Africa Market Watch - September

Standard Bank

Africa markets watch Botswana

Ghana

Kenya

Lesotho

Malawi

Mauritius

Mozambique

Namibia

Nigeria

Swaziland

Tanzania

Uganda

Zambia

Zimbabwe

Africa ● September 2008

Recent developments Zimbabwe – On Monday, 15 September 2008 we witnessed the historic signing of the power-sharing agreement that lays the foundation for the formation of a transitional government of national unity in Zimbabwe. For a lot of Zimbabweans this agreement holds the promise that they finally have a government that will start addressing their plight. The international community is watching in anticipation of a strong and genuine commitment of the signatories to rebuilding the country. This agreement is built on various aspects identified as significant for the restoration and rebuilding of the country’s economy; for example, land reform, constitutional reform and freedom of expression and communication. The implementation of these pillars of the agreement should convey a strong message of commitment and cooperation among the country’s stakeholders. The success of this fragile agreement depends not only on the benevolence of the signatories to the deal but on their ability to ascend the differences and animosity eminent in the negotiation stages. To the Zimbabweans, normality will be realised when the rights to pave their own path are fully entrenched and protected through the ballot box. It is important to note that the agreement signed does not outline policy prescription necessary for economic recovery nor does it present clear government thinking necessary to restore some confidence in the country. The agreement does, however, provide a platform from which genuine and inclusive deliberations on policy direction and an economic recovery plan can now start. Commitment and compromise from all signatories to the agreement might help to restore private sector confidence that has become a negative force in the recent past. Angola - Almost one month after voters elected parliamentary representatives for the first time in 16 years, Angola has sworn in its new parliament. One-hundred-and-ninety-one legislators from the Movement for the Liberation of Angola (MPLA) took seats in the legislature, while the largest opposition party, the National Union for the Total Liberation of Angola, has just 16 representatives. The remaining seats are shared among the smaller opposition parties, with the Social Renewal Party claiming eight, the Angola National Freedom Front claiming three and the New Democratic Coalition claiming two. The new House speaker is former Prime Minister Fernando Dias dos Santos, who replaces Roberto de Almeida. A new cabinet is expected to be composed soon. Mauritius - The central statistics bureau of Mauritius has revised its 2008 real GDP forecast down from 5.7% to 5.6%. Mauritius is closely linked to international financial markets and the slowdown in the US and Europe will have significant connotations for the Mauritian economy and its reliance on through-trade and transportation. Despite a deteriorating external environment and softer growth, there are still signs of strength in the economy. The sugar sector continued to perform above expectations in the second quarter of this year and manufacturing also came in on the upside compared to the first quarter of this year. Nigeria - The Central Bank of Nigeria (CBN) held an emergency meeting of its Monetary Policy Committee on 18 September 2008 to assess the state of the domestic banking system in the context of the current global financial crisis and to address the liquidity shortages eminent at that time. In an attempt to lubricate the system, the MPC decided to reduce the Monetary Policy Rate (MPR) by 50 basis points from 10.25% to 9.75%; reduce the cash reserve ratio from 4% to 2%; reduce liquidity requirements for banks from 40% to 30%; extend the repo tenors with the CBN from overnight to 90 days, 180 days and 360 days; and to buy and sell securities (Treasury bills) through two-way quotes. In the short term, these measures should easily inject about NGN1.5 trillion into the system. Zambia - Four presidential candidates filed their nomination papers between 23 and 26 September 2008 for the presidential by-elections scheduled for 30 October 2008. The main contenders are the ruling Movement for Multiparty Democracy’s candidate, the current acting president, Rupiah Banda, the colourful Michael Sata of the Patriotic Front and Hichelema Hakainde of the United Party for National Development (UPND). The prospects for the UPND candidate, who performed surprisingly well in the 2006 general election, are expected to be diluted by the fact that at the upcoming presidential by-election he will not be representing the three-party alliance, the United Democratic Alliance, as he did in 2006. This time around, the UPND’s former alliance partners, the United National Independence Party and the Forum for Democracy and Development, are backing the ruling MMD’s candidate, thus boosting Banda’s prospects..

Jan Duvenage, Anita Last, Yvonne Mhango & Victor Munyama

Standard Bank Group Economics Standard Bank Group Economics

Botswana Inflation continues to climb. Botswana’s inflation rate has tended to be high and averaged 8.6% from 2002 to 2007. This year inflation has continued its upward trend, from a low of 6.3% y/y recorded in April 2007 to 15.1% y/y in August. Overall inflation continues to breach the central bank’s upper limit of the medium-term target of 3-6%. Food and non-alcoholic beverages have been the main drivers of the inflation rate, rising by over 18% y/y every month since January, rising to 18.8% y/y in August. Transport inflation rose by 37.3% y/y in July but eased to 35.5% y/y in August. Non-food inflation rose by a more subdued 14.7% y/y in July and August. Inflation is largely imported from South Africa. We expect inflation to average 12.5% this year.

The Bank of Botswana leaves policy rate unchanged. The Bank of Botswana’s Monetary Policy Committee (MPC) kept the bank rate, the policy rate, unchanged at 15.5% at its meeting on 14 August. The MPC raised the bank rate by 50 bps to 15.5% in June. The committee argued that interest rates are at a level that is sufficient to contain second-round effects, driven by administrative prices, and dampen inflationary expectations, while avoiding the retardation of economic growth. The real policy rate was at a low of 0.5% in July. Monetary policy is more influenced by the BoB’s medium-term inflation forecast and less by credit growth, as in the past. Rates are expected to remain at these levels.

Inflat ion r ate

Inflation - % y/y

Interest rates - %

18

18 17 16 15 14 13 12 11 10

15

12 9 6 3

2002

0

2002

2003

2004

2005

2006

2007

2008

2003

2004

Prime rate

2005

2006

2007

Bank rate

2008 3m BoBC

Source: Bank of Botswana

Source: Bank of Botswana

Rising inflation rate implies a weaker pula. Under Botswana’s crawling band exchange rate system, introduced in 2005, the pula trades in a narrow band of ±0.5% around central parity. The band effectively rules out a large and unexpected adjustment in the exchange rate, which occurred in 2005. Botswana’s relatively high inflation rate implies that the pula should weaken proportionately in line with expected inflation differentials with its main trading partners. The crawling band arrangement and monetary policy are used jointly to achieve a competitive and stable real effective exchange rate, which promote exports and diversification. The pula traded at an average of BWP6.82/USD in September. We expect the pula to trade at an average of about BWP6.46/USD this year and BWP6.71/USD in 2009.

Diamond production declining. IMF statistics show the diamond sector contributes 30% of GDP, 75% of exports and 45% of government revenue on average. Botswana’s diamond production has reached a plateau and is expected to decline over the coming decade. Botswana needs to diversify its output and export base. Indeed, diversification has been on the government’s agenda for some time, but the process is proceeding slowly, despite some successes. In 2007 diamond exports amounted to USD3 359.2 million and USD3 412.9 million in 2006. Exports amounted to USD793.8 million in Q2 08, compared to USD1 021.5 million in Q1 08.

Exchange rates

Diamond exports – US$ million per quarter

8.0

BWP/USD

BWP/ZAR

1.0

1,200

7.0

0.9

1,000

6.0

0.8

800

5.0

0.7

600

4.0

0.6

400

3.0

0.5

200

2002

2003

2004

2005

BWP/USD (lh)

2006

2007

2008

BWP/ZAR

Source: Bloomberg

0

2002

2003

2004

2005

2006

2007

2008

Source: Bank of Botswana

Page 2

Standard Bank Bank Group Group Economics Economics Standard

Botswana - picture gallery Real GDP growth - % 10

Sectoral contribution to GDP - %

8 4.9

6

Other 14.3%

Agriculture 2.1%

8.3 5.7

6.0

6.3

Construction 4.6%

Manufacturin g 3.6%

5.0 4.3

5.4

4.7

Trade & hotels 10.4%

3.6

4 2 0

00

01

02

03

04

05

06

07

08f

Mining 38.0%

09f

Government 16.5%

Banking, insurance 10.5%

Source: IMF

Foreign exchange reserves

Source: IMF

Trade balance – Pula million

US$ mn

months

11,000

50

9,000

40

7,000

30

5,000

20

3,000

10

35,000 30,000 25,000 20,000 15,000 10,000 5,000

2004

2005

2006

2007

Forex reserves

0

2008

2002

Import cover

Exports

2003

2004

Imports

2005

2007p

Merchandise trade balance

Source: Bank of Botswana

Government budget balance - % of GDP

2006

Source: Bank of Botswana

Diamond prices - US$ index, 1982 = 100

10

180

8

170

6 4

160

2

150

0

140

-2

130

-4

120

-6 02/03

03/04r

04/05r

05/06p

2001 2002 2003 2004 2005 2006 2007 2008

06/07b

Source: Bank of Botswana

Source: IMF

Weights of consumer price index (CPI) constituents

Botswana Stock Exchange indicators 40

31%

'000 month-end

19% 9%

30

9

20

6

10

3

0 Food Alcohol & tobacco Clothing

12

22%

8% 11%

Pula billion

Transport Housing Other Source: Bank of Botswana

0 2002

2003

2004

2005

Market cap. (lh)

2006

2007

2008

Domestic index (rh)

Source: Bloomberg, Bank of Botswana

Page 3

Standard Bank Group Economics Standard Bank Group Economics

Ghana Inflation declines for two consecutive months. The harvest season, which started in August, has provided some relief from food inflation and headline inflation declined to 18.1% y/y in August from 18.3% y/y in July and 18.4% y/y in June. Food, which represents around 45% of the CPI basket of goods, rose from 7.5% y/y in August 2007 to 17.7% in June 2008. This was due to the restriction of local food supply in the north of the country by drought in the first part of 2007, followed by flooding in September coupled with the upward trend in global food prices at a time of high transport costs. Over the same period, non-food inflation rose from 10.9% y/y to 18.9% y/y driven by changes in utility prices and transport costs. The moderation in international crude oil prices and the improved domestic food supply on the back of the ongoing harvest season should continue to support a marginal declining trend.

