Growth has accelerated in a wide range of developing countries over the last couple of decades,

resulting in an extraordinary period of convergence with the advanced economies Over the past
two decades, emerging markets have established themselves as a significant global growth
engine as they have consistently grown faster than the economies of their developed market
counterparts. Due to this, investing in emerging markets has the potential to translate into
significant returns for some investors. Emerging economies are the engine of global growth,
but the performance of individual economies varies considerably. Many of the emerging
countries are positioned as low-cost manufacturing hubs for international brands and the next
wave of growth in the auto sector is expected to be driven through emerging markets.
SOUTH AFRICA
Unemployment

Employment rates are defined as a measure of the extent to which available labour resources
(people available to work) are being used. They are calculated as the ratio of the employed to the
working age population. Employment rates are sensitive to the economic cycle, but in the longer
term they are significantly affected by governments' higher education and income support policies
and by policies that facilitate employment of women and disadvantaged groups. Unemployment
continues to be a major challenge. The unemployment rate in South Africa rose to 27.6 percent
in the first quarter of 2019 from 27.1 percent in the previous period. It is the highest jobless
rate since 2017 By genders, the jobless rate dropped for women (29.3 percent vs 29.5 percent
in Q4) but it increased for men (26.1 percent vs 25.1 percent). Also, the youth unemployment
rate continued to climb to 55.2 percent from 54.7 percent in Q4, putting the rate at the highest
level since Q2 2017.

Increased investment in socioeconomic infrastructure can spur medium- to long-term growth

and enhance investment to translate growth into lower unemployment. To dent the
unemployment ailments in Southern Africa, there is a case for promoting small and medium
enterprises (SMEs), which account for almost 90 percent of the businesses in both developed
and developing economies.

The national minimum wage and other legislative amendments have come into effect,
providing much-needed certainty in the labor market. Through the National Economic
Development and Labor Council, business and labor have committed to support job creation
and retention. Exemptions and shifts in working hours are expected to limit the job losses from
upward wage adjustments as a result of the national minimum wage.
INFLATION

Inflation measured by consumer price index (CPI) is defined as the change in the prices of a basket
of goods and services that are typically purchased by specific groups of households. Inflation is
measured in terms of the annual growth rate and in index, 2015 base year with a breakdown for
food, energy and total excluding food and energy. The annual inflation rate in South Africa rose
to 4.5% in May 2019 from 4.4% in the prior month, Main upward pressure came from prices
of housing & utilities and food while those of transport slowed. But when compared with
previous year it slowed from 5.3 per cent in 2017 to 4.7 per cent in 2018, as lower food and
services inflation offset high petrol inflation in the second half of the year. Inflation has
remained within the central bank’s target band of 3% to 6% for more than two years but Fuel
inflation rose to 20.1 per cent in the second half of 2018 due to higher oil prices, putting upward
pressure on public transport and freight costs. As a result of these large fuel price increases, the
Department of Energy is reviewing the basic fuel price formula.

GROSS DOMESTIC PRODUCT

Real gross domestic product (GDP) is GDP given in constant prices and refers to the volume level
of GDP. Constant price estimates of GDP are obtained by expressing values of all goods and
services produced in a given year, expressed in terms of a base period
Growth in the South African economy—mainly driven by services, manufacturing, and mining
—has been slow since 2011, when it recorded 3.3 percent. Since then, growth has generally
been trending downward

The South African economy showed no growth in the first quarter of 2019, after expanding 1.1
percent in the prior period and missing market expectations of a 0.7 percent growth. Slower
rises were seen in manufacturing, transport & storage, finance and government services. In
addition, agriculture, mining, construction, utilities and trade posted contractions. GDP Annual
Growth Rate in South Africa averaged 2.73 percent from 1994 until 2019, reaching an all-time
high of 7.10 percent in the fourth quarter of 2006 and a record low of -2.60 percent in the
second quarter of 2009.

The central bank recently cut the country's 2019 GDP growth outlook to 1.0 percent from
previous 1.3 percent. The government sees the economy expanding 1.5 percent in 2019.

