A Economic Preview of 2004

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The Global Credit Crunch In Context

• Presented By
• Dawie Roodt
• 15 April 2008
• Midrand Convention Centre

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Subprime, Say Wha ??

• Subprime definition
• A loan that is offered at a rate above prime
  (0.1 - 0.6 higher) to individuals who do not
  qualify for prime rate loans.
• A.k.a NINJA loans
• Low interest rate environment
• Large-scale lending and borrowing

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Fed Funds Rate A Matter of Interest
9/11
Inflation Surge
Subprime Lending
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Poppo Strikes The Fan

• Dec 2004 - interest rates hiked 125 (1 to
  2.25)
• Continuously hiked till 5.25 (Jun 06 to Aug 07)
• Borrowers start to default..
• Banks and Securities firms report losses
• Total losses are estimated /- 900bn (IMFs
  estimation)
• nearly THREE times the SAs economy!!

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Feds Rescue Plans

• Dramatic cuts in interest rates start 5.25
  (Sept 07) to 2.25 (Mar 08)
• 200bn Securities for Mortgage Loans
• 168bn Fiscal Injection
• Lender of Last Resort
• Orchestrate buy-out of Bear Sterns by JP Morgan
  Chase
• Major Regulation Overhaul Fed gains more
  oversight responsibility

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Fed Funds Rate A matter of Interest
Inflation Surges
9/11
Credit Crises
Subprime Lending
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Dow Jones Jan 2007 to now.
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U.S. Greenback vs Euro
Fed starts to cut rates
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Not only Uncle Sams Problem

• Decoupling theory tested
• BRICs role in surviving?
• Europe influenced
• Euro appreciates vs Dollar,
• European banks also exposed to subprime market
• Japan influenced
• Japanese Export demand fuelled by American
  consumers
• Resources safe havens

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Gold Price
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Platinum Price
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South Africa
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Back Home

• Threats
• More Volatile Rand
• Inflation pressure
• Electricity crisis (effect on GDP?)
• Low savings
• Politics
• Sub-USA crisis
• Opportunities
• Commodity cycle
• Export stocks
• Infrastructure development
• Manufacturing

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Pressure on the Rand
9/11 Aftermath

• US troubles
• Emerging Market Risk rising
• Global Inflation

• - Bull run
• Stability
• Emerging Market Appetite

Inflation bracket
- Politics - Eskom
Source SARB and own calculations
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Inflation
CPIX Ave 2007 5.9 CPIX Ave 2008 9.4 (estm)
Inflation bracket
Source StatsSA and own calculations
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Interest rates
Toothless SARB
?
Source SARB and own calculations
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Economic Overview
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South African Tourism Industry
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Travel Tourism International Competitiveness

• World Economic Forum Study
• The Travel and Tourism Competitiveness Index
  2008
• 130 countries ranked
• 3 Sub Indices
• TT Regulatory Framework
• TT Business Environment and Infrastructure
• TT Human, Cultural and Natural Resources

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SAs Travel Tourism Results
Sub index 1 TT Regulatory Framework
SA - 70th Place Best 35th
Environmental Sustainability Worst 123rd Safety
and Security
Sub index 2 TT Business Environment and
Infrastructure SA
51st Place Best 29th Price
Competitiveness Worst 73th Infrastructure
60th
Sub index 3 TT Human, Cultural and Natural
Resources SA 52nd
Place Best 21st Natural Resources Worst
118th Human Resources
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Dumelang Visitors Local Tourists

• Local consumers are under strain.
• Retail trade, motor sales figures
• 450bp hike in interest rates
• Expect lower local expenditure on holidays
  (luxuries)

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Dumelang Visitors Foreign Tourists
118,4 Increase from 94
Source StatsSA Report on Tourism, March 2008
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Arrivals from Country of Residence

• Exchange Rates
• - 25
• - 23
• 3. - 12

Purpose of Visit 91.6 - Holiday 3.8 - Business
Source StatsSA Report on Tourism, March 2008
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Dumelang Visitors Foreign Tourists

• Good
• Appreciated currencies (Euro, Sterling)
• Improved sentiment
• 2010 World Cup
• Bad
• Investor jitters
• US consumers spend less..
• Electricity worries

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Crunch on Tourism?

• Pros
• Weaker Rand
• Natural Scenery
• Positive emerging market sentiment
• FIFA World Cup 2010

• Cons
• Crime
• Electricity
• Global spending jitters
• Skills

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