Bank of Ghana keeps the policy rate at 17%. The Monetary Policy Committee (MPC) hiked the policy rate by 100 basis points to 17% in July in response to accelerating inflation. The central bank policy rate (prime rate) was raised from 13.5% to 14.25% in March and again in May by 175 basis points to 16%. Following the MPC’s rate decision in July, average commercial bank lending rates were similarly revised upwards within a range of 22% to 41%. (The commercial bank rates continue to show high spreads between deposit and lending rates and are also well above the Bank of Ghana’s prime rate). Due to a declining inflation trend we do not expect an interest rate hike but we do expect monetary policy to remain tight in the presence of inflationary pressures stemming from pre-election spending and high utility prices.

Inflation - % y/y

Interest rates - %

26

35 30

22

25

18

20 14

15 10

10

5

6 2004

2005

2006

2007

2004

2008

2005 Prime

2006 2007 91-day t-bill

2008 Lending

Source: Bank of Ghana

Source: Bank of Ghana

The cedi continues to depreciate. The cedi lost some ground during 2007 and depreciated by 5%, 7% and 17.5% against the US dollar, pound sterling and euro respectively. Demand pressures were exerted mainly from the golden jubilee anniversary celebration, preparations for hosting the AU summit and the continued energy crisis. In addition to this, lower cocoa production, as a result of extreme rainfall, led to a 33.8% decline in earnings from exports of cocoa beans and products. Despite strong international prices for gold and cocoa, the national currency continued to depreciate in 2008 - a trend that was fuelled by a large and burgeoning current account deficit stemming from capital goods and oil imports. The cedi largely stabilised in August and September and traded between GHc1.1543/US$ and GHc1.1640. We expect marginal depreciation to continue, especially in a pre-election context.

Favourable cocoa harvest expected. Ghana’s Cocoa Board (Cocobod) expects favourable output for the 2007/08 season as a result of improving weather conditions. Purchases declared by private buyers reached 566 340 tonnes in the first 25 weeks of the 2007/08 season, which represents an increase of 10.2% over the same period in 2007. Consequently, Cocobod increased its initial estimate of 600 000 tonnes at the start of the season to 634 000 tonnes (8% increase). Last year the country declared total production of 614 469 tonnes, down from a record 740 457 tonnes in 2006. The average price of cocoa bean exports (US$1 942.2 per tonne) at the end of 2007, increased by 7.7% to US$2 091.8 per tonne in the first quarter of this year.

Exchange rates

Cocoa prices – US$/metric tonne

1.18

1.60

1.14 1.50

1.10

3500 3000 2500

1.06

1.40

1.02

2000

0.98

1.30

1500

1.20

1000

0.94 0.90 2007

2004

2008 USD (rhs)

2005

2006

2007

2008

EUR (lhs) Source: Bloomberg

Source: IMF

Page 4

Standard Bank Bank Group Group Economics Economics Standard

Ghana – picture gallery Real GDP growth - %

Sectoral contribution to GDP - %

7 6 5 4 3 2 1 Trade, hotel & restaurant Agriculture Mining & quarrying Construction

0 2000 2001 2002 2003 2004 2005 2006 2007 2008

Services Cocoa production & marketing Manufacturing Other

Source: Bank of Ghana

Foreign exchange reserves - US$ million

Source: Bank of Ghana

Trade account - US$ million

3000

10000 8000 6000 4000 2000 0 -2000 -4000 -6000

2500 2000 1500 1000 500

2001

2002

2003

2004

2005

2006

2007

0 2004

2005

2006

2007

2008

Imports

Exports

Source: Bank of Ghana

Government budget balance - % of GDP

Trade Balance Source: Bank of Ghana

Gold Price - US$/oz

0

1000

-2

900 800

-4

700 -6

600 500

-8

400

-10

2004

2005

2006

2007

2008

2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: IMF

Weights of consumer price index (CPI) constituents

Ghana Stock Exchange index 12000

7% 10%

9%

Source: Reuters

6% 5%

10000 8000

52%

4% 3%

Food & Bev. Utilities Trans. & Comm. Health Misc.

4%

Clothing & Footwear Furnishings Enter. Alcohol & Tobacco Source: Bank of Ghana

6000 4000 2000 2004

2005

2006

2007

2008 Source: Bloomberg

Page 5

Standard Bank Group Economics Standard Bank Group Economics

Kenya Strong food price increase drives up September’s inflation to 28.2% y/y. This year’s poor “long rains” season (on the heels of insufficient rainfall in the end-2007 “short rains” season) has exacerbated the deterioration in food security. Declining food stocks put upward pressure on prices, 2% m/m in September, and spurred an acceleration in food inflation to 37.2% y/y from 36.2% y/y in August. The incline in non-food inflation was largely due to a significant increase in housing costs in September, 2% m/m. The fuel and power, and transport and communication subindices reported softer price increases in September, 0.5% m/m and 0.3% m/m respectively, from 3.6% m/m and 0.9% in August. Given the persistent food inflationary pressures, overall inflation is projected to only slip below 20% in the second quarter of 2009.

Inflation - % y/y

Short-term interest rates ease. Following the central bank’s decision to hike the policy rate to 9% in June 2008, there was a parallel increase in the 91-day Treasury bill yield to 8.03% in July. The tightening of policy was effective at moderating the liquidity situation, which has now normalised. The central bank has insisted that the drivers of inflation are exogenous and due to liquidity to justify its decision not to tighten policy despite high inflation. Greater appetite for short-term debt over that with a longer maturity partly explains the slide in short-term rates. Investors are uncertain about future prospects, given the global financial turmoil and recent political crisis in Kenya, are reluctant to put their money in long-dated debt instruments.

Interest rates - %

35 30 25 20 15 10 5 0

15 13 11 9 7 2004

2005

2006

2007

5

2008

2005 2006 91-day TB rate

Overall Underlying (excl. food) Underlying (excl. food, energy & transport)

2007

Central Bank Rate

2008 Average lending rate Weighted average repo

Source: Sources: National Bureau of Statistics, Central Bank of Kenya

Source: Central Bank of Kenya

The Kenyan shilling slides. The shilling depreciated by a significant 5.7% against the US dollar in September, compared to the exchange rate in August, to a monthly average exchange rate of KES71.65/USD. While the US dollar’s sharp gain of 3.7% against the euro contributed to the weakening of the exchange rate, the decline in foreign exchange inflows stemming from agricultural exports, capital inflows and tourism revenue added to the shilling’s woes. International reserves dropped to 3.2 months of imports at the end of September, from four months in January, partly explaining the depreciation of the Kenya currency. The shilling is now weaker against the US dollar than it was during the political turmoil in the first quarter of 2008. Depreciation pressures are expected to persist over the short term.

Liquidity pressures subside. As expected, broad money (M3) growth decelerated in the third quarter of 2008 to 17.1% y/y in August, from this year’s peak of 28.5% y/y in April that reflected the surge in the growth rate of net foreign assets due to the capital inflows related to the Safaricom IPO. The slowdown in M3 growth was partly due to the payment of refunds related to investors that had oversubscribed to the IPO. M3 growth is expected to stabilise at current levels. The deceleration of reserve money growth to 16.7% y/y in May from 24.5% y/y in January, reflects the decline in currency in circulation, particularly during the political crisis when economic activity was interrupted. However, from mid-2008 it is expected to have picked up as the economy recovers.

Exchange rates

Money supply growth - % y/y 30

110

16

100

14

90

12

80

10

70

8

60

6

24 18

2004

2005 KES/USD

2006

2007

KES/EUR

2008 KES/ZAR (rhs)

Sources: Bloomberg, Standard Bank Group est.

12 6 0 2004

2005

2006

Broad money (M3)

2007

2008

Reserve money Source: Central Bank of Kenya

Page 6

Standard Bank Bank Group Group Economics Economics Standard

Kenya - picture gallery Real GDP growth - %

Sectoral contribution to GDP - %

8 Real estate, renting & bus. serv. 6% Government 14%

7 6 5 4 3

6.4

5.8

5.3

Transport, storage & commun. 12%

4.2 2.3

1 0 2005

2006

Manufacturin g 11%

7

2

2004

Community, social & Agriculture, personal forestry & services fishing 4% 30%

Electricity & water 3%

2007

2008p

Construction 3%

2009f

Financial services 4%

Source: Kenya National Bureau of Statistics, Standard Bank est.

Foreign exchange reserves – import cover

Hotels & restaurants 2%

Wholesale & retail trade 11%

Source: Central Bank of Kenya

Trade account - US$ million

US$ millions

months

3600

2500

0

2000

-300

1500

-600

3.5

1000

-900

3.0

500

-1200

4.5

3000 4.0 2400 1800 1200 600 0

0

2.5 2004

2005

2006

2007

2008

Gross foreign reserves

-1500 2004

Exports

Import cover Source: Central Bank of Kenya

Government finance - % of GDP

2005

2006

2007

Imports

2008 Trade deficit

Source: Central Bank of Kenya

Tea, Mombasa, Kenya, Auction price – US cents per kilogram

1.0 0.5 0.0 -0.5 -1.0 -1.5 -2.0 -2.5 -3.0 -3.5 -4.0

350 300 250 200 150 2002/03

2003/04

2004/05

2005/06

2006/07

2007/08

Source: Central Bank of Kenya

Weights of consumer price index (CPI) constituents 6%

4%

2% 2% 3%

Nairobi Stock Exchange indicators Kshs billions

6000

50% 12%

1000 5000

800

4500

600 400

6%

Food and drink Recreation and education Clothing and footwear Fuel and power Personal goods and services

1400 1200

5500

9%

6%

Source: IMF

4000 Housing Household goods and services Transport and communication Medical goods and services Alcohol and tobacco Source: Central Bank of Kenya

200

3500

0 2006

2007 2008 Market Capitalisation (rhs) NSE 20 Share Index (1966=100) Source: Central Bank of Kenya

Page 7

Standard Bank Group Economics Standard Bank Group Economics

Lesotho Overall inflation driven by food and energy prices. Inflation is largely imported from South Africa as almost 85% of Lesotho’s goods and services are sourced from there. High international and regional food prices and high crude oil prices have impacted negatively on the inflation rate. Drought conditions also add to food price pressures as the subsistence economy is adversly affected. In August overall inflation reached 11.2% y/y, one of the highest rates in years, from 10.5% y/y in the previous month. Food inflation was 15.2% y/y in August and 14.9% y/y in July, somewhat lower than the high of 18.7% y/y recorded in February. The food group has a weight of nearly 40% in the CPI. Transport prices also rose steeply; by 14% y/y in August and 12.4% y/y in July.

