RMB FIXED INCOME, CURRENCY & COMMODITIES VUKA AFRICA 09 April 2008

Transcription

1 AFRICA WEST AFRICA Rate hikes to stem prices EAST AFRICA Oil and food prices drive inflation higher NIGERIA Campaign against corruption in full force UGANDA Upbeat medium-term outlook Peace deal extended once more KENYA Touch and go in forming government KES forecast changed More realistic growth forecast NAMIBIA A new issuance programme TANZANIA Investing in electricity T-Bill rates falling BOTSWANA Dealing with declining diamond sales Now forecasting a weaker BWP Rates on hold Smooth transition to new president SOUTH AFRICA AND CMA ZAR: Turning more bearish Hike is now a close call MAURITIUS Cutting rates to stimulate growth Gunther Kuschke: gunther.kuschke@rmb.co.za John Cairns: john.cairns@rmb.co.za Celeste Fauconnier: celeste.fauconnier@rmb.co.za

2 OVERVIEW AFRICA STILL HOLDING UP WELL Global conditions continue to worsen. The IMF has downgraded its 28 world GDP growth forecast to 3.7 from 4.1 against an original forecast of 4.8. Overall, 28 is now expected to be considerably worse than 27. Figure 1: IMF revises 28 world growth outlook to Source: IMF A potential decline in export commodity prices is also a concern, although this would alleviate some of the inflation worries. It is not all negative though as reports still indicate that foreign investor interest in the continent remains strong, with new African funds still being set up and now the World Bank talking about luring some of the Sovereign Wealth Funds assets into the continent. The political situation has also improved, most notably in Kenya, with a smooth transition in Botswana and ongoing hopes for Zimbabwe. A case in point is Kenya, where the improved political situation plus the Safaricom IPO have lured inventors back to the country, strengthening the exchange rate. Figure 2: South Africa and US growth to slow during South Africa US African growth is holding up very well. Latest estimates are that GDP grew at 5.8 in 27. The UN is the latest to release a positive outlook, expecting a remarkable 6.2 this year. We are more cautious though; while we haven t downgraded many of our country GDP forecasts, we increasingly recognise that the risks are to the downside. In particular, rising levels of inflation are a concern in many countries. Associated with food, oil and supply side pressures, monetary policy is still having to be tightened in many cases Source: IMF, RMB FM Research A notable exception to these positive trends is South Africa where growth is slowing, portfolio flows aren t being seen, and where we have had to revise our ZAR forecast weaker. Table 1: Summary of exchange rate forecasts change Forecasts Current Year-to-date Year-on-year Jun-8 Sep-8 Dec-8 Mar-9 USD/BWP USD/GHS USD/KES USD/MUR USD/NGN USD/TZS 1, ,15 1,2 1,25 1,288 USD/UGX 1, ,73 1,745 1,76 1,783 USD/ZAR Source: RMB FM Research, Reuters RAND MERCHANT BANK page 2

3 SOUTHERN AFRICA SOUTH AFRICA AND THE CMA ZAR: TURNING MORE BEARISH The continued lack of portfolio inflows into South Africa implies that the bias on the USD/ZAR is still upwards. We have revised our year-end forecast to 8.5 from 7.7 with a continued expectation of high volatility. Our forecast implies that the rand moves even further from fair value. While the environment presents more two-way risks than in recent months, the risk to our forecast is still to the upside; in fact, we should even start considering a continued lack of portfolio inflows right through the year. Figure 4: A close call on South African rates y/y Prime rate Repo rate CPIX inflation Target band Figure 3: We have revised upwards out USD/ZAR forecasts Source: Reuters, RMB FM Research Actual Forecast Previous HIKE IS NOW A CLOSE CALL With inflation continuing to rise, the ZAR weakness, and further potential electricity hikes, the chance of yet another, or even more than one, rate hike has grown. Our core view is that rates will remain on hold at the April meeting and indeed through this year before the SARB starts cutting early next year, but we acknowledge that the risk is for another hike. And, if the SARB hikes, we feel that the Bank of Namibia will have no choice but to follow. While they have allowed a 5bp rate gap to develop, we feel that they would not be comfortable with a full 1bp gap Source: Reuters, RMB FM Research NAMIBIA A NEW ISSUANCE PROGRAMME The new debt programme targets a significant increase in issuance, reflecting the move into a fiscal deficit and the expiry of the GC8 bond in July. The programme includes scheduled bond issuance once every two months, starting this week. The next 24 months will see as many as 12 bonds issued. As we mentioned in the March Vuka, this issuance should be well absorbed given pent-up local demand, all the more so because of the increased captive base associated with the tightening of exchange controls under Regulation 28. In fact, it is even possible that in the extreme, the full Namibian bond curve might actually trade below that of South Africa. Figure 5: The Namibian and South Africa yield curves ZAR Yield Curve Namibia Jun-5 Jun-15 Jun-25 Jun-35 Jun-45 Source: Reuters, RMB FM Research RAND MERCHANT BANK page 3

