MTN Group Limited (MTN) Earnings Call Transcript & Summary

Honorable Ministers, members of the investment community, leaders of business, esteemed guests, ladies and gentlemen, good afternoon. And welcome to the MTN Capital Markets Day. Thank you so much for joining us here today at the MTN Innovation Center and of course, to the hundreds of people that are already logged on virtually through our webcast. My name is Andile Khumalo, and I will be your host for the next 1.5 days or so, i'll be facilitating the program. We've got lots in store for you as we go through the macroeconomic environment that many of the geographies that MTN operates in as well as keep digging deep into the strategy of MTN Group, which is, of course, Ambition 2025. We're going to hear about its progress. We're going to hear about its prospects and of course, all the plans that the leadership at MTN Group have in store for the creation of the MTN of tomorrow. The program includes a couple of presentations, some keynote addresses. There's a lot of panel discussions. And most importantly, there's enough time and space for you to ask your questions. I was talking to some members of the investment community outside and they were saying, Andile we come to this day because we've already read everything on the SENS announcements. We already watched every interview of the CEO and we hope that with these engagements, we get a little bit more color and depth, and that's exactly what I have in store for you. We hope everything that will be discussed today will give you a deeper understanding of this Pan African group as well, of course, as its compelling investment case, notwithstanding the challenges that not only the continent has, but the world over. Before we kick off, I have some housekeeping rules for you. The emergency first of all. There are 2 emergency exits. There's one on my immediate right, if you go left here, it will take you out into the exhibition and the cafeteria area that you saw. The second one is on the far left at the top. It will also take you out into an open area. And if you're looking for tea and lunch, you just go down the stairs, you end up in the same area. But should there be an emergency, please look right now for the one closest to you, the stuff they tell us on aeroplanes. Please, right now is a good time to find the one is closer to you, should you need to get out of here in a hurry. There are also restrooms, of course, in this building everywhere, but the nearest one is that as you get out of the emergency exit on my top left, there is a tech bar reception right next to it are bathrooms. And if you're using this particular exit, as you get out here right next to the elevators, there is a bathroom there for you as well. We do have free WiFi, we are MTN, of course. So on the screen, you're going to be having some QR codes that you can scan as well as around the room, you'll see some scanners, especially on the left-hand side. You can also scan those. It will take you straight into the free WiFi, but we also realized there are those of us that are more old school than others. So the user name and password is here. If you don't quite know about this QR thing, we've got you. So you just need to complete SSID is also like a user name and the password, as you can see, is a #MTNevents2023. For those who'll be tweeting, which we do encourage or perhaps using other social media platforms. On twitters, specifically, we are @MTNGroup. I am pretty sure many people that can't join us physically or online, would love to hear some of your insights as the day goes by. So take pictures, share selfies, whatever you wish, and please use the hashtag #MTNCMD23, which of course, stands for MTN. Capital Markets Day 2023. That is for sharing. We've also made some provisions to avoid being affected by load-shedding, all right? So we've got a UPS system in this building. So you should probably hear nothing or feel nothing or see any difference other than what you already see. But sometimes things don't work as planned. So if something does quite happen now, i'll make sure that I'll be on stage and kind of calm you down and the lights to be back in no time. This is the new reality we have to deal with now. Please also note there is a disclaimer for independent speakers. We are a publicly listed company. We have to be quite responsible about this one fact. We've invited a lot of people that do not work for MTN, that do not represent MTN, we need them because they give us a lot of insights, especially in this ever-changing world. The views that will be expressed by these independent speakers at this Capital Markets Day are their own and do not reflect the views of MTN. When there is a lunch and tea, your exits are here to my right and to the top of my left, if you go out to the top of my left, you just have to kind of make your way back down. So those are the exits. When we are ready to get back into the room, there will be a sound that will play, that does not mean stand and dance. If you wish to dance, please dance on your way back into this room. That means it's time for us to start whatever the next session will be. And so please, when you hear that, make your way into the sessions. If you need any assistance at all, they are MTNers all around the room, all around this particular venue, they look like this wonderful stand-in model we've got here in marina. They are all wearing these wihite stops with a wonderful pattern that represents MTNs colors. And of course, it's routes that are in the continent of Africa. So anybody dressed like that can help you. That's the short answer. Right. Now let's get the show on the road. This afternoon, we are going to be discussing our markets in a little more, more detail. We have a lot of experts that operate in these markets that write and cover these markets, whether for the media as analysts, and we're going to be getting into the depth of what's happening in these various markets that all, of course, culminate into this beautiful group called MTN. We're going to begin though with an introduction. From the MTN Group President and CEO, Mr. Ralph Mupita, he's been at the helm of MTN since September 2020, and he will now be addressing us and welcoming us and setting the scene and the tone for this Capital Markets Day. Ralph?

Thank you very much, and a hearty welcome from my side as the Group President and CEO of MTN. On behalf of the MTN Group, we really are privileged to see a house full here at 14th Avenue campus, and we know that on the webcast, many other investors are online. We really appreciate you taking out 2 full days to actually engage with us as MTN. We launched our Ambition 2025 strategy to the capital markets pretty much 2 years ago. And we feel that we are kind of midstream in execution of what is a 5-year plan and thought it's very important that we would engage with our capital holders and broader stakeholders to give a sense of how we're progressing and what has shifted, if anything, in terms of the commitments that we've made. And as Andile has mentioned, for today, what we want to start off with is give you a sense of the macro backdrop. Obviously, we have independent speakers, not MTN speaking. We will engage in some of the discussions and the narrative. But before we go into the detail of how we're executing the strategy, which is tomorrow, we thought it's important to kind of zoom out and look at some of our key markets. And the big issues that we believe our stakeholders and shareholders more broadly would have as key issues that they're applying their minds around in terms of thinking about the MTN investment case. And as we mentioned by Andile, we have a wonderful array of speakers today. I wanna thank the Minister of Finance of Ghana, [ Ma'am Poso ], also thank you for joining the Minister, the Minister has trips across the continent. He has arrived yesterday from [ suhum ] on his way back to Accra,and I think he will give you some good insights around what's happening in Ghana and the Ghana investment case. We also have Bismarck Rewane, who is a renowned economist in Nigeria. And given the change in administration on Monday, I think you can ask him the question and form your own views about the direction of Nigeria over the next 4 years. And in South Africa, we've got 2 speakers who will give us a really good sense of the macro backdrop. Load-shedding, obviously, is very topical. But the deputy Reserve Bank governor Cassim would actually give us a sense of how the Reserve Bank is looking at South Africa more broadly. The MPC was last week, 50 basis points up. The rand did react to that a little bit. But I think we also have James, and will give us a sense from the Energy Council how he sees the load-shedding and what needs to be true to see what -- how people should frame they're thinking about Load-shedding, and it's impacts on the economy. So we have a really good program today and tomorrow, we'll deep dive into Ambition 2025 and give you a sense of where we are now that we've been executing for the last 2 years. And I hope that you would take a couple of things back at the end of today, and I want to put these things out today. I think the first thing that we hope as a management team, you'll take forward is that Africa presents a unique and compelling growth opportunity for digital and financial inclusion. We at MTN believe that deeply. We believe that Africa's growth prospects are going to be driven by the digital economy. So I think that's the one message that we will leave. I think we will also want to leave a message that we see ourselves as partners for nation states development. For sure, we have a responsibility towards building a business that delivers value for our shareholders, but we see ourselves also having a social purpose. And that social purpose is enabling the markets that we operates to grow. And hopefully, you leave that with that message. The third message that we hope you take is for sure, they are near-term macro challenges that are impacting pretty much all businesses globally, and thus, we will have a specific set of issues. We have a plan that will help us navigate these issues and come out on the other side are more stronger and more resilient, and we'll take you through all of that detail. The fourth is really that we have a very, very clear plan and we're still committed to executing on Ambition 2025 and that our medium-term guidance and the targets that we set out, we feel that responsibility to our capital holders that we are going to deliver on them. And myself and the executive team who will support me in the presentations tomorrow, will give you a lot of detail on that. But enough of that tomorrow, let's get the show underway Andile and start with the first panel discussion. Thank you so much.

Thank you very much, Ralph, for those opening words and setting the scene and the tone for us. I'm pretty sure everybody is excited to hear that, especially the point about the digital economy driving Africa's growth and, of course, the MTN Group, hopefully being a leader in that particular space. Next up, we're going to take a deep dive into the macroeconomic environment here in South Africa, which happens to be MTN Group's base since launching operations in the country way back in 1994. So Africa has enormous growth potential as we all know, but has experienced a steady GDP growth over the past decade. Unfortunately, in the context of a very difficult challenge around the power cuts that have been growing quite intensely in the past few years. We are very pleased to have with us today 2 authorities on these particular topics, one on the economy and one on the power situation in South Africa. We're going to kick off with Dr. Rashad Cassim, he is the Deputy Governor of the South African Reserve Bank and a member of the Monetary Policy committee. That committee that you and I hold our breath every time they have an announcement to make, yes, he's that guy. And he oversees the financial markets and international cluster there he's responsible for financial markets, international economic relations and policy as well as legal services. Ladies and gentlemen, please join me in giving a round of applause to Dr. Rashad Cassim

