1. PRESENTATION TO BUSINESS
FORUM SOUTH AFRICA
Pravin Gordhan 30 August 2013

2. SECRET 2
Region / country 2012 2013 2014 2013 2014
Percentage
World 3.1 3.1 3.8 -0.2 -0.2
Advanced economies 1.2 1.2 2.1 -0.1 -0.2
US 2.2 1.7 2.7 -0.2 -0.2
Euro area -0.6 -0.6 0.9 -0.2 -0.1
UK 0.3 0.9 1.5 0.3 0.0
Japan 1.9 2.0 1.2 0.5 -0.3
Emerging markets
and
developing countries
4.9 5.0 5.4 -0.3 -0.3
Developing Asia 6.5 6.9 7.0 -0.3 -0.3
China 7.8 7.8 7.7 -0.3 -0.6
India 3.2 5.6 6.3 -0.2 -0.1
Sub-Saharan Africa 4.9 5.1 5.9 -0.4 -0.2
South Africa 2.5 2.0 2.9 -0.8 -0.4
Source: IMF WEO Update, July 2013
GDP projections Change from April
2013 WEO
Annual percentage change in GDP in selected regions/countries
• High levels of financial market volatility due to expectations of US
monetary policy tightening (“tapering”)
• Global growth close
to LR averages
– Some acceleration
expected in 2014
– Led by EU, UK
rebound
– China growth still
“low” in 2014
• IMF growth forecasts
revised lower
– Growth
disappointments in EMs
(especially China)
– Deeper than expected
EU recession
– Higher than expected
US fiscal drag
GLOBAL GROWTH OUTLOOK HAS CHANGED

3. • EU growth has begun to decline
– ECB continues to try support growth (extended forward guidance in July) – but consensus on
growth remains limited
– Fiscal drag, banking problems persist; lower growth in China could have negative feedback loop
for Germany; Italy’s appetite for fiscal reform may be waning
• Strong private growth in US dampened by fiscal
tightening
– 2014 and beyond growth looks reasonable
– But tempered with expectations of monetary policy tightening
• Japan growth has picked up
– Net exports risen thanks to yen depreciation
– Consumption other major driver of growth
• So 2014 June consumption tax could cause growth shock
• Chinese growth faltering
– Political leadership seeking more balanced growth, don’t want to encourage bubbles
– Investment sustainability, bank NPLs, local gov’t debt levels
• Emerging market growth has begun to slow
– Weak global trade, soft commodity prices
– BRICS have led slowdown
3
UNDERSTANDING GROWTH DYNAMICS:
THE THREE SPEED ECONOMY AS EMs DROP A GEAR

4. 4
Growth supported by:
- structural reforms
- solid growth in Asia and Africa
Downside risks
- weaker domestic demand
- infrastructure bottlenecks
- lower commodity prices
- increased external vulnerability –
capital outflows
In recession:
- sluggish domestic demand
especially in periphery countries
- fiscal consolidation
Downside risks
- slow implementation of the OMT
- weaker growth in France and
Germany
- high unemployment
Growth supported by:
- solid domestic demand
- supportive housing and labour
markets
Downside risks
- fiscal consolidation
-6
-4
-2
0
2
4
6
8
10
2000 2002 2004 2006 2008 2010 2012 2014
percent
Euro Area
Emerging market and developing economies
United States
THREE-SPEED GLOBAL RECOVERY:
EU IN RECESSION; REBOUND IN US & GROWTH IN EMs