4 BOTSWANA DEALING WITH DECLINING DIAMOND SALES With diamonds accounting for around 35 of GDP and 75 of export earnings, the expected decline in diamond production from 22 and the depletion of reserves by 229 is a large concern. The government has addressed the issue in two ways. First, by encouraging a diversification in the economy. This strategy has had some success but isn t happening fast enough. The country has largely escaped the resource curse, where large natural resource endowments encourage corruption and restrict growth in other parts of the economy. And, second, by not building up debt by a) running a fiscal surplus, and b) applying the Sustainable Budget Index (SBI) under which mineral revenue matches government investment spending. The IMF s annual report and an additional Working Paper released last week looked at whether these efforts were sufficient and found that essentially not enough is being done. Ideally, further diversification of the economy is needed, both into other mineral production and into other sectors, which will be hard to achieve. The Fund s other suggestion is that the government build up savings and use these to tide the economy over when diamond production slumps. Depending on various assumptions, this additional saving would have to be between 1 and 4 of GDP and would be added to the Pula Fund (an investment fund under the Bank of Botswana), which would perhaps then be turned into an explicit Sovereign Wealth Fund. Furthermore, government spending as a percentage of GDP would contract to less than 3 and the government would look for alternative tax resources, such as raising VAT. The good fiscal management should continue, but it will not be good enough to completely escape the negative effects of a fall-off in diamond production when it eventually comes. NOW FORECASTING A WEAKER BWP The revision to our ZAR forecast leads to a similar upward adjustment in our USD/BWP forecast given the basket regime. We now look for USD/BWP7.29 by year-end. We continue to expect a 3 crawl rate of depreciation, reflecting that the local rate of inflation is higher than that of the trading partners in the basket. Figure 6: We have revised our BWP forecasts to account for the ZAR Source: Reuters, RMB FM Research RATES ON HOLD Bank of Botswana Governor Moholo has clearly set out the interest rate outlook. Speaking in London in mid-march, she said that the Bank will not lower rates until inflation peaks and begins a downward trend. Admittedly, this might not be too long because inflation will probably top out in H1. At the same time, though, she dismissed the potential for another rate hike. However, a case could be made for higher rates given the upward surge in an inflation rate that is already well above target. Her statement was made before the February inflation number was released. The number came in at 9 and after January's 8.4 it seems that there is no chance that the Bank s forecast of 8 inflation in Q1 will be achieved. Still, a rate hike looks unlikely given the earlier comment and we look for rates to remain on hold through to the latter part of this year, where after they can be expected to drop. Figure 7: Botswana interest and inflation rate USD/ZAR USD/BWP Official interest rate Inflation Source: I-Net Bridge RAND MERCHANT BANK page 4

