Investment Opportunities: Balancing Act

2. Investment Opportunities:Balancing Act Presented by: Dawie Roodt 6 March 2008

3. “…The global economy grew by 5 per cent from 2003 to 2007. It was a period of robust expansion but also of widening international imbalances. Now there are storm clouds ahead...” - Minister Trevor Manuel, 2008 budget presentation

4. In This Presentation: • South African Economic Trends • Investment and the Business cycle • Balancing risk and return • Balanced portfolio

5. South AfricanEconomic Trends

6. Economic Overview Financials - Banks Financials Retailers Positive for equity Negative for bonds Neutral equities Positive bonds (short term) Negative bonds (long term) Positive for rand hedges Negative for importers Negative for bonds Positive rand hedges Positive exporters Negative importers Negative bonds Negative equities Positive bonds

7. South Africa:GDP

8. GDP at Market Prices Source: StatsSA and own calculations

9. Monetary Policy

10. Pressure on the Rand… 9/11 Aftermath • US troubles • Emerging Market Risk rising • Global Inflation • - Bull run • Stability • Emerging Market Appetite - Politics - Eskom Inflation bracket Source: SARB and own calculations

11. Inflation Inflation bracket CPIX Ave: 5.9% Source: StatsSA and own calculations

12. Interest rates Toothless SARB Source: SARB and own calculations

13. Debt Levels

14. Private Sector Credit Extension Source: SARB and own calculations

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

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

17. Balance of Payments

18. Balance of Payments Source: SARS and own calculations

19. Fiscal Policy

20. Background Deficit Gold Surplus

21. Investments and the Economic Cycle

22. Consumption Expenditure Positive for retailers and consumer goods Source: South African Reserve Bank

23. Gross Fixed Capital Formation Infrastructure boom Source: South African Reserve Bank

24. Total Exports and Imports Trade Account Deficit Source: South African Reserve Bank

25. Balancing Risk and Return

26. Resources • Pro’s • Value of sales • Boom in commodity prices • Global demand for resources • Weaker rand inflates income • Cons • Production problems (labour, electricity, deep gold mines, input costs) • Sustainability of high precious metal prices? • High P/E-ratio

27. Mining and Quarrying GDP at Market Prices Source: StatsSA and own calculations

28. Mining Value of Sales Bull Run Inflation bracket Source: StatsSA

29. Contribution of mineral groups to total value of mineral sales, 2006

30. Resources: Price and PE Inflation bracket Source: I-net

31. Industrials • Pro’s • Infrastructure development • Manufacturing drive (auto industry, etc) • Weaker rand support exports • Cons • Electricity supply • Slower growth?

32. Manufacturing GDP at Market Prices Source: StatsSA and own calculations

33. Manufacturing Value of Sales Inflation bracket Source: StatsSA

34. Contribution to total value of manufactured product sales, 2006 Source: StatsSA

35. Industrials: Price and PE Inflation bracket Source: I-net

36. Financials • Pro’s • Interest rate cycle (Domestic and global) • Global competitive institutions • Value for money (P/E basis) • Cons • Sub-USA crisis • Pessimism towards sector • Uncertainty

37. Finance, Real Estate and Business Services, GDP at Market Prices Source: StatsSA and own calculations

38. Financials: Price and PE Inflation bracket Source: I-net

39. Construction • Pro’s • Infrastructure boom (2010) • Interest rate cycle (Domestic and global) • Cons • Supply constraints • Electricity

40. Construction GDP at Market Prices Source: StatsSA and own calculations

41. Construction and Material: Price and PE Inflation bracket Source: I-net

42. Asset Allocation

43. Investment Options

44. Balanced Portfolio

45. www.efgroup.co.za