5. • Stronger US growth = tighter US monetary policy
– Employment numbers have been improving
– May: Bernanke signals policy will need to tighten
• According to Fed guidance:
– QE programme likely to wind out by end 2014 (unemployment rate: 7.0%)
– Rates likely to rise in H2 2015 (unemployment rate: 6.5%)
• Market moves since May reflect re-pricing of global risks
– Market expects that by September 2013, Fed will begin to reduce its US$85bn per month bond
buying programme
– This will cause prices for bonds to fall (yields to rise)
– This makes EM bonds look relatively more expensive / unattractive
– Driven sell-off in EM markets (esp. bonds)
5CONFIDENTIAL
This is compounding EM problems: slower growth domestically, slower trade
globally, lower commodity prices
EM investors sold US$35.9bn of EM assets (bonds US$28.6bn)
Total net sales / purchases of US mutual and pension fund investors of EM assets. Source: EPFR
UNDERSTANDING GROWTH DYNAMICS: THE
DOUBLE-EDGED SWORD OF US MONETARY POLICY

6. • Varied drivers of EM slowdown:
– “growth disappointments in major emerging market economies, reflecting, to varying
degrees, infrastructure bottlenecks and other capacity constraints, slower external demand
growth, lower commodity prices, financial stability concerns, and, in some cases, weaker
policy support” IMF July WEO update
• Brazil
– Growth (already slowing as monetary policy normalised) hit by social unrest
– Currency volatility, weakness – makes more hikes likely
• India
– Global issues are now also beginning to impact - rupee very vulnerable; monetary policy
beginning to tighten in response
– Politics also continue to create policy paralysis, domestic investment falling
• Russia
– Demand for credit weakening, few reforms to help boost investment – even if monetary
policy loosens
• Turkey
– Political turmoil; high current account deficits; tighter monetary policy to protect currency 6
EMs IN THE SPOTLIGHT

7. • GDP growth has decelerated steadily
– from 7.9%YoY in Q42012 to 7.5%YoY in Q22013
– IMF forecasts 7.7% in 2013; 7.8% in 2014
• Many market commentators see growth below that
• New government continues to emphasise reforms
– Rebalancing from investment-led growth to consumption-based model.
– Use reforms rather than stimulus to sustain growth
• Credit market is chief concern
– China's debt: GDP ratio over 200%
• Higher than US / Europe
• 50% pts higher in just 4 years
– Shadow banking chief concern
– Lower credit growth could hit investment
• backbone of economic growth
7
Uncertainty will probably add to market
volatility
Although concerns are valid in long
term, not immediately apparent what
will trigger “meltdown”
Slower Chinese growth = lower
commodity prices, slower but not
collapsing African growth
THE UNRAVELLING OF CHINA?

8. • Africa
– The IMF expects Sub-Saharan Africa to grow by 5.6 per cent in 2013 and 6.1 per cent
in 2014
• Decline since April (-0.4%pts in 2013; -0.2%pts in 2014)
– Weaker commodity prices, weaker Chinese growth – also may be raising concerns
about sustainability of fiscal issuance in recent months
– Political risks in more fragile states could be affected by lower global risk appetite
• Long term growth story remains in tact
– Growing working population out of an estimated population of 1billion in 54 countries
– More stable macro-economic environment, growing intra-regional trade, large scale
investments from many BRIC economies
– Growth in extractive industries (mining, oil, gas) and opportunities in consumer
goods, and infrastructure/construction.
8
Summary for EMs:
Looking ahead China & US forces should offset “–” and “+” impacts on EM growth
However, financial market volatility will remain high
Capital flows competition to rise – many budget and current account deficits need to be funded
Domestic fundamentals may help to secure longer term flows
EMs IN THE SPOTLIGHT

9. 9
Global factors contributed to broad sell-off in emerging currencies since May
South Africa’s exchange rate movements have decoupled from general EM trends since mid 2012
… suggests the importance of local idiosyncratic factors (same for Brazilian real and Indian rupee)
Although a lot was priced into SA scenario – so hence relative resilience in July / August compared
to other EMs where bad news is resulting in some “catch up”
Rand versus EM currency index – 2011-2013EM currency changes vs US dollar, 2013
EMERGING MARKET VULNERABILITY SINCE MAY
EVIDENT IN CURRENCY MOVEMENTS
65
70
75
80
85
90
95
100
EM currency
index

