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African Business Outlook Part of the Global Business Outlook

African Business Outlook Part of the Global Business Outlook. A joint survey effort between Duke University, The South African Institute of Chartered Accountants and CFO magazine. CFO Global and African Business Outlook – Overview. Global Business Outlook

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African Business Outlook Part of the Global Business Outlook

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  1. African Business OutlookPart of the Global Business Outlook A joint survey effort between Duke University, The South African Institute of Chartered Accountants and CFO magazine

  2. CFO Global and African Business Outlook – Overview Global Business Outlook Duke University has surveyed CFOs around the world every quarter since 1996, most of those years jointly with CFO magazine. The survey takes the pulse of the business community and has a strong record of predicting future economic activity. The results are relied upon by Central Bankers, Analysts, Investors, and are widely reported in the press. SAICA and the African Business Outlook SAICA joined the survey in 2013, helping to found the African Business Outlook. South African results are highlighted in the analysis, enabling SAICA and other survey partners to share key insights about the African economy with members of the Institute and others focusing on Africa. The analysis in this report will assist companies to make important business decisions as they can benchmark themselves against their global peers. The long run goal is to develop a large and steady set of responding African firms. • Key Survey Facts • Survey Respondents: 35 • Of which, 31 from South Africa, 2 from Nigeria, and 2 from other parts of Africa • Responses from Nigeria and other parts of Africa were excluded from analysis as the small number of respondents may skew results. South Africa results are extrapolated to represent Africa in the global report. • Sample includes CFOs from both public and private companies representing a broad range of industries • Retail/Wholesale, Mining/Construction, Manufacturing, Transportation/Energy, Communications/Media, Technology, and Banking/Finance/Insurance • Certain questions are constant each quarter, to capture trends in corporate optimism, expected hiring and capital investment plans, inflation, wages, and many other categories. • Other questions change each quarter to examine topical economic issues and newsworthy business or political events that may affect the landscape of corporate finance. African Business Outlook Duke University / SAICA / CFO Magazine Jun 2015

  3. Sentiment Regarding Domestic Economy African optimism about the next 12 months remains low Trends in South African Optimism CFOs are less optimistic about the domestic economy • Compared to last quarter, more South African CFOs (77%) report being less optimistic about the domestic economy this quarter When ranked on a 100 point scale, the African Optimism Index (for the economic prospects of the continent over the next year) reduced from 47.8 in Q1 2015 to 42.5 in Q2 2015. African Business Outlook Duke University / SAICA / CFO Magazine Jun 2015

  4. Own Company Sentiment Most African CFOs are optimistic about their own companies, despite being less optimistic about the overall economy. Own-company optimism is still high in South Africa • While some South African CFOs are less optimistic for their own companies compared to last quarter, a higher number of CFOs have shown more optimism for the financial performance of their own companies. When ranked on a 100 point scale, the Own-Company African Optimism Index (for the economic prospects over the next year of each CFO’s own company) reduced from 67.6 in Q1 2015 to 61.4 in Q2 2015 African Business Outlook Duke University / SAICA / CFO Magazine Jun 2015

  5. Top 10 Corporate Concerns for African CFOs Concerns of African CFOs vary by country. Reliability and cost of electricity is a top concern in South Africa while cost of borrowing is a top concern in Nigeria. Top 10 Corporate Concerns South African CFOs have identified competition from Chinese and Indian imports as a pressing concern African Business Outlook Duke University / SAICA / CFO Magazine Jun 2015

  6. Top 10 Company Changes (One-year Forecast) African CFOs estimate the following changes (in %) will occur in their companies during the next 12 months. Top 10 Company Changes African Business Outlook Duke University / SAICA / CFO Magazine Jun 2015

  7. Effects of Changes in Interest Rates African CFOs indicate that current and expected changes in Interest rates have a direct and negative impact on their business. Effect of Changes in Interest Rates Impact of Changes in Interest Rates on Business The impact of exchange rates has a net negative effect on businesses in South Africa. African businesses experienced direct impact from changes in exchange rates. African Business Outlook Duke University / SAICA / CFO Magazine Jun 2015

  8. Projections of Changes in Interest Rates (South Africa) Projected Impact of Changes in Interest Rates on Capital Spending Plans and Hiring Plans (South Africa) Expectations of Changes in Long Term Interest Rates (South Africa) Changes in interest rates has minimal impact on the capital spending and hiring plans of South African businesses. 30% of South African business leaders expect a +50 bps change in Long Term Interest Rates. African Business Outlook Duke University / SAICA / CFO Magazine Jun 2015

  9. Effects of Changes in Oil Prices African CFOs indicate that current and expected changes in Oil Prices have an indirect and positive impact on their business. Effect of Changes in Oil Prices Impact of Changes in Oil Prices on Business The changes in price of Crude Oil has had a positive impact on 43% of South African businesses. The changes in price of crude oil has affected more South African businesses indirectly. African Business Outlook Duke University / SAICA / CFO Magazine Jun 2015

  10. Projections of Changes in Oil Prices (South Africa) Projected Impact of Changes in Oil Prices on Capital Spending Plans and Hiring Plans (South Africa) Expectations of Changes in Oil Prices (South Africa) The changes in oil prices has not affected the capital spending and hiring plans for most businesses in South Africa. 97% of South African business leaders believe that the price of oil will end the yar at about $60 per barrel. About on-in-ten CFOs 10% posit that the price will rise as high as $80 per barrel. African Business Outlook Duke University / SAICA / CFO Magazine Jun 2015

  11. Effects of Changes in Currency Values African CFOs indicate that current and expected changes in Currency Values have a direct and mostly negative impact on their businesses. Effect of Changes in Currency Values Impact of Changes in Currency Values on Business Most South African CFOs believe that changes in the value of the US Dollar has impacted their businesses directly and indirectly. A significant number of South African CFOs indicate that changes in the value of the US dollar has had a negative impact on their businesses. African Business Outlook Duke University / SAICA / CFO Magazine Jun 2015

  12. Projections of Changes in price of USD to Euro (South Africa) Projected Impact of Changes in $/Euro on Capital Spending Plans and Hiring Plans (South Africa) Expectations of Changes in $/Euro (South Africa) More than 70% of CFOs in South Africa indicate that the changes in the price of the US $ has no impact on their company’s capital spending and hiring plans. Nearly half of CFOs believe that the value of the currency will increase by 5%. African Business Outlook Duke University / SAICA / CFO Magazine Jun 2015

  13. Information Security – Successful Hacking Attempts Mitigating/Preventive Actions Against Hacking Successful Hacking Attempts 85% of South African CFOs indicated that hacking attempts on their companies’ servers have resulted in data breaches. 45% of African CFOs have not taken ANY significant steps in the past year to deter hacking, likely due to the cost of prevention African Business Outlook Duke University / SAICA / CFO Magazine Jun 2015

  14. Focus of the CFO – African responses South African CFOs believe that, in order to best serve all stakeholders, CFO focus on Budget and Forecast should be significant. In addition, more than 50% believe that focus on Board Relations and Internal Growth should be moderate. African Business Outlook Duke University / SAICA / CFO Magazine Jun 2015

  15. Likelihood of a Recession A significant number of South African CFOs believe that there is low likelihood for an economic recession by the end of 2015. 25% of CFOs in South Africa opine that there will be an economic recession by the end of 2015. African Business Outlook Duke University / SAICA / CFO Magazine Jun 2015

  16. Return on Assets and Capacity Utilization South African companies expect an reduction in ROA over the next year and an increase in capacity utilization in the second half of 2015. African Business Outlook Duke University / SAICA / CFO Magazine Mar 2015

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