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Nedbank Limited Reg No 1951/000009/06. Authorised financial services and registered credit provider (NCRCP16).

Isaac is an Economist in the Group

Economic Unit, Nedbank Group. He was

previously with Standard Bank Ltd’s Group

Economics Division – Africa Desk, and

Investment Solutions Ltd’s Market and

Economic research unit.

He holds degrees in Economics from the

University of North West and the University

of South Africa and is studying a Masters in

Development Finance with the University of

Cape Town’s Graduate Scholl of Business.

His research interests include sovereign risk

analysis and the development of capital

markets in developing economies. He is a

regular commentator in the print and

electronic media

Isaac Matshego Economist – Nedbank Ltd

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Nedbank Limited Reg No 1951/000009/06. Authorised financial services and registered credit provider (NCRCP16).

August 2017

ITC-SA

Cape Town Macroeconomic Overview & Outlook

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The outlook for the South African economy is more uncertain

SA Macro – growth remains lacklustre, political and policy uncertainty are elevated

□ Political events have dampened the economic outlook

□ The contentious revisions to the Mining Charter □ Could a Land Expropriation Bill be next?

□ Business confidence is likely to remain low as political uncertainty is high

□ Domestic political developments will remain in focus as the ANC heads for its conference

in December 2017 □ The “No-Confidence” vote laid bare the extent of divisions with the ANC

□ Foreign investors have continued to accumulate local assets despite the credit rating downgrades, with the “search for yield” and strong emerging market sentiment boosting demand for SA assets

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“Junk” status: how long till we restore investment-grade status?

Source: Moody’s, S&P Global Ratings, Fitch Ratings

Date Rating (Outlook) Date Rating

Fitch 2017/04/07 BB+ (Stable) 2017/04/07 BB+

S&P 2017/04/03 BB+ (Negative) 2017/04/03 BBB-

Moody's 2017/06/09 Baa3 (Negative) 2017/06/09 Baa3

Long term Ratings

Foreign Currency Local Currency

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Industries Q-o-q % change (saar) Size

2015 Q1'16 Q2'16 Q3'16 Q4'16 2016 Q1'17 % of total

Agriculture -6.1 -8.7 -7.8 -0.2 -0.1 -7.8 22.2 2.4

Mining 3.9 -21.8 14.6 4.2 -11.5 -4.7 12.8 7.9

Manufacturing -0.2 0.6 7.6 -3.3 -3.1 0.7 -3.7 13.4

Power & water -1.5 -5.4 -3.2 -2.5 2.4 -3.5 -4.8 3.7

Construction 1.7 0.8 0.1 0.7 0.4 0.7 -1.3 4.0

Domestic trade 1.4 1.9 1.6 -2.0 2.1 1.2 -5.9 15.2

Transport & comm 1.1 -0.3 2.2 1.7 2.6 0.4 -1.6 10.1

Finance 2.8 1.7 2.4 1.3 1.6 1.9 -1.2 20.2

General government 0.8 1.4 1.3 2.0 0.9 1.4 -0.6 17.3

Personal services 1.1 1.3 1.8 1.4 1.0 1.2 -0.1 5.8

Value added 1.3 -1.3 3.2 0.4 -0.2 0.4 -0.7 100.0

GDP 1.3 -1.5 3.1 0.4 -0.3 0.3 -0.7

Source: Statistics South Africa and calculations by Nedbank Group Economic Unit

Economic recession as output declines in nine of 10 sectors

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The longest, but moderate, downturn since the early-1990s

Source: South African Reserve Bank

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The expansion phases: Another consumer-led rebound likely?

Source: South African Reserve Bank

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Downbeat confidence hurts business investment

Source: Bureau for Economic Research, South African Reserve Bank

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Consumer confidence also at 15-year lows

Source: Bureau for Economic Research, SA Reserve Bank

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Unemployment rate has reached a 14-year high

Source: Statistics South Africa

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Household income pressured by economic weakness & inflation

Source: South African Reserve Bank

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Vehicle sales dragged lower by commercial vehicles

Source: National Association of Automobile Manufacturers

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A fragile home construction sector

Source: South African Reserve Bank

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Credit demand growth subdued by lacklustre activity

Source: South African Reserve Bank

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Corporate credit demand has been firmer

Source: South African Reserve Bank

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Steady but slow interest rate reduction phase likely

Source: South African Reserve Bank, Nedbank forecasts

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Rand supported by positive investor sentiment

Source: Reuters

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2014 2015 2016 2017 2018 2019

Growth (real, % change)

GDP 1.5 1.3 0.3 0.6 1.3 1.9

PCE 0.7 1.7 0.8 0.8 1.1 1.8

GFCF 1.7 2.3 -3.9 -0.6 0.9 2.3

Exports 3.2 3.9 -0.1 2.3 3.9 4.5

Imports -0.5 5.4 -3.7 2.6 4.2 5.0

Balance of payments (Rbn)

Current account as a % of gdp -5.3 -4.4 -3.3 -3.0 -3.2 -3.2

Gold price (average per ounce)

$ 1 266.4 1 161.7 1 249.2 1 254.6 1 248.3 1 247.7

Rand 13754 14837 18380 16885 17584 17908

Exchange rates, average

$-Rand 10.86 12.77 14.71 13.46 14.09 14.35

Euro-Rand 14.34 14.10 16.22 15.14 15.95 15.90

GBP-Rand 17.88 19.53 19.87 17.31 18.37 18.71

Interest rates (end of period)

Prime 9.25 9.75 10.50 10.00 9.50 10.00

Inflation (average)CPI 6.1 4.6 6.4 5.3 5.2 5.8

Economic outlook complicated by political and policy uncertainty

Sources: Various, Nedbank forecasts

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Nedbank Limited Reg No 1951/000009/06. Authorised financial services and registered credit provider (NCRCP16).

Thank you.