5 SMOOTH TRANSITION TO NEW PRESIDENT President Seretse Khama Ian Khama is the new leader of Botswana after Festus Mogae retired on 31 March. The handover did receive some criticism for being undemocratic, but the smooth transition has been praised locally and internationally, reinforcing the country s image of political stability and low political risk. We also expect President Khama to continue with the same policies as the previous presidency and he should retain his presidency in the October 29 elections. Figure 8: Mauritian GDP growth vs SEMDEX stock index Index 1 Growth SEMDEX 2,5 8 2, 6 1,5 MAURITIUS 4 1, CUTTING RATES TO STIMULATE GROWTH Last month saw the BoM cut the benchmark interest rate by 5bp to 8.5. This comes after a 75bp cut in mid-27 and another 25bp cut at the start of the year. The central bank is worried about the current global risks impacting world growth, and believes the downside risks to its growth outlook currently outweigh the upside risks to inflation. We expect inflation to average 8. in 28 but upside risks to our forecast include continued high fuel and food prices, which will put pressure on the central bank s expectation of slowing inflation during 2H8. Mauritius is continuing its economic recovery and is steadily upholding its aggressive reform agenda. One of the reforms includes Mauritius adopting the Hague Securities Convention, which is aimed at improving the efficiency of global securities market transactions, reducing systemic risk in cross-border transactions and smoothing the progress of cross-border capital flows Source: RMB FM Research, Reuters 5 For the time being we stick to our 4 growth forecast for 28, as we await more concrete evidence that the current measures taken by the government and central bank to stimulate economic activity is paying off. However, the IMF is less conservative in their outlook and expects growth to reach 7 in 28 due to strong growth in the finance, services, tourism and construction sectors. An added bonus is the planned US$25m investment by the Dubai Group in the above sectors. Table 2: Southern African macro economic snapshot 28 GDP () Inflation () Budget/GDP () CA/GDP () Foreign debt/gdp () Import cover (Months) Botswana Mauritius Namibia Source: RMB FM Research, EIU RAND MERCHANT BANK page 5

6 WEST AFRICA RATE HIKES TO STEM PRICES With inflationary pressures building, both Nigeria and Ghana have hiked benchmark interest rates in the past few weeks. Figure 1: Regional inflation picking up since last year 15 Ghana Nigeria (RHS) Figure 9: Energy prices adds risk to interest rates 25 Nigeria Ghana 2 Oil price (RHS) US$/bbl Dec-6 Mar-7 Jun-7 Sep-7 Dec-7 5 Jan-5 Jul-5 Jan-6 Jul-6 Jan-7 Jul-7 Jan-8 Source: RMB FM Research, Reuters, BoN, BoG 1. Nigeria hiked rates by 5bp to 1 at the start of April although inflation in February slowed from 8.6 to 8. The rate hike shows commitment by the CBN to keep monetary policy tight as inflation has increased since 4Q8. Inflation expectations are also building from an expansionary budget and after releases from the oil savings account to lower tier governments. This proactive decision, together with grain releases from the country s strategic reserves, will help keep prices in single digits this year. The BoG raised rates by 75bp to as prices increased in February for the fifth month in a row. Inflation came in at 13.2 in February from 12.5 the previous month, pushed predominately by movements in food and energy prices. Despite the rate hike, it seems unlikely that Ghana will see single digit inflation this year as the full extent of last September s flood damage to farmlands hasn't yet passed through the system. 3 Source: RMB FM Research, Reuters NIGERIA CAMPAIGN AGAINST CORRUPTION IN FULL FORCE Nigeria s two health ministers, Adenike Grange and Gabriel Aduku, have been forced to resign by President Yar Adua in response to corruption allegations. They are the first two cabinet ministers to lose their positions due to embezzlement charges since Yar Adua s presidency started in early 27. Yar Adua s anti-corruption attack has also led to the suspension of 14 senior ministry officials, but the anti-graft drive will continue to face difficulties due to immunity clauses against state governors and lengthy trials. Yar Adua has shown, albeit slowly, his promised zero tolerance stance towards corruption. His apparent dedication is expected to influence his popularity and also boost investor confidence, as long as his commitment extends to showing progress in a highprofile probe into certain power-sector contracts awarded under Yar Adua s supporter and former president, Olusegun Obasanjo. There has been little significant progress in this case recently and it needs to become Yar Adua s number one priority if he wants to effectively tackle corruption in Nigeria. Table 3: West African macro economic snapshot 28 GDP () Inflation () Budget/GDP () CA/GDP () Foreign debt/gdp () Import cover (Months) Ghana Nigeria Source: RMB FM Research, EIU RAND MERCHANT BANK page 6

