11 october 2005 a walk through the global village dawie roodt efficient group presented by

11 October 2005

A Walk Through

the Global Village

Dawie RoodtEfficient Group

Presented by

Index

• Us• Our Neighbours• Us and Them• Global Hotspots• If I was the Minister• Threats• Pick Your Currency• What now?

Us

Economic Aggregates

Economic Aggregates 2004 2005

Fiscal Deficit (Fiscal) -1.6% -0.9%

CPIX (average) 4.3% 4.2%

Prime Interest rate (year-end) 11.0% 10.5%

PSCE (year-end) adj 16.1% 18.6%

Current Account : GDP -2.9% -2.7%

R/$ (year-end) 5.73 6.51

GDP (full year) 3.7% 4.4%

Outcome:Revenue

R bn Budget ‘04 Efficient Difference Budget ‘05 Efficient Difference

Personal Tax 105.9 110.8 4.9 116.9 123.2 6.3

Company Tax 68.8 71.3 2.5 68.7 87.5 18.8

VAT 89.5 98.1 8.6 106.0 109.5 3.6

Excise Duties 13.1 13.8 0.7 14.5 13.6 -0.9

Fuel levy 17.4 18.7 1.3 20.7 20.9 0.2

Other 32.3 34.6 2.3 43.3 44.8 1.3

Total 327.0 347.3 20.3 370.1 399.5 29.3

State Finance

Deficit:GDP

-8

-7

-6

-5

-4

-3

-2

-1

0

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006

%

Government Finance

Government Debt: GDP

25

30

35

40

45

50

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006

%

Heading for debt trap Consolidation

Stable

Inflation

CPI

0

3

6

9

12

15

18

21

Jan-80 Jan-82 Jan-84 Jan-86 Jan-88 Jan-90 Jan-92 Jan-94 Jan-96 Jan-98 Jan-00 Jan-02 Jan-04 Jan-06

%

14.61%

9.91%

5.24%

Interest Rates

Prime

9

11

13

15

17

19

21

23

25

Jan-80 Jan-83 Jan-86 Jan-89 Jan-92 Jan-95 Jan-98 Jan-01 Jan-04

%

?

De KockStals

Mboweni

BoP

Current Account vs Financial Account

-60

-40

-20

0

20

40

60

80

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006

R bnBarclays/Absa

De Beers DelistingWakefordgateLifting of Int

SanctionsDebt Standstill

PPP Cycle (R vs. USA$)

-70

-60

-50

-40

-30

-20

-10

0

10

20

30

Jan-80 Jan-83 Jan-86 Jan-89 Jan-92 Jan-95 Jan-98 Jan-01 Jan-04

%

Rand Valuation

Gold $800

Rubicon

Stock market crash

ANC, Reds fall

Elections Exchange controls

Asia

n

Wakefordgate

Rus, Zim, Arg

Fin RandNOFP + NOFP

-

GDP

GDP

-3

-2

-1

0

1

2

3

4

5

6

7

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006

%

GDP

GDP per capita '00

20000

20500

21000

21500

22000

22500

23000

23500

24000

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004

RGold

Lifting of Int Sanctions Asian

Crises

Our Neighbours

4% of African Area

23% of African GDP

21.2% of African Exports

Mistakes made in Africa

• Idolise Leaders• Marketing Boards• Nepotism• Incompetence• Corruption• Poor Fiscal Discipline• Too Relaxed Monetary Policy• Unrealistic Projects

?

???

GDP

Africa, World GDP per Capita

0

1000

2000

3000

4000

5000

6000

7000

1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004

$

Source: UN

AIDS

People infected with Aids

20%

68%3%1%

4%

4%

Asia Africa Eastern Europe & Central Asia Caribbean Latin America High Income Countries

Source: UNAIDS

Us and them

$

€ Yuan ¥£

R

Euro Composition

Country Currency Conversion rate:€1

Austria Schillings 13.76

Belgium Francs 40.34

Finland Markkaa 5.95

France Francs 6.56

Germany Deutsche Marks 1.96

Greece Drachmae 340.75

Ireland Pound 0.79

Italy Lire 1936.27

Luxembourg Francs 40.34

Netherlands Guilder 2.20

Portugal Escudos 200.48

Spain Pesetas 166.39

$

€ Yuan ¥

15 years?

$

€Yuan ¥

€

50 years?

$

€?

€

Sensible?