Interest rates are linked to South African trends. Lesotho is a member of the Common Monetary Area (CMA) with South Africa, Namibia and Swaziland. Membership implies that the county has limited control over monetary policy, which is imported from South Africa. The Central Bank of Lesotho monetary policy targets net international reserves of US$500 million to support the 1:1 currency peg with the rand. The Lombard rate, the policy rate, is set at 400 basis points above the 91-day Treasury bill rate. Interest rates in South Africa have risen on the back of higher inflation, but the prices could start easing in 2009, leaving room for the central bank to start cutting rates, reducing the prime rate from 15.5% to 13.5% in December next year.

Inflation - % y/y

Interest rates - % 20.0

20

17.5

15

15.0 12.5

10

10.0

5

7.5 5.0

0 2004

2005

2006

2007

Consumer inflation

2003

2008

2004 Prime

Food inflation

2005

2006

Lombard rate

Source: Bureau of Statistics

2007

2008 91-day TBs

Source: Central Bank of Lesotho

The currency depreciates. The loti is pegged at par to the South Africa rand under the CMA agreement. Economic conditions in Lesotho have no effect on the exchange rate. Export competitiveness is, however, linked to the value of the currency. The weaker long-term trend against the US dollar is welcome relief for exporters, but imported food and fuel will become dearer as a result, driving overall inflation higher. The exchange rate averaged LSL7.70/USD in August compared to LSL7.34/USD in July. Standard Bank expects that the exchange rate will average LSL7.78/USD in 2008; LSL7.97/USD in 2009 and LSL8.10/USD in 2010. Turmoil in the banking and financial markets, falling commodity prices and a slowing world economy will ensure that the exchange rate remains volatile.

Basotho mineworkers in South Africa. Basotho mineworkers employed on South African mines, particularly gold mines, provide valuable income for Lesotho households. Even though the number of miners employed has fallen dramatically, the value of the remittances has continued to rise. In 2000 the number of Basotho miners employed in South Africa was 64 907, but fell to 51 595 in 2006. Over the same period the value of the remittances rose from M1 400 million to M1 983 million, as the average annual wage rose from M30 131 to M53 670. The higher gold prices should help boost demand for mine labour.

Exchange rate - LSL/USD

Mineworkers and remittances Number

12

66,000 64,000 62,000 60,000 58,000 56,000 54,000 52,000 50,000

11 10

9 8 7

6 5 00

01

02

03

04

05

06

07

08

09

Source: Bloomberg

M millions

2,100 2,000 1,900 1,800 1,700 1,600 1,500 1,400 1,300 2000 2001 2002 2003 2004 2005 2006 Number employed (lh) Miners' remittances (rh)

Source: IMF, Central Bank of Lesotho

Page 8

Standard Bank Bank Group Group Economics Economics Standard

Lesotho - picture gallery Real GDP growth - %

Sectoral contribution to GDP - %

8

Manufacturin Electricity & g water 17.9% 5.4% Livestock 5.8%

7.2

7

5.4

6

4.9

5

5.2

4.2

4

2.8

3

2.3

2

1.8

Wholesale & retail 8.6%

Crops 10.0%

0 01

02

03

04

05

06

07

08f

Other 17.8%

09f

Education 7.6%

Financial intermed 5.9%

Source: IMF

Foreign exchange reserves USD m

Months 8.0 7.5 7.0 6.5 6.0 5.5 5.0 4.5 4.0

2004

Source: IMF

Trade balance – US$ million

1,000 900 800 700 600 500 400 300 200

2003

Public admin 7.8%

2.9

2.7

1 00

Construction 13.3%

2005

2006

Gross reserves

1500 1000 500 0 -500 -1000

2007

01

Import cover

02

Exports

03

04

Imports

05

Trade balance

Source: Bloomberg

Government budget balance - % of GDP, including grants

06e

Source: IMF

Manufacturing index – Index 2000=100 160

20

140

15

120

10

100 5 80 0

60

-5

40

-10

2002 02/03

03/04

04/05

05/06

06/07

07/08p

2003

2004

Textile and clothing

Source: IMF

Weights of consumer price index (CPI) constituents Transport 7.8% Clothing & footwear 15.6%

Alcoholic beverages & tobacco 6.4%

Other 13.3%

2005

2006

2007

2008

Total manufacturing Source: Bureau of Statistics

Capital account – US$ million 400 200 0 -200 -400 -600

Furnishings, h/h equip, maint. 17.0%

-800 Food & nonalc. bev. 39.8%

Source: Central Bank of Lesotho

01

02 03 04 05 Trade balance Current account (incl transfers) Capital & financial account

06e

Source: IMF

Page 9

Standard Bank Group Economics Standard Bank Group Economics

Malawi Inflation accelerated to 9.1% y/y in August. Inflation followed global trends, accelerating from 8.7% y/y in July, mainly due to fuel and maize price increases. In spite of high oil prices, inflation recorded the lowest rates in decades in 2007 and averaged just below 8%. However, oil prices that kept reaching new highs as well as a marginal seasonal increase in food inflation towards the end of last year saw overall inflation starting to increase moderately from a historical low of 7.1% y/y in September 2007 to 8.2% y/y in March 2008. Although inflation eased in April and May due to the seasonal decline in food costs, the upward trend continued in June. High oil prices and increased government spending ahead of the 2009 election as well as money supply growth pose further upside risks to overall inflation.

Monetary Policy Committee keeps the policy rate flat. In view of the current inflationary pressures stemming from high international oil prices as well as accelerating money supply growth, the Monetary Policy Committee maintained its monetary stance at its meeting, and kept the bank rate at 15% and the liquidity reserve requirement at 15.5%. Despite the government’s intention to encourage private-sector-led development of the economy, we expect monetary policy to remain tight in order to contain inflation expectations. However, should inflation drop to the estimated levels of below 7% presented in the 2008/09 budget, we expect interest rates will be brought down to around 12%, as projected in the 2008/09 budget.

Inflation - % y/y

Interest rates - %

20

45

16 35 12 8

25

4

15

0 2004

2005

2006

2007

Overall Inflation Food inflation

5

2008

2004

Non-food inflation

2005 Prime-avg

2006

2007

Bank rate

2008 91-day t-bill

Source: National Statistics Office

Source: Reserve Bank of Malawi

Kwacha stability ensured through RBM intervention. The authorities attach importance to exchange rate stability as an intermediate measure in maintaining macroeconomic stability. The kwacha remained relatively stable against the US dollar in the first three quarters of 2008 and averaged MWK140.35/USD, MWK140.63/US$ and MWK140.69 respectively. In September the kwacha was slightly weaker at MWK140.82. The economy is into the seasonal lean period following the end of the tobacco auctions. The pressure on foreign reserves from fertilisers and oil imports will remain a concern for some time, although the kwacha is expected to receive some support from donor funds and the authorities. The RBM is expected to continue intervening in the foreign exchange market and we therefore expect the kwacha to trade within a narrow band of MWK140/US$ and MWK142/US$.

Tobacco auction floors more than doubled sales. The tobacco auction floors had processed about 143 million kilograms valued at US$348 million as at the end of July 2008. In value terms, the quantity is almost double that posted for the whole season last year (US$185 million). As at 22 August, 168.7 kilograms of the green gold had been sold, earning US$412.3 million – an average price of 244 US cents per kilogram. Out of the total sold, burley contributed 145.9 million kilograms (86.5%) whereas flue-cured contributed 20.9 million kilograms (12.3%). All foreign currency payments for tobacco sold in Malawi are now made through the central bank and not commercial banks as in the past. The onset of uranium exports next year will be an additional source of support for the local currency.

Exchange rates

Tobacco export price – UScts/kg

260

24

220

22

180

20

140

18

100

16

60

14 2004

2005 USD

2006

2007 EUR

2008 ZAR (rhs) Source: Bloomberg

350 300 250 200 150 2004

2005

2006

2007

Source: Tobacco Control Commission

Page 10

Standard Bank Bank Group Group Economics Economics Standard

Malawi – picture gallery Real GDP Growth - %

Sectoral contribution to GDP - %

10 8 6 4 2 0 -2

Agriculture Manufacturing Construction Transport and Comm Private social services

-4 -6 2001 2002 2003 2004 2005 2006 2007 2008 2009

Mining and quarrying Utilities Distribution Finance & Insurance Government services Source: OECD 2007

Source: IMF

Foreign exchange reserves – import cover

Trade Balance - US$ million

US$ million

Months

1500

250

3.5

200

3.0

500

150

2.5

0

100

2.0

50

1.5

1000

-500 -1000

2004

2005

2006

2007

Foreign reserves

2001 2002 2003 2004 2005 2006 2007 2008

2008 Imports

Import cover

Exports

Source: Central Statistics Office

Source: Reserve Bank of Malawi

Government finance - %

Tobacco exports – million Kg

0 -2 -4 -6 -8 -10 -12 -14 -16 02/03

03/04

04/05

Including grants

05/06

06/07 07/08e 08/09f

140 120 100 80 60 40 20 0 2001 2002 2003 2004 2005 2006 2007

Excluding grants Source: IMF

Weights of consumer price index (CPI) constituents 6%

Trade Balance

5%

4%

Source: Reserve Bank of Malawi

Malawi Stock Exchange index 6000

6%

5000

9% 58% 12%

4000 3000 2000 1000

Food Clothing & footwear Beverage & tobacco Household operation

Housing Misc. Transport Source: Central Statistics Office

0

2006

2007

2008 Source: MSE

Page 11

Standard Bank Group Economics Standard Bank Group Economics

Mauritius Continued pressure on inflation from high food and oil prices. Headline inflation has been on a declining trend since July last year but remained relatively high at around 9%, largely as a result of the pass-through effects of high food and energy prices. The appreciation of the rupee in the first four months of this year dampened the impact of mounting import prices, and inflation came marginally down to 8.8% y/y in May. After remaining level during June, inflation accelerated to 9.1% y/y in July and to 9.5% y/y in August. Once again the main pressure came from food and fuel. With oil prices showing a softening bias and food prices expected to plateau, external pressures are easing, although domestic pressures such as strong demand are expected to remain. Our expectation is that overall inflation will slightly exceed the 8.6% average projected in the 2008/09 budget.

