South Africa

SEB MERCHANT BANKI NG – COUNTRY RI SK ANALYSI S Apri l 14, 2008

important your attention is drawn to the statement on the back cover of this report which affects your rights.
Analyst: Jenny Nordgren. Tel : +46 8 763 96 05. E-mail : jenny.nordgren@seb.se

Political and economic uncertainty has increased. However, the economy benefits from an improved
fiscal position, a flexible exchange rate and a strong track record of managing economic shocks.
Country Risk Analysis
oçÄìëí=Äìí=ãçÇÉê~íáåÖ=ÖêçïíÜ. Tle economy las expanded robuslIy during lle Iasl
four years vill an average GDI grovll of 5 ° driven mainIy by a consumplion
boom spurred by rapid credil expansion. In 2007, lovever, a surge in infraslruclure
inveslmenls - mainIy pubIic ÷ slarled lo repIace privale consumplion as lle main
driver of economic grovll as louseloIds vere lil by ligller monelary poIicy. Tle
need lo improve poor infraslruclure and prepare Soull Africa for lle 2010 IIIA
WorId Cup slouId conlinue lo spur inveslmenl demand in lle nexl fev years, bul
nol enougl lo slave off a sIovdovn in grovll lo 3-4 ° llis year due lo inleresl rale
spiIes since mid-2006, a veaIer gIobaI economy and eIeclricily slorlages lurling lle
mining seclor in parlicuIar.

mêìÇÉåí=ÉÅçåçãáÅ=éçäáÅÉë. Tle fiscaI posilion las graduaIIy improved and resuIled
in a sleady reduclion of pubIic debl lo GDI lo beIov 30 °. Iarge revenue gains from
robusl economic grovll lave aIIoved lle governmenl lo increase spending on
infraslruclure and sociaI services vliIe Ieeping lle fiscaI posilion in a smaII surpIus.
Tle budgel is expecled lo conlinue lo slov a smaII surpIus over lle medium-lerm
budgelary slralegy period up lo fiscaI year 2010/11 ending Marcl. Tle CenlraI BanI
las responded lo lle demand boom and rising louseloId indebledness (aImosl 80 °
of disposabIe income) by raising lle repo rale since mid-2006 from 7 ° lo 11.5 ° and
inlroducing ligller Iending slandards in mid-2007 (NalionaI Credil Acl). As a resuIl,
lle sliII rapid credil expansion moderaled sIigllIy during faII 2007 lo a bil more llan
20 ° p.a. vliIe lle infIalion rale conlinued lo rise lo more llan 9 ° in Iebruary,
parlIy due lo surging food and energy prices and lle exclange rale deprecialion.

táÇÉåáåÖ=ÅìêêÉåí=~ÅÅçìåí=ÇÉÑáÅáí. Slrong
domeslic demand and ligl oiI prices videned
lle currenl accounl deficil lo a record 7.3 ° in
2007 despile soaring commodily prices. Slrong
porlfoIio infIovs lave unliI recenlIy leIped
finance lle deficil and even aIIoved a furller
buiId-up of inlernalionaI reserves lo more llan
USD 30 biIIion. Since Iale 2007, lovever,
porlfoIio infIovs lave laiIed off perlaps due
lo lle gIobaI marIel lurmoiI and increased
poIilicaI uncerlainly vliIe IDI (foreign direcl
inveslmenl) fIovs increased. LxlernaI debl lo GDI is reIaliveIy Iov al beIov 30 °
bul increasing. Tle composilion is aIso clanging rapidIy lovards a mucl Iarger
External Balance
Source: Reuters EcoWin
02 03 04 05 06 07
Z
A
R

(
b
i
l
l
i
o
n
s
)
-50
-40
-30
-20
-10
0
10
20
30
40
50
Current
account
Portfolio investment, net
FDI, net
SEB Merchant Banking Country Risk Analysis April, 2008

2
slare of slorl-lerm debl, nov accounling for more llan 58 ° of lle lolaI up from Iess
llan a llird in 2005. Iarge foreign ovnerslip of lle slocI marIel (18 °) and non
residenl's loIdings of IocaI currency debl (40 ° of exlernaI debl) maIe lle baIance of
paymenls vuInerabIe lo gIobaI inveslor confidence.