10. • Growth outlook much weaker than during the Budget
– IMF forecasting growth of 2.0% in 2013 and 2.9% in 2014
• (0.8%pts and 0.4%pts lower than April)
• Despite the rebound in 2Q GDP, growth is likely to be subdued in H2:2013
– Rand weakness and volatility - Strike activity intensifying, uncertainty in the Middle-
East, fears of Fed tapering
– CPI inflation rose to 6.3% y/y in July on higher petrol prices, private transport operation
costs, electricity tariffs and municipal assessment rates
– Rising inflation, high debt levels and unemployment weigh on spending
• But major growth constraints remain:
– Power constraints remain a major blockage to growth
– Unemployment is stubbornly high at 25% and government continues to sustain
employment growth
– Investment very weak – just 2.5% in Q1 – SOEs grew by 1.5%
10CONFIDENTIAL
IN SA SPECIFICALLY

11. 0 2 4 6 8 10 12
ZAF
COL
RUS
MEX
CHL
IDN
BRZ
THA
TUR
IND
0 2 4 6 8 10
THA
BRZ
ZAF
MEX
RUS
CHL
IDN
COL
IND
TUR
0 2 4 6 8
BRZ
ZAF
TUR
RUS
MEX
IND
COL
CHL
IDN
THA
0 2 4 6 8
ZAF
BRZ
RUS
MEX
TUR
COL
CHL
IND
THA
IDN
0 2 4 6 8 10 12
MEX
TUR
THA
CHL
ZAF
BRZ
IDN
COL
RUS
IND
0 2 4 6 8
TUR
MEX
THA
CHL
COL
ZAF
BRZ
RUS
IDN
IND
-8 -6 -4 -2 0 2 4 6
RUS
MEX
TUR
THA
ZAF
CHL
BRZ
COL
IDN
IND
0 2 4 6 8 10 12
BRZ
THA
MEX
IDN
ZAF
CHL
COL
TUR
RUS
IND
11
2006 200920082007
2010 2011 2012 2013*
BRZ = Brazil, CHL = Chile, COL = Colombia, IND = India, IDN = Indonesia, MEX =
Mexico, RUS = Russia, ZAF = South Africa, THA = Thailand, TUR = Turkey
SOUTH AFRICA GDP GROWTH
FALLING BEHIND PEERS

12. 2006 200920082007
2010 2011 2012 2013*
12
-10 -5 0 5 10
ZAF
TUR
COL
MEX
IND
BRZ
IDN
CHL
RUS
THA
-10 -5 0 5 10
ZAF
TUR
CHL
COL
IND
MEX
BRZ
IDN
THA
RUS
-5 0 5 10
ZAF
TUR
COL
IND
BRZ
MEX
IDN
CHL
RUS
THA
-10 -5 0 5 10
TUR
ZAF
COL
IND
MEX
THA
BRZ
IDN
CHL
RUS
-10 -5 0 5 10
TUR
IND
COL
ZAF
BRZ
MEX
IDN
CHL
THA
RUS
-10 -5 0 5 10
TUR
IND
ZAF
COL
BRZ
CHL
MEX
IDN
THA
RUS
-10 -5 0 5
ZAF
TUR
IND
CHL
COL
IDN
BRZ
MEX
THA
RUS
-10 -5 0 5
TUR
ZAF
IND
CHL
COL
IDN
BRZ
MEX
THA
RUS
Rising external vulnerability • Structural weaknesses • Near term risks • Medium term risks • Government response
CURRENT ACCOUNT
BALANCE (% of GDP)

13. 13
GDP growth rebounded in the second quarter – but
underlying momentum remains weak
• Services sectors (excluding government) have been the chief contributor to growth (account
for more that 40 per cent of GDP)
• Mining, manufacturing and agriculture are the main swing factors to GDP
-8
-6
-4
-2
0
2
4
6
8
1Q2007 1Q2008 1Q2009 1Q2010 1Q2011 1Q2012 1Q2013
percentagepoints
Agriculture Mining Manufacturing
Government Services (non-gov) Other industry
•Recovery in manufacturing sector was responsible
for GDP acceleration in 1Q
•Primary sector was the main underperformer
during the quarter