Further interest rate cuts ruled out. Against the backdrop of a reduction in policy interest rates by the US Federal Reserve and the Bank of England as well as potential downside risk to economic growth stemming from decelerating growth in major trading partners, the BoM cut the repo rate by 25 basis point to 9% in February, lowered it further to 8.5% in March and in May again by 50 basis points to 8%. In view of growing demand-side pressures on inflation and no slowdown in food and fuel prices, the BoM increased the repo rate on 21 July to 8.25%. It is likely that the MPC will commit to another interest rate rise, especially if inflation presses closer to double digits. However, there are some positive signs, particularly with regard to commodity prices such as food and oil which are thought to have peaked.

Inflation - % y/y

Interest rates - %

14

14

12

12 10

10

8

8

6

6

4

4

2 2004

2005

2006

2007

2008

2 2004

2005

2006

2007

Prime rate Lombard Rate

2008

Bank rate Repo Rate

Source: Central Statistics Office

Source: Bank of Mauritius

Rupee depreciated further in September to MUR28.67/USD. Supported by FDI inflows, record tourism earnings and the depreciation of the US dollar on currency markets, the rupee appreciated by 9% in the first quarter of this year to a four-year high of MUR25.5/US$. In April this trend was reversed when the rupee averaged MUR26/US$, MUR26.5/US$ in May and MUR27.2/US$ in June. This was mainly on account of continued deterioration of the current account as import prices, particularly food and fuel, pushed up the import balance. The extent and duration of the global downturn will play a large part in export demand as Mauritius is closely linked to international financial markets and the majority of its export demand (more than 50%) comes from Europe and the US. The current account will therefore remain under pressure. FDI and tourism receipts should lend some support to the rupee.

Tourist arrivals increased by 5.5% in the first half of 2008. Tourist arrivals increased to 455 758 compared to 432 113 for the same period in 2007. Gross tourism receipts for the first six months amounted to Rs22 170 million, an increase of 12.2% compared to Rs19 752 million for the same period in 2007. According to the BoM, tourism receipts for this year will be around 13% higher than last year. Tourist arrivals for the year are estimated to be between 965 000 and 975 000 against 903971 last year. Given the construction timeframe of current hotel projects, the sector should receive a substantial increase in capacity through 2008 and 2009. The sector continues to play a large role in terms of attracting FDI and is one of the main drivers of the country’s economic recovery.

Exchange rates

Tourism receipts - Rs million

45

5.5

60000

40

5.0

50000

35

4.5

40000

30

4.0

30000

25

3.5

20000

3.0

10000

20 2004

2005 MUR/USD

2006

2007 MUR/Euro

2008 MUR/ZAR (rhs)

0 2001 2002 2003 2004 2005 2006 2007 2008

Source: Bloomberg

Source: Central Statistics Office

Page 12

Standard Bank Bank Group Group Economics Economics Standard

Mauritius – picture gallery Real GDP Growth - %

Sectoral contribution to GDP - %

12 10 8 6 4 2 0 2000 2001 2002 2003 2004 2005 2006 2007 2008

Sugar Export-oriented industry Wholesale & Retail trade Transport, storage & communication Others (incl. gov)

Non-sugar agriculture Construction Hotels & Restau-rants Financial Inter-mediation

Source: IMF (2006)

Source: Central Statistics Office

Foreign exchange reserves – import cover

Trade Balance – US$ million

2500

50

2000

40

1500

30

1000

20

500

10

0

0 2004

2005

2006

2007

Foreign Reserves

2008

3000 2500 2000 1500 1000 500 0 -500 -1000 2000 2001 2002 2003 2004 2005 2006 2007

Weeks of import cover

Imports

Exports

Source: Central Statistical Office

Government finance - % of GDP

Trade balance

Source: Central Statistical Office

Tourist arrivals - number

0

1200

-1

1000

-2

800

-3 600

-4 -5

400

-6

200

-7

0 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09

2000 2001 2002 2003 2004 2005 2006 2007 2008

Source: IMF

Weights of consumer price index (CPI) constituents 4%

8%

Source: Central Statistics Office

Stock Exchange of Mauritius index 2200

9% 10% 16%

2000

9%

1800 13% 5%

22%

4%

1600 1400 1200

Clothing, footwear

Housing, water, electricity

Health

Transport

800

Communication

Furnishings, household

600

Recreation, culture

Education

Restaurants, hotels

Miscellaneous goods, services Source: Central Statistical Office

1000

2005

2006

2007

2008 Source: Bloomberg

Page 13

Standard Bank Group Economics Standard Bank Group Economics

Mozambique Marginal increase in overall inflation to 10.7% y/y in September. As projected, non-food inflation accelerated to 4% y/y in September as the low base effect kicked in. Other than food, the annualised inflation rates for the transport and households’ goods sub-indices accelerated in September. Although food prices moderated by 0.1% m/m in September, its annualised inflation rate increased to 16.1% y/y, from 15.7% y/y in August. The modest decrease in the food price in September is in our view temporal, especially as the lean season is approaching implying that food stocks will decline, putting upward pressure on prices. However, a high base effect in the last quarter of 2008 is expected to moderate the impact of higher food prices. Single-digit inflation is thus projected to return in the first quarter of 2009, when the worst of the lean period, and the festive season has passed.

Inflation - % y/y

The interest rate on the 91-day Treasury bill edged up in the third quarter. The climb of the interest rate on the short-term government security to 13.89% in August, after being flat at 13.5% in the first half of 2008, reflects the tightening of monetary policy in response to the spurt in demand for money in the third quarter of 2007. The base money stock exceeded the September programme target ceiling in July, on account of strong demand for currency from buyers acquiring newly harvested cash crops. However, the spurt in base money was temporal and in August had fallen to below the end-quarter target. The approaching festive season is likely to prompt monetary expansion, as such monetary policy is expected to remain firm in the short term and thus the policy rate is expected stabilise over this period.

Interest rates - %

25

30

20

25

15

20

10

15

5

10

0

5 2004

2005

Overall

2006

2007

Food

2008

2004

Non-food

2005

Prime

2006

2007

2008

Standing lending facility

91 day t-bill

Source: Source: Instituto de Nacional Estatistica

Source: Banco de Mocambique

The metical holds steady against hard currencies. The modest 0.7% depreciation of the Mozambican currency against the US dollar in September, to MZN24.05/USD, was largely due to a stronger US dollar. Conversely, the metical strengthened against the rand, the currency of Mozambique’s largest trading partner, South Africa, and the euro. The sound build up of international reserves to beyond six months of import cover has provided resources for the Bank of Mozambique to lean towards foreign exchange sales to drain liquidity and place less emphasis on Treasury bill issuances. The subsequent injection of foreign exchange into the domestic market partly explains the strength of the metical in recent months. Added to that are the large donor and foreign direct investment inflows. The metical is projected to hold steady at present levels over the short term.

Base money fell below target ceiling in August, after overshooting in July. Strong demand for currency in July explains base money’s breach of the end of September ceiling target of MZN17 347 million. It expanded by 15.6% y/y in July and amounted to MZN17 479 million. This growth spurt was due to the purchase newly harvested cash crops, including cotton. In August, base money declined by 0.8% m/m to MZN17 332 million, thus allowing for the monetary aggregate to fall below the target ceiling. The long weekend in early September may have spurred higher currency demand that may have countered the moderation of base money in August, implying a fair likelihood of a September breach. The approaching festive season implies a fair likelihood of monetary expansion in the short term.

Exchange rates

Money supply

40

4.6

36

4.3

32

4.0

28

3.7

24

3.4

20

3.1

16

2.8 2004

2005 MZN/USD

2006 2007 MZN/EUR

2008 MZN/ZAR (rhs) Source: Bloomberg

35 30 25 20 15 10 5 2004

2005

2006 M2

2007

2008

Base money Source: Banco de Mocambique Page 14

Standard Bank Bank Group Group Economics Economics Standard

Mozambique – picture gallery Real GDP growth - %

Sectoral contribution to GDP - %

10

Real estate activities & business services, 9%

8 6 4

7.0

7.0

Transports, storage & communicati ons, 10%

2005

2006

2007

2008p

Manufacturin g, 15%

Commerce, 11% Construction, Hotels and 4% restaurants, 2%

0 2009f

Source: Banco de Mocambique

Gross foreign reserves & import cover 10

1600

8

1200 6 800 4

400 0

2 2005

2006

Electricity and water, 6%

Source: Source: Instituto de Nacional Estatistica

Trade balance – US$ million

2000

2004

Fishing, 2% Extractive industries, 1%

7.7

2

2004

Community services, 7%

Agriculture, animal production, hunting & forestry, 24%

Financial activities, 6%

8.7

8.4

7.5

Education, 4%

2007

Foreign reserves

900 750 600 450 300 150 0 -150 -300

2008

2004

2005

2006

2007

2008

Import cover Exports

Imports Deficit Source: Banco de Mocambique

Source: Banco de Mocambique, Standard Bank est.