Okay. Thank you very much. It's a great pleasure to thank you to Ralph and the leadership team and other dignitaries from our lovely continent. I assure you when I woke up this morning and in the darkness put on a tie. I didn't realize the significance of the color until I met Ralph and he was very pleasantly surprised. So there are 2 things, I guess, most of you are acutely aware of the fact that economists are boring and having both an economist and a central bank and the one present, I'm happy that I'm not doing the after-lunch shift. Well to describe the after lunch, so I have a particular challenge. Andile, warn me when my time is up. I am going to raise many things, but I hope that we can talk more about this when we have the discussion. Investors often say, we do many road shows, the governor and I will be doing 1 abroad pretty soon. We do them in New York. And often, the SARB has a reputation for being brutally honest to the point that at times we tend to be maybe a bit more alarmist than we should be. We say it like this, but -- and I think that investors appreciate the fact that we're pretty honest. I have a few themes. I won't talk through all the themes and there are a few questions I'm sure in your mind, how do we think about inflation and growth. That's our key mandate. Why on earth are interest rates going up when the economy is -- growth is rather very, very sluggish. What does the energy crisis mean for the macro policy. And there are always 2 sides to how you think about the economy. The economic side, which economists ironically call the real economy strange term. And then it's the monetary side, lending, borrowing the financing of our ability to sustain the economy. That's a very important part of understanding the cost of borrowing and sovereign risk. So those are really some of the key issues that I will talk to, but not to all of it, hopefully, we can clarify some of that in the discussion. I wanted to just make a simple point here that South Africa is not an outlier when it comes to inflation. Inflation is worse in many other parts of the world than in South Africa. But I think what happens with inflation -- trying to tame inflation has severe consequences for South Africa. I said to many people as someone who's, I think, been on the Monetary Policy Committee, for 12 years. For the first time, I worry more about U.S. inflation numbers than I do about South African inflation numbers because the impact of U.S. monetary tightening on South Africa is something that we cannot ignore. The other important thing is it being a small open economy, global growth has a very important impact on our own growth prospects. And that means that if you take ZAR 2,000, when the global economy was growing at about 5%, we were growing at about 5%. The numbers are coincidence. But I think that the ability to take advantage of global growth is very important for a small open economy like South Africa. The argument today is that if global growth goes up back to 5%, it will be very hard for us to grow at that amount because it mean a number of structural problems in the economy that makes that very hard. Okay. So this is just the point that I was making that you can see every country has increased its rates. Actually, if you want to -- if you think that we've been a bit extreme in raising rates, the Brazilians have a real interest rate of about 9%, which means that theie inflation is about 4%, and their repo rate is about 13%. Whereas in our case, our repo rate is 8.75% and the inflation rate is around 7%, -- 6.9%, 6.8% the last reading. So countries have really -- and Brazilians and the Latin Americans, as you know, have a history of hyperinflation in the way that we don't have. Now we like using a term called the potential growth of the economy. A very important term. And the reason it is an important term is because the potential of the economy determines how far can you grow without having an inflation problem. So in other words, you can say that maybe the potential of a country like China or India is 6%, 7%. The moment they start growing above 6%, 7%, they have capacity constraints and inflation picks up and the monetary authorities have to control the economy and do that. South Africa is not the same, but it used to be a 3% economy. Pre-2008 we used to be a 3% economy. The moment the economy goes above 3%, we start seeing inflationary pressures. But now we've become a 1% economy. So in other words, the potential of this economy is very low. And the real challenge is how do you get this potential to grow. As you can see, our GDP growth is very modest. We think that the economy will grow at about 0.3% this year. But we think that in the longer run, it will pick up to 1%, 2%. It's very hard to make a dent in the unemployment numbers with those growth. So one thing that's really important is -- and I just throw this out. I'm not going to talk much to is, how do you think about economic growth of an economy, Economics 101. And that is that there are -- there's cycles. So sometimes you can have a cycle where commodity prices pick up, and we, like many other parts of our countries and our continent, gain a lot. We have the windfall gains from commodities. So sometimes the economy can grow for 2, 3 quarters at 2%, 3% and then it can stagnate again. And it's all cyclical. It's cyclical growth. But the real question is what happens in the short term, the medium term and the long term. In the short term, we are very modest about our growth prospects. But I do think that there is a silver lining with the energy constraint, and that is that there's -- most of the investment we're tracking is in renewables. So you're going to see a reallocation of investment in the economy. And those kind of things, I think, will really be important. It's going to -- it's hard to see it now, but I take a very positive view about the investment that the energy problem will unleash in this economy. There's a robust private sector. You can see the ex-center with solar companies are thriving. So I do think there is something coming out from this. Now we have an energy expert, I don't want to go too much into energy. I just want to say that a few things. It is not only energy that is constraining the potential of this economy. It is also, for example, logistics and transport. And these are low-hanging fruit. They could be fixed up very easily. It can accelerate growth. But we have found that in our -- one of the reasons why our forecast for economic growth is low for this year is the load-shedding, but also many able exporters are struggling to get their goods to their harbor, their backlogs and so on. These things could be fixed up very easily and could turn the fortunes of this country quite a bit. So the thing that worried us most was the unprecedented days of load-shedding that we estimate -- we saw it in 2022, but that we estimate for 2023. And in our estimate, economic growth for 2023 would have been not 0.3%, but 2.3%. So this is how load-shedding has weighed down on our growth, had it not been for load-shedding. In fact, we make an assumption that when we're at Stage 1, Stage 2, actually, that impact on the economy is not very significant. Firms work around it and so on. But at the moment, there's a nonlinearity, the moment you go up to 3% and 4% and 6%, its impact on growth is very binding. It's a very binding constraint. So our estimate of minus 2%. We think that as we deal better with load-shedding what the constraint of the economy for 2024 and 2025 is much less, but it does weigh heavily on us. Now on the one side, the supply side of the economy is a problem. The potential has declined. On the other side, there are some positive things. Household expenditure is a bit more robust than it was. Household expenditure drives our economic growth. It's a major part of what drives our economic growth. The real challenge really comes in public fixed capital formation or what we generally call investment. And part of the problem is that government always accounts for a large part of investment, but that has declined for many good reasons. So one of the reasons why South Africa is growing at the rate it grows is our investment as a percentage of GDP is around 14%. If you compare us to our East Asian tigers who grow at 6% 7%, their investment as a percentage of GDP is around 25%, 30%. It's not only the level of investment, it's the efficiency of the investment. But this is the thing. We cannot conceive of having a higher growth rate above what we have currently, if investment as a percentage of GDP is going to remain at the current levels. So what will it take to get investment up is the real key challenge. I'm not going to say much here. I think that the one important point is that notwithstanding the fact that the economy hasn't been doing too well, we've been pleasantly surprised at how credit extension is -- has been increasing now. This is a highly unequaled society. It happens in some households, where some households are bleeding. The thing that's most depressing, I think, about this economy is that we actually have not reached pre-COVID unemployment levels. As you can see in the blue graph, the unemployment level was around -- sorry, the number employed in the formal economy was just above 16 million we're just below that. And that has been the devastating impact of the COVID experience, but we've had so many other unfortunate events. What's the movie something an unfortunate event that really has had a very negative impact on our growth. There is the inflation problem. Now we have a 3% to 6% target and inflation has been rather high. But -- this is where South Africa is not unique. We're not -- there is nothing idiosyncratic about our inflation problem. It is a problem that exists in many parts of the world, and they exist for very different reasons. But the biggest culprit has been food prices, has been oil prices, thanks to the Ukraine, Russian war. There's not much we can do about it, but it has had an impact on the economy. We can talk more about it as we go along. We divide inflation into services, and you can see that services inflation is much lower while underlying inflation is much higher. Now one thing that is quite striking, look at the exchange rate, and I look at prices in the economy. Now let me tell you something. I'm not a user of very fancy personal care, I walk into [ disk cam ] and take whatever I can get, whether it's after shave or whatever. But I'm amazed at the relationship between the exchange rate and personal care. Most of our personal care is important. So exchange rate depreciates you see personal care inflation go up. And that's part of the problem that many are -- that is why core goods inflation is high because of the import content of coal goods. Now on one side, I talked about the impact of load shedding on the productive potential of the economy. On the other side, we have done some estimates of the impact of load-shedding on inflation. So we estimate that it has an additional impact of 0.5%. And in total, and that has to do with what you all are seeing. Businesses have to have generators, perishables in particular. So where the impact is more stock is in the perishable area, little supermarkets have to invest in generators. So we hit from both sides. We hit from the inflation side and from the productive potential side of the economy. I don't want to get into this, but this gives you a sense of South Africa reduced its repo rate to 350 basis points at the beginning of COVID. And we had to increase it unfortunately, it's a very technical concept that I talk about here is what is called the real repo rate, which gives you an indication of how tight or loose monetary policy is. By this criteria, we don't think we're very tight. Now I talked about the monetary side of the economy. So the big thing about the monetary side of the economy is the success story of this country was that when you had the great financial crisis, there was this search for yield. Investors were getting very low return in the U.S. And the success story is that the nonresident component of investment in South African bonds went up from something like about 10% to about 40% at its peak. So what that does? What it does is it basically says that nonresidents are owning South African bonds, that compresses premiums of your yield curve, and it means that the cost of borrowing comes down. So this is what we saw. We saw that under the global financial crisis. We had this massive increase in bonds. And the blue line, shows you how that was happening from 2012 to 2014. But now from a peak of 40% non-resident ownership of South African bonds have come down to about 20%, 25% of total ownership. Now it's not only idiosyncratic as you know, the treasury bill in the U.S. looks very good. The returns are very high, so that -- so looking for more safe investments, it's not only South Africa that has experienced the outflow, but it is many other countries, but our idiosyncratic risks has intensified that in a way that is a bit unusual. I put in 2 other things, one of our roles in the SARB is not only to maintain price stability, but also financial stability. So we look at what's going on in financial markets, the SARB is what I call the market make of last resort. We play a very important role in ensuring that our financial markets are stable. And I think that's a real positive for an investor in this economy. So this gives you a sense of the outflows of capital. And you must remember, when you have a current account deficit, and when your savings, when you're saving your income is below your expenditure, we import capital. How do we import capital through people investing in our equities, in our bonds and so on. And the moment there's a net outflow of capital. These are -- this puts a particular strain on the economy, but we have an incredibly sophisticated economy. We have, by emerging market standards, one of the most deepest liquidity markets. So -- that also partly explains the behavior of the rand of which I will come to. I'm almost done until I can see you that, look, I can look is saying you should be finishing up. So -- let's make no pretense to the fact that the rent to a particular knock and the higher we're going up the worst the performance. So you can look at the ZAR compared to the average EM currency and a few others. And that knock happened particularly in the last month or so. Now I've just put forward a list of what's explaining the risk. This slide has to be treated very carefully because when I say that investors are concerned about load-shedding, they're concerned about the fiscals, slippage in sovereign rating. They're concerned because not because we're the worst, is from where we were, that South Africa has an incredible infrastructure by any measure. But what has happened is that, that infrastructure has deteriorated over the last couple of years. And it's -- so it's the starting point and the decline from the starting point that is a concern. And I think that -- and I think that -- I was asked -- I think it was last night on SABC, what would improve the rand? Can the SARB play a role? And I said the SARB's role is probably insignificant compared to government giving more clarity on its position on Russia or government give more clarity on how decisively wants to deal with load-shedding and so on. Those are the factors that are driving the Rand But the Rand also has a very special place. It is the proxy Rand. They used to say Mexico, the Mexican Peso and the South African Rand with the proxy. So whatever happens to them is a proxy of what -- I think the Rand has become the authoritive proxy. Someone asked me a question now the other day. Why is it that Turkey has a 50% inflation rate. But it's currency is not weakening as much as the South African currency. I'd say the big difference is that the Turkey Central Bank has eroded its reserves to a very dangerous levels by selling dollars and by selling dollars for more lira, it created demand for the lira. So it's artificially kept its currency up. We are totally free floating exchange rates. So our exchange rate is more volatile. So when you compare our currency with others, there are a lot of little technical factors that one has to take into consideration. But I've raised a lot of things. I know there's a discussion. I can follow up on some of the issues I've raised in the discussion. So let me end there. Thank you very much.

