NDBs MSC SA Mondi

Slide1: 

Sectoral Strategies and the Role of DFIs Lumkile Mondi Chief Economist, IDC Rethinking the Role of DFIs 22 November 2006

Africa’s growth remains robust: 

Africa’s growth remains robust Sources: African Economic Outlook 2006, IMF, OECD Total OECD AFRICA %

Oil producing countries are leading growth: 

Oil producing countries are leading growth Source: African Economic Outlook 2006 Performance of oil producers (%) (%)

Oil importers performed better than expected: 

Oil importers performed better than expected Sources: African Economic Outlook 2006 Best Performers in 2005 (%) (%)

Thanks to rising commodity prices and increased production: 

Thanks to rising commodity prices and increased production Sources: African Economic Outlook 2006

Thanks to good harvest … and better internal policies : 

Thanks to good harvest … and better internal policies Lower inflation Sources: African Economic Outlook 2006 (%)

Chemical Value Chain Definitions - 1: 

Chemical Value Chain Definitions - 1

Chemical Value Chain Definitions - 2: 

Chemical Value Chain Definitions - 2

Chemicals Value Chain Definitions – 3: 

Chemicals Value Chain Definitions – 3

Metals Value Chain Definitions – 1: 

Metals Value Chain Definitions – 1

Metals Value Chain Definitions – 2: 

Metals Value Chain Definitions – 2

Precious Metals Value Chain Definitions: 

Precious Metals Value Chain Definitions

SA Economy: Sectoral composition (2005): 

SA Economy: Sectoral composition (2005) Manufacturing 18.6% Financial andamp; business services 21.1% Agriculture 2.5% Mining 7.0% Trade, catering andamp; accommodation 14.6% Electricity, gas andamp; water 2.3% Construction 2.5% Government 15.1% Transport, storage andamp; communication 10.0% Other services 6.3% Source: Stats SA

Export basket: 

Export basket Composition of South Africa’s Exports (% of total exports) Source: IDC Considerable headway has been made in the diversification of South Africa’s export basket. Gold production declined from 620 tons in 1993 to less than 300 tons in 2005. Re-admittance into global economy helped the manufacturing sector to increase its share in the overall export basket.

SA sector performance: 1994 - 2004: 

SA sector performance: 1994 - 2004 High GDP growth Communication; Furniture; Finance and insurance. High export growth Motor vehicles, parts and accessories; Communication; Medical, dental and veterinary service. High growth in capital stock Plastic products; Communication; Civil Engineering; Mining, excluding gold and coal; Motor vehicles, parts and accessories. Average annual growth rate of growth sectors:

SA sector performance: 1994 - 2004: 

SA sector performance: 1994 - 2004 Reasons: Consumer trends towards healthier lifestyles and government legislation (tobacco) The extremely competitive nature, with overtrading the primary cause (printing and publishing) Increasing competition from Asia (textiles and footwear) The gold mining sector in South Africa is facing difficult challenges - it is a mature industry with increasing depth of remaining reserves. However, the recent surge in the international gold price is easing the pressure somewhat. Sectors that recorded mainly negative average annual growth

Sector-specific drivers of growth: 

Sector-specific drivers of growth

Sector-specific drivers of growth: 

Sector-specific drivers of growth

Sector-specific drivers of growth: 

Sector-specific drivers of growth

Sector-specific drivers of growth: 

Sector-specific drivers of growth

Composition of IDC’s Portfolio: 

Composition of IDC’s Portfolio IDC’s Exposure by SBU* Showing Future Direction September 2006 *incl. Guarantees and Undrawn Commitments, Excluding Listed Shares and Wholesale Venture Capital

Slide22: 

Macro-economic forecasts Real GDP growth of 5% p.a. and investment-to-GDP ratio increasing to 21.4% by 2010 A moderation in consumer spending, due to higher interest rates A widening deficit on the balance of payments due to strong import demand Inflation to remain under control

Slide23: 

Sectoral GDP forecasts A substantial improvement in overall economic activity by the manufacturing sector is forecast as this sector is expected to benefit from strong domestic demand as well as from fairly strong global economic growth The construction sector will expand rapidly due to increased activity linked to the SOE capex progammes, public sector and private sector construction activities Services-related sectors such as the trade and transport sectors are also likely to expand at a rate faster than the national average

Slide24: 

Sectoral fixed investment forecasts The manufacturing sector is expected to see a rapid increase in fixed investment activity over the next 5 years, as many sub-sectors are operating close to, or at full capacity Urgent investments in new productive capacity are essential to sustain the higher economic growth momentum Government’s multi-billion rand spending on public infrastructure over the next 5 years, the SOE capex programme, the 2010 World Cup and Gautrain will all provide a major stimulus to fixed investment and higher rates of economic growth Rapid fixed investment growth of 10% p.a., on average, over the period 2006 to 2010 will result in the investment-to-GDP ratio rising from 17.2% in 2005 to 21.4% by 2010

Slide25: 

Sectoral export forecasts Manufacturing exports are projected to grow at a substantially faster pace due to a gradual depreciation of the Rand, which should improve the price competitiveness of export-oriented manufacturing enterprises Mining exports should still benefit from strong global demand for commodities over the forecast period Gold exports are forecast to continue their long-term declining trend Exports of non-gold mining industries are forecast to increase rapidly, by more than 5.5% p.a.

Slide26: 

Sectoral import forecasts The high import-intensity of fixed investment activity in SA should result in a rapid increase in import demand over the period 2006 to 2010 It is estimated that the SOE capex programme has an import leakage of 40%, which compares extremely unfavourably with an average import leakage (import-output ratio) of 12% for the economy as a whole Higher levels of economic activity will result in more goods being transported throughout the country, thereby increasing the demand for fuel and, hence, increased imports of crude oil Robust consumer demand should continue to be reflected in fairly high levels of imported consumer goods

Slide27: 

Sectoral employment forecasts Against the background of higher levels of economic activity, it is projected that the labour absorption capacity of the economy will improve Approximately 1.17 million new jobs are forecast to be created over the period 2006 to 2010 in the formal sectors of the economy The manufacturing sector could experience a moderate improvement in job creation levels, with roughly 87 000 new jobs to be created until 2010 The main contribution to job creation will emanate from the financial and business services sectors, with close to 480 000 additional jobs

Slide28: 

Thank You