Economic recovery

beckons –

If the NDP is implemented

Dr Roelof Botha

Introducing –Optimum Financial Services Group (an authorised FSP)

International best practice for ethical standards

Highest possible professional practice standards

Strict international competence for investment research & analysis

Offices in Pta, Cape Town, George, Bloemfontein, Upington & Vanderbijlpark

Senior financial advisers in all nine Provinces

Integrated services include: Life & risk cover, Investment, Health & Legal

Returns on Optimum products feature in the top quartiles for most classes

Access to investment platforms of all major investment houses

Tailor-made solutions for comprehensive financial planning

Optimum BCI Balanced Fund (% weighting)

Offshore fixed

income - 6 Local equity - 36

Local fixed

income - 31

Local bonds - 6Local property - 4

Offshore equity -

17

4

Local Equities

80

90

100

110

120

130

140

TOTAL RETURN = 24%

Investment return on equities when p/e ratio is relatively high (at start)

5

Local Equities

100

120

140

160

180

200

220

240

03

-Jan

-12

03

-Mar

-12

03

-May

-12

03

-Ju

l-1

2

03

-Se

p-1

2

03

-No

v-1

2

03

-Jan

-13

03

-Mar

-13

03

-May

-13

03

-Ju

l-1

3

03

-Se

p-1

3

03

-No

v-1

3

03

-Jan

-14

03

-Mar

-14

03

-May

-14

03

-Ju

l-1

4

03

-Se

p-1

4

03

-No

v-1

4

03

-Jan

-15

03

-Mar

-15

03

-May

-15

03

-Ju

l-1

5

03

-Se

p-1

5

03

-No

v-1

5

03

-Jan

-16

03

-Mar

-16

03

-May

-16

03

-Ju

l-1

6

03

-Se

p-1

6

03

-No

v-1

6

03

-Jan

-17

03

-Mar

-17

03

-May

-17

03

-Ju

l-1

7

03

-Se

p-1

7

03

-No

v-1

7

Investment return on equities when p/e ratio is relatively low (at start)

TOTAL RETURN = 117%

6

Performance

YTD

Group/Investment

Return

(Cumulative)

Peer group

rank

Peer group

quartile

(ASISA) South African MA Medium Equity

Optimum BCI Balanced A 6.35 13 1

Number of investments ranked 59 59

Peer Group Median 5.21

(ASISA) South African MA High Equity

Optimum BCI Managed Growth A 5.90 27 1

Number of investments ranked 145 145

Peer Group Median 4.55

(ASISA) South African MA Low Equity

Optimum BCI Stable A 7.18 10 1

Number of investments ranked 105 105

Peer Group Median 4.78

2019/01/01

2019/08/15

OPTIMUM Performance year-to-date (selection)

Focus on agriculture &

sub-Saharan Africa

Total Primary Agriculture Output

R290bSecondary Agriculture

(Processing)

R465b

Wholesale trade R411b

Retail trade R413b

Restaurants & caterers R51b

Electricity & Water R46bn

Finance R185b

Estimated output

(turnover) for all

agricultural activity

In SA - 2017

CommunicationR75b

Transport & Construction R31b

Total linked turnover R1.97

trillion

Meat, fish, fruit & veg

Dairy

Grain mills

Beverages

Tobacco

Sawmilling

Leather products

Other food

Agriculture Value Added R100

Primary agriculture trade balance (R126b surplus since 2013)

(Source: SARS)

0

10

20

30

40

50

60

70

80

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Exports

Imports

R billion

Bestemming van Suid-Afrika se voedseluitvoere –

Januarie tot Junie 2019 (Bron: Statistiek SA)

Res van Afrika -

3.4

Europa - 20.7

Asië/Oseanië -

14.1

Namibië - 4.6

Mosambiek - 3.7

Amerika - 3.6

Botswana - 4.9

Res van SADC -

10.6

Totaal: R65.6 miljard

GDP in 2018 – Selected countries in SSA(Source: IMF)