7 EAST AFRICA OIL AND FOOD PRICES DRIVE INFLATION HIGHER East Africa is still buckling under soaring oil and food prices as seen in the latest inflation releases from these countries. Inflation edged up to 8.1 (from 7.8) and 21.8 (from 19.1) in Uganda and Kenya respectively last month. Prices increased by 8.9 in Tanzania in February from the 8.6 recorded in December. Figure 11: Price pressures still on the increase Jan-6 Jul-6 Jan-7 Jul-7 Jan-8 Source: RMB FM Research, Reuters These forces pose the biggest risks to price stability during the rest of the year with added pressures in Kenya as staple food prices are likely to increase further due to high inset costs. Many farmers have warned that some crops were not planted as a result of the displacement and violence. Currently, we hold with our East African inflation view for the year but a continuation of this upward trend in prices over the next few months will necessitate a forecast adjustment and will put pressure on interest rates going forward. KENYA Uganda Kenya Tanzania TOUCH AND GO IN FORMING GOVERNMENT The task of forming the new coalition government has proven difficult and has forced a delay in naming the new Cabinet. Thus far a 4-member Cabinet has been decided upon, with 2 seats each going to the PNU and ODM. Parliament has passed two bills which make up part of the power-sharing deal. A unanimous vote saw President Kibaki sign into law the Constitution of Kenya (Amendment) Bill, and the National Accord on Reconciliation Bill. But the division of ministerial jobs has proved difficult. Opposition halted Cabinet talks yesterday, delaying the Cabinet formation even further. We remain cautious due to the underlying mistrust and bickering between the two sides which will provide a crucial test for the government s initial workability, but we do see serious commitment by both parties to remain in line with the principle of power sharing, and international pressure could lead to the eventual naming of the Cabinet which is key to ending the post-election crisis. Meanwhile, the US State Department has relaxed a Kenya travel warning after most violence had come to an end after the coalition deal was signed. Protests by supporters of both parties are now focused on making the government choose a lean and representative Cabinet. If the situation is not sorted out soon, riots could break out, especially in Nairobi's slums. KES FORECAST CHANGED The return of investor confidence after the brokered peace deal and the successful Safaricom IPO launch at the end of last month has led us to change our view on the KES. It is now expected to gain further from current levels to close 2Q8 at USD/KES6, mainly due to an expected influx of hard currency after the IPO closes on 23 April. The government is selling 25 of its 6 share in Safaricom at US$.8 per share (worth around US$729m in total). A small correction, back to 65, is likely during 2H8 as the effect of the IPO dissipates and the expected widening of the current account weighs on the currency. Figure 12: Safaricom IPO to buffer KES in the short run USD/KES USD/KES 6 Jan-6 Jan-7 Jan-8 Jan-9 Source: RMB FM Research, Reuters Forecast Election violence As the KES will be very politically sensitive during the rest of the year, a lot will depend on how existing issues on the formation of the Cabinet are resolved and the time it takes to set up a working government. The political crises during 1Q8 left the export horticulture sector largely unscathed and early indications are that the sector will stay buoyant during 28, which will give the KES some respite. Horticulture (cut flowers make up around 65 of the sector) eclipsed tourism last year as the country s largest forex earner. RAND MERCHANT BANK page 7