And this first question comes from that slide. Very interesting indeed. Thank you so much, Dr. Rashad Cassim. There's a lot to talk about on your insights today, especially why is it that the currency is doing things that we didn't learned in University when interest rates go up. So I'm dying to find out how that works. Next up is the second part of our kind of deep dive into the South African macroeconomic environment. and that is our electricity challenge or a crisis as some might say. James Mackay is the CEO of the Energy Council of South Africa with professional qualifications in engineering and finance. He has got more than 20 years of diverse experience in public and private sectors and has worked across the continent, and he will be addressing us on our energy security challenge. Over to you, sir.

Great. Thank you very much, Andile. [indiscernible] coming through, all right? Greetings Minister, Board members, everyone and also online and Ralph, it's fantastic to be here. Thanks very much. Rashad, that was a great presentation. Thank you. I think you've covered all the important areas of energy, but I've been taking some notes and I am going to work on it. But I'm disappointed you haven't got rooftop solar yet and got to the trend and keeping the lights on. I'm going to take also just a quick moment to introduce the Energy Council. We're not as famous and well known as the reserve bank Hopefully, after this, we will be though. So the mandate of the Energy Council is the energy transition of South Africa. So it is a national mandate. We represent business, both public and private sector. So the IDC central energy fund, Petro SA, Eskom those are founding members and Board members. And really, the objective is to unify the voice of business, both sort of in action and investment because we have got a very long hard road towards net zero, and we've committed to this energy transition. So we are relatively new, expanding quickly. I came on board last year in November. So we've been building this organization very quickly. Membership is expanding. So very much started off with the mining and industrials. The banks are all on board. The renewables developers are starting to come on board. A lot of the organization, so the energy-intensive user group, the Storage Association, PV Association, some of those IBP associations. Telcos are coming on board. So MTN is not there yet. So Ralph, there's nothing for [indiscernible] in life,so we'll be chasing. Okay. So I'm going to try and squeeze this kind of behemoth topic into sort of probably 20 minutes, and I'm going to talk to it. It won't be dearth by PowerPoint. I did ask Ralph about the techy portions of this thing. This is a very informed and intelligent audience. So I hope that I won't have too many acronyms and gigs and whats, but bear with me, we can clear it up in the Q&A. So I'm going to cover a little bit of setting the scene, current status of the system load-shedding the old UCLF, EAF, other generation options, including renewable energy and then some views around delivery confidence and importantly, I'm also going to just talk about NeCom and the presidential energy action plan. I think these are quite important to kind of understand where we're at. So our energy crisis has been a long time in the making. And I think in hindsight, we can see that although we had policies to avoid the crisis really implementation failed us. Load-shedding is causing immense economic and social pain, which I think Rashad is very well sort of painted out. And I'm going to lay out an engineering or technical road to end load shedding by the end of 2024. Yes, people will say nonsense, but anyway, I'm going to put that out for you. The critical question though is, again, will be implementation, okay? I also do believe if we fail to action the high road, really what we'll see is this implementation and load shedding will stretch probably until maybe into 2028. I choose this date really because there is a study that has been done, it's not publicly released, I've engaged a little bit on it and I personally feel it's a little bit overly negative. It really doesn't understand some of the things, but I have an obvious sort of optimism buyers sitting in the Energy Council. But I will leave you sort of to think about it and decide. So really, what I'll frame is we've got these 2 ends -- book ends around ending load-shedding 2024, 2028. It's also very clear that energy crisis has spurred some positive structural changes these really being sort of real collaboration now between business and government. I think secondly, an acceleration of market liberalization, very important, and then increasing transparency. So Andre De ruyter's book, I think, is an easy example of how a corruption and sort of poor performance has been paraded for all to see and has spurred action. So over the last 6 months as the Energy Council CEO, I've certainly had to embrace the phrase 1 can't wish for a better past because the reality is we've squander the last 6 to 7 years in the energy sector. And so we really do need to take action very quickly, but I believe we can recover more resilient and more relevant. We also can't ignore the state capture period, and this is important because I think it's really broken the -- a lot of the institutional delivery capability and the decision-making in specifically in SOEs. And I make a differentiation from the institutional side because I think we've got to still recognize and understand that there are some very committed, very technically competent and capable people working in Eskom as well as in government and I sort of work and engage with them regularly. And so we need to then create some separation and we need to think of a way to create a better storyline and to actually protect those who are doing. So this sort of a little bit of an opening backdrop I put against sort of really big external disruptors COVID-19 and climate change. And climate change really is the biggest global sort of disruptor in history. And the energy transition is fundamental and an explicit part of climate change. So South Africa, we're the most coal-dependent economy and the most emissions dependent sort of economy hence, Eskom makes up 43% of our emissions profile. So despite the sort of low economic base and high emissions, we have adopted a global leading position on climate change. And so we are the only African country who has legislated a 2050 Net Zero and implemented a carbon tax. So lofty ambitions, but this is a significant challenge even for leading global economies. In the South African context, this maybe is just a commitment that could be viewed as an insurmountable challenge. And I think also talks a little bit to the constant push-pull politics and policy and coherence that has been frustrating and that we have experienced. So despite the cracks in this policy environment and lack of energy transition planning, the upside is that actually the broader reform momentum has really steadily progressed, and I'll talk a little bit about this later. But I do believe that market liberalization really is on the cusp of a big shift, and this is going to really move a lot of the energy development and investment that you talk about, Rashad. It is very exciting. It's going to move into the hands of the private sector very quickly, and it's going to be a positive, I think, for the economy and also for the sector. Now to give just a reference or some color to the cracks that I referred to. We think of -- the REIT program, I think, was renowned as a world leader starting in 2011, 4 bid rounds successfully done stalled in 2016 only ready to be resurrected in 2021, Bid round 5, and it's still stalling and struggling despite the commitments for Bid rounds 7 and 8. In the meantime, sort of -- I think the other side is that our national utility Eskom actually got Global Power Company of the Year in 2001. But really then got just trapped into this classic utility death spiral, which is a well-recognized kind of global phenomenon. And then the obvious challenges, 13 CEOs in 13 years, technically insolvent for probably nearly the last 5 years. So really, really difficult. But Eskom is in reality, actually being the biggest driver of reform planning and restructuring. From design of independent grid company, adoption of new technology and standards, the implementation of National Wheeling, development of the first internal energy market, which are all very exciting. Part of this reform narrative actually also included an aggressive decommissioning of 12,000 megawatts of our coal-fired power fleet, which is roughly 1/3 by 2030, which actually conveniently aligned with sort of old age. So we won't look at around the room. Sometimes they talk about who's out at old age. But old age is not necessarily a good lead indicator of that. However, nonetheless, when we put this in context, I believe that there's a bit of a disconnect in the environment and where Eskom's core business actually was neglected unfortunately, which combined with key sort of loss of skills and the broader sort of challenges really has just become -- became a breeding ground for corrupt activities, which is where we find ourselves. So I think a bit of a tough opening position. But as I say, we can't wish for a better past and we really do need to find a constructive way to move through and move forward. So we'll talk a little bit now about the actual current system outlook. And I'm just going to talk about gigs. Gigs is gigawatts. Hopefully, that all makes sense, but it keeps it simple. So winter is likely going to range from stage 4 to 6 load shedding, and I think we will see occasional stage 8. The rumors of stage 16, I think are really just that. The stage 16 is an extended technical definition under an NRS code, but it's not related to an Eskom operating outlook or systems planning Okay. Also, while we are talking about scenarios, let me also just reference that deeper load shedding doesn't equate to the risk -- deeper risk of a blackout. There's been some really sensational media coverage about an impending blackout. I personally are very confident that the risk of blackout is extremely low. Eskom is a highly competent system operator, regularly tests, blackout protection and black start procedures. And I think it's also very important technically to understand that a blackout is actually premised on rapid loss of frequency in the system. It's not actually load shedding. And the rapid loss of frequency in the system is actually protected largely through automated protection functions, but is designed to actually island the system. And Eskom actually do test this on a regular basis, and they do have plans for this. So I think these things are quite different, and the system operator is very confident and do understand what they're doing there. They've also quite recently released a very informative presentation talking about the technicalities of blackouts, et cetera. We can talk about it during the Q&A, but I think it's just relevant in the general conversation. So coming back to load shedding itself. If we start with demand, it's important to consider that the summer peak in South Africa, 27, 29 gigs. This goes up to about 33, 34 gigs. So winter has quite a high increase in peak, especially in the evenings. And so there's an obvious view that maybe in the winter period now, there's a deterioration in the system reliability, which is not actually sort of necessarily true. So in compensating for now, as we go into winter, certainly, Eskom have reduced their planned maintenance function by about 4 gigs. This is a big offset. So they were focused only on statutory schedules in terms of maintenance. This does create a little bit of risk in the system because it leaves more volatility in unplanned or sort of reactive maintenance that may be required. So again, we do have to think about that. And hence, I say I think this -- we will have some journeys into the stage 8 load shedding which is going to be very tough, but really, we should be able to stay between 4 and 6. On the Eskom demand side, again, with those winter peaks, especially in the evening, there is a demand program, which Eskom have. They have also busy rolling out a communication program. And the other part of the demand program is a buyback scheme, and this is targeting about 1.4 gigs of demand reduction, especially in the peak, and it's already showing kind of good progress in yielding results. So I think that's positive. If we switch a little bit then into the unplanned losses, and this is where everyone sort of talks about the Energy Availability Factor or EAF. So the installed capacity of 47.5 gigs, Eskom is running at unplanned losses of about 16 to 17 gigs with 19 gigs essentially being the equivalent of about stage 6. So we're sitting in that sort of 4 to 6 load shedding stage range. 