14. SA’S ACHIEVEMENTS SINCE 1994

15. • GDP growth: The South African economy has
expanded by 83 per cent over the past 19
years.
• National income per capita has increased from
R27 500 in 1993 to R38 500 in 2012 – an
increase of 40 per cent. Disposable income
per capita has increased by 43 per cent (just
over 1.9 per cent a year).
SA’S ACHIEVEMENTS SINCE 1994

16. • Gross fixed capital formation increased from
15% of GDP in 1993 to an average of 20% over
the past five years.
• While income inequality remains high, the
expansion of the social grants system has
contributed to a reduction in the proportion
of households living in poverty.
SA’S ACHIEVEMENTS SINCE 1994

17. • Substantial progress has been made in the
provision of basic services:
– Housing: RDP housing programme has built over 3
million housing units
– Social assistance: from 2.5 million to approximately 15
million recipients
– Water services: percentage of households with access
to potable water has increased from 60% to over 90%
– Access to electricity has increased from 50% of
households to 85%.
SA’S ACHIEVEMENTS SINCE 1994

18. • Over 1.6 million work opportunities were created
in phase 1 of the Expanded Public Works
Programme and the programme now aims to
achieve over 500 000 fulltime employment
opportunities.
• Stable public finances: from the fragmented
public administrations of the apartheid era we
have constructed a unitary state, nine provinces
and a reconfigured municipal landscape; debt as
a % of GDP has been reduced while doubling
expenditure on public services in real terms.
SA’S ACHIEVEMENTS SINCE 1994

19. • A new tax administration system has been
established in the SARS, and an overhaul and
modernisation of the tax structure has allowed
lower rates of company tax to be phased in
together with broadening of the tax base.
• South Africa’s financial sector remains robust and
healthy, with strong growth in turnover on the
JSE stock exchange, highly liquid capital markets
and a well regulated banking and financial
services industries.
SA’S ACHIEVEMENTS SINCE 1994

20. • Transformation of ownership and management is
under way through an orderly process governed by law
and agreements between stakeholders.
• Over R600 billion in BEE transactions have been
recorded since 1995;
• black people and women in senior management has
increased from less than 10% in the 1990s to over 40%
today – more progress is needed, but the trend is in
the right direction.
• Dynamic growth in telecommunications has
transformed the way people communicate with each
other, and there is steady progress in internet access.
SA’S ACHIEVEMENTS SINCE 1994

21. • In hosting the 2010 FIFA World Cup we have demonstrated
our capacity to manage major events and undertake large
construction projects in record time;
• other major infrastructure projects include our partnership
with Lesotho in building the Lesotho Highlands Water
Project,
• completion of the Gautrain rapid rail project,
• expansion and rehabilitation of our main airports, major
national road improvements and the expansion of power
generation capacity and rail transport capacity that is now
in progress.
• The total value of infrastructure projects currently under
way and in planning amounts to over R3.6 trillion.
SA’S ACHIEVEMENTS SINCE 1994

22. • We have initiated one of the largest renewable
energy programmes in the world, bringing private
sector capacity and new technologies into
improving long term energy security and
contributing to environmental sustainability.
• While the corporate conglomerates of the old
South Africa have largely been dismantled, new
and dynamic South African companies are
making their mark on the global and regional
front
SA’S ACHIEVEMENTS SINCE 1994

23. • SA mining and construction companies are
contributing to Africa’s development
• Telecommunications companies are major players
in many other countries, our retail and logistics
companies are growing in significance in Africa’s
trade and development.
• SA is playing its part in reconfiguring global
economic arrangements, through participation in
the IMF and World Bank, the G20, the Financial
Stability Forum, the WTO and more recently in
partnership with the BRICS countries.
SA’S ACHIEVEMENTS SINCE 1994