fåÅêÉ~ëÉÇ=éçäáíáÅ~ä=ìåÅÉêí~áåíóK=In Iasl December, Iacob Zuma vas eIecled lle nev
Ieader of African NalionaI Congress (ANC) defealing Iresidenl MbeIi by a vide
margin. Tlis las raised concerns aboul lvo cenlres of pover÷ in lle governmenl and
lle ANC ÷ vlicl may affecl lle effecliveness of lle governmenl and lle direclion of
economic poIicies in lle run up lo lle 2009 generaI eIeclions. Some fear llal a Zuma
presidency couId Iead lo more Iefl-ving poIicies oving in parl lo lle supporl le
enjoys from lle Congress of Soull African Trade Unions (COSATU) and lle Soull
African Communisl Iarly despile repealed slalemenls by Zuma llal lle broad llrusl
of economic poIicies viII lle slay lle same. Hovever, Zuma is facing corruplion
clarges in an upcoming lriaI in Augusl vlicl couId prevenl lim from running for
office. In a Ionger-lerm perspeclive, Soull Africa conlinues lo face major
socioeconomic claIIenges.

bñÅÜ~åÖÉ=ê~íÉ=îçä~íáäáíó=~åÇ=êÉëáäáÉåÅÉ. IoIilicaI uncerlainly, videning currenl
accounl deficil and veaIer grovll prospecls lave pul dovnvard pressure on lle
exclange rale. Tle rand las deprecialed around 15 ° againsl lle USD llis year and
lle exclange rale is IiIeIy lo remain voIaliIe. Yel, Soull Africa las proved resiIienl lo
severaI slocIs in lle pasl and according lo our risI scenario anaIysis lle economy
slovs a reIalive ligl degree of resiIience even if lle unprecedenled recenl videning
of lle currenl accounl deficil increases lle uncerlainly of resuIls based on lisloric
dala. One of lle raling agencies' las jusl slaled llal lleir raling loIds for a
deprecialion of more llan 20 ° againsl lle USD.
--˘--
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hÉó=ÑáÖìêÉë OMMU
IopuIalion (miIIions) 49
GDI/capila ($) 6146
GDI (clange) 4°
InfIalion 7°
Curr.Acc. baIance/GDI -7°
Reserves/imporls (monlls) 4
Budgel baIance/GDI 1°
Governmenl debl/GDI 24°
Graph: The pentagon shows Turkey's risk worse
than average in all respects including to its
traditional competitor, Brazil, reflecting weaker
liquidity, macro balance and absence of event risk.
bñíÉêå~ä=ê~íáåÖëW=
Iilcl: BB-/pos
Moody's: Ba3
S&I: BB-/pos
dê~éÜW Tle penlagon slovs Soull Africa's risI
profiIe vlere il scores beller llan average for aII
emerging marIels on resiIience and informalion
vliIe il scores beIov average on Iiquidily, macro
baIance and abscence of evenl risI - mainIy poIilicaI
risI.
bñíÉêå~ä=ê~íáåÖëW=
Iilcl: BBB+,pos.
Moody's: Baa1
S&I: BBB+
mÉÉêëW
Hungary
India
Russia
-1
1
3
5
7
9
11
13
Resilience
Liquidity
Information
Absence of event
risk
Macro balance
South Africa Average EM
How to read the chart?
Moving out from the center
reduces risk.


