Investec plc · LSE:INVP
Investec — IMF 2010
35 slides from Investec's conference presentation, 2010
Slide 1: Stephen Koseff, CEO of Investec group – IMF 2010
Stephen Koseff, CEO of Investec group IMF 2010
Slide 2: Overview of Investec
Overview of Investec
Slide 3: Slide 3
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Slide 16: SA's government forecasts a deficit of 6.2% of GDP
SA’s government forecasts a deficit of 6.2% of GDP, but indications are it will be below this. Budget deficit as a % of GDP (-ve deficit) Sovereign risk (%) -1 0 -0.6 0.4 1 1.1 2 1.4 1.5 1.9 1.9 2.1 2.3 3 2.8 3.7 3.7 3.8 4 5 4.6 5.1 5.0 5.6 5.9 6 7 6.7 7.3 9 8 91/92 93/94 95/96 97/98 99/00 01/02 03/
Slide 17: Capital inflows are financing modest trade and current account deficits
Capital inflows, attracted by SA’s comparatively high interest rates, are amply financing the modest trade and current account deficits. % GDP 7 5 3 1 -1 -3 -5 -7 -9 1993 1995 1997 1999 2001 2003 2005 2007 2009 Current account Trade Account Source: SARB 15
Slide 18: Government borrowing is set to rise substantially over the medium-term
Government borrowing is set to rise substantially over the medium-term, which is sustainable … Net debt % GDP Net debt is total (gross) debt less government’s financial assets (cash, deposits, loans, holdings of traded equities etc) 50 45 40 35 30 25 20 15 10 5 0 2000/01 2005/06 2010/11 2015/16 Nati
Slide 19: … due to very low current debt levels …
… due to very low current debt levels … Government debt as % of GDP 140 120 100 80 60 40 20 0 US Germany Ireland Australia France China Spain Italy Greece Japan South Africa Canada India Brazil UK 2009 Forecast 2012 2009 Forecast 2012 Source: Standard and Poors 17
Slide 20: … enabling SA to fund investment in infrastructure and human capital
… enabling SA to fund investment in infrastructure and human capital that could result in growth of 6-7%. % change y/y 10 8 6 4 2 0 -2 -4 1947 1957 1967 1977 1987 1997 2007 Fixed capital stock growth GDP growth Employment Source: SARB 18
Slide 21: This will place SA on a much firmer long-term growth path …
This will place SA on a much firmer long-term growth path … % change y/y 8 6 4 2 0 -2 2007 2009 2011 2013 2015 2017 GDP growth Source: SARB, Investec Group Economics 19
Slide 22: … than most advanced economies whose high debt levels mean austerity
… than most advanced economies whose high debt levels means higher taxes and austerity measures. Real growth, % change y/y 8 6 4 2 0 -2 -4 -6 2007 2009 2011 2013 2015 2017 SA Japan US UK EU16 Germany Source: Standard and Poors 20
Slide 23: Sovereign debt crisis prolonged SA's lower interest rates
The sovereign debt crisis prolonged SA’s lower interest rates - but comparatively our real interest rates are still high. Real interest rate (%) Brazil 5.9 Australia 2.7 South Africa 2.3 Russia 2.3 Poland 1.5 Argentina 1.4 Malaysia 1.2 Japan 0.9 0.8 Indonesia Chile 0.5 South Korea 0.1 Hungary 0.0 Cz
Slide 24: SA's household debt levels are low compared to advanced economies
SA’s household debt levels are also low in comparison to advanced economies. Household debt / disposable income 180% 160% 140% 120% 100% 80% 60% 40% 20% 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Germany United Kingdom United States South Africa Australia Source: OECD 22
Slide 25: Borrowing is negligible, improving private sector balance sheets
Borrowing is negligible improving the health of private sector balance sheets. Private sector credit extension, y/y 35 30 25 20 15 (%) 10 5 0 -5 -10 2002 2003 2005 2007 2008 2010 Corporations Individuals Source: SARB 23
Slide 26: Debt servicing costs are falling
Debt servicing costs are falling due both to a moderation in debt levels and lower interest rates. % disposable income Rm 180,000 25 160,000 20 140,000 120,000 15 100,000 80,000 10 60,000 40,000 5 1998 1999 2000 2001 2002 2003 2004 2006 2007 2009 Debt Servicing cost of Household Debt Servicing cost
Slide 27: Private sector spending is noticeably stronger …
Private sector spending is noticeably stronger … Household consumption expenditure , q/q seasonally adjusted 12 9 6 (%) 3 0 -3 -6 2001 2004 2007 2010 Euro-zone UK US SA Source: SARB, Bloombergs 25
Slide 28: … despite the rise in the already high unemployment rate …
… despite the rise in the already high unemployment rate … Unemployment rate % 30 20 10 0 2000 2002 2004 2006 2008 2010 Euro-zone US UK SA Source: StatsSA, Bloombergs 26
Slide 29: … as salary and wage increases are running well above inflation
… as salary and wage increases are running well above inflation. % Change, in real terms 18 14 10 6 2 -2 -6 -10 1971 1976 1980 1984 1988 1992 1996 2001 2005 2009 Public Sector Remuneration per worker Private Sector Remuneration per worker Source: SARB 27
Slide 30: Confidence is improving
Confidence is improving. (%) 100 80 60 40 20 0 -20 Mar-04 Sep-05 Mar-07 Sep-08 Mar-10 FNB/BER Consumer Confidence RMB/BER Business Confidence Source: BER 28
Slide 31: SA's middle class continues to grow rapidly
SA’s middle class continues to grow rapidly, despite the recession. Thousands of individuals – survey results 21,000 19,000 17,000 15,000 13,000 11,000 9,000 7,000 5,000 3,000 1,000 1994 1997 2000 2003 2006 2009 LSM 6-7 LSM 8 Definition of LSM: Living standard measure - focuses on household utilitie
Slide 32: Inflation is currently subdued
Inflation is currently subdued. % change , y/y 14 12 10 8 6 Inflation target range 4 2 1998 2000 2002 2004 2006 2008 2010 CPIX CPI Actual CPI forecast Source: StatsSA, Investec Group Economics 30
Slide 33: Fixed investment as a % of GDP continues to pick-up
Fixed investment as a % of GDP continues to pick-up significantly … % of GDP 30 66 28 64 26 62 24 60 22 58 20 56 18 54 16 52 14 50 1960 1970 1980 1990 2000 Gross Fixed Capital Formation Household Consumption Expenditure Source: SARB 31
Slide 34: … and international demand for SA's goods is rising
… and international demand for SA’s goods is rising. Growth in exports, y/y % 100 80 60 40 20 0 -20 -40 -60 2006 2007 2008 2009 2010 Africa Europe America Asia Source: SARS 32
Slide 35: Conclusion
Conclusion • The stimulus led recovery in the US, along with Asia's rapid rebound in growth, has caused SA’s recovery to proceed better than initially expected. • Revenue collections are up on last year and expenditure lower than expected. The budget deficit may be somewhat lower than previously est