24. CABINET DECISIONS
Reignite inclusive growth

25. • REIGNITING ECONOMIC GROWTH
• Cabinet recognised that the South African
economy can no longer rely heavily on the global
economy to reignite growth and create jobs. The
focus of government, business and labour must be
on accelerated implementation of domestic plans
to grow the economy in an inclusive way and
create jobs, as well as seizing opportunities in the
region.
• In this regard, Cabinet decided, among other
things, to:
CABINET LEKGOTLA DECISIONS

26. • 2.1 Act immediately and take steps to resolve the energy
constraint by:
• Starting the process towards building Coal 3 while working with
relevant stakeholders to speed up co-generation;
• Finalising the process of authorising shale gas exploration in a
responsible and environmentally friendly manner;
• Taking steps to encourage projects to enhance regional hydro-
power capacity and enter into carefully considered contracts to
import energy from the region.
• Improve the regulatory environment through, for
example, streamlining licence approvals for water, mining and
environmental impact assessments with the view of shortening the
approval times.
• Strengthen industrial programmes, including mineral beneficiation
projects in the platinum, titanium, iron and steel sectors.
ACT IMMEDIATELY

27. • Accelerate various infrastructure programmes: National Treasury
and relevant departments will work with the Presidential
Infrastructure Coordinating Commission to unblock procurement
processes in infrastructure projects. This will cover priorities in
education, health, transport, public works and human settlements.
• Stimulate agriculture and agro-processing for the benefit of rural
development and job creation by finalising the Agricultural Policy
Action Plan in partnership with the sector by the end of next
month, September 2013.
• Upscale youth and public employment schemes through a new
phase of the Extended Public Works Programme and expansion of
the Community Work Programme. This will include implementation
of youth employment incentives and the employment tax incentive
for Special Economic Zones.
ACT IMMEDIATELY

28. • Stabilise the mining sector by supporting the Framework Agreement for a
Sustainable Mining Industry as led by the Deputy President. Government
will continue implementing its key commitments under the Framework to
help stabilise the industry.
• Improve support to small businesses by, among other things, creating a
one-stop shop and portal for SMME’s. This will start with the alignment of
SMME programmes across all government spheres and departments and
will be launched by the end of this year.
• Ministers leading Outcome 4 – Decent Employment Through Inclusive
Growth will prepare an action plan to give effect to the aforementioned
proposals by September this year. These implementation plans will see
government acting on key elements of the National Development Plan as
part of speeding up implementation of Vision 2030.
ACT IMMEDIATELY

29. • Symbiotic relationship between government
and business, specifically focusing on
– NDP,
– Infrastructure and
– Job creation
WE HAVE MADE A DIFFERENCE…!

30. • SYMBIOTIC
• INTERDEPENDENT
• SYNERGISTIC
• CONTRADICTIONS / CONSTRUCTIVE TENSION
• GOVERNMENT AS AN ENABLER, SUPPORTER, OF BUSINESS
• REPRESENTS NATIONAL INTEREST, BALANCED ACTION
• GOVERNMENT AS “REGULATOR” - EXCESSES
• THE EXCLUDED……
• How the public and private sectors can work more closely
together?
GOVERNMENT and BUSINESS?

31. • South Africans focus too intensely on what is
bad, Archbishop Emeritus Desmond Tutu said last Wednesday.
• "Yes, the state of our political firmament, and the
lawlessness, cannot be ignored," he said in a speech at Lead SA's
third anniversary.
• "But my heart soared on Saturday where we witnessed ecstatic
Bafana Bafana supporters giving the Springboks such a rousing
welcome. And the Springboks bore the word, 'unite' on their
sleeves."
• Anyone who imagined this scene in the 1980s would have been
accused of hallucinating, if not terrorism, and would have been
taken to an asylum or prison, Tutu said.
ARCHBISHOP EMERITUS TUTU

32. "Strong societies have strong civil societies,
with citizens who are active and engaged,
who, through their active engagement,
have earned the right to hold their
leadership to account."
ARCHBISHOP EMERITUS TUTU