Government deficit - % of GDP

Aluminium price – US$ per metric tonne

0

3500

-1 -2

3100

-3

2700

-4 2300

-5

1900

-6 -7

1500 2003

2004

2005

2006

2007

2008p

2004

2005

2006

2007

Source: IMF CR. No 08/220

Weights of consumer price index (CPI) constituents 10% 5% 52% 3%

1%

3% 2% 2%

Food & non-alcoholic drinks Transport Clothes & footwear Leisure, recreation & culture Alcohol & tobacco Miscellaneous

Source: IMF

Capital account – US$ million 5%

13%

2008

2% 2%

Dwellings,water,elec., gas & fuels Mobile dwellings, hhold equip. & main. Health Communications Restaurants & hotels Education

Source: Instituto de Nacional Estatistica

1500 1000 500 0 -500 -1000 -1500 -2000 -2500 2006 Foreign borrowing

2007

2008p

Amortisation

2009p

2010p

Direct investment Source: IMF

Page 15

Standard Bank Group Economics Standard Bank Group Economics

Namibia Inflation may have peaked. As 85% of Namibia’s goods and services are sourced from South Africa, inflation is largely imported. This year inflation rose from 7.8% y/y in January to 12% y/y in August. Inflation is mainly driven by the escalation in food and energy prices. The food group has the largest weight in the overall consumer price index at 29.6%. Food inflation rose from 15% y/y in January to 18.8% y/y in July, but eased to 18.3% y/y in August. Food prices may have peaked which suggests overall inflation could ease. However, transport inflation (weight 14.8%) remained high at 18.1% y/y in July and August. South Africa’s producer price inflation is an important leading indicator of Namibia’s inflation rate and rose by 19.1% y/y in August. Although high it is expected to ease in coming months.

Monetary Policy Committee keeps policy rate flat. Namibia’s policy stance is closely linked to that of the South African Reserve Bank’s (SARB) through membership of the Common Monetary Area (CMA). Namibia’s monetary policy focuses on maintaining the Namibian dollar’s peg to the South African rand at par by holding adequate foreign exchange reserves. Namibia’s interest rates have remained unchanged this year, whereas the SARB hiked rates in April and June. Namibia’s policy or bank rate is 10.5% and the prime rate is 15.25%. The Central Bank of Namibia (BoN) no longer meets on the same day as the SARB. Interest rates have started to diverge from South Africa’s, signalling some degree of policy independence.

Inflation - % y/y

Interest rates - %

20

20

16

16

12

12

8 4

8

0

4

-4

2002 2004

2005

2006 CPI

2007 2008 Food

2003

2004

2005

Prime rate

2006

2007

Bank rate

2008 91-day TB

Source: Bank of Namibia

Source: Bank of Namibia

The Namibian dollar is under pressure to depreciate. The Namibian dollar (NAD) is pegged to the South African rand (ZAR) at 1:1. Several factors are affecting the exchange rate, such as South Africa’s large trade and current account deficits, emerging markets jitters and global uncertainty from the subprime debacle, and are exposing the rand to further weakness. The weaker exchange rate could help boost the export sector, but equally could underpin imported inflation. Greater exchange rate uncertainty and volatility can be expected. The projected exchange rates for the rand/Namibian dollar exchange rate to the US dollar are: NAD8.05/USD in Q4 2008; NAD8.17/USD in Q1 2009 and NAD8.12 in Q2 2009. The 12-month trading range is NAD7.30 to NAD8.50 to the US dollar.

Diamond mining’s contribution to GDP declining. The important diamond mining contributed 5.9% of GDP in 2007, below the high of over 10.4% in 2002. The sector contributed an average of 8.3% to GDP from 2000 to 2007. Diamond mining output amounted to N$3.11 billion in 2007, marginally below N$4.05 billion in 2006. The sector’s growth is erratic: between 2002 and 2007 it grew by 17.3%, -3.5%, 38.6%, -3.4%, 25.2% and -0.3% respectively in real terms. The mining and quarrying sector as a whole also exhibited volatility. Diamond prices, as measured by the Antwerp Diamond Index, surged to 171.7 in June this year (the latest available) from 140.9 a year earlier, after being relatively stable in 2006 (see Botswana Picture Gallery).

Exchange rate - NAD/USD

Diamond mining N$ billion

12

%

5.0

12%

4.0

10%

9

3.0

8%

8

2.0

6%

7

1.0

4%

11 10

6

0.0

5 00

01

02

03

04

05

06

07

08

2% 00

01

02

03

Diamond mining (lh) Source: Bloomberg

04

05

06

07

% of GDP (rh) Source: Bank of Namibia

Page 16

Standard Bank Bank Group Group Economics Economics Standard

Namibia – picture gallery Real GDP growth

Sectoral contribution to GDP - %

8

6.7

Mining & quarrying 8.3%

6.6

6

4.8

3.5 4

4.4 4.1

3.5

4.7

4.5

2.4

Fishing 4.2% Agriculture & forestry 5.7%

2 0 00

01

02

03

04

05

06

07

08f

Manufacturin g 12.6%

Other 15.1%

09f

Other services 35.5% Government services 18.6%

Source: Bank of Namibia

Source: IMF

Foreign exchange reserves

Trade balance - N$ billion

US$ mn

Months

1,400 1,200 1,000 800 600 400 200 0

7 6 5 4 3 2 1 0

2004

2005

2006

2007

Reserves (lh)

25

20 15 10 5 0 -5 2002

2008

2003

2004

Exports

Import cover (rh)

2005

Imports

2007p

Trade balance

Source: Bloomberg, Bank of Namibia

Government budget balance (incl. grants) - % of GDP

2006p

Source: Bank of Namibia

Fishing industry N$ billion

%

4

2.5

2

2.0

5.0%

0

1.5

4.5%

-2

1.0

4.0%

-4

0.5

3.5%

-6

5.5%

0.0

-8

3.0% 00

03/04

04/05

05/06e

06/07

07/08p

01

02

03

04

Fishing on board (lh)

Source: IMF

Weights of consumer price index (CPI) constituents 20%

30%

7%

7% 15%

Food & non-alc. bev. Transport Misc. goods & services

21%

Housing, water, electricity Education Other

Source: Bank of Namibia

05

06

07

% of GDP (rh) Source: Bank of Namibia

Namibia Stock Exchange index 1,100 1,000 900 800 700 600 500 400 300 200 2002

2003

2004

2005

2006

2007

2008

Source: Bloomberg

Page 17

Standard Bank Group Economics Standard Bank Group Economics

Nigeria Risk to inflation remains high. Headline inflation declined from 14% y/y in July to 12.4% y/y in August 2008 driven by a decline in food prices. Food prices (which account for about 64% of the CPI basket) declined from an average of 20.9% y/y to an average of 18.8% over the same period. Despite headline inflation remaining in double digits, core inflation (headline inflation, excluding food) declined from an average of 4.8% y/y in July to an average of 3.9% y/y in August 2008. We expect the improvement in agricultural production to ease food supply problems thereby reducing food prices through 2008. Significant growth in broad money, M2, mostly fuelled by rising private sector credit growth continues to pose an upward risk to inflation. We have revised our inflation forecast upwards to average 10.7% in 2008.

Monetary policy rate (MPR) reduced by 50 basis points. As core inflation remains in single digits, the central bank continues to divert its focus to liquidity management to avert the long-term inflationary pressures from fiscal expansion and high inflows of oil revenue rather than fight the shortterm inflationary impact of rising food prices. Following an emergency monetary policy committee meeting on 18 September, the MPR was reduced from 10.25% to 9.75% in an attempt to address liquidity shortages in the system. However, excess liquidity from fiscal expansion and rapid private sector credit extension, which is driving high money supply growth, continues to pose major interest rate risks. Overall, we expect monetary policy to remain restrictive through 2008.

Inflation - % y/y

Interest rates - %

40

20

30

16

20

12

9.75

10 8

0

4

-10

0

-20 2005

2006 CPI inflation CPI ex food & energy

2007

2008 CPI ex food Transport

2005

2006

2007

Policy rate

Prime

2008 91-day TB

Source: National Bureau of Statistics

Source: Central Bank of Nigeria

Naira exchange rate remains relatively strong. The central bank continues to uphold its strong stance of a strong and stable exchange rate. The exchange rate continues to trade within a narrow range fluctuating around NGN117 per US dollar. A strong naira should also help curb the high import bill, especially from food and energy. Due to high oil revenues and fiscal expansion, we expect the monetary authority to remain active in the forex market. This should help reduce the surge in money supply and be an effective way of managing excess liquidity that is posing significant long-term risks to inflation. We expect the naira to remain relatively strong and to average NGN116.50 per US dollar in the fourth quarter of 2008.

Non-oil sector continue to drive economic growth. First quarter GDP growth was revised downwards from 6.5% to 5.5%. The economy grew by 6.7% in the second quarter of 2008 mainly driven by 8.5% growth in the non-oil sector. Non-oil sector growth was driven by strong agriculture performance following favourable weather conditions and high prices of agriculture products that increased by between 16% and 40% for the nine monitored agriculture commodities. The unrest in the Niger Delta area continues to constrain oil production thereby leading to slowdown in the oil sector growth. The manufacturing sector contracted by 2.2% in the second quarter due to poor electricity supply. Overall, we expect GDP growth to remain strong in 2008 due to strong performance in the non-oil sector.

Exchange rates

Real sectoral GDP growth - % 25

135

20 130

15 10

125

5 0

120

-5 -10

115 2006 Naira/US$

2007 2008 Budget exchange rate (Naira/US$)

Source: Bloomberg & Federal Ministry of Finance

2003 2004 Real GDP

2005

2006 2007 2008f 2009f Oil GDP Non-oil GDP Source: National Bureau of Statistics

Page 18

Standard Bank Bank Group Group Economics Economics Standard

Nigeria – picture gallery Real GDP growth - % 12

10.3

Sectoral contribution to GDP - % Manufacturin Wholesale & g, 4.0 retail trade, 16.2

10.6 9.4

10 8 5.4

6

8.6

Telecommun ication, 2.3

Agriculture, 42.2

6.4

6.2

4 2

Finance & insurance, 3.9

0 2003

2004

2005

2006

2007

2008f

Building & construction, 1.7

2009f

Oil & gas, 19.4

Source: NBS

Source: NBS

Foreign exchange reserves – US$ million

Trade account 100 80 60 40 20 0 -20 -40 -60

70000 60000 50000 40000 30000 20000 10000 0

2004 2003

2004

2005

2006

2007

2008

2005

Exports

2006 Imports

2007

Trade surplus

Source: Bloomberg

Government surplus - % of GDP

2008f Source: IIMF

Oil production and prices million bpd

30

US$/barrel

3.5 3.0 2.5 2.0 1.5 1.0 0.5 -

20 10 0 -10 2003

2004

2005

Overall balance (cash basis)

2006

2007

Revenue

2008f

160 140 120 100 80 60 40 20 2005

Expenditure Source: IMF

Weights of consumer price index (CPI) constituents

2006 2007 2008 Total production Bonny Light spot price (RHS) Source: International Energy Agency

Nigerian stock exchange – All share index 70000

18%

4%

60000

4%

50000

64% 3% 5%

2%

40000 30000

Food & non-alcoholic bev. Transport Clothing & footwear Other

Hse water, elec, gas & other fuel Furn & hshld equip maint Alcohol, tobacco & kola

20000 10000 2003

Source: NBS

2004

2005

2006

2007

2008

Source: Bloomberg

Page 19

Standard Bank Group Economics Standard Bank Group Economics

Swaziland High food and transport prices driving inflation. Inflation is largely imported from South Africa through close trade links. Almost 90% of Swaziland’s imports are sourced from South Africa. Swaziland’s inflation averaged 14.7% y/y in August, above 13.3% y/y in July. Although food inflation data is not readily available, it can be assumed that food prices follow South African trends. Swaziland has rebased its CPI in April 2007; the food group’s weight rose from 25.3% to 37.7% and the transport group’s from 7.9% to 8.6% in the index. The greater weights of these two important groups, which both experienced price surges, are more reason why inflation is at these high levels. South Africa’s inflation rate is expected to peak in the next few months, which should bring some relief.