2022 was 56% EAF for the year. This has declined year-to-date to 51% in 2023. The official plan in Eskom, and so this is -- sometimes we hear different plans out of different ministries, but the official plan in Eskom is recover 60% by March 24 and 65% by March 25. And actually, this is enough to end load shedding. So again, it comes back to confidence around implementation. Incidentally, 2015, the EAF of Eskom was 74%. So again, I referenced this last period that we've got to recover. I think to also just understand a little bit better and certainly what we're working with now is that we have to break down this EAF global number, what does it mean? So the first thing, if we look at the return to service units that are out. So there's about 5 gigs of capacity there. We know it's the Casella 3 units on the duct failure, those are targeted for return by December this year. Casella Unit 6 will be back in commercial operations, Feb 24. Medupi Unit 4 is the replacement generator that's targeted for August 24. [ Kuber ] for both units, midlife refurbishment by November 24. So collectively, the return to service plants should be putting back operational capacity, not total capacity, for about 2.4 gigs sort of this year and within the next 12 months and then another gig in the sort of -- by the end of 2024 in those programs. So that's about 3 to 4 stages of load shedding that will be addressed by the return to service units. If we quickly just look at the older coal fleet and really, I'm just looking at the 10 old stations. So the best-performing stations Lethabo, Matimba combined capacity of about 8 gigs, strong performance, good availability. By contrary cost, the 4 worst performing stations to Tutuka, Kendal, Mejuba and Duvha combined capacity of about 15.5 gigawatts. Kendal, Majuba being actually the youngest stations under 30 years, but operating at really poor performance levels to the low 20% range. So these 4 stations making up nearly 60% of total unplanned losses for the Eskom complete at the moment. So one can see underneath this global number that gets put into the media that there's actually a very different sort of technical situation. So to recover the operating performance, Eskom has launched a targeted power station improvement program. It's being led by the new Head of Generation, Bheki Nxumalo. Bheki has a deep experience. He's been a power station for many years. He talks the numbers, and he says, "No, that can't be those tube failure didn't happen. Go look at the numbers again." So I think really great to have a steady hand. I think it's already making a big difference. And we see really a lot of the focus is around stabilizing leadership and management at the power station level, and this is what -- where we have to focus, I think, to get this right. What really kind of does give me sort of more confidence, though, is the business Eskom teamwork, which is starting to take shape. I spoke about this partnership under NECOM, I think this is really starting to move. We're business is supporting Eskom to action a number of specific technical challenges. So working with Eskom, we've actually identified 4 power stations with key issues, things like mills, ash handling, deem and water, strategic spares that actually are targeted to continuous losses of nearly 3.5 gigs of power. So I go back to the sort of earliest reference to institutional capacity to implement these remedial actions which is just, I think, lacking. We've lost this in this middle period. And right now, we've got to find a way to get this up and running, but we don't have time. So we need to support NECOM, I think, is working into a really good action-orientated vehicle. And we are hopefully going to have about 3 teams, business teams on the ground within weeks, working with Eskom, focusing on specific technical sort of issues with a target in mind. So we know what the gigawatts are that we can put back on the grid. So I think that's a really positive sort of action orientation. And when one looks at those plans, it looks at about in the next 6 to 12 months if we can address those, there's another 2 to 3 stages of load shedding we can put back. Just quickly switching to external power being purchased. And I think this is where we need to think about how market liberalization is going to be an opportunity also for the private sector. So there's a rapidly expanding source of direct purchases from private generators. So actually, when I said Eskom has just quietly got on with a lot of the reform. They've already established an internal market where generators are bidding against each other. This is being expanded now to include external supply. So the market mechanisms are the standard offer of feed-in tariff. They just launched an emergency generation program and also regional purchases from the SA Power Pool. This is really -- it's a significant reform step because it creates this platform for the first South African wholesale energy market. And so when thinking in the concept of energy as a service, which is going to be the future, it's actually something a lot of companies even like MTN, chatting to Charles, I think you're building that resilience in the network already. But now you'll be able to sort of target a developing marketplace. So I think credit needs to be given actually to some good and hard working clever people in Eskom who've been driving this reform work. They've already contracted some of the first private generators who are bidding in on static and dynamic pricing. So they have got a real day ahead market, weekly, monthly. So it's quite remarkable that they managed to pull this off with probably limited support also and limited support from NERSA. But it is an exciting development, and I think can unlock probably about 1.5 gigs of power in the next 18 months, which I believe once it's brought out in the new national transmission company under the unbundling, that is going to be the market and it's going to expand very, very rapidly. A quick switch just back to the OCGTs or diesel peakers as we know them. In the short term, this really is the only quick lever that Eskom has to pull. We've got 3.1 gigs of these diesel peakers. A big challenge is being able to get enough diesel through them. They're not designed to be able to cater for the higher levels of utilization. I mean this has been a challenge for Eskom. So securing this reliable diesel supply. Again, we have a business Eskom team on the ground starting on Monday, which is going to look at sort of trying to optimize and improve the reliability. So that especially during the winter period, Eskom can kind of reliably run at higher loads. And this will put an additional approximately 500 megawatts back into the system operators pocket, which I think will help with load shedding [ gig in ]. Lastly, I'm just going to look quickly or touch on renewables because that's a little bit of sort of outside of the Eskom purview. So we know that through the proposed public procurement bid windows, which there's been some bullish statements on that. But I think also really what we've seen is the big acceleration is in the private sector direct investment. So in the form of corporate PPAs and behind the meter solutions also some of the -- and the rooftop solutions. So we're seeing a really rapidly expanding rate of wind and solar development. And despite the grid constraints and other sort of issues that are -- we're facing, I believe we're fast approaching about a 4 to 5 gig build sort of rate per annum. This is -- will make a huge reduction in terms of load shedding and creates an energy buffer for that sort of extended Eskom maintenance that they need. So I think are very positive. To give you sense of the numbers of this, the renewable energy pipeline at the moment, Eskom have issued about 58,000 megawatts of cost estimate letters for grid connections. And of those, I've got 13,000 megawatts or 13 gigs already in budget quote. So those are projects which are actually kind of going into being built. As impressive as this sounds, as Energy Council, we've made a call for a 2030 energy ambition of actually 56,000 megawatts of wind and solar, 8,000 megawatts of storage, 5,000 megawatts of gas to power. If we could achieve that, that would give us the energy stability and headroom to decommission the 12,000 megawatts of coal, which have been targeted in our emissions profile. The reality is, I think we're well behind that ambition of energy. And so I think that really what -- the reality of that is we will have to see a delayed coal decommissioning program as a trade-off to keep the lights on. That is something probably which we'll have to deal with in the planning. But in terms of the reality of the system, I think that's where we're at. Just some other, I think, key reform indicators, which are worth noting. We're highlighting is that the ERA amendment, which has gone through cabinet now sitting with parliament, really essentially legislate the liberalization of the energy market and nondiscriminatory access to the grid. So this is a real positive. But there are other things, the tax incentive for residential solar, an aggressive 125% write-off for businesses, support fund for agricultural energy, embedded generation is all gazetted as SIPs, and then the national transmission company is now registered with SIPs. As a company, NERSA will, I think, finally issued the license in the next 2 months. And I believe that we will see an unbundling of Eskom as a transmission company by before the end of this year. This is going to be a really big signal and I think an important shift in move in the form of energy sector, so I think very positive and will help to deal with good constraints. So in summary, based on the opportunities outlined, I think we can quickly add up opportunities then we get to about 9.5 gigs that we could realize over the next 18 to 24 months. This plus the ongoing renewable program clearly can end load shedding. Going back to my opening remarks and implementation, the obvious question is what needs to be done to keep tracking delivery on the high road, which is where NECOM, I think, is presenting a positive structural shift in collaboration and action. I'll quickly just talk -- give a sense of NECOM. I think it's very important. But as I said earlier, the energy crisis really has created this burning platform and triggered an engagement between business, the President and a number of ministries. And all were in agreement that we really have to work very urgently in partnership. So under the Presidential Energy Action Plan, the National Energy Crisis Committee was formed, that's NECOM, and it's being strongly supported by business. Businesses have established the resource mobilization fund, which is ZAR 100 million worth of professional services that are going to be mobilized into supporting NECOM and to get that moving. There are 10 work streams structured in NECOM to -- and the structure now is working collectively or at the table business, government and Eskom. And so there are a number of initiatives there as well as 2 of the -- so a few of the key dedicated work streams. One is the power station performance, which we're calling kind of the EAF recovery. And this is where I referenced earlier, we've got business teams. We're hoping to probably have joint business Eskom teams on the ground within the next weeks and I think very positive working relationships and really getting into the sort of the meat of the challenges. We've also got other workstreams and focus areas. which is workstream 9 is market and wheeling, big focus there trying to unlock national wheeling municipal utilities. This is a very important part of the recovery plan. We've got to bring the municipal utilities into the reform program, which I think they've been left out up until now. And then workstream 10 is on grid. And I think everyone understands grid, grid, grid a very important part of the reform program. So in conclusion, Andile, pleased to see me go. I think we're going to experience high stages of load shedding in the immediate future, but we do have the structural capacity to largely end load shedding by end of 2024. So I think that's a very positive opportunity. However, it's going to require a really big team effort. It will require government Eskom and business to work kind of well and really focused. But we're already seeing positive traction maybe thanks to the crisis, it's forced this. Without the collaborative approach and the focus and mobilization of capacity, business as usual is likely to be somewhere closer towards 2028, which I just can't be an option for us. In more general terms, I think it's also unlikely that we're going to see big shifts in policy direction and pace. But the reality is the electricity sector, I think, is sufficiently deregulated actually to allow a rapid market response and drive exponential private sector sort of investment, which I've referenced. So I think that there's some mitigation there. And at the end of the day, the stone age didn't end because it ran out of stones. It ended really because society chose a better way to live. And so I think we need to think along those lines. Thank you very much.

