fig 1: Consumer Confidence Index Updated 01 December 2011 Market Overview Source: Bureau for Economic Research 2008/2009 Recession Boom period – High levels of GDP growth Period of recovery Consumer Confidence

25. © 2011 Trade Intelligence Market Overview COMMENTARY Consumer confidence increased by 1 index point in Q4 of 2011 to +5 (from +4 in Q3 of 2011) Consumer confidence increased due to a slightly higher percentage of consumers expecting an improvement in their household finances and a slightly lower percentage rating the present as the wrong time to buy durable goods relative to Q3 of 2011 However, these increases were partially countered by a decline in the percentage of consumers that expect the economic situation in South Africa to improve over the next 12 months In Q4 of 2011 consumers became even more pessimistic about the economy, but slightly more optimistic about their own finances. Consumer confidence remains above average though, supportive of consumer spending. This means that consumers will spend the bulk of any increases in real disposable income going forward. However, accelerating inflation will likely dent the growth in real disposable income over the short term, which will probably lead to lower growth in consumer spending given the limited access to bank credit. Consumer Confidence

26. © 2011 Trade Intelligence Fig 1: Retail Trade Sales (R’m) Updated 01 December 2011 Market Overview Source: South African Reserve Bank Spikes indicate festive season sales peaks Retail Sales

27. © 2011 Trade Intelligence Fig 2: Retail Trade Sales (R’m) – Trended Updated 01 December 2011 Market Overview Source: StatsSA. Measure: Economic activity in the retail trade based on a sample of income tax registered private & public enterprises (incl VAT). Consists of food, beverages & tobacco (largest contributor ± 35%), pharmaceutical & medical goods, cosmetics, toiletries, household furniture, appliances, articles & equipment, repair of personal & household goods, hardware, paints & glass, textiles, clothing, footwear & leather goods. Effects of 2008/2009 Recession felt Boom period Positive retail environment despite economic uncertainty Retail Sales: Trended

28. © 2011 Trade Intelligence Market Overview COMMENTARY Retail sales growth for September unexpectedly accelerated to 8.3% compared to September 2010, when the market had expected growth of 6.4% The highest growth rate was recorded by retailers in hardware, paint and glass while retailers of food, beverages and tobacco in specialised stores experienced a 0% YOY increase in retail sales for the month Analysts believe that this level of growth is unsustainable and must be considered in light of the soccer World Cup last year, which had caused a spike then created a lower base for the current results. It is however an indication that the low interest rates, slightly improved employment levels and high nominal income levels are supporting some South African consumers, although food retailers seem to be suffering from high food inflation levels globally. With household debt still so high, consumers are expected to spend cautiously this festive season. Retail Sales

29. © 2011 Trade Intelligence Disclaimer These materials and the information contained herein are collated by TI* referencing a wide range of public domain data sources, face-to-face interviews, retailer presentations and financial reports, and are intended to provide general information about the South African consumer goods trading environment and selected retailers, and are not intended as an exhaustive treatment of such subjects. Whilst every effort has been made to ensure that the information published in this work is accurate, your use of these and the information contained herein is at your own risk. The information is not intended to be relied upon as the sole basis for any decision which may affect you or your business, and TI makes no express or implied representations or warranties regarding the accuracy of the information herein. TI will not be liable for any special, indirect, incidental, consequential, or punitive damages or any other damages whatsoever, whether in an action of contract, statute, tort (including, without limitation, negligence), or otherwise, relating to the use of these materials and the information contained herein. TI expressly disclaims all implied warranties, including, without limitation, warranties of merchantability, title, fitness for a particular purpose, non- infringement, compatibility, security, and accuracy. * TI refers to The Retail Workshop (Pty) Ltd trading as Trade Intelligence For further information: +27 (0)31 303 2803 / info@tradeintelligence.co.zainfo@tradeintelligence.co.za Other Sources ABSA Agri Trends; BizCommunity; Bloomberg; Business Day; Business Report; Department of Agriculture, Forestry and Fisheries; Financial Mail; Finweek; Fin 24; The Mercury; Reuters; Sunday Times; Sunday Tribune; The Times ; www.businesslive.co.za; www.businessweek.com; www.moneyweb.co.za; www.supermarket.co.za