the faults in our stars goolam ballim. the outlook for the global and african economies
TRANSCRIPT
The Faults in our StarsGoolam Ballim
The outlook for the global and African economies
STANDARD BANK GROUP STRATEGY / PAGE 3 /
Index: 1995 = 100
Untangling structural and cyclical patterns
Central & Eastern Europe
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140
120
240
360
480
600
720
LATAM & the Caribbean
Developing Asia
World
Real GDP index
SSA
STANDARD BANK GROUP STRATEGY / PAGE 4 /
GDP growth: index, 1995 = 100
Broad-based gains; “reformers” most prosperous
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140
100
200
300
400
500
600
Real GDP index
S6 - Bfs, Eth, Moz, Rwa, Tnz, Uga
Select 6
Oil exporters
Low income
SSA
Middle incomeFragile countries
STANDARD BANK GROUP STRATEGY / PAGE 5 /
0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 40
1
Sudan
0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0
Angola
Ghana
Kenya
Zambia
Ethiopia
Uganda
Tanzania
4.5
Nigeria (7.9m)
S.Sudan, 2030
Ethiopia, 2030
Tanzania, 2030
Uganda, 2030
Mozambique, 2030
Zambia, 2030
Kenya, 2030
Angola, 2030 Sudan, 2030
Ghana, 2030
Nigeria, 2030 (20.4m)
Total middle-class households (including lower-middle class, mn (2014, 2030)
Middle-class households (including lower-middle class) as a share of total HHs (2014, 2030), %
0
5
2520
15
10
45
40
35
30
50
Middle-income gains by 2030
STANDARD BANK GROUP STRATEGY / PAGE 6 /
Global
In China’s grip
STANDARD BANK GROUP STRATEGY / PAGE 7 /
Earlier Chinese growth was robust, buoyed by credit…
Mar-03
Jun-03
Sep-03
Dec-03
Mar-04
Jun-04
Sep-04
Dec-04
Mar-05
Jun-05
Sep-05
Dec-05
Mar-06
Jun-06
Sep-06
Dec-06
Mar-07
Jun-07
Sep-07
Dec-07
Mar-08
Jun-08
Sep-08
Dec-08
Mar-09
Jun-09
Sep-09
Dec-09
Mar-10
Jun-10
Sep-10
Dec-10
Mar-11
Jun-11
Sep-11
Dec-11
Mar-12
Jun-12
Sep-12
Dec-12
Mar-13
Jun-13
Sep-13
Dec-13
Mar-14
Jun-14
Sep-14
Dec-14
Mar-15
0
10
20
30
40
Percent year-on-year
Total social financing
Nominal GDP growth
STANDARD BANK GROUP STRATEGY / PAGE 8 /
… now, a structural slowdown has been unmasked…
Jan-10
Feb-10
Mar-10
Apr-10
May-10
Jun-10
Jul-10
Aug-10
Sep-10
Oct-10
Nov-10
Dec-10
Jan-11
Feb-11
Mar-11
Apr-11
May-11
Jun-11
Jul-11
Aug-11
Sep-11
Oct-11
Nov-11
Dec-11
Jan-12
Feb-12
Mar-12
Apr-12
May-12
Jun-12
Jul-12
Aug-12
Sep-12
Oct-12
Nov-12
Dec-12
Jan-13
Feb-13
Mar-13
Apr-13
May-13
Jun-13
Jul-13
Aug-13
Sep-13
Oct-13
Nov-13
Dec-13
Jan-14
Feb-14
Mar-14
Apr-14
May-14
Jun-14
Jul-14
Aug-14
Sep-14
Oct-14
Nov-14
Dec-14
Jan-15
Feb-15
Mar-15
Apr-15
May-15
Jun-15
Jul-15
45.0
47.5
50.0
52.5
55.0
57.5
2
6
10
14
18
22
China PMI – left scale
China industrial production – right scale
Index Percent year-on-year
STANDARD BANK GROUP STRATEGY / PAGE 9 /
... and China is a large global risk
China now EM at risk now Asia 1997 Peripheral Europe 20110
3.6
7.2
10.8
14.4
18
Share of world GDP (PPP weights)
STANDARD BANK GROUP STRATEGY / PAGE 10 /
EM growth is highly correlated to China