Thank you very much. Mr. Mackay. All I heard there was that load shedding ends at the end of 2024. I'm now going to ask Dr. Rashad and also Ralph, to please join me for our panel discussion. James, grab any of those. Just so that we can distill some of the stuff you all 3 have already shared with us. Let me just remind you all especially those at home that are joining us or in the office, that are joining us via webcast, which just as a part of your screen, there's an opportunity for you to load your questions. I'll be receiving them here on my device, and I'll be able to send them to the gentleman here on my left. And everybody in the room, we've got roving mics that are on standby for you. So just simply raise your hand when I give you a chance, and you can pause your question as well. We've got a couple of minutes to get through as many questions as we possibly can.

And I'm going to kick off with you, Ralph. You've heard Dr. Rashad, you've heard Mr. Mackay promising us end of load shedding end of next year, which I'm absolutely thrilled about. But both of them have given the landscape of what's happening in South Africa, right, from a macro and also this particular challenge. What are your reflections on that?

Yes, maybe a couple of points with an MTN kind of lens on it. I think the first thing is that we had MTN and have taken a position that we do think we need to take matters into our own hands really around load shedding. And I think we came to the market with our results and said we're taking a particular view that we're going to be a sustained stage 4 plus. And therefore, we need to ensure that the network in South Africa is resilient for that outlook. And as the data sets you've seen have shown is that the load shedding really creeped up on us very suddenly. And 3 or 4 years ago, you'd have said, well, what's the likelihood of stage 4, you'd have said this force majeure. And so -- so I'm heartened by what both of them have said because actually our own planning and framing is within that bookends that says somewhere between 2024, I would love to believe that it's going to get there 2024, but we're being a bit more conservative and putting the investment. And also importantly, and I think it's a point that James makes is really this point that actually, the investment you make in energy right now actually, you should think about it with the opportunity creates about energy markets and the liberalization. So Charles and team are already thinking about and investors can ask him some questions tomorrow. So we've been real about the situation, and we've changed our guidance to reflect the reality that we see. I think the second point I would make is that we're not standing back as a business, and I think there's a lot of criticism that business is not leaning into the situation. I think we're trying to do a lot of work behind the scenes and engage in the government. James and myself and a few other CEOs are members of a CEO group that's been meeting since January with a focus on 3 major themes. One is the energy security and how we engage government to deal with this 6 gigs issue. I mean the bottom line is if today, you have 6 gigs, we wouldn't have load shedding. So how do we work with government towards ensuring that. So that's the energy security is theme #1. Theme #2 is what Rashad spoke about, which is logistics. So we talk a lot about load shedding, but just go back and reference the chart on capacity for rail. And you just see everybody is now using the roads and you see the infrastructure. So there is a real bottleneck on the logistics side. So work stream, too, is the logistics. And the third one is climate corruption. In our engagements, we've said, look, it's not enough to talk to the business about the problems. We have to come up with solutions. So the solution issue is really about jobs. Can we create 300,000 jobs? What will it take? What's our role in business? So I think the other point -- the point to make is that we're not sitting behind. I know there's a lot of criticism, but actually, there's significant engagement. And actually, there's an engagement at the presidency level with CEOs.

That's really encouraging. Dr. Cassim, let me come to you, I said it jokingly about what the currency has done since your very unpopular decision of raising interest rates last week around weakened, we were all surprised. Then yesterday, it's slumped even further. So I learned I was in a wrong class or something weird is happening. What's going on?

So was I. I think that, firstly, the worst predictors of the rand are economists. I mean, part of the problem of making sense of what drives the rand is there's just so many moving parts, a multiplicity of factors. So at the time when the Monetary Policy Committee announced the 50 basis points increase. The rand weakened a bit because U.S. economic indicators look better. And what that meant by economic indicators looking better, it means that the U.S. is going to continue to tighten, to keep inflation in check. So that had a negative effect on the rand. I think that when we came out, the market expected a 50 basis points tightening. I don't know what would have happened had we had the count effect or at 35 or 75. But I think that there was something in the statement that worried the markets, maybe we were a bit more explicit than we should have been about our concerns about the weakness of the rand. And I think the market took that in a negative way that actually, in our model, we assume that the rand will actually improve. But in the current moment, we assume that there's some upside risk to the weakness of the rand. So I think we were the bearer of bad news the market felt that our assessment of the economy was more negative than they felt. So that could have been some of the factors that may have led to a slightly -- I think that the recent example you're looking at is people are just nervous. The people drawing -- their investors draw in their mind, what are the implications of secondary sanction? Every time government does something which indicates that we have a very ambivalent view about what we think of Russia, the rand takes a no. So there are all these factors that just make it very difficult.

Before you wrapped up this morning, your slide about South Africa's idiosyncratic risk. The first 2 bullet points are quite interesting, and I'd like you to elaborate because I know you were running out of time at the time, elevated levels of load shedding known covered by James and a risk of grid collapse not fully factored in, which I'll ask James about. But the second point was interesting for me, which was you mentioned the high risk of SA listed and the risk of secondary sanctions. What's your take on what that could really lead to if it actually materializes?

So I mean, we have a living example and that's Russia, right? The long example is that it cannot trade. It is off the swift system. Russia has actually developed its own payments infrastructure, which means it can trade internally, but it's extremely hard to import goods. There's the other thing. There's the highly politicization of finance where some of its reserves are kept frozen. So that's the extreme. I think that the concern with secondary sanctions is it becomes harder for the financial sector to do business. There's an extra layer of documentation required. There's concerns that it will be -- that maybe, there will be a boycott on some of our trading partners. Most of our investors, if you look at our breakdown of foreigners owning South African equities, foreigners owning South African bonds, they come from countries that are closely aligned to the West. They could go on some -- on a bit of a strike to pull out some of the investments. So I think that's the kind of thing that we had a press conference the night on Monday night, where we launched something called the Financial Stability Report. And the aim of that was to flag secondary risks as to what it means for the financial system. And that's what I can talk about what it means for the financial system.

Absolutely. Thanks, Dr. Cassim. Mr. Mackay, let me come to you. Direct question, your view on the likelihood of a total grid collapse.

Yes. So in very simple terms, one can't say none because it's possible. There have been many good collapses and blackouts internationally, even U.S. and Texas had a good blackout. So one has to understand that there are sort of circumstances that can lead to a blackout, so that's possible. The question is, are we at a stage where our system is collapsing and we can't protect against that? No. Do we have an incompetent system operator? No? If it does happen, do we have no plan to recover it? No. So I think part of the media hype around this blackout has been that we have an incredibly negative sentiment and narrative in the energy space. There are many, many groups who are just looking to kind of almost jump on anything and bash everyone from Eskom, from fossil fuels from government. And understandably, there's a lot of frustration. There's a lot of pain in the system. So I think we have to put that in context. And then it was just a matter of time before kind of blackout was going to be the next thing to grab on to and sort of rattle around. But from a technical perspective, we are no further at risk of blackouts than what we were prior to 2015 when things were working well. I think more what we have to think about is at deeper stages of load shedding if we had to go be at a stage 8 or something like that. The reality is that the average person in the street doesn't see a positive or constructive narrative of how this is going to end. They don't understand the bookends. They haven't seen the bookends and government is not telling them about the bookends. So people are going to sit there and go, "Wow, I'm out of power for 12 hours a day, 14 hours a day, so I don't know. I give up." And I think that is what we've got to address. It's not the blackout. It's going to have to be messaging to society that there is hope we can get through this. There's a lot of constructive things that are happening, but the average person just sees kind of darkness. So maybe there's an interesting parallel there between darkness and blackout.

Maybe dark but it won't the black, I'll be back. Ladies and gents, let me take some questions from the floor. I'm pretty sure many of you guys have got some views. I've got a gentleman. So please keep your hand up, sir. Here you go. Please just your name and the organization you represent.

Sure. It's [ A.J. Saman from Pericom Capital ]. I have a question for Dr. Cassim. Thanks for your time today, and I think I speak on behalf of most of Africans and thanking subs so for your dedicated and disciplined work. I understand that the subs mandates inflation and the only to -- well, the base tool you have at your disposal is interest rates. And I hear what you're saying about the fact that South Africa is not unique in the context of the global inflationary environment. But I would like to argue that perhaps indeed we are, and maybe put it to you that inflation expectations is all anchored around load shedding, the cost that's pushed through the system because of load shedding. So in that context, do you think that the current hiking cycle that we're in or the stage of the hiking cycle that we're in is actually an effective and efficient tool for our specific inflationary environment in South Africa?