8 MORE REALISTIC GROWTH FORECAST The government has finally cut their 28 growth forecast from 7 to between 4.5 6, with a worst case scenario of 4. This is more in line with our 5.4 forecast. With the ramifications of the post-election violence only starting to come to the surface now, some downside risk to our forecast remains. UGANDA UPBEAT MEDIUM-TERM OUTLOOK The IMF upheld its upbeat outlook for the Ugandan economy after a review of the current Policy Support Instrument (PSI). The Fund expects Uganda s economy to expand by 7 this year, in line with our 6.5 forecast. Although the mediumterm growth outlook is positive, Uganda needs to increase infrastructure investment, in particular, add extra energy generating capacity, boost longer-term growth, alleviate poverty, and create employment going forward. Figure 13: Different Uganda GDP growth forecasts for Source: : RMB FM Research, IMF, GI, EIU, CBU To help Uganda s energy development drive, the Indian government made a US$35m credit line available for the construction of a new hydropower plant on the Nile. The plant is expected to generate around 1MW the completion date is yet to be finalised. Uganda s installed capacity is around 3MW and they have an energy deficit of 1MW. Umeme (Uganda s sole electricity distribution company) has also pledged to spend US$1m over the next four years to improve the country s power supply, which will be crucial as electricity consumption is set to increase sharply over the next few years as the public and private sectors tap the national grid EIU GI IMF RMB CBU PEACE DEAL EXTENDED ONCE MORE LRA leader Joseph Kony has requested an extension for signing the peace agreement between the rebel group and the Ugandan government. It was due to be signed by the end of March, but Kony has apparently been experiencing difficulties travelling to the signing venue and with facilities at the destination. The signing is now due to take place on 1 April. The government is deeply disappointed but believes it is a small setback and both parties remain committed to the peace deal. As previously reported, Kony s international arrest warrant is still valid, which is damaging to the current peace agreement as the LRA will not disarm if the charges aren t dropped. The UN Security Council can request the International Criminal Court to put the arrest warrant on hold if it would increase the chances of peace but is yet to do so. TANZANIA INVESTING IN ELECTRICITY The African Development Bank (ADB) has signed a US$48m agreement with the Tanzanian government to improve and expand the electricity grid and supply in certain areas of the country. Tanzania is very dependent on hydroelectricity and thus the country faces extensive blackouts in times of droughts. The lack of infrastructure, the monopoly of the stateowned electricity institution, and the costs of constructing new power plants remain major obstacles for this sector. To counter these drawbacks, and with the help of the World Bank and the ABD, the government is investing heavily in upgrading and building new power plants and is also allowing considerable investment by independent power producers (IPPs), which will help contribute much-needed power to the national grid. The IMF confirmed it expected a 7.5 growth rate for Tanzania this year, which is the same as our forecast. The expected expansion stems from robust growth in the manufacturing, construction and service sectors. Increased foreign investments in the mining sector together with gold prices expected to remain elevated during the year will provide an added boost. Market expectations see gold staying around US$9/oz throughout the year. As with its East African neighbours, upside risk to inflation remains. We expect inflation to average 6.2 this year above the BoT s target of 5. T-BILL RATES FALLING With the BoT s decision to stop using government securities to mop up excess liquidity in the market, we have seen the yield on the 91-day T-bill drop from over 1 at the start of the year to 5.22 currently. The current trend is expected to hold as the BoT sells forex to mop up surplus money in the market instead of issuing paper. RAND MERCHANT BANK page 8

9 The TZS has depreciated by around 2 since the March Vuka, moving out of the USD/TZS1,11 1,18 band established during 4Q7. The TZS is currently trading around 1,185 and we see it moving even weaker during H2, closing the year at 1,25 as the current account imbalances pose a depreciation risk. Figure 14: Weighted average yield on the Tanzanian 91 day T-Bill 2 16 Average for period Q7 2Q7 Source: RMB FM Research, BoT Yield decline since January 3Q7 4Q7 Jan-2 Jan-9 Jan-23 Feb-6 Feb-2 Mar-5 Mar-19 Apr Table 4: East African macro economic snapshot 28 GDP () Inflation () Budget/GDP () CA/GDP () Foreign debt/gdp () Import cover (Months) Kenya Tanzania Uganda Source: RMB FM Research, EIU RAND MERCHANT BANK page 9

10 EXCHANGE RATE FORECASTS Jun-8 Sep-8 Dec-8 Mar-9 Jun-9 Sep-9 Dec-9 Mar-1 Dollar rates USD/BWP USD/GHS USD/KES USD/MUR USD/NGN USD/TZS 1,15 1,2 1,25 1,288 1,325 1,363 1,4 1,4 USD/UGX 1,73 1,745 1,76 1,783 1,85 1,828 1,85 1,85 USD/ZAR Dollar rates BWP/ZAR ZAR/GHS ZAR/KES ZAR/MUR ZAR/NGN ZAR/TZS ZAR/UGX Source: RMB FM Research Kenya and Mauritius exchange rate forecasts South Africa and Botswana exchange rate forecasts USD/KES USD/ZAR 4 USD/MUR 6 USD/BWP Tanzania and Uganda exchange rate forecasts Nigeria and Ghana exchange rate forecasts 2, , USD/UGX 12 USD/NGN 1.2 1,5 9.9 USD/GHS (RHS) 1, USD/TZS Source: RMB FM Research, Reuters RAND MERCHANT BANK page 1