0 50 100 150 200 250 300 350 400

Cameroon

DRC

Côte d'Ivoire

Tanzania

Ghana

Ethiopia

Kenya

Angola

South Africa

Nigeria

$bn

(Total

$1.3t)

GDP in 2018 – Selected countries in SSA (minnows)

(Source: IMF)

0 5 10 15 20 25 30 35 40

Namibia

Mauritius

Mozambique

Botswana

Senegal

Zambia

Uganda

Cameroon

$bn

(Total

$177b)

GDP per capita (at PPP) 2018 – Selected countries in SSA(Source: IMF)

0 3 6 9 12 15 18 21

Cameroon

Zambia

Côte d'Ivoire

Nigeria

Ghana

Angola

Namibia

South Africa

Botswana

Mauritius

$’000

% Increase in real GDP per capita (at PPP) 2018 –selected countries in SSA (Source: IMF)

0 1 2 3 4 5 6 7 8

Senegal

Uganda

Zambia

DRC

Kenya

Mozambique

Côte d'Ivoire

Mauritius

Tanzania

Ghana

Rwanda

Ethiopia

%

Population in 2018 – selected countries in SSA(Source: IMF)

0 30 60 90 120 150 180

Cameroon

Côte d'Ivoire

Angola

Ghana

Mozambique

Uganda

Kenya

Tanzania

South Africa

Ethiopia

DRC

Nigeria

Million

people

(Total

718m)

% Increase in population 2008 - 2018 – Selected countries in SSA (Source: IMF)

25 27 29 31 33 35

Rwanda

Cameroon

Ghana

Côte d'Ivoire

Kenya

Nigeria

Mozambique

Senegal

Angola

DRC

Zambia

Uganda

%

Increase

= 170m

(SSA18)

Per capita GDP at PPP (in rand terms, based on 2011 international dollar) (Sources: World Bank; own calculations)

0

100

200

300

400

500

600

SSA Asia South America M/East & North

Africa

Eastern Europe Advanced

R’000

Avg. formal sector salary in SA

Avg. formal sector salary in SA at PPP

Essential enablers

• Property rights

• Adequate infrastructure

• Supporting trade policy

Important enablers

• Standards & regulations

• Sufficient research & development

• Access to financial services

Useful enablers

• Ease of doing business

• Business development services

• Business linkages

Enabling factors for developing food and agriculture

value chains

Obstacles to

growth & other

challenges

Consumption expenditure by general government as % of GDP – selected countries (Source: World Bank)

5 8 11 14 17 20 23

Nigeria

India

Mexico

Chile

US

Turkey

Argentina

Germany

Russia

Brazil

South Africa

France

%

Employment in general government and in manufacturing(Source: SARB)

75

80

85

90

95

100

105

110

115

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Jun-

18

Index; 2010 = 100

Manufacturing

Government

Venezuela - real per capita GDP since nationalisation of land (Source: World Bank)

10

11

12

13

14

15

16

17

18

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

$’000

Zimbabwe & Zambia – nominal GDP before & afterradical land reform (EWC) (Note: 2-year moving avg; Source: World Bank)

0

3

6

9

12

15

18

1992 1994 1996 1998 2000 2002 2004 2006 2008

$ billion

Expropriation starts

In Zimbabwe

Zambia

Zimbabwe

Real GDP forecasts based on a 10-lag model (high & low growth) and EWC scenario 1 (Sources: Stats SA; own calculations)

1.19

1.21

1.23

1.25

1.27

1.29

Q1 2018 2 3 4 Q1 2019 2 3 4 Q1 2020 2 3

R trillion

Note: Quarterly figures at 2018 p

Scenario 1 - expropriation

Scenario 3 – no EWC

& higher growth

Scenario 2 – no EWC

& modest growth

Capital formation/GDP ratios for selected countries & world average - 2017 (Source: World Bank)