Interest rates linked to South Africa’s. Swaziland’s monetary policy focuses mainly on maintaining its 1:1 currency peg to the rand by holding adequate foreign exchange reserves. The Common Monetary Area rules limit Swaziland’s policy independence and policy is effectively imported from South Africa. The Central Bank of Swaziland did not raise its discount rate in June when the SARB raised the repo rate to 12%, keeping the discount rate at 11.5%. In the 2008 MPC statement, the committee argued that a less restrictive policy may be followed to avoid stifling economic growth and encourage the agricultural sector, helping to offset imported food price pressures. Also, higher local interest rates do not affect prices determined internationally.

Inflation - % y/y

Interest rates - %

16

18

14

16

12

14

10

12

8

10

6

8

4

6

2

4

0

2002 2002

2003

2004

2005

2006

2007

2008

2003

2004

Prime rate

2005

2006

Discount rate

2007

2008 TB rate

Source: Central Bank of Swaziland

Source: Central Bank of Swaziland

Depreciation in the offing. The lilangeni is pegged at par to the South African rand under the CMA agreement. The rand is legal tender in Swaziland, but not vice versa. Economic conditions in Swaziland do not affect the exchange rate of the ZAR, only South African and global economic conditions. The SZL/ZAR is expected to trade at an average of SZL8.05/USD in the fourth quarter of 2008 and SZL7.78/USD for the whole of 2008; SZL8.17/USD in the first quarter and SZL8.12/USD in the second quarter of 2009; and SZL7.97/USD for 2009. The 12month trading range is SZL7.30-8.5/USD. However, South Africa’s large trade and current account deficits, emerging markets jitters and global uncertainty from the sub-prime debacle expose the rand to further weakness.

Sugar production. Sugar is the backbone of the economy, but recent changes in the global trade regime has meant that the industry will suffer. European Union sugar prices continue to fall. Sugar production is also vulnerable to weather conditions, particularly water for irrigation. Sugar production has been relatively stable between 2004/05 (597 563 MT) and 2007/08 (631 236 MT), despite being lower than in 2005/06 (652 735 MT). About half the production is sold domestically. The value of exports, however, has risen from E758.4 million to E1 126.0 million over the same period. Export earnings were boosted by the weaker exchange rate, but a lower international sugar price dampened earnings (see the picture gallery below).

Exchange rates – SZL/USD

Sugar production MT '000

E million

12

700

11

675

1,000

10

650

800

9

625

600

8

600

400

7

575

200

6

550

5

0 04/05

00

01

02

03

04

05

06

07

08

Source: Bloomberg

1,200

05/06 Production

06/07

07/08

Value of exports

Source: Central Bank of Swaziland

Page 20

Standard Bank Bank Group Group Economics Economics Standard

Swaziland – picture gallery Real GDP growth - %

Sectoral contribution to GDP - % 3.9

Manufacturin g 32.0%

4 2.8

3 2

Construction 3.7%

2.5 1.8

2.0

Services 49.7%

2.4

2.2

2.0

2.0

08f

09f

1.0

1 0 00

01

02

03

04

05

06

07

Agriculture 12.1%

Other 2.5%

Source: IMF

Foreign exchange reserves

Trade balance – US$ million

US$ mn

Months

1000 900 800 700 600 500 400 300 200 100

2,500 6 5 4

3

2004

2005

Source: IMF

2006

2007

Gross reserves

2,000 1,500 1,000

2

500

1

0

0

-500 2002

2008

2003

2004

Trade balance

Import cover

Source: Bloomberg

Government budget balance - % of GDP, including grants

2005 Exports

2006e

2007p

Imports Source: Bloomberg

Sugar prices – international - Sugar No. 11 contract – US$/lb

12 10 8 6 4 2 0 -2 -4 -6

20 16 12 8 4 0 03/04

04/05

05/06

06/07

07/08p

08/09p

95 96 97 98 99 00 01 02 03 04 05 06 07 08 Source: Bloomberg

Source: IMF

Weights of consumer price index (CPI) constituents

Capital account – US$ million 400

Transport 8.60%

Health 3.58%

Education 5.38%

200

Other 12.34%

0

Furniture 11.88%

-200 Clothing 6.16%

Housing 14.33%

Food 37.73%

Source: IMF

-400 2002 2003 2004 2005 2006e Trade balance Current account Capital & financial account

2007p

Source: IMF

Page 21

Standard Bank Group Economics Standard Bank Group Economics

Tanzania Second round effects of high oil prices. Headline inflation increased from 9.5% y/y in July to 9.8% y/y in August mostly driven by high energy and transport costs. The food component (which constitutes about 55.9% of the consumer price index – CPI- basket) declined marginally from 11.2% y/y in July to 11.1% y/y in August as the country enters the harvest period. Energy prices (which constitute about 8.5% of the CPI basket) increased from 12% y/y in July to 12.7% y/y in August as the country continues to import its full quota of oil. Second-round effects of high energy prices are now evident as transport costs increased from 5.5% y/y in July to 9.9% y/y in August. Thus we expect softer oil prices and increased food supply to bring some relief through 2008. We have revised our inflation forecast downwards to average 9.5% in 2008.

Upside risk to interest rates. The declining interest rates environment experienced since November 2007 seems to be fading. Having declined from a high of 15.14% in October 2007 to 4.95% in May 2008, the 91-day Treasury bill (T-bill) rate increased to 8.62% in August 2008. As developments in T-bill yields continue to provide an anchor for marketdetermined interest rates, the yields for all maturities have started increasing as well. The overall weighted average Tbill rate also increased from a low of 7% in May to 9.47% in August 2008. The high inflation environment should lead to an increase in nominal lending rates through 2008, which should help to maintain stable real interest rates. Overall, the risks to interest rates are on the upside. We forecast the end-year T-bill rate to reach 11.4%.

Inflation - % y/y

Interest rates - %

15

25

12

20 15

9

10 6

5

3

0 2005

0 2005

2006 Overall

2006 2007 2008 Central Bank Rate Comm.Bank Lending Rate Treasury Bills Source: Bank of Tanzania

2007 2008 Non-food Food Source: National Bureau of Statistics

The shilling exchange rate to strengthen through 2008. As the country enters the agriculture harvest period, we expect the currency to strengthen throughout the remainder of the year. Export performance continues to determine fluctuations in the exchange rate as the economy is heavily dependent on the agriculture and commodity sectors. Increased demand for tourism services and continued inflow of donor aid should also support a strong currency. As the boom in the world commodity market continues, this should further improve mining exports thereby strengthening the currency. The shilling appreciated from an average of TZS1 160.33 per US dollar in August to an average of TZS1 159.16 per US dollar in September 2008.

Tourism leading the export sector improvements. Tanzania’s economy depends heavily on the agriculture, commodity and tourism sectors. Trade, hotels and restaurants (accounting for about 25% of the country’s forex earnings) should continue to grow as tourism remains strong. The low-cost high volume tourism strategy continues to attract more visitors into the country, thereby generating more revenue. Travel receipts, of which tourism is 80%, dominates the export sector followed by gold receipts. Infrastructural bottlenecks will have to be addressed if the tourism sector is to reach its full potential. Following the aggressive marketing drive by the tourism authorities, we expect a continued increase in tourism services in the medium term.

Exchange rates

Exports (year ending May) – US$ million

TZS per USD

Millions of US$

240

1200

1300

200

1000

1250

160

800

1200

120

600

1150

80

400

1100

40

200

1050

0

1350

2005

2006

2007

2008

Volume of transactions (US$ millions) RHS Exchange rate (TZS per USD) Source: Bank of Tanzania

0 Travel 2005

Gold 2006

Traditional exports 2007

Manufactured exports 2008

Source: Bank of Tanzania

Page 22

Standard Bank Bank Group Group Economics Economics Standard

Tanzania – picture gallery Real GDP growth - %

Sectoral contribution to GDP - % 5.4%

17.5%

10 7.2

8

6.9

7.8

7.4

6.7

7.8

7.1

6.9%

9.2%

5.4%

8.1

5.8% 1.5%

6

3.8% 44.7%

4.1%

4 2 0 2002

2003

2004

2005

2006

2007

2008f 2009f

Agriculture Financial & Business Services Public Admin. Construction Mining and quarrying

Source: National Bureau of Statistics

Source: National Bureau of Statistics

Foreign exchange reserves, import cover

Trade account – US$ million months

US$ millions 3000

8

2500

7

2000

6

1500

5

1000

4

500

3

0

2

3000 2000 1000 0 -1000 -2000 -3000 -4000 -5000 -6000 2000 2001 2002 2003 2004 2005 2006 2007e

2000 2001 2002 2003 2004 2005 2006 2007e Gross reserves

Trade, Hotels & Restaurants Manufacturing Transport & Comm. Electricity and water supply Owner occupied dwellings

Exports

Import cover (rhs)