11 SELECTED INDICATORS GDP & INFLATION FORECASTS GDP growth () Inflation () WORLD AFRICA SUB-SAHARAN AFRICA Botswana Mauritius Namibia Ghana Nigeria Kenya Tanzania Uganda COMMODITY PRICES Current m/m change y/y change Implied volatility 3-month future 12-month future Metals Gold US$/oz Copper US$/tonne ,27. 6,998. Softs Cattle USc/lb Cocoa US$/tonne 2, N/A 1,966. 1,995. Coffee - Arabica USc/lb Coffee - Robusta US$/tonne 2, N/A 1,878. 1,887. Cotton USc/lb Maize - Yellow R/tonne 1, ,555. 1,516. Maize - White R/tonne 1, ,55. 1,527. Raw Sugar USc/lb Energy WTI Crude US$/bbl ALL RATED SUB-SAHARAN COUNTRIES Fitch Moody's S&P Benin B B Botswana A2 (P) A Burkina Faso B Cameroon B B Cape Verde B+ Gabon BB- BB- Ghana B+ B+ Kenya B+ (N) B Lesotho BB- Madagascar B Malawi B- Mali B- B Mauritius Baa2 Mozambique B B+ Namibia BBB- Nigeria BB- BB- Rwanda B- (P) Senegal B+ (N) Seychelles B South Africa BBB+ Baa1 (P) BBB+ Uganda B P = Positive Outlook N = Negative Outlook Note: For full ratings disclosure please refer to last page. INTEREST RATES 3-m T-Bill Jan-8 Current YTD ( change) Policy rate - Current South Africa Botswana Mauritius Namibia Kenya Tanzania OMO* Uganda Ghana Nigeria * Open market operations Sources: RMB FM Research, Bloomberg, Reuters, Global Insight Note: Prices are bid side and are indicative only RAND MERCHANT BANK page 11

12 EVENTS SCHEDULE Month Day Event and Country April 28 9 MPC meeting (South Africa) 17 Emerging Market Summit by FDInet - World Bank Group (Paris, France) 24 Conference on International Macro-Finance IMF (Washington, D.C.) 24 Emerging Markets 28 Conference - International Finance Review (London) 26 East African Investment Conference (Rwanda) Union Day (Tanzania) 27 Freedom Day (South Africa) 28 1st Europe-Africa Business Summit (Hamburg, Germany) May 28 1 Ascension Day (Botswana) Worker's Day (South Africa) 2 Human Rights Day (South Africa) 4 Cassinga Day (Namibia, Rollover to 5th)) 6 Agro-Industry 28 (Tanzania) 21 Power Indaba (South Africa) 25 Africa Day (Namibia - Rollover to 26th) 29 Democracy Day (Nigeria) June 28 1 Madaraka Day (Kenya) Sir Seretse Khama Day (Botswana) 3 Maryr's Day (Uganda) MPC meeting (Nigeria) 8th West African International Mining and Power Exhibition (Ghana) 4 World Economic Forum on Africa (South Africa) 9 Heroes Day (Uganda) 16 Youth Day (South Africa) 2 Agribusiness Africa Exhibition and Conference (South Africa) 26 East Africa Investment Conference (Rwanda) July 28 1 Republic Day (Ghana) 7 Sabasaba Day (Tanzania) August 28 5 MPC meeting (Nigeria) 8 Peasant Day (Tanzania) 13 MPC meeting (South Africa) 26 Heroes Day (Namibia) September 28 2 Ramadan (2 Sept - 2 Oct) 3 World Agricultural Forum's Regional Congress (Uganda) 24 Heritage Day (South Africa) October 28 1 Independence Day (Nigeria) 2 Eid-ul-Fitr 7 MPC meeting (Nigeria) Infrastructure Partnership for African Development Central Africa (DRC) 8 MPC meeting (South Africa) 9 Independence Day (Uganda) 1 Moi Day (Kenya) 14 Nyerere Day (Tanzania) 2 Kenyatta Day (Kenya) 28 Divali December 28 2 MPC meeting (Nigeria) 5 National Farmers Day (Ghana) 7 Ghana presidential and parliamentary elections 8 A customs union for 19-member Common Market for Eastern & Southern Africa trade bloc takes effect 9 Eid-ul-Adha 1 MPC meeting (South Africa) 12 Independence Day (Kenya) 2 Id Ul Hajj 25 Christmas (All) 26 Boxing Day (All except Mauritius) 31 Revolution Day (Ghana) RAND MERCHANT BANK page 12