SEB Merchant Banking Country Risk Analysis April, 2008

3
Key data: 2002 2003 2004 2005 2006 2007 2008 2009
GDP (bill. US$) 112 168 217 242 258 280 300 320
GDP/capita (US$) 2400 3569 4566 5055 5342 5755 6146 6524
GDP, real (change) 3.7% 3.1% 4.9% 5.0% 5.4% 5.1% 3.8% 4.3
Investments/GDP 15% 16% 17% 17% 19% 21% 22% 23%
Budget deficit/GDP -0.1% -2.2% -2.0% -0.3% 0.6% 0.7% 0.9% 1.0%
Govt debt/GDP 40% 38% 36% 36% 32% 27% 24% 21%
CPI inflation (%) 9.2% 5.9% 1.4% 3.4% 4.6% 7.1% 7.4% 5.5%
Money demand (%) 6.3% 5.5% 17.3% 15.2% 16.0% 12.0% 7.2% 5.9%
Stock prices (%change) 16% -13% 24% 34% 44% 33%
Interest rates 12.0 11.7 7.8 7.1 7.6 9.6 10.6 8.9
Exch. Rate ($) 10.5 7.6 6.4 6.4 6.8 7.0 7.6 7.7
Trade/GDP (%) 53% 44% 45% 46% 52% 55% 56% 56%
Oil price (Brent)$ 25 29 38 54 65 73 87 77
Billions US $
Export of goods 31.9 38.7 48.3 55.3 63.9 73.9 79.6 86.6
Imports of goods 27.1 35.3 48.6 56.3 70.0 80.6 87.9 93
Other: -3.9 -5.3 -6.7 -8.7 -10.4 -13.8 -12.0 -11.5
Current account 0.9 -1.9 -7.0 -9.7 -16.5 -20.5 -20.2 -18.2
% of GDP 0.8% -1.1% -3.2% -4.0% -6.4% -7.3% -6.7% -5.7%
Net FDI 1.9 0.2 -0.6 5.6 -6.7 2.1 2.7 5.9
Loan repayments -3.8 -2.0 -1.5 -2.0 -3.8 -7.5 -10.0 -12.5
Net other capital flows 0.9 4.0 13.2 12.5 32.1 33.6 28.7 26
Balance of payments -0.1 0.4 4.1 6.4 5.0 7.7 1.1 2.1
Reserves 5.7 6.1 10.1 16.5 21.5 29.2 30.4 32.4
Total debt 24.7 26.6 27.2 29.6 33.9 35.5 38.0 40
o/w short term debt 7.8 7.4 7.7 9.0 13.2 20.6 26.8 31.3
Source: OEF (Oxford Economic Forecasting) and SEB estimates
Rating history
Fitch BBB- BBB BBB BBB+ BBB+ BBB+
Moody's Baa2 Baa2 Baa2 Baa1 Baa1 Baa1
S&P BBB- BBB BBB BBB+ BBB+ BBB+
Type of government: ANC majority government headed by president Thabo Mbeki
Next elections Parliamentary elections 2009.
Other:
Latest PC deal n.a.
Recent IMF programs Compensatory and Contingency Financing Facility (CCFF) in December 1993.
%
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E x c h a n g e r a t e
S o u r c e : R e u t e r s E c o W i n
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C P I X









SEB Merchant Banking Country Risk Analysis April, 2008

4



fãéçêí~åí> Tlis slalemenl affecls your riglls.


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AII researcl (reporls, sludies and pubIicalions) is produced for inslilulionaI inveslors onIy. AII researcl
(reporls, sludies and pubIicalions) is produced for privale informalion of recipienls and SIandinavisIa
LnsIiIda BanIen AB (pubI), (lle BanI) is nol soIiciling any aclion based upon il.

Opinions conlained in aII researcl (reporls, sludies and pubIicalion) represenl lle banI's presenl opinion
onIy and are subjecl lo clange villoul nolice. AII informalion las been compiIed in good faill from
sources beIieved lo be reIiabIe. Hovever, no represenlalion or varranly, express or impIied, is made vill
respecl lo lle compIeleness or accuracy of lle conlenls and il is nol lo be reIied upon as aullorilalive.
Recipienls are urged lo base lleir inveslmenl decisions upon sucl invesligalions as lley deem necessary.
To lle exlenl permilled by appIicabIe Iav, no IiabiIily vlalsoever is accepled for any direcl or
consequenliaI Ioss arising from use of llese eIeclronic or prinled documenls or lleir conlenls.

Your allenlion is dravn lo lle facl llal a member of, or any enlily associaled vill, lle banI or ils affiIiales,
officers, direclors, empIoyees or slareloIders of, sucl members may from lime lo lime lave a Iong or slorl
posilion in, or ollervise parlicipale in lle marIels for, lle currencies and securilies of counlries
menlioned lerein.

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