1. 2013 Weather Forecast
Cloudy with a chance of rubber bullets
29 Jan 2013
1

2. Economic activity will be more positive than in
2012, but...
Many Lessons to be Locall conditions may
learned from 2012 impede growth
Negative spill-over Limited influence of
through trade channels is monetary and fiscal
high for South Africa - policy
large dependence on
Europe for exports of Labour unrest may harm
manufactured goods production and increase
pressure on the currency
Export orders for South
African goods will pick up Downside risk from
in 2013, aided by an Europe is still a concern
anticipated weaker Rand
Positive growth sentiment
from the US
?
2

3. In 2012 conditions were stormy and foggy
Europe Growth & Industrial Output, 2012  2012 started off gloomy with limited
opportunity for movement from monetary
or fiscal policy in South Africa
6.0
Turkey
 It was foggy, but we didn’t have the
Industrial Production Growth (%)
4.0 Poland Mordor-like gloom that settled over
Europe
2.0 Germany
United Kingdom
 Sigh of relief when 2012 drew to a close
0.0 and we moved into a slow, but promising
Hungary
(3.0) (2.0) (1.0) 0.0 1.0 2.0 3.0 4.0 new year
(2.0)
Czech Republic  Looking forward to improved sentiment
France in Europe, an uptick in the housing
(4.0)
Italy market in the US and no threat of global
apocalypse
(6.0)
(8.0)
Spain
(10.0)
(12.0)
GDP Growth (%)
3

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
Investor sentiment remain risk averse
remains negative in EU
Moderate uptick in US and risk averse toward
(expected) emerging markets  Uptick in the US economy - growth in services sector
(highly likely)
LIKELIHOOD
and a turnaround in housing markets which could
support consumer growth
 Relatively positive sentiment from the US
Positive European Collapse of US
growth (unlikely) economy (not likely)
POSITIVE IMPACT NEGATIVE IMPACT
4

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
5

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
Annual Protest Growth Rate
220
 Growth trend shows major increase in 2013
Protest Growth Rate (%)
200
 Major impacts:
180
 Supply bottlenecks and demand pressure 160
 Production losses 140
 Investor sentiment, pressure on current 120
account and Rand volatility/weakness 100
2008 2009 2010 2011 2012
Source: Multi-Level Governmental Initiative and Frost & Sullivan Analysis
6

7. Key concerns and developments to look out for in 2013
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
 Government debt and budgetary pressure
Rising and deserves urgent attention
 Investor sentiment
Volatile and risk averse
 Rand volatility Largely driven by sentiment and speculation, mostly
weak Rand
 Losses due to protest action Increasing trend, losses may be substantial
 GDP Growth - 2.9% in 2013
Export growth, consumer expenditure
moderate, unflattering investment prospects, mining
& agriculture under pressure
7

8. Cloudy with a chance of rubber bullets
Thank you
8

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