13 CONTACT DETAILS RMB AFRICAN TRADING DESK John Martin and Dean Theron Minos Gerakaris - Financial Institutions minos.gerakaris@rmb.co.za Gregory Havermahl - Structured Trade & Commodity Finance gregory.havermahl@rmb.co.za CUSTOMER DEALING RMB CORPORATE Spencer Robus spencer.robus@rmb.co.za RMB COMMERCIAL Anthony Grant anthony.grant@rmb.co.za RMB CAPE TOWN Louis Koen louis.koen@rmb.co.za RMB DURBAN John Gaughran john.gaughran@rmb.co.za RMB PORT ELIZABETH Jacky Buys jacky.buys@rmb.co.za CURRENCY SOLUTIONS Raveen Ramlakan raveen.ramlakan@rmb.co.za FIRST NATIONAL BANK BOTSWANA Pauline Motswagae pmotswagae@fnbbotswana.co.bw FIRST NATIONAL BANK NAMIBIA Phillip Shiimi pshiimi@fnbnamibia.com.na FIRST NATIONAL BANK SWAZILAND Khetsiwe Dlamini kdlamini@fnb.co.za FIRSTRAND UK Martin Richardson Jan Sluis-Cremer Sylvia Kenny +44 () Reuters: FRBL RMB FINANCIAL MARKETS RESEARCH AFRICAN RESEARCH Celeste Fauconnier - Politics Gunther Kuschke - Economics SOUTH AFRICAN RESEARCH Commodities Research Josina Oliphant Credit Research Jana Kershaw Elena Ilkova Currency Research John Cairns Data Analyst Raymond Sithole Economic Research Ettienne le Roux Kay Muller Fixed Income Research Theuns de Wet Bulent Badsha RAND MERCHANT BANK page 13

14 DISCLAIMER This research has been written by the financial markets research team at FirstRand Bank Limited (acting through its Rand Merchant Bank division) ( the Bank ). Whilst all care has been taken by the Bank in the preparation of the opinions and forecasts and provision of the information contained in this report, the Bank does not make any representations or give any warranties as to their correctness, accuracy or completeness, nor does the Bank assume liability for any losses arising from errors or omissions in the opinions, forecasts or information irrespective of whether there has been any negligence by the Bank, its affiliates or any officers or employees of the Bank, and whether such losses be direct or consequential. Nothing contained in this document is to be construed as guidance, a proposal or a recommendation or advice to enter into, or to refrain from entering into any transaction. This research contains information which is confidential and may be subject to legal privilege. It is for intended recipients only. If you are not the intended recipient you must not copy, distribute, publish, rely on or otherwise use it without our consent. Some of our communications may contain confidential information which it could be a criminal offence for you to disclose or use without authority. If you have received this communication in error, please notify us at the address below and destroy the communication immediately. This communication is not intended to nor should it be taken to create any legal relations or contractual relationships. The Bank is an Authorised Financial Service Provider under South African law but is not authorised and regulated by the Financial Services Authority in the UK ( the FSA ). Any protection afforded by the rules of the FSA does therefore not apply. FirstRand (UK) Limited is a co-subsidiary of the Bank. Both companies are owned by FirstRand Limited, a company listed on the Johannesburg Stock Exchange in South Africa. FirstRand (UK) Limited is authorised and regulated by the Financial Services Authority to provide arranging and advisor services. RATINGS DISCLAIMER Ratings are not a recommendation or suggestion, directly or indirectly, to any person, to buy, sell, make or hold any investment, loan or security or to undertake any investment strategy with respect to any investment, loan or security or any issuer. Ratings do not comment on the adequacy of market price, the suitability of any investment, loan or security for a particular investor (including without limitation, any accounting and/or regulatory treatment), or the tax-exempt nature or taxability of payments made in respect of any investment, loan or security. The ratings agencies (Fitch, Moody s and S&P) are not your advisor, nor are they providing any person any financial advice, or any legal, auditing, accounting, appraisal, valuation or actuarial services. A rating should not be viewed as a replacement for such advice or services. Ratings may be raised, lowered, placed on Rating Watch or withdrawn at any time for any reason in the sole discretion of the agencies. The assignment of a rating by the agencies does not constitute consent by the ratings agencies to the use of its name as an expert in connection with any registration statement or other filings under US, UK or any other relevant securities laws. RAND MERCHANT BANK page 14