Pol
and
Indi
a
Bra
zil
Hon
g K
ong
SA
R
Sou
th A
fric
a
Cze
ch R
epub
lic
Tai
wan
Pro
vinc
e of
Chi
na
Chi
le
Rus
sia
Per
u
Tur
key
Ital
y
Isra
el
Ger
man
y
Sw
eden
Fra
nce
Spa
in
Japa
n
Rom
ania
Mex
ico
Aus
tral
ia
Kor
ea
Tha
iland
Den
mar
k
Indo
nesi
a
Uni
ted
Kin
gdom
Phi
lippi
nes
Uni
ted
Sta
tes
Nor
way
New
Zea
land
Can
ada
Hun
gary
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
EM average
DM average
Correlation coefficient: overall (2000-present)
STANDARD BANK GROUP STRATEGY / PAGE 11 /
Like most EMs, key African economies are tied to China…
Angola South Africa Nigeria Zambia Uganda Kenya Ethiopia Tanzania Mozambique0.00
0.20
0.40
0.60
0.80
1.00Correlation coefficient: overall (2000-present)
STANDARD BANK GROUP STRATEGY / PAGE 12 /
… with commodity-centric nations most vulnerable…
Guinea
26%
86%
Botswana
27%
92%
Zambia
13%
73%
Rep of Congo
74%%
76%
Cameroon
24%
51%
Nigeria
14.4%
97%
Gabon
66%
84%
Namibia
27%
39%
Angola
56%
97%
Cote d’Ivoire
20%
15%
LEGEND
Mining (% of GDP)
Fuel, Minerals & Metals (% of Exports)
Ghana
17%
46%
(South) Sudan
60%
78%
Hydro carbon exporters
Non-oil resources
STANDARD BANK GROUP STRATEGY / PAGE 13 /
… as already evinced by floundering exports…
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140
20
40
60
80
100
120
African imports from China
African exports to China
USD billion
STANDARD BANK GROUP STRATEGY / PAGE 14 /
... and across product types…
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140
2
4
6
8
10
0
10
20
30
40
50
60
Iron ore
Crude oil – right scale
Copper
Platinum
USD billion
STANDARD BANK GROUP STRATEGY / PAGE 15 /
… with oil economies most exposed…
Sudan (North + South)
DRC
Congo
Angola
Eq.Guinea
Egypt
Africa (total)
Ghana
Gabon
Cameroon
Libya
Chad
Algeria
Nigeria
0 10 20 30 40 50 60 70 80 90 100
Crude oil exports to China as a share of crude oil exports to the world (%), 2014
STANDARD BANK GROUP STRATEGY / PAGE 16 /
… resulting in mixed GDP growth prognosis
EthiopiaMozam-biqu
eTanza-niaKenya
ZambiaGhana
Uganda
NigeriaAn-golaSouth
Africa
0 2.2 4.4 6.6 8.8 11
10.8
7.3
6.45
5.19
7.6
7.32
6.95
7.39
10.13
3.01
8.37
7.46
7.13
7.02
7.1
6.36
5.61
4.99
4.52
2.17
Percent
3-year forecast2005-2014 average
STANDARD BANK GROUP STRATEGY / PAGE 17 /
Slowing international trade
STANDARD BANK GROUP STRATEGY / PAGE 18 /
… resulting in a structural world trade slowdown
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20130
4000
8000
12000
16000
20000
USD billion
Exports
Imports
STANDARD BANK GROUP STRATEGY / PAGE 19 /
South Africa: waiting to exhale
STANDARD BANK GROUP STRATEGY / PAGE 20 /
SA stands on rating precipice…
'94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14
S&P
Moody’s
Fitch
B+
BB-
BB
BB+
BBB-
BBB
BBB+
A-
A
A+
B
B1
Ba3
Ba2
Ba1
Baa3
Baa2
Baa1
A3
A2
A1
B2
Non-investment grade
STANDARD BANK GROUP STRATEGY / PAGE 21 /
… with market pricing signaling concern
2004 - 2014 Aug-15 H2:16 est0
