Authorised Financial Services Provider – FSP No: 859

1. Authorised Financial Services Provider – FSP No: 859

2. Economic Developments - Speed Bump or Prolonged Pain..? Presented by: Dawie Roodt 13 November 2008

3. InternationalCredit Crises

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

5. 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

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

7. U.S. Interest Rate Subprime BubbleBursts Nasdaq Bubble Inflation Credit Crises Source: I-Net, Efficient Research, 2008

8. Consequences….. U.S. Institutions Bear Sterns, Lehman Brothers, Merrill Lynchbankrupt or taken over AIG, Fannie Mae, Freddie Macbailed out U.K. & Europe Northern Rock Iceland = Bankrupt Credit Market Freeze……

9. Emergency Rescue Plans U.S. $700bn bailout package Additional Interest rate cuts (100bp) Fed buys commercial paper Fed doubles its auctions to banks ($900bn) Etc. U.K. & Europe U.K. £50bn purchase of preference shares BOE & ECB Interest rate cut (50 - 150bp)& more to follow.. Guarantees private & retail deposits IMF China, IndiaCuts i% G20 Meeting Germany €400bn $$$

10. Will It Work…..? Financial Markets Real Economy

11. What About Us?

12. Excellence in SA Banking Sector SA Banks Locally: No Direct Exposure International: Limited Exposure Thorough Assessment by Registrar of Banks in July 08 : “financial system is sound” International Comparison on Safety of Banks : SA is 15th out of 134

13. Where Will It Impact?

14. Dollar Strength Source: I-Net, 2008

15. Commodity Prices Source: I-Net, 2008

16. Rand Weakness Source: I-Net, 2008

17. Slowing International Demand Slower Growth?? Other8.0% Recession?? Source: SARS, 2008

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

19. Balance of Payments Source: SARS and own calculations

20. C/A Deficit Funding “Hot Money”-DANGER- Source: SARB, 2008

21. Interest Rate Advantage Source: Efficient Research, 2008

22. Still Positive on SA Growth Average:3.0% Source: StatsSA and own calculations

23. South Africa:

24. Economic Overview

25. Household debt to disposable income Q208:76.7% 59.4% 56.9% 50.2% 44.5% Source: SARB and own calculations

26. Savings to disposable income of households 9.2% 5.4% 2.6% 0.5% Q208:-0.5% Source: SARB and own calculations

27. Economic Overview

28. Inflation: Old Basket CPI Average: 2008 11.9% Source: StatsSA and own calculations

29. Economic Overview

30. Economic Overview

31. Economic Overview

32. Government’s Infrastructure Spend • Eskom: R343bn (5 yrs) • Transnet: R78bn (3 yrs) • 80 New Capital Projects – R336.1bn (2008 to June)50% higher than 2007’s total R224bn Source: Budget Review 2008/09; Nedbank, 2008

33. Fixed Capital Investment Source: SARB, 2008

34. Economic Overview

35. Background Deficit Gold Surplus

36. Theory versus Practice expansionary FISCAL SURPLUS

37. Spending Priorities Social Spending

38. Social Grants Beneficiary Numbers Source: 2008 Budget 2007: 11,9m recipients 25.0% of SA population

39. Is SA the next Zim?Institutional Approach

40. Institutional Approach to Answer Independent Judiciary Private Property Rights Freedom of Press Independence Central Bank Democratic Process

41. Destruction of Institutions Democracy:New Leader Appointed Ecstatic! Change Economic Policy: More ‘democratic’ Take from the “Haves” (non-supporters) Give to the “Have-Nots”(supporters) IGNORES Private Property Rights Negative ImpactonInvestmentSavingsConfidence UNDERMINES Economy

42. Destruction of Institutions Democracy:New Leader Appointed Ecstatic! Change Economic Policy: More ‘democratic’Take from the “Haves” (non-supporters) Give to the “Have-Nots”(supporters) Inflation: 200,000,000% ?? IGNORES Private Property Rights Negative ImpactonInvestmentSavingsConfidence UNDERMINES Economy CapitalDwindles…. Start to Print Money DESTROYS Independence Central Bank Media & Press: Report on Disapproval and Objections by Public Court & Legal System:Public tries to find Justice through legal system DESTROYS Independent Judiciary BANS Freedom of Press

43. Destruction of Institutions Democracy:New Leader Appointed Ecstatic! Change Economic Policy: More ‘democratic’Take from the “Haves” (non-supporters) Give to the “Have-Nots”(supporters) DESTROYS Democratic Process Democracy: Mugabe-Style1 Man, 1 Vote, 1 Candidate! IGNORES Private Property Rights Voting System:Public tries to vote dictator out Negative ImpactonInvestmentSavingsConfidence UNDERMINES Economy CapitalDwindles…. Start to Print Money DESTROYS Independence Central Bank Media & Press: Report on Disapproval and Objections by Public Court & Legal System:Public tries to find Justice through legal system DESTROYS Independent Judiciary BANS Freedom of Press

44. Institutions in SA

45. Destruction of Institutions in SA? Private Property Rights 2008: Land Expropriation Bill

46. Destruction of Institutions in SA? Freedom of Press “Mbeki received R30m”

47. Independent Judiciary Destruction of Institutions in SA? Zuma’s Mauritius Papers

48. Independence Central Bank Destruction of Institutions in SA? SARB Hikes 10Times! interest rate

49. Destruction of Institutions in SA? Democratic Process POLOKWANE

50. Is SA the Next Zim?Economic Approach