Imports

Source: Bank of Tanzania

Government deficit – % of GDP

Trade deficit Source: Bank of Tanzania

Services receipts – year ending May - US$ million

0

1200

-1

1000

-2

800

-3

600

-4 -5

400

-6

200

-7

0 2000 2001 2002 2003 2004 2005 2006 2007 2008f

Transportation 2004

Travel (Tourism)

2005

Source: Bank of Tanzania & IMF

Weights in consumer price index (CPI) constituents

8.5%

55.9%

9.7% 2.6%

2007

2008

Source: Bank of Tanzania

Capital account - US$ million

6.4%

6.9%

2006

Other Services

1.4%

6000

2.1%

5000

2.1% 2.1%

4000 3000

0.8%

2000 Food Clothing and Footwear Fuel, Power and Water Household Operations&Maintenance Recreation & Entertainment Education

1.5%

Drinks and Tobacco Rents Furniture & Household Equipment Personal Care & Health Transportation Miscellaneous Goods and Services

Source: National Bureau of Statistics

1000 0 2000 2001 2002 2003 2004 2005 2006 2007e Source: Bank of Tanzania

Page 23

Standard Bank Group Economics Standard Bank Group Economics

Uganda Overall inflation subdued by slowing food inflation. Overall inflation slowed to 15.2% y/y in September from 15.8% y/y in August on the back of a deceleration in food inflation to 30.7% y/y from 33.6% y/y. Nevertheless, food prices are expected to remain high because despite favourable domestic production, demand from neighbouring countries, including Kenya, is projected to deplete food stocks and thus maintain upward pressure on food prices in the short term. The softening of the international oil price is expected to reduce the inflationary pressures stemming from the transport and fuel sub-indices. Nevertheless, overall inflation is projected to remain stubbornly high for longer and persist until the second quarter of 2009.

Central bank governor signals lower interest rates. The Bank of Uganda’s outlook for inflation is positive and the governor suggested in September that there were grounds to cut interest rates, especially as the inflationary pressures are exogenous. Following the suspension of Treasury bill auctions in July, which prompted a spike in the 91-day Treasury bill yield of 9.1%, the yield eased to 8.6% at the end of September. The rediscount rate was higher in the third quarter of 2008 than it was in the first half of the year, implying a tightening of monetary policy as liquidity increased. This reflects the upward pressure of sterilisation on interest rates, mainly through debt issuances.

Inflation - % y/y

Interest rates - % 28 24 20 16 12 8 4 0

18 15 12 9 6 3 0

2004

2005

2006

Overall

2007

2005

2008

Core (excl. food, fuel, electricity and utilities)

2006 2007 2008 91 Day TB (yield) Weighted average lending Rediscount

Source: Uganda Bureau of Statistics

Source: Bank of Uganda

The shilling stabilises. The 1.4% depreciation of the Ugandan currency against the US dollar in September, compared to August, to UGX1 646.27/USD, in relation to its appreciation against the rand and the euro reflects the effect of a stronger US dollar. The Ugandan shilling has benefited from large inflows of foreign exchange due to sound export earnings, capital inflows and aid. The Bank of Uganda’s preference for foreign exchange sales for open market operations, made possible by the prudent accumulation of international reserves to about six months of import cover, has also boosted the value of the shilling. The moderation of the oil price is likely to ease pressure on the current account, which is shilling friendly. The risk to the shilling is investors’ increasing risk aversion to emerging market assets.

Large foreign exchange inflows raise liquidity. Strong foreign exchange inflows due to growing capital inflows and buoyant export revenue have proven a challenge for the authorities to sterilise, hence the breaching of the indicative target on base money at the end of 2007 and end of March 2008. The acceleration of money supply growth over the past two years from the teens to the 20-30% range on an annual basis is testimony to these increasing inflows. To accommodate the permanent effect on the level of food and fuel prices, the base money target for June 2008 was upwardly adjusted. To subdue second-round effects, the authorities have based their target for June 2009 on a conservative core inflation projection of 5%.

Exchange rates

Money supply growth - % y/y

2700

360

2500

300

2300

240

2100

180

1900

120

20

1700

60

10

1500

0

2004

2005

2006

2007

2008

50 40 30

0 2004

UGX/USD

UGX/EUR

UGX/ZAR (rhs)

Source: Bloomberg, Standard Bank est.

2005

2006

M3 (Broad money)

2007

2008 Base money

Source: Bank of Uganda

Page 24

Standard Bank Bank Group Group Economics Economics Standard

Uganda - picture gallery Real GDP growth - %

Sectoral contribution to GDP - %

10

Community services 24%

Transport & communicati on 10%

8

Agriculture 30%

6 9.4

8.6

4

9.2

9.1

8.9

6.6

Hotels & Restaurants 3%

2

Wholesale & Retail Trade 11%

0 2004 2005 2006 2007e 2008p 2009f Source: Uganda Bureau of Statistics, IMF, Standard Bank est.

Foreign exchange reserves – import cover

Construction Electricity 11% and water 1%

Manufacturin g 9%

Source: Uganda Bureau of Statistics

Trade account – US$ million

US$ million

3000

Mining and quarrying 1%

months

7.5

1200

0

1000

-90

800

-180

600

-270

2500

7.0

2000

6.5

1500

6.0

1000

5.5

400

-360

500

5.0

200

-450

0

4.5

0

2004

2005

2006

Forex reserves

2007

-540 2005

2008

2006

Exports

Import cover (rhs)

2007

2008

Imports

Trade balance (rhs) Source: Bank of Uganda

Source: Bank of Uganda, Bloomberg

Government budget deficit - % of GDP

Coffee prices – US cents per pound

1 200 0

160 120

-1

80

-2

40 -3

0 2004

-4 2005/06

2006/07

2007/08

2005

2006

Robusta price (rhs)

2008/09p

2007

2008 Arabica price (rhs) Source: IMF

Source: IMF CR No. 08/236

Weights of consumer price index (CPI) constituents 16.8% 14.7%

27.2%

12.8% 4.5%

14.8%

Food Beverages and tobacco Clothing and footwear Rent, fuel and utilities Household and personal goods Transport and communication Education

4.7% 4.4%

Source: Uganda Bureau of Statistics

Capital and financial account – US$ million 4000 3000 2000 1000 0 -1000 -2000 -3000 Capital account (MDRI) 2005/06

FDI and Other Short-term portfolio investment investment investment 2006/07 2007/08 2008/09p Source: IMF CR No. 08/236

Page 25

Standard Bank Group Economics Standard Bank Group Economics

Zambia Inflation accelerates to 14.2% y/y in September. The persistent incline of inflation from 13.2% y/y in August was due to food, fuel and transport prices. Food inflation remained steady at 16.2% y/y in September. However, the rent, fuel and lighting sub-index’s inflation accelerated to 17.7% y/y from 14.5% y/y, while the transport and communication sub-index’s inflation surged to 11.5% y/y from 5.3% y/y. The price of fuel is very high and feeds into transport costs and final goods and services. To ease the pressure of high fuel prices on production and inflation, the authorities cut import tariffs on diesel and petrol to 7% and 36% from 15% and 45% respectively. This is projected to ease fuel prices and transport costs; however, the approaching lean season will keep food prices elevated in the short term.

Interest rates edge up. Uncertainty surrounding Zambia’s imminent presidential elections, the global financial turmoil and high inflation contributed to the increase in short-term interest rates in September. In recent years, yields on Treasury instruments have been largely influenced by portfolio capital inflows. Over the past year, portfolio investors have sought longer dated instruments, thus easing the downward pressure on yields. However, in the second half of 2008 these flows slowed, hence the increase in the yield on the 91-day Treasury bill to 12.5% in September from 10.9% in March. Even the sticky lending rate edged up to 25.6% in September. Interest rates are expected to moderate over the short term as uncertainty recedes.

Inflation - % y/y

Interest rates - %

25

50

20

40

15

30

10

20

5 10

0

0

-5 2004

2005

2006

Overall

2007

Food

2004

2008

2005

2006

Average lending rate

Non-food

2007

2008

BoZ rate

91-Day TB

Source: National Bureau of Statistics

Source: Bank of Zambia

Kwacha weakened by pre-election jitters and a softer copper price. The Zambian currency depreciated against three hard currencies, namely the US dollar, euro and rand, in September. The kwacha’s loss in value is due to a slowdown in portfolio capital inflows on account of uncertainty surrounding domestic events, turmoil in global financial markets and the 15.4% m/m drop in the copper price to USD6 388 per tonne at the end of September. Accelerating inflation has also aggravated the value of the kwacha, as the inflation differential with that of its trade partners widens thus spurring a weaker currency. A stable kwacha is projected in the short term on the grounds that policy continuity is all but assured under new leadership. Although the copper price has softened it is not expected to fall off.

M3 growth slows on the back of softening growth of foreign currency deposits. The slowdown in the growth rate of broad money (M3) to 29.2% y/y in July from 34.6% y/y in January is reflective of a significant deceleration in the growth of the foreign currency deposits constituent of broad money to 10.1% y/y in August from 57.3% y/y in January. The weakness of the US dollar in the first half of the year and relatively lower appetite for Zambian debt partly explains this year’s decline in foreign currency deposits. Reserve money’s cumulative increase target of ZMK22 billion was met in June 2008; however, at the end of August, the ceiling target for September was exceeded by ZMK127 billion, likely due to the challenge of fully sterilising net purchases of foreign exchange.

Exchange rates

Money supply growth % y/y

6600

900

50

6000

750

40

5400

600

30

4800

450

20

4200

300

3600

150

3000

0

2004

2005

2006

2007

2008

10 0 -10 2004

ZMK/USD

ZMK/EUR

ZMK/ZAR (rhs)

Source: Bloomberg, Standard Bank Group est.

.

2005

2006

Broad money (M3)

2007

2008

Reserve money Source: Bank of Zambia

Page 26

Standard Bank Bank Group Group Economics Economics Standard

Zambia – picture gallery Real GDP growth - %

Sectoral contribution to GDP - %

7

Financial Real Estate Institutions & Business & Insurance services 7% 9%

6 5

Community, Social & Personal Services 8%

4 3

6.2

5.4

6.1

5.7

5.2

Transport, Storage & Communica tions 9%

6.2

2 1

2005

2006

2007e 2008f 2009f Source: IMF, Standard Bank est.

