RFA 2013 Conference

1. The sceptical optimist:  – Mike Schussler Economists.co.za RFA 2013 Conference www.economists.co.za

2. Global & Local prospects & Risks. • Global Context • Business cycle indicators. • The BIG Debt Story. • Africa. • South Africa. • Overall Economy long term. • Sectors. • Transport Sector (contract) • Labour market. • Rand

3. International Leading indicators. economists.co.za

4. Two track world growth www.Economists.co.za

5. The two track goes to three track. • Global output expanded by 3,3% in 2012and forecasted to be 3,25% (3.6%) in 2013 and expected 4% in 2014. • Advanced economies' grew 1,3% in 2012 and forecasts of 1,2% (1.5%) in 2013. Improves to 2% in 2014 • But America and Japan much better than Europe. • Emerging markets grew 5.3% in 2012, and are expected to recover remain around those levels in 2013 and improve to 5,7% in 2014. www.Economists.co.za

6. This however remains a debt crisis; but one that will heal over time. www.Economists.co.za

7. USA Total debt to GDP.Government and Private sector economists.co.za

8. Government Debt summed up in two worlds. www.Economists.co.za

9. Private sector debt is also high.SA is in 15th place and highest of emerging market countries. www.Economists.co.za

10. To help Central banks will keep rates low. Loose monetary policy is something you can bank on…… Very low interest rates keep the world going at present. They are unlikely to raise any time soon perhaps not even in 2018! www.Economists.co.za

11. And Central banks keep pumping money….. • The Federal Reserve Bank in the US pumps in $85 billion a month….. • Japan is expanding it’s monetary base from 10% to 20% of GDP in one year and is going for 50% by 2015! • Bank of Japan buys government bonds at a rate of nearly 1% of GDP a month. • UK will over time add 373 billion pounds. • The money is helping but it has to go somewhere ….Assets? www.Economists.co.za

12. Debt free consumers with weak institutions. Africa. The new SA frontier. www.Economists.co.za

13. African Growth www.Economists.co.za

14. Africa vs. South African Growth. www.Economists.co.za

15. The Economy in nominal; Terms is now around R3,3 Trillion. South African Economy. Slower growth and lower inflation. economists.co.za

16. Longer term GDP growth. www.Economists.co.za

17. SA GDP growth consensus. Please Note that each year has at least five institutions forecasts but 2013 has over 40 and 2014 has about 34 www.Economists.co.za

18. A few facts and figures for keeps. • 62 year average GDP growth rate in 3,42% on an annual basis. • Next six year forecast from IMF is for 3,6% average – but………. • SARB Estimate of GDP potential is 3.5%. • We have not created enough wealth and therefore not enough jobs, income etc. www.Economists.co.za

19. SA sectors are not all equal. www.Economists.co.za

20. SA Manufacturing. www.Economists.co.za

21. Not all manufacturing is equal. www.Economists.co.za

22. Mining and manufacturing as % of GDP vs. the commodity boom. Missing the Boat. economists.co.za

23. Retail sales and rates. Still a happy place. www.Economists.co.za

24. Broadly…. • South Africa is still moving from the production growth to consumption side but consumption is becoming limited. www.Economists.co.za

25. Transport Still growing but margins may be under pressure www.Economists.co.za

26. Land Transport: Monthly payload by Mode. www.Economists.co.za

27. Growth by mose in payload. www.Economists.co.za

28. Value of transport by sector. www.Economists.co.za

29. How the contract transport sector is doing. • In 2010 the net margin was 4%. • Cost of fuel has nearly doubled in four years and lost year fuel costs increased with 16,1% • Labour costs increased with about 9%. • Transport strike losses estimated at R1,2 to R1,4 billion • Every week Transport turnover is about R1,3 billion • Believe net margins have not recovered for most of 2012. www.Economists.co.za

30. Employment and the not employed (not the same as unemployed as that is a definitional problem) Labour market in SA. www.Economists.co.za

31. Employed adults vs. Not employed www.Economists.co.za

32. Employment in SA. • 4 out of ten adults works. • 2,5 in the formal non farm sector. (similar to non-farm payrolls in USA and also 98% of tax payers in this sector) • 1,5 work in informal, domestic or farm and subsistence sector. • SA employment in private sector: numbers are the same as in 2003 the small increase has been in public sector. www.Economists.co.za

33. Strikes in SA • SA lost over 3 million man days last year in Strike action. • Over 39 million man days lost since 2007 or about 3 days for each person employed! • 2012 was the most violent in last two decades. • Union rivalry is now also a very big factor in both mining and Transport. • Likely to move to other sectors too. www.Economists.co.za

34. The Risk are going on to the Rand www.Economists.co.za

35. Current Account www.Economists.co.za

36. Twin peaks…….. www.Economists.co.za

37. SA currency now at risks from. • Portfolio flows turning. • Inflation differentials. • Ratings Downgrades (Although we should stay investment grade ) • Wildcat strikes have shown a new risk. • On the Upside new leadership of the ANC is seen as stable and with finance minister and others economic minister now in NEC also positive. www.Economists.co.za

38. Summary www.Economists.co.za

39. Quick summary • Growth below 3%. • Tough but bearable • 2014 looking better. • Inflation 6% • Labour costs 8,5% • Fuel increase between 5% to 10%. • Rand weakness persists. • Transport growth of about 3% but Africa is the new frontier. www.Economists.co.za