Percentage of World, ‘04

Country Country Area GDP GDP per Capita International Trade (03)

Africa 20.3% 2.2% $895 2.5%South Africa 0.8% 0.5% $4 507 0.4%Japan 0.3% 11.4% $36 501 4.4%France 0.4% 5.0% $32 984 5.2%Germany 0.2% 6.8% $33 162 7.9%UK 0.2% 4.3% $35 718 4.5%USA 6.4% 27.6% $35 718 12.2%China 6.4% 4.5% $1 283 2.5%Russia 11.4% 1.5% $4 047 16.8%India 2.2% 2.2% $626 0.9%Brazil 5.7% 1.9% $3 225 0.9%

GDP, y:y Q2 05

GDP

0

1

2

3

4

5

6

7

8

9

10

SouthAfrica

Japan France Germany UK USA China Russia India Brazil

%

Source: Economist

GDP, 99 – ’03 avg

GDP

0

1

2

3

4

5

6

7

8

9

SouthAfrica

Japan France Germany UK USA China Russia India Brazil

%

Source: World Bank

Inflation, Aug 05

CPI

-2

0

2

4

6

8

10

12

14

SouthAfrica

Japan France Germany* UK USA China Russia* India Brazil

%

* Sep

Source: Economist

Interest Rates, Aug 05

Short termInterest Rates

0

2

4

6

8

10

12

14

16

18

20

SouthAfrica

Japan France Germany UK USA China Russia India Brazil

%

Source: Economist

Africa - Loser

FDI In: $15bn

FDI Out: $1.3bn

Western Europe

FDI In: $310.2bn

FDI Out: $350.3bn

North America

FDI In: $36.4bn

FDI Out: $173.4bn

South America

FDI In: $49.7bn

FDI Out: $10.7bn

Central & Eastern Europe

FDI In: $20.9bn

FDI Out: $7.0bn Asia - Winner

FDI In: $107.1bn

FDI Out: $23.6bn

FDI Flows 2003

Source: World Bank

Global Hotspots

Hotspot

If China grows at its five year average (8.52%) it will surpass the US in 2040 if the US continues at 2.78%

Tax systems

Personal Corporate Dividends Sales, value added

France 49.58% (€47 131) 34.33% territorial Income tax 19.6%

Germany 47% from (€52 293) 27.9575% Income tax, 50% exempt

16.0%

Japan 50% nat.; local (¥18m)

30.0% Comp tax 50% exempt; income tax

16.0%

UK 40% (£30 500) 30.0% 10%; 32.5% (£30 500) 17.5%

USA 35% Fed; 0-11% state ($311 950)

35.0% Federal + 0-12% state

Comp tax; 5-15%; double taxed

0% Federal + 0-7.25% state

SA 40% from R300 000 29% 12.5% exempt in indv 14%

Flat Taxes Systems

• Flat tax first introduced in the 19th century• Estonia – 24%• Latvia – 25%• Russia – 13%• Slovakia – 19%• Romania – 16%• US States ranging from 3.5% - 5.3%

• Illinois• Indiana• Massachusetts• Michigan• Pennsylvania

• Canada provinces– Alberta – 10.5%

Considering Flat Tax Systems

• Poland – 15%• Greece – 25%• Czech Republic• Croatia• The Netherlands – 40%• USA

If I was the Minister

Tax Requirements

• Consumption tax + 6%

• Redistribution tax + tax on dividends

• Sin taxes

Tax Requirements

• Consumption tax + 6%

• Redistribution tax + tax on dividends

• Sin taxes

• No corporate taxes

• No other taxes

Threats

Oil: Impact

Brent Near Future - Oil Price

10

20

30

40

50

60

70

Jan-90 Jan-92 Jan-94 Jan-96 Jan-98 Jan-00 Jan-02 Jan-04 Jan-06

$ p/b

Oil: Impact

Real Rand Oil Price

50

100

150

200

250

300

350

400

450

Jan-85 Jan-87 Jan-89 Jan-91 Jan-93 Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05

R p/b

Commodities

Goldman Sachs Commodity Index

100

150

200

250

300

350

400

450

500

Jan-94 Jan-96 Jan-98 Jan-00 Jan-02 Jan-04

Pick Your Currency

Euro (3.00%)

80

90

100

110

120

130

140

150

160

170

Jan-80 Jan-83 Jan-86 Jan-89 Jan-92 Jan-95 Jan-98 Jan-01 Jan-04

International Currencies

Pound (4.50%)

45

55

65

75

85

95

105

Jan-80 Jan-83 Jan-86 Jan-89 Jan-92 Jan-95 Jan-98 Jan-01 Jan-04

International Currencies

Dollar (3.75%)

85

90

95

100

105

110

115

120

125

Jan-80 Jan-83 Jan-86 Jan-89 Jan-92 Jan-95 Jan-98 Jan-01 Jan-04

International Currencies

Yen (0.10%)

90

140

190

240

290

340

Jan-80 Jan-83 Jan-86 Jan-89 Jan-92 Jan-95 Jan-98 Jan-01 Jan-04

International Currencies

What now?

Asset Allocation, 2005

Reason

Domestic Ratings upgrades, GDP, Commodities

International ( ) Uncertainty over oil price; economic recovery

– Heavy Overweight

– Overweight

– Neutral

– Underweight

– Heavy Underweight

Asset Allocation, 2005

Domestic International

Equities

Property ( )

Bonds

Cash

– Heavy Overweight – Overweight

– Neutral – Underweight

– Heavy Underweight

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