10 15 20 25 30 35 40

South Africa

Rwanda

World

Uganda

Australia

India

Botswana

Tanzania

Zambia

Ethiopia

China

%

R 865 bn

Convergence of total ATMs – ACSA airports (5) & non-ACSA airports (6) (Note: Excluding OR Tambo)

71

74

77

80

83

86

Q4'14

Q1'15 2 3 4

Q1'16 2 3 4

Q1'17 2 3 4

Q1'18 2 3 4

Q1'19

Acsa

Non-Acsa

‘000

Growing gap since 2015 between real GDP growth & the real prime rate (Sources: Stats SA; own calculations)

-1

0

1

2

3

4

5

6

Q1'12 3

Q1'13 3

Q1'14 3

Q1'15 3

Q1'16 3

Q1'17 3

Q1'18 3

Q1'19

%

Note: Year-on-year GDP growth rates

Real prime rate

GDP growth rate

Ratio of household debt to household disposable income(Sources: SARB)

70

71.5

73

74.5

76

77.5

79

80.5

Q1'12 3

Q1'13 3

Q1'14 3

Q1'15 3

Q1'16 3

Q1'17 3

Q1'18 3

Q1'19

%

Extent to which real SA repo rate exceeds real central bank rates – selected countries (July 2019)

0 50 100 150 200 250 300 350 400 450

Brazil

Chile

US

Australia

Average

Poland

UK

Eurozone

Basis

points

(Sources: Trading economics; own calculations)

Demand side composition of GDP at constant 2019 prices(Source: Stats SA)

0

100

200

300

400

500

600

700

Capital

formation

Gov exp Exports Imports H/Hold exp

Q1'17

Q1'18

Q1'19

R billion

Only decline

% Change in key household expenditure items Q1’19 (y-o-y)

(Source: Stats SA)

-4 -3 -2 -1 0 1 2 3

Recreation & hotels

Housing & utilities

Clothing

Furnishings

Food

Education

Health

Alcohol

%

Communication

Transport

The recession is over – prepare for higher growth

Dr Roelof Botha

The Ramaphosa effect

Distribution of national assembly votes by major parties –

what has changed? (Sources: IEC; own calculations)

0

10

20

30

40

50

60

70

2004 2009 2014 2019

ANC/EFF

DA/moderates

%

(Note: EFF since 2014)

Recent volatility of the exchange rate of the rand against the

US dollar (Source: Oanda interbank rates)

13

13.3

13.6

13.9

14.2

14.5

14.8

15.1

15.4

3 Ju

l'18

01-A

ug

29-A

ug

18-S

ep

24-N

ov

5 Ja

n'19

01-F

eb

29-M

ar

14-A

pr

08-Jun

20-Jul

09-A

ug

21-A

ug

15-S

ep

01-O

ct

14-O

ct

R/$

Rand remains stronger against the US dollar than in 2016(quarterly average) (Source: SARB)

11.5

12

12.5

13

13.5

14

14.5

15

15.5

16

Q2'15 3 4

Q1'16 2 3 4

Q1'17 2 3 4

Q1'18 2 3 4

Q1'19 2 3

R/$

Real effective exchange rate (REER) of the rand

(Sources: SARB; Currencies Direct)

65

70

75

80

85

90

95

100

105

110

115

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

Jul'1

9Aug

23-O

ct

Actual REER

L/T avg. (93.3)

($13.53)

Foreign currency unit/R; Index; 2010 = 100

Argentina

financial crisis

World recession

Zuptagate

Ramaphoria

Trade war

$14.67

Optimum Index of Household Financial Resilience (HFR)

98

100

102

104

106

108

Q1'12 2 3 4

Q1'13 2 3 4

Q1'14 2 3 4

Q1'15 2 3 4

Q1'16 2 3 4

Q1'17 2 3 4

Q1'18 2 3 4

Q1'19 2

Index; Q1 2012 = 100

Nuclear power project canned

(Sources: eePublishers; CSIR; P van Berge)