Foreign reserves & import cover

Constructio n 11%

Electricity, Gas & Water 3%

Trade account – US$ million 4.0

1200

3.5

900

3.0

900

600

2.5

600

300

2.0

300

0

1.5 2005

Wholesale & Retail trade 18%

Source: Central Statistical Office

1500

2004

Manufacturi ng 11%

Restaurants , Bars & Hotels 3%

0 2004

Agriculture, Forestry & Fishing 13% Mining & Quarrying 8%

2006

2007

2008

1500 1200

0 -300 2005

Forex reserves (US$ millions) months of import cover

2006

Imports

Exports

Source: Bloomberg, Bank of Zambia

Government budget balance - % of GDP

2007

2008 Trade balance

Source: Central Statistics Office

Copper prices – US$ per tonne

20 500 16 400 12 300 8 200 4 100

0

0

-4 2005

2006

2007

2008p

2009f

2004

2005

4.1 4.9

0.8

9.6 8.2 57.1

8.5 6.8

Food & beverage Rent, fuel, lighting Medical care Recreation & education

Clothing & footwear Furniture & household goods Transport & communication Other goods & services

Source: Central Statistical Office, Standard Bank Group est.

2007

2008

Source: Bank of Zambia

Source: IMF CR No 08/187

Weights of consumer price index (CPI) constituents

2006

Stock market indicators ZMK billions

4000 3500 3000 2500 2000 1500 1000 500 0 2005

22000 20000 18000 16000 14000 12000 10000 8000 6000

2006 2007 2008 LuSE All Share Index (Jan 1997=100) Market Capitalisation (rhs) Source: Lusaka Stock Exchange

Page 27

Standard Bank Group Economics Standard Bank Group Economics

Zimbabwe Hyperinflation environment remains a major challenge. Lack of foreign exchange, shortages of goods and services and a resultant increase in food prices, high global energy prices, sharp depreciation of the currency and rapid growth of money supply continue to drive inflation to new record highs. The government continue to print money to finance quasi fiscal spending and that is also fuelling the hyperinflation environment. However, in the absence of any official inflation and monetary survey data, it remains difficult to quantify the extent of the country’s economic crisis. Also, in the absence of substantial productive activities, hyperinflation will continue. The last official inflation recorded for June 2008 was 11.2 million per cent.

Monetary policy remains restrictive and ineffective. Continued depreciation of the currency and the hyperinflation environment remains a major challenge for the monetary authorities to conduct monetary policy effectively. Secured overnight accommodation rate remains unchanged at 8500%. This tight monetary policy environment has completely crowded out any meaningful economic activity, as access to credit is severely limited. The central bank continues to maintain stringent statutory reserve requirements that impose a heavy administrative burden on commercial banks. Commercial banks’ lending remains unprofitable. Overall, real lending rates remain deeply in negative territory and this should escalate the hyperinflation environment.

Inflation - % y/y

Interest rates - % 10000

12000000

8500

8000

10000000

6000

8000000

4000

6000000

3000

2000

4000000

66.3

0

2000000

2005

0 2006

2007

2008

2006 2007 2008 Prime lending rate Overnight accommodation (secured) 91-day T-bill

Source: Reserve Bank of Zimbabwe

Source: Reserve Bank of Zimbabwe

Depreciating currency. Since the redenomination of the currency by a factor of 1:10 000 000 000 on 1 August 2008, the Zimbabwe dollar continues to depreciate significantly. The official interbank exchange rate depreciated from Z$7.78 per US dollar on 1 August 2008 to Z$132.30 per US dollar on 30 September 2008. The parallel exchange rate was Z$750 000 per US dollar on 30 September 2008. Even with the recent political settlement, foreign exchange management will continue to be a major challenge to all the efforts to institute any meaningful economic reforms. Continued shortages of foreign exchange should lead to a further depreciation of the currency.

Sectoral performance remains dismal. Overall, we expect the economy to contract by about 7% in 2008 as most sectors continue to operate below capacity. The country’s inability to secure essential raw materials, machinery and equipment should continue to fuel the slump in production in most sectors of the economy. The agricultural sector continues to perform dismally. Because the sector has been the largest purchaser of goods and services (for example, manufactured products) and the anchor around which industries and services developed, its poor performance continues to hinder developments of other sectors.

Exchange rates – Z$ per US dollar

Manufacturing output index - 1990=100 120

160 140 120 100 80 60 40 20 0 4/Aug/08

100 80 60 40 20 0 18/Aug/08

1/Sep/08

15/Sep/08

29/Sep/08

Source: Bloomberg

1996

1998

2000

2002

2004

2006

2008f

Source: IMF

Page 28

Standard Bank Bank Group Group Economics Economics Standard

Zimbabwe – picture gallery Real GDP growth - %

Sectoral contribution to GDP - % 19%

0 -2 -4 -6 -8 -10 -12 -14 -16

20%

4%

8% 22%

18% 9%

Agriculture Other Distribution Manufacturing

2000 2001 2002 2003 2004 2005 2006 2007 2008f

Mining & quarrying Transport & comm. Finance & insurance Source: Central Statistical Offices

Source:IMF & Standard Bank

Foreign reserves – months of import cover

International trade – exports shipment by sector US$ million

1.4

Tobacco

1.2

Mining

1.0

Manufacturing

0.8

Hunting

0.6 0.4

Horticulture

0.2

Agriculture

0.0 2003

2004

2005

2006

0

2007

100

Source: IMF

Government deficit (excluding grants) - % of GDP

200

2008H1

300

400

500

2007H1

Source: Reserve Bank of Zimbabwe

Mineral production - kilograms

0

25000

-2

20000

-4

15000

-6

10000

-8

5000

-10

0

-12 2001

2002

2003

2004

2005

2006

2001 2002 2003 2004 2005 2006 2007 2008Q1 Platinum Gold

2007 Source: IMF

Weights of consumer price index (CPI) constituents Education, 2.9% Recreation and culture, 5.7% Communication , 1.0%

Restaurants and hotels, 1.5%

Source: Zimbabwe Chamber of Mines

Monetary Survey - %

Miscellaneous goods and services, 3.9% Food and nonalcoholic beverages, 31.9%

200000 160000 120000

Transport, 9.8% Alcoholic beverages and tobacco, 4.9%

Health, 1.3% Rents plus furniture, household equipment & maintenance, 15.1%

Housing water electricity gas and other fuels, 16.2%

Clothing and footwear, 5.7%

80000 40000 0 2006

2007 M3

Source: Reserve Bank of Zimbabwe

2008

Claims on Private Sector Source: IMF

Page 29

Standard Bank Group Economics Standard Bank Group Economics

Group Economics Goolam Ballim – Group Economist +27-11-636-2910 [email protected] South Africa Johan Botha +27-11-636-2463 [email protected]

Shireen Darmalingam Jeremy Stevens +27-11-636-2905 +27-11-631-7855 [email protected] [email protected]

Danelee van Dyk +27-11-636-6242 [email protected]

Anita Last +27-11-631-5990 [email protected] Angola Ghana Malawi Mauritius

Victor Munyama +27 11-631-1279 [email protected] DRC Nigeria Tanzania Zimbabwe

Rest of Africa Jan Duvenage +27-11-636-4557 [email protected] Botswana Lesotho Namibia Swaziland

Yvonne Mhango +27-11-631-2190 [email protected] Kenya Mozambique Uganda Zambia

All current research is available on the Standard Bank Group Economics home page. In order to receive Group Economics’ research via email, all clients (new and existing) are required to register and select publications on the website. Click on http://ws9.standardbank.co.za/sbrp/LatestResearch.do, select Register and enter your email address. A username and password will then be emailed to you.

Analyst certification The authors certify that: 1) all recommendations and views detailed in this document reflect his/her personal opinion of the financial instrument or market class discussed; and 2) no part of his/her compensation was, is, nor will be, directly (nor indirectly) related to opinion(s) or recommendation(s) expressed in this document Disclaimer This document does not constitute an offer, or the solicitation of an offer for the sale or purchase of any investment or security. This is a commercial communication. If you are in any doubt about the contents of this document or the investment to which this document relates you should consult a person who specialises in advising on the acquisition of such securities. Whilst every care has been taken in preparing this document, no representation, warranty or undertaking (express or implied) is given and no responsibility or liability is accepted by the Standard Bank Group Limited, its subsidiaries, holding companies or affiliates as to the accuracy or completeness of the information contained herein. All opinions and estimates contained in this report may be changed after publication at any time without notice. Members of the Standard Bank Group Limited, their directors, officers and employees may have a long or short position in currencies or securities mentioned in this report or related investments, and may add to, dispose of or effect transactions in such currencies, securities or investments for their own account and may perform or seek to perform advisory or banking services in relation thereto. No liability is accepted whatsoever for any direct or consequential loss arising from the use of this document. This document is not intended for the use of private customers. This document must not be acted on or relied on by persons who are private customers. Any investment or investment activity to which this document relates is only available to persons other than private customers and will be engaged in only with such persons. In European Union countries this document has been issued to persons who are investment professionals (or equivalent) in their home jurisdictions. Neither this document nor any copy of it nor any statement herein may be taken or transmitted into the United States or distributed, directly or indirectly, in the United States or to any U.S. person except where those U.S. persons are, or are believed to be, qualified institutions acting in their capacity as holders of fiduciary accounts for the benefit or account of non U.S. persons; The distribution of this document and the offering, sale and delivery of securities in certain jurisdictions may be restricted by law. Persons into whose possession this document comes are required by the Standard Bank Group Limited to inform themselves about and to observe any such restrictions. You are to rely on your own independent appraisal of and investigations into (a) the condition, creditworthiness, affairs, status and nature of any issuer or obligor referred to and (b) all other matters and things contemplated by this document. This document has been sent to you for your information and may not be reproduced or redistributed to any other person. By accepting this document, you agree to be bound by the foregoing limitations. Unauthorised use or disclosure of this document is strictly prohibited. Copyright 2004 Standard Bank Group. All rights reserved.

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