1

2013 Weather Forecast

Cloudy with a chance of rubber bullets

29 Jan 2013

2

Economic activity will be more positive than in

2012, but...

Many Lessons to be

learned from 2012

Negative spill-over

through trade channels is

high for South Africa -

large dependence on

Europe for exports of

manufactured goods

Export orders for South

African goods will pick up

in 2013, aided by an

anticipated weaker Rand

Positive growth sentiment

from the US

Locall conditions may

impede growth

Limited influence of

monetary and fiscal

policy

Labour unrest may harm

production and increase

pressure on the currency

Downside risk from

Europe is still a concern

?

3

In 2012 conditions were stormy and foggy

2012 started off gloomy with limited

opportunity for movement from monetary

or fiscal policy in South Africa

It was foggy, but we didn’t have the

Mordor-like gloom that settled over

Europe

Sigh of relief when 2012 drew to a close

and we moved into a slow, but promising

new year

Looking forward to improved sentiment

in Europe, an uptick in the housing

market in the US and no threat of global

apocalypse

Czech Republic

France

Germany

Hungary

Italy

Poland

Spain

Turkey

United Kingdom

(12.0)

(10.0)

(8.0)

(6.0)

(4.0)

(2.0)

0.0

2.0

4.0

6.0

(3.0) (2.0) (1.0) 0.0 1.0 2.0 3.0 4.0

Ind

ustr

ial P

rod

ucti

on

Gro

wth

(%

)

GDP Growth (%)

Europe Growth & Industrial Output, 2012

4

Only moderate cold fronts expected

Are there any global downside risk factors expected

for 2013?

Eurocrisis still persistent in 2013 with regional average

growth expected to contract slightly

Many downside risks still present in Europe, even

though policy actions have reduced some of these

risks and financial conditions have improved for

governments and banking institutions - investors

remain risk averse

Uptick in the US economy - growth in services sector

and a turnaround in housing markets which could

support consumer growth

Relatively positive sentiment from the US

Investor sentiment

remains negative in EU

and risk averse toward

emerging markets

(highly likely)

Positive European

growth (unlikely)

Collapse of US

economy (not likely)

LIK

EL

IHO

OD

NEGATIVE IMPACT

Moderate uptick in US

(expected)

POSITIVE IMPACT

5

External factors will constrain the Reserve Bank

Food prices are expected to rise above historical average -

US drought especially harsh

Greatest increases expected in fresh produce and meat

Housing, fuel and power prices also expected to remain

under pressure

Consumer expenditure not expected to feature strongly this year as

a result of high household debt and budget pressures due to rising

food and fuel costs

Inflation will most likely peak at 6.5% by mid 2013 before recovering

below 6.0% by the end of the year

Leaves MPC little room to manoeuvre with rates expected to be

unchanged for 2013

6

Local unrest may lead to a build-up of violent storms

Violent protest activity felt hard in mining, agriculture

and transport sectors

Disruptions to both supply and demand-side of

economy

Businesses do not operate in a vacuum - political

climate has a major influence on consumers and

supply chains

100

120

140

160

180

200

220

2008 2009 2010 2011 2012

Pro

test

Gro

wth

Rate

(%

)

Annual Protest Growth Rate

Source: Multi-Level Governmental Initiative and Frost & Sullivan Analysis

Growth trend shows major increase in 2013

Major impacts:

Supply bottlenecks and demand pressure

Production losses

Investor sentiment, pressure on current

account and Rand volatility/weakness

7

Key concerns and developments to look out for in 2013

Government debt and budgetary pressure

Investor sentiment

Rand volatility

Losses due to protest action

GDP Growth - 2.9% in 2013

Rising and deserves urgent attention

Volatile and risk averse

Largely driven by sentiment and speculation, mostly

weak Rand

Increasing trend, losses may be substantial

Export growth, consumer expenditure

moderate, unflattering investment prospects, mining

& agriculture under pressure

The skies are clearing for promising external growth conditions in the latter part of 2013 and into

2014, however certain local pressures may constrain growth potential in the short to medium-

term

8

Cloudy with a chance of rubber bullets

Thank you

9

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