0.5 0.65 0.8 0.95 1.1 1.25 1.4 1.55

Wind

Photo-voltaic

Gas turbines

Coal IPP

Mid-merit gas

Baseload coal

New nuclear

Mid-merit coal

Energy

Costs

R/kWh

Foreign direct investment into South Africa(Source: SARB)

0

15

30

45

60

75

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

R billion

Green

shoots

appearing

Tourist arrival from overseas(Source: Stats SA)

400

450

500

550

600

650

700

750

800

Q1'16 2 3 4 Q1'17 2 3 4 Q1'18 2 3 4 Q1'19 2

Number (‘000)

Trend

Source countries for inbound tourism – April 2019

(Source: Stats SA)

UK - 39.8

Other Europe -

43.1

USA - 27.8

Other Americas -

14.2

France - 14.3

Germany - 25.8

Australia - 10.6

Asia & M/East -

30.2

Netherlands -

11.3

Total: 217,000

Real remuneration per worker(Sources: SARB; Stats SA)

95

98

101

104

107

110

113

116

Q1'12 2 3 4

Q1'13 2 3 4

Q1'14 2 3 4

Q1'15 2 3 4

Q1'16 2 3 4

Q1'17 2 3 4

Q1'18 2 3 4

Q1'19

Public sector

Private sector

Index; 2010 = 100

Afrimat Construction Index (ACI) – 2nd quarter 2019

95

100

105

110

115

120

125

130

135

Q1'11 2 3 4

Q1'12 2 3 4

Q1'13 2 3 4

Q1'14 2 3 4

Q1'15 2 3 4

Q1'16 2 3 4

Q1'17 2 3 4

Q1'18 2 3 4

Q1'19 2

Index; Q1 2011=100

4Q average

Investment income for long-term insurers recovers in 2018

(constant 2018 prices)

26

28

30

32

34

36

Q4'12

Q1'13 2 3 4

Q1'14 2 3 4

Q1'15 2 3 4

Q1'16 2 3 4

Q1'17 22 3 4

Q1'18 2 3 4

Sources: SARB; own calculations

Note: 4 quarter avg.

R billion

Merchandise exports & imports for the 1st semester

(Source: SARS)

520

540

560

580

600

620

Jan to June 2017 Jan to June 2018 Jan to June 2019

Exports

Imports

R billion

First semester manufacturing sales values at constant 2019 prices (Source: Stats SA)

1

1.03

1.06

1.09

1.12

1.15

1.18

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

R trillion

Year-on-year % change in real retail trade sales(3-month moving average) (Source: Stats SA)

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

Feb'18

Mar

Apr

May Ju

nJu

lAug

Sep O

ctNov

Dec

Jan'19 Feb M

arApr

May

June

%

1st semester mineral sales at current prices(Source: Stats SA)

100

120

140

160

180

200

220

240

260

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

R billion

Short-term insurers – premiums received (constant 2018p)(Sources: SARB; own calculations)

25

26

27

28

29

30

31

32

Q1'12 2 3 4

Q1'13 2 3 4

Q1'14 2 3 4

Q1'15 2 3 4

Q1'16 2 3 4

Q1'17 2 3 4

Q1'18 2 3 4

Q1'19

R billionTrend

Household disposable income continues to grow (constant 2017 p) (Sources: SARB; own calculations)

1.5

1.7

1.9

2.1

2.3

2.5

2.7

2.9

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

R trillion

Gross capital formation at constant 2019 prices(Sources: Stats SA; own calculations)

180

190

200

210

220

230

240

250

Q1'16 2 3 4 Q1'17 2 3 4 Q1'18 2 3 4 Q1'19 2

R billion

4 Quarter

Avg.

South Africa’s per capita GDP at constant 2017 prices (Sources: SARB; own calculations)

60

65

70

75

80

85

1972 1977 1982 1987 1992 1997 2002 2007 2012 2017

R’000