Yes. Look, at the end of the day, using interest rates to manage inflation is a crude tool. It's the best tool we have. Just to say that what drives inflation expectations. So for those of you who don't follow this, that a mark of a successful central bank is when expectations about inflation are anchored. So what does that mean? It means that if you have a shock from the oil price, so you have a shock from food prices. And it's temporary. In other words, inflation goes up from, say 4.5% to 12%. And -- but if you believe that this central bank is credible, it will not allow inflation to stay at 12%. It means inflation expectations are anchored. It means we don't have to use monetary policy to tighten because that will be temporary. It will come back to 4.5%. Now directly speaking to your question, I think that the big issue that the public has with us is how on earth could you tighten by 50 basis points when real estimates of real disposable income of households for this economy for this year are kind of 0.5%. Now the argument is as simple and we don't have the luck of getting to the detail, but the argument is very simple. Expectations are driven not only by load shedding. That's a more recent phenomenon. Expectations are driven by the fact that you're a contractor, you're a construction company. Oil prices are going up, food prices are going up, the exchange rate is depreciating, so your import costs have gone up. And now you're pricing in more high inflation into your 5-year contracts. But maybe you're pricing it higher than you should because you don't believe expectations are anchored. So the best monetary policy works best when the economy is overheating, demand offers us supply, you call the economy down. Here, it's a very, very crude tool. But I think the logic of our system is that if you don't make the tightening now, if you're slowing down the economy, at the rate that we may be by tightening. By not trying to keep inflation in check, we may have to slow down much more dramatically in a few years' time. So let's say that for the last 3 MPCs, we didn't do anything. It may well be that a year down the line, we may have to tighten by 400 basis points. So I think that's the logic of it but it's a big debate we have with the analysts.

I'm sure it is. I'm sure it is. Let me go to our webcast right now. Maybe turn to you, James, Mike Farry from the Sasol Pension Fund. Has a question about the risk you rate to highlight it is about execution. I mean Ralph has already touched on what CEOs and business is doing to create the right kind of lobby platforms to get everybody doing. But at some point, the buck stops with somebody. So Mike is asking what are the key factors underlying either good or poor execution and who is ultimately responsible?

So I think at the end of the day, it's Eskom. Eskom is the only entity that can really make the decisions sign the check and say kind of do whatever. And we -- so we mustn't forget that the people who are on the ground making the decisions running these things are Eskom employees. So I think that's where we have to focus. My personal view is that there are -- I think that we've seen a very different Eskom starting to sort of come out. There's a different narrative, a more positive. We're going to recover. We're going to do stuff. I think some of the reform things that I spoke about are supporting and helping that. We do need to change the broader context of the Eskom bashing and start recognizing some of these pockets of excellence and supporting Eskom. When it comes to then the do versus the not do, we've got a gain just reflect in this last period 6, 7 years. There's just not enough technical capacity left in Eskom. And not everyone is a pocket of excellence because that's also a little bit of a legacy of the system. So in the short term, we just have to create capacity around those pockets of excellence. We know what needs to be done. We've just got to get done and find a way to do that. I think that will buy us time to kind of get through load shedding, and we need to then start having a strategy of what is our future utility going to look like. Internationally, they're great public and private utilities. They compete head-to-head. We have very different structures in energy markets. We don't have a clear vision of that. And so we've got to find that and find a sustainable place where Eskom is going to move towards. And I don't think that's been defined for Eskom. It was reformed to this and just leave this somewhere to just decay. And that was never sustainable. And I think we've got to rethink that strategy around it.

Let me take one more. A couple more from the floor? Yes, sir. I'll come back to you, sir.

My name is Sunil Varghese from the Public Investment Corporation. One question for the deputy governor there. You were talking about secondary sanctions. So one thing that comes to mind is earlier this year, the financial action, tax task falls relisted us. So can you give us some insight as to the steps that we are taking to reverse that? And when do you think we could be removed from the gray list?

Before Dr. Cassim comes in, let me take that gentleman and then we'll just answer both questions and wrap up this section. Yes, sir, right in the middle.

It's Preshendran Odayar from Nedbank CIB. I've also got a question for Dr. Cassim. You mentioned that South Africa's investment as a percentage of GDP is relatively low at 14%. How do we get that up in a rising interest rate cycle now that your cost of debt is increasing and your cost of equity would also increase on the back of what the Energy Council is also talking about higher cost to actually run businesses during load shedding. Just your thoughts on that.

So yes, on FATF, I should say that, my colleague, Deputy Governor of the regulator's, Fundi Tshazibana and the acting Director General of Treasury worked extremely hard at FATF -- by the time we were gray listed here, I can't remember the numbers, but there were maybe something like 25 issues that FATF had raised by the time they got to the assessment, they were limited to maybe something like half the amount, which shows that the country really, really worked hard at trying to deal very decisively. There was an incredible team that did this. I think that the FATF did identify a few issues, weaknesses in our prosecution services, and the broader issues around money laundering and so on. So I can tell you that the financial sector remains a very credible and robust sector in this economy. It is one of the kind of leading areas that -- where I think that one shouldn't worry. How long it will take? I think these things take 1 or 2 years. I think there are few countries that have worked with it, but I'm not exactly sure how long that could take. So the issue of interest rates, I mean, there is a school of thought that when you tighten you make the cost of borrowing much more expensive. How can you accept investment to grow? But in fact, interest rates play a very small role. It on the margin helps you make your decision, are you going to invest in the market? Not excessively tight could be very dangerous. I think that the real problem is confidence. And confidence is not about monetary policy. It's about firms having the confidence to invest in this economy. I think that one of the areas that need a lot of attention is the difficulty that firms have in local municipalities. Many firms are feeling the brand of being able to do business in this country when we can see what happened with Clover in a little town, Langeberg. Because everything was going, [indiscernible]. So I think that there are so many from business confidence to sorting out so many things before you can get investment going. So I think that's really the issue. I think that the SAB by being preemptive, maybe able to kind of keep inflation in check once inflation goes down, interest rates go down.

All right. Ladies and gentlemen. We're going to wrap it that. Round of applause for our panel. Thank you, guys. Right, lots more to talk about. Thank you, gentlemen. Thank you for giving us the time and also the time you've taken to prepare for these presentations. It is now lunch time. I know it sounds early, right, because probably you had lunch before you got here. But we have lunch for you, okay? It has now just gone 13:38. We're going to give you about 40 minutes to enjoy a bit of lunch. Also in the area where we'll be having lunch is a whole exhibition on a couple of things. I know the MTN Group ESG team has got a bit of a demo there for you. There's a couple of organizations that the MTN Group supports. I know that some of the gifts have already been handed out that are being supported by some communities in the underprivileged communities of our country. They are exhibiting a few very interesting initiatives, but please interact with that. And also the initiatives that are within the MTN Group around digital services and what Ralph has already touched on, which is the future of our continent being driven by digital. I need you back in this room in the next 40 minutes. So that will take us to 20 past 2, and 20 past 2, we will then kick off the second session where we'll be going deeper into 2 other markets in our continent, being Nigeria and Ghana. Enjoy lunch. [Break]

Ladies and gentlemen, welcome back. I hope you enjoyed your lunch break. So many people when the music -- when the beat came on the first time, some people are still a little confused whether that, [indiscernible] must come back. But well done for doing the best you can, we're going to move on with our agenda. We've got quite an action packed on for the rest of the afternoon. And a few moments we'll be hearing from Razia Khan, who's the Head of Research for Middle East and Africa at Standard Chartered Bank. And then we'll get into 2 of MTN Group's largest markets being Nigeria. We've got a couple of invited guests that will be sharing some insights with us. And then also the other market that is just as important, if not perhaps a bit more in terms of prospects and then will be Ghana, and we'll talk a bit more about that. It is actually the center of the MoMo product that MTN has got, as you know, and rolling out in all the markets and Ghana seemingly has had the greatest traction in recent times, and we'll hear about that. And then that will be the wrap-up of our day. So to kick us off, let me introduce you to what is hopefully going to be a quite a comprehensive review of the performance and prospects of the sub-Saharan Africa region coming from, of course, Razia Khan. You might know her very well. She's the Head of Research at SCB. And she's been there now for a couple of years, covering Middle East and Africa. So over 2 decades of experience covering emerging markets and frontier markets and of course, a well-known commentator on our region. She did do a pre-record for us. The lights will be dimmed that the screens will be on. So sit back, relax, as she takes us through the current trends and developments that are happening in our region and to what extent that might affect the prospects of the MTN Group. Ladies and gentlemen, Razia Khan.