100
200
300
400
500
600
700
800
900
1000
341
216290
142
238
273
345 366
375
Basis points
ZAR risk premium
Credit risk premium
Risk free rate
STANDARD BANK GROUP STRATEGY / PAGE 22 /
Poor GDP growth blights SA’s status…
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015f 2016f-2
0
2
4
6
GDP growth, annual percent
2% average
4.8% average
1.3% aver-age
STANDARD BANK GROUP STRATEGY / PAGE 23 /
… but, corporate SA outperforms…
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 20154
8
12
16
20
24
-34
-17
0
17
34
51
Annual percent Annual percent
3136 38
35
18
13.5 11
14.5
10
7.5Nominal GDP growthEarnings per share growth – ALSI (RHS)
STANDARD BANK GROUP STRATEGY / PAGE 24 /
… VAT is resilient…
2011
28 Feb 2011
31 Mar
2011
30 Apr
2011
31 May 2011
30 Jun 2011
31 Jul 2011
31 Aug 2011
30 Sep 2011
31 Oct
2011
30 Nov 2011
31 Dec 2011
2012
29 Feb 2012
31 Mar
2012
30 Apr
2012
31 May 2012
30 Jun 2012
31 Jul 2012
31 Aug 2012
30 Sep 2012
31 Oct
2012
30 Nov 2012
31 Dec 2012
2013
28 Feb 2013
31 Mar
2013
30 Apr
2013
31 May 2013
30 Jun 2013
31 Jul 2013
31 Aug 2013
30 Sep 2013
31 Oct
2013
30 Nov 2013
31 Dec 2013
2014
28 Feb 2014
31 Mar
2014
30 Apr
2014
31 May 2014
30 Jun 2014
31 Jul 2014
31 Aug 2014
30 Sep 2014
31 Oct
2014
30 Nov 2014
31 Dec 2014
2015
28 Feb 2015
31 Mar
2015
-8
0
8
16
24
5
7
9
11
13
Value-added tax collections - left scale
Nominal household spending growth – right scale
Percent year-on-year, smoothed
STANDARD BANK GROUP STRATEGY / PAGE 25 /
… and personal income tax is buoyant …
2011
28 Feb 2011
31 Mar
2011
30 Apr
2011
31 May 2011
30 Jun 2011
31 Jul 2011
31 Aug 2011
30 Sep 2011
31 Oct
2011
30 Nov 2011
31 Dec 2011
2012
29 Feb 2012
31 Mar
2012
30 Apr
2012
31 May 2012
30 Jun 2012
31 Jul 2012
31 Aug 2012
30 Sep 2012
31 Oct
2012
30 Nov 2012
31 Dec 2012
2013
28 Feb 2013
31 Mar
2013
30 Apr
2013
31 May 2013
30 Jun 2013
31 Jul 2013
31 Aug 2013
30 Sep 2013
31 Oct
2013
30 Nov 2013
31 Dec 2013
2014
28 Feb 2014
31 Mar
2014
30 Apr
2014
31 May 2014
30 Jun 2014
31 Jul 2014
31 Aug 2014
30 Sep 2014
31 Oct
2014
30 Nov 2014
31 Dec 2014
2015
28 Feb 2015
31 Mar
2015
4
8
11
15
18
Percent year-on-year, smoothed
Nominal Personal disposable income
Personal income tax
STANDARD BANK GROUP STRATEGY / PAGE 26 /
Summary
STANDARD BANK GROUP STRATEGY / PAGE 27 /
Summary
• Global: China and world trade subsidence
• Rest of Africa: reformers will be resilient
• South Africa: private sector is the nation’s scaffolding
5 Simmonds Street Johannesburg 2001 / P O Box 7725 Johannesburg 2000Tel +27 (0)11 636 9112 / Fax +27 (0)11 636 6299 / Mobile +27 (0)00 000 000
standardbank.com
ThankYou
STANDARD BANK GROUP STRATEGY / PAGE 29 /
End of commodities super-cycle…
1970s 1980s 1990s 2000s 2010s 2020s 2030s 2040s 2050s 2060s 2070s0
1
EM
EM
EM
Commodities(Energy, maize,
meat, copper)
Low-enddurables
(Stove, cars)
High-enddurables (Luxurycars, satellite TV)
Services(Tourism, insurance,
advertising)
EM