The region’s sectoral characteristics suggest the need for greater structural transformation,
more manufacturing, more value addition, and job-creating growth

Manufacturing industry decreased by 8.8% and contributed -1.1 of a percentage points to GDP
growth.
Seven of the ten manufacturing sectors, petroleum, chemical products, rubber and plastic
products; motor vehicles, parts and accessories and transport equipment; wood and wood
products, paper, publishing and printing divisions, reported negative growth rates in the first
quarter. Only three sectors, government services (1.2%); personal services (1.1%); and finance,
real estate and business services (1.1%), showed growth

GOVERNMENT DEBT

Generally, Government debt as a percent of GDP is used by investors to measure a country

ability to make future payments on its debt, thus affecting the country borrowing costs and
government bond yields. Southern Africa’s many development aspirations come with big
challenges. Massive financing in a dynamic financing landscape is rapidly increasing public
debt

South Africa recorded a government debt equivalent to 55.80 percent of the country's Gross
Domestic Product in 2018. Government Debt to GDP in South Africa averaged 40.31 percent
from 2000 until 2018, reaching an all-time high of 55.80 percent in 2018 and a record low of
27.80 percent in 2008 Tighter global financial conditions and fading investor sentiment toward
emerging markets contributed to a reversal in capital inflows and to higher financing costs
Traditional and new alternative sources for financing development should be considered,
including investment-seeking opportunities for sovereign wealth funds and pension funds as
well as innovative financial instruments.

South Africa's trade balance

Currently the value of Imports and Exports per quarter equates to roughly 60% of
South Africa's Gross Domestic Product (GDP). So trade is an extremely import part
of the South African economy. The overall size of imports and exports as a
percentage of our economy points to the fact that South Africa is a very open
economy. Due to South Africa's economy being so open, it does lend itself to
greater volatility as the local economy is in a large part influenced by global events
and economies..

In recent years South Africa has largely been running a "twin deficit", with the budget
deficit of government (where government spends more than what they are getting in)
as well as a trade deficit, where the value of South African exports is far less than
the value of South Africa's imports, leading to a trade deficit. This "twin deficit" has
definitely hurt the exchange rate over the years. Or it might be due to our weak
exchange rate that we are running at a trade deficit. We have argued before a
stronger Rand would mean one of our biggest imports (crude oil) would be a lot
cheaper. And the effect of the cheaper oil would more than compensate for our
exports becoming more expensive due to a stronger Rand, and thus a better trade
balance due to a stronger Rand. It is contrarian and against regular economic theory
and thought but we believe there is merit in this view.

South Africa recorded a positive trade balance of R1.7 billion during May 2019 with
the rest of the world. The summary below shows the top 5 export destinations for
South African exports during May 2019:

1. China (11.0%)
2. United States (7.2%)
3. Germany (6.8%)
4. United Kingdom (6.1%)
5. Japan (5.4%)

So just over 10% of South Africa's exports in May 2019 headed to China, with just
over 7% heading to the United Sates.
The summary below shows the top 5 import origins in South Africa during May 2019:

1. China (18.5%)
2. Germany (9.1%)
3. United States (7.3%)
4. India (4.9%)
5. Nigeria (4.6%)

Almost 20% of South Africa's imports came from China, 9.1% from Germany (most
cars and machinery and equipment), and 7.3% of South Africa's imports came from
the USA.

Total Exports for May 2019: R 112,069,153,495

Total Imports for May 2019: R 110,331,942,516
Trade Balance for May 2019: R 1,737,210,979

SECTOR PERFORMANCE

MINING

In the first three quarters of 2018, real value added in the mining sector contracted
by 1.4 per cent compared with the same period in 2017, lowering overall GDP
growth by 0.1 percentage points. Policy and regulatory uncertainty have contributed
to the sector’s weak performance in recent years. The President’s economic stimulus
and recovery plan has resolved much of this uncertainty

The mining sector is expected to remain under pressure over the medium term,
largely as a result of low commodity prices

Agriculture

In the first three quarters of 2018, real value added in the agriculture, forestry and fishing
sector contracted by 3.2 per cent compared with the same period in 2017. Exports of certain
agricultural products have grown appreciably in recent years, particularly in new Asian
markets Industry and government are working together to expand export market
access.
Manufacturing
Real value added in manufacturing increased by 0.9 per cent in the first three
quarters of 2018 compared with the same period in 2017 An upturn during the third
quarter was driven by food and beverages, and motor vehicles and parts.

Financial and business services

Growth in real value added by the finance, insurance, real-estate and business
services sector edged up to 2.2 per cent in the first three quarters of 2018 compared
with 1.8 per cent in the same period of 2017. The sector’s contribution to GDP
growth increased slightly from 0.4 percentage points in 2017 to 0.5 percentage
points in the first three quarters of 2018.

Transport and telecommunications

Growth in transport services weakened from 1.4 per cent over the first three quarters
of 2017 to 0.9 per cent in the same period of 2018. Growth was dampened by
derailments on the iron ore line, a decline in overseas tourist arrivals and aircraft
movements, and a national bus strike.

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