Good day to everyone who's joined this conference. I'm going to be presenting to you the Africa economic outlook as we see things right now. If we could move on, please, to the very first slide, which is tighter global financial conditions have a negative impact on the outlook. We know that there's a lot of focus on this at this particular point in time. When we look at Sub-Saharan African growth, the region has been impacted by a series of negative shocks for -- that happened in very quick succession. Not only had we had the 2014, 2015 commodity price slowdown concerns around China's growth and the sustainability of that growth early on. But this has followed in quick succession by, in 2020, the COVID crisis. The impact of global tightening as everyone recovered and it looked as though inflation rates in developed markets were much stronger than even central banks had anticipated. The tightening that was necessary, the inflation risks compounded by the Russian invasion of Ukraine, the impact in food and energy prices and an even further tightening of global financing conditions still, the IMF and others have often remarked that at any one point in time, even 1 of the single -- singular shocks would have been sufficient to disrupt African growth. Nobody would have imagined that we would have seen all of these various shocks impacting at the same time. I'm going to talk you through a presentation on how we see the outlook going forward. So moving on to Slide 3 of the presentation pack, please. The first chart I would like you to focus on is that relationship between sub-Saharan African growth and global growth. We know that when we look at the global economic outlook, this is a time of significant uncertainty that we have seen a lot of tightening and unprecedented speed to that tightening in some respects from global central banks, both in developed markets and in emerging markets alike. And this is bound to have repercussions for the growth outlook. We also know from history that any time there has been a global shock, growth in sub-Saharan Africa has been impacted with some lag. That typically, it's only a year after the global shock it's felt that the full effect is transmitted to sub-Saharan African economies. And it looks very much as though that post-COVID 2021 recovery in growth now looks to be at risk of being significantly disrupted. Moreover, if the calculation is that we are going to see tighter monetary conditions, tighter external financing conditions remaining in place for African sovereigns for some time, this would be a fair assumption, then it becomes very difficult to focus on what the drivers of future growth could be. Moving back to the second chart that you see before you on Slide 3 of the presentation. This looks at the relationship between global food prices and inflation in Africa. For much of the rest of the world, they're over the worst of the global food price shock. In year-on-year terms, food prices have started to trend down, energy prices also reflecting the expectation of a growth slowdown are also weaker. But this comes as a source of very little comfort for African economies. What we're generally seeing across the region is that the lagged impact of those shocks is still playing out for individual economies. Moreover, it is often compounded by foreign exchange stress. The fact that we've been in a strong dollar environment for so long that African currencies are largely still weakening against the dollar and other global currencies means that this is something of a more prolonged inflation shock. We should not forget that food contributes around 40% of consumption baskets in Africa in general. So there is little point and downplaying the impact of any food-related shock. The inputs for agriculture remain very expensive in local currency terms, there is little comfort that we're getting from the scale of domestic harvest that things are likely to improve very meaningfully. And all of this means for a variety of reasons inflation in many sub-Saharan African markets remains elevated. Not only do we have difficult growth conditions, but this means that for the region central banks many are still in a tightening cycle. They do not have the luxury of adding at all to policy accommodation to try to ease the way through this likely growth slowdown and this just adds to the difficult conditions that the region must contend with. Moving on to the next slide, Slide 4 of the presentation. What can we say about the recent growth trend. Well, 2021 was broadly a year of recovery for the Sub-Saharan African region. Even as we saw many economies still having to deal with the long drawn out effects of the COVID shock. Nonetheless, the reopening in developed markets was a source of external positive surprise for many African economies. Commodity prices recovered, growth in those developed markets initially seemed to be bouncing back more strongly than many had anticipated. And that external demand, no doubt, contributed to conditions that saw bounce back in African growth. But let's look at what the more forward-looking survey data is telling us right now. And that is, if you focus on the blue dots on this particular chart, the most recent PMIs for the region, you'll see that across the different economies, there is a mixed picture. In many instances, the PMIs have been struggling to hold up above that crucial 50 level. That would typically denote the difference between contractionary or expansionary conditions in the economy. And the takeaway is that because of the magnitude of external stresses concerns about a global slowdown, concerns about how governments are able to finance or refinance their maturing debt obligations, central banks having to keep monetary policies still very tight. Problems to do with the availability of foreign exchange and dollar liquidity in many instances. But all of these different factors have been playing out as well. And the survey data tells us that in many instances, this is leading to quite a negative turn in terms of business sentiment notwithstanding the growth recovery that we have so clearly seen since the COVID years. Moving on to the next slide, Slide 5. There are a number of charts that I would like you to focus on here. The first one is simply a rebasing of different African exchange rates to a single starting point January 2020, and you can observe the performance against the U.S. dollar. Now there's one very important point to bear in mind when interpreting this chart. And that is that in some instances, FX rates don't seem to be very volatile. Nigeria, for example, the official FX rate has hardly adjusted. That in itself is part of the problem. We have seen alongside accelerated Fed tightening at Standard Chartered, we believe we're now seeing the peak in the cycle in terms of where U.S. interest rates are. Nonetheless, that has fed into a strong dollar environment. And very few economies have been immune to that strengthening of the dollar. We have seen a pronounced amount of FX volatility in many different African currency pairs. And where it doesn't show up on the chart that often hides the fact that we have nonfunctioning markets where whatever levels you see in the official FX rate in official FX markets are very unlikely to be market-clearing levels. This is part of the problem. In economy after economy, the supply of dollar liquidity has been that much more constrained. Those currencies that are still relatively flexible, those countries with the benefits of a flexible exchange rate have generally been spared the worst of the growth pressures because they still have functioning FX markets but an increasing number of different African FX markets have moved from better functioning to less well functioning as they have had to contend with these dollar liquidity pressures, and this is the problem. As a consequence of those global shocks and it's still very difficult global external environment facing African economies, it's not clear where the supply of dollar liquidity is necessarily going to come from. In many instances, significant FX adjustment is still very much required and this will need to be watched very carefully. Another chart on the same slide that I want you to focus on now is this one of euro bond spreads. We know the story, 2020 a global shock disrupted the world's economy in a way that very few of us had ever imagined could be the case. The simultaneous lockdowns, the ceasing essentially of global economic activity, a slowdown that we wouldn't have been able to contend with just a few years ago when we thought the global financial crisis was as bad as it got. Accompanying that situation, the COVID shock was a withdrawal of capital from many so-called perceived to be riskier markets. In Africa, we saw this reflected not only by the withdrawal of investors from local currency debt markets but a considerable widening in euro bond spreads. We know about the policy reaction, we know that the COVID shock was followed by an unprecedented amount of global central bank tightening, balance sheet expansion on a scale we just had been seen before. This, in part, is responsible for some of the inflation story today. But at the time, even that unprecedented pumping of liquidity into the world's economy did very little for African markets. There's a lot of debate around the debt service suspension initiative, soon followed by the G20 common framework for the restructuring of external debt. And the belief was that credit is 2 different sub-Saharan African sovereigns might be forced to share the burden of some of that service suspension as well. So it took a while before we saw any meaningful spread compression in African euro bonds. But even when it did happen, we will very quickly seeing the replacement of 1 shock, the COVID shock with yet another the Russia invasion of Ukraine, elevated inflation, even more concerned that central banks were behind the curve and that they needed to do so much more to tighten even faster. All of this has meant a very difficult market access conditions for sub-Saharan African sovereigns. The irony of it is that in a slowing global environment where there are concerns about developed market growth, in particular, these elevated spreads mean that it's still very difficult for African sovereigns to seek the external financing that they need often when it comes to the refinancing of existing euro bond commitments, it's just prohibitively expensive. It isn't going to be happening in the near term. And the longer that situation lasts where essentially, the whole world economy is having to adjust to the magnitude of tightening that we've just seen, the more the fears about some countries just not making it through the stress are going to be sustained. And there will be investor concerns around who might be next to sign up for a debt restructuring, which is the next country that is likely to default on its debt. Those fears are currently reflected in market pricing in the elevated spreads. And it's not clear what kind of a situation moves us out of this very easily. So if I were to summarize, if we were to look at the performance of both African FX rates, some of which show the adjustment even worst cases that don't where an adjustment is still very necessary. If we were to look at the performance of African euro bonds, they all speak to considerable financing stresses still. These are the challenges that the Africa region with all of its natural growth advantages, let's not forget the big picture, demographics that are favorable and urbanization pace the formalization of economies, things that would normally lend themselves to productivity gains and faster growth. They're still there in the background that they're very much overshadowed by these other concerns right now. If we can move on to the next slide, please. And this shows us the impact of offshore investor positioning in local currency markets. Now to those of you in South Africa, you would know this very well. Around the time of the COVID shock, South Africa also got a downgrade from Moody's that meant the loss of its last remaining investment-grade rating. And that meant World Government Bond Index exclusion, the outflow of billions of dollars from the local currency debt market. It's a little comfort to look at a slide like this and to realize that South Africa shouldn't be seen in exclusion, if anything, it's one of the economies where there haven't been problems with an FX market that just ceases to be functional and South Africa has since seen inflows from offshore investors. But for a lot of the rest of the region, with the exception perhaps of Uganda, which is still seen as tradable, which is still seen as open to foreign portfolio investment, we have seen a real step decline in the amount of foreign portfolio investor participation in local currency debt markets. And you can see that despite everything that South African markets have had to contend with, South Africa possibly still sees the healthiest amount of foreign investor participation compared to the frontier market equivalents in the region where foreign investor interest is really rather minimal, where investor positioning has lightened up very considerably. Now as always, at the accusation of being an economist who looks at this in many different ways, there are different ways that you can look at this. The good news is that investor positioning is so light that there are very few instances where we think we could be seeing more market volatility because investors have anything to sell, have anything with which they can exit. In a lot of instances, should risk conditions improve eventually, it won't happen until developed market growth concerns have disappeared, and that may not be on the horizon for a long while yet. But should risk conditions improve because investor positioning in the region's local currency markets is already so light. One way of looking at this would be it can only get better from here on surely or maybe not. Let's move on to the next slide in this presentation. And that slide very soberingly shows you the trajectory of credit ratings in the region. We're looking specifically at Moody's here, but it wouldn't be an altogether different picture if we were to consider Fitch or S&P, there is 1 overwhelming trend that really stands out. And that is that in recent months and recent years, it's the credit rating downgrades that have become that much more prevalent in the region. Forget the good long-term growth potential offered by African economies at a time of global stress, at a time of significantly tighter global financing conditions, most credit ratings have only been moving in one direction and that is down, down very considerably. You can see that some economies seem to have bucked the trend or rather have weathered the storm a little bit better than their counterparts elsewhere. The Francophone economies where because they have a peg to the euro, they haven't been subject to the FX depreciation stresses that feed into even more concerns around solvency, how will these economies afford to finance their external debt to pay their external debt service. But by and large, just about every other economy has been subject to a reassessment of credit strength by the rating agencies. There have been downgrades and in some instances, multi-notch downgrades. I would say we're not out of this process yet, there is necessarily going to be an adjustment to the resetting higher of global interest rates. After the global financial crisis, we had been in a world of such easy monetary policy for so long. Now we're coming out of it. One of the ways in which Fed tightening works is that it causes a slowdown in the rest of the world as well. And that weakening of demand weakens commodity prices, weakens global demand leads to a lessening of inflationary pressure on a global scale over time. But it's very painful for the weaker credits involved in this process. It's very painful for the most vulnerable economies who are left without the financing that they would otherwise need. Moving on to the next slide then, please. And this is where the crux of the concern really comes about. In country after country, on an almost daily basis, we are asked which is the next country that is going to have difficulty financing its external obligations. One way of looking at this, as we've done here is to use the euro bond debt maturities as a proxy. It's an imperfect proxy. The best way to do this would be to look at all external financing obligations. The entire external financing requirements, what do countries need to finance their current account deficits. What debt service do they have to pay over the next year and that could be principal repayments, it could be the interest payments on the existing debt. Add that altogether to get the total external financing requirement compare it to where their foreign exchange reserves are. And you will be a lot more worried than the simple color scale adopted on this particular table, even this paints to sobering picture. There are some economies given their current foreign exchange reserves that are going to have great difficulty financing their external obligations. At the time when a lot of the Eurobond debt was being taken on in the region, the easy assumption in that instance was that African economies were benefiting from accommodative global monetary policy. This is why they could issue big in international capital markets. This is why they could borrow more commercially on an unprecedented scale. We were kind worried about what would happen 10 years on where suddenly the region would see this concentration of maturities but never in our wildest imagination, did we think that this would happen in the context of multiple global shocks. COVID, Russia, Ukraine and unprecedented speed to develop market tightening, emerging markets having to tighten to keep up. So no amount of tightening is quite sufficient in an environment when all central banks are doing the same thing. And this is a problem because it's suddenly so much more expensive to refinance those external debt obligations. And this theme of which countries are going to get through this easily, at which countries will stumble and fall over and may have to sit down with their creditors and try to go through an orderly debt restructuring. It's not going to go away anytime soon. The problem is given the global tightening that we have experienced, it's going to be very difficult for many African sovereigns to seek the financing that they need through markets. Yes, the IMF and the World Bank and other multilaterals are trying to step up the global community is coming together to say what financing can we provide to these very vulnerable economies in a situation where the market financing just isn't available because of the amount of risk aversion out there. But we know from the experience of recent decades, not even recent years, that the financing requirements for African economies are substantially more than is likely to be easily satisfied by IMF, World Bank financing alone by what we can get from the international financial institutions. And this is the basic problem. To be able to power African growth or investment in the region to come back in a strong way, we need to see private sector flows being reestablished. But global conditions right now, the downside risks to growth, the geopolitical fragmentation, the tensions between China and the rest. These are not going to go away. And these conditions do not necessarily lend themselves to the easy availability of financing. So this is the basic problem. If I were to summarize, I'd say, I remain, as always, a longer-term believer in African growth. We have so much potential. We know from the good years of the kind of growth rates that can be achieved. There is economic diversification to happen. The Africa Continental Free Trade Agreement will set about the impetus for far deeper intra-regional growth. We know that there's still the financing of infrastructure to be able to enhance that process. We know that there are other building blocks to growth. We know that African economies continue to formalize but there's a lot of upside to revenue mobilization still. But as people move from lower value-added activities in rural areas to higher value-added activities in urban areas that there is a productivity boost growth underway. We know that with the adoption of new technology, we could supercharge that growth in Africa. But the sobering fact is these are going to be difficult years. Notwithstanding those natural growth advantages, there is the tightness of external financing conditions to contend with. The global community, if it put any value on the boost to global growth that we could see from an Africa that is performing, needs to come together in a way that is much better than has been done so far to try to deal in a more rapid way with debt restructurings. To try to deal in a more conducive way with the conditions that will attract private capital back to the region. It will happen, but there's a bumpy road ahead as we navigate through these difficult times. So I hope that does as a summary of the overall Africa outlook. We know that we could look at the individual growth outlooks for many different economies. There are different challenges underway. The good news is that in a big economy like Nigeria, which I'm sure you'll hear about, there is the expectation of significant reform impetus. FX reforms, field subsidy reforms, things that make it easier to do business in Nigeria. This could be a big boost to overall growth prospects. In other countries like Kenya, where the government is going through a difficult time with fiscal consolidation. Nonetheless, we are seeing a willingness to put in place reforms, raising revenue mobilization, ensuring that the process of formalizing the informal economy continues, and this will ultimately strengthen performance over the long term. Let's not downplay the impact of intra-regional trade at all in a world of global geopolitical fragmentation when many different countries are moving into different blocks, African countries coming together can provide an important impetus to growth. It isn't going to be easy, but it can be done. Thank you for your time today.

And thank you, Razia Khan, for that presentation. Great and comprehensive review of what's happening in our region. Razia did wrap up by referencing Nigeria and did quite great because it segues well into the next conversation that will be focused on Nigeria as a market. And as we all know, Nigeria is both the most populous country in Africa and also the largest African economy. It has numerous related growth opportunities. It does face elevated inflation, though and a depreciating currency. And these have pressurized consumers as disposable incomes and the cost of doing business over there. Limited foreign exchange availability does make it difficult for multinational companies lag the MTN Group to repatriate earnings and this has been a big topic in much of the discussion on Nigeria. We are quite honored this afternoon to have with us today the best people equipped to speak with authority on what's happening in Nigeria. Let me introduce you to our first speaker. He is the Managing Director and CEO of Financial Derivatives Company in Lagos, is macroeconomic research and finance advisory firm that he runs them. He's got over 40 years experience as an economist, a banker and a financial analyst. Ladies and gentlemen, please put your hands together for Mr. Bismarck Rewane.

Good afternoon, ladies and gentlemen. Once again, thank you for having me. And after listening to Razia, encouraged what I want to say because kind of validates also the points that I made. But let me start off by saying, clearly, the question is Nigeria is now almost fully integrated with the global economy, one; two, there are three possible options for Nigeria. We just had an election, and it's being contested in the courts. Well, Nigeria is Nigeria at a point of [ deprecates ] one; two, is Nigeria about to how would I put it? Nigeria at the point of inflection, which means it's going to take off or Nigeria is going to remain the same. Some facts that must be noted, Nigeria's economy is $500 billion. It's about almost 21% of the African economy. Two, between the Nigeria and the rest of the regional economy has actually narrowed. Three, Nigeria has actually shifted more from being higher dependents in terms of activity to becoming more service oriented. I think that is clear. Now the question is, what kind of leadership it's going to take place? What kind of leadership and what kind of policy reform policy change is going to take place? Two, will that be courage and the confidence to have institutional reform to reform the institutions. And three, with this change, is this change sustainable and what does the future hold for those who are investing in this country? So let me start off first and foremost, as you can see from this slides, it is during what our generals are made and one general handing over to a civilian general button change, policy change and institutional reforms are imminent. Now we're going to be talking about snapshot analysis and key takeaways with Nigeria right now. Where are the challenges and major positive changes that would take place? The outlook and the opportunities, the risk footprints, summary and conclusion. So firstly, there are about 13 variables that we're looking at here. Of this 13 variables 3 green, which is positive and the others are all negative. When they're looking at the 5-year average as well as where it is now and where it will be in the next few years. Now what are the key takeaways here? The growth is [indiscernible] I think earlier on a colleague from the South Africa result talked about potential growth and real growth. You'll find that Nigeria has been growing so optimally and total factor productivity, which means the optimize use of capital has not been the highest. There's been low labor productivity and on the utilization of capital stock. Inflation is at 17-year are higher of 22.2% and it has stayed that way. Again, anchoring inflation on the expectations. Inflation expectations in Nigeria are relatively very, very people are expecting inflation to continue. So there's no -- the expectations are different in the sense that the inflation psychology, people have factored in the fact that there will be shortages and the price -- the transmission of prices in future is going to be much higher. There is also what we call it lags the time between when you notice the policy and when you react to it and when the impact is felt. The lags in Nigeria are pretty high. And we'll come back to this because [ online ] dispensation on a volatile in lags are going to be much shorter because there will be some decisiveness. Then the monetary policy transmission mechanism is weak. The effective exchange interest rates, nominal interest rates are quite diverse. Now you can see from that point here that the treasure bills 364-day treasure bills rate is 8%, which gives you a negative yield of 14%. There are also restrictions, ForEx restrictions and rationing. So you have that whole philosophy that if you the more you ration, the more you stabilize the price and the exchange rate, but that does not found out to be true. There are subsidies in the system. Subsidies are range from petroleum subsidies, all the way the ForEx subsidies to fertilize the subsidies and so on. And we'll talk about the big ones coming up soon. The other thing that we've seen revenues actually begin to decline compared to GDP. So having said that, this is another slide that is important. It's a country of bottlenecks there is a fast, there's a lot of output and a lot of resources. But because of the bottleneck, you will find out you will have negative outcomes. So for example, there's a lot of farmland, 70 million hectares of land, whether it's food security because of the bottleneck. Light oil reserves and gas reserves, but it's very little refined products, you have the crisis that is at hand right now. There's a large population but low productivity. There's abundant water resources but no irrigation and electricity. There's a high volume of fertilizer, but they are also having a cost of output. Having said that, what will the new admiration and major policy changes? So what is the background of this guy? This guy walked in at mobile and he knows how to pick the right team. He has big dreams and he has a lot of good ideas. We ask him again. In other words, the value at risk -- if anything goes bad, he has much to lose. If I have more to lose than the other man on the street. So it's got big dreams, but dreams can become nightmares, if you're not careful, but also because you have to start by visioning and dreaming and then you set your goals and then you have the outcomes. So what I just said, he said, I will move petrol subsidy that we did yesterday. And then, of course, there was a crisis and it's moved in and they fix the new prices. So things get better. You talked about unified exchange rate, which means that, again, we want to deal with the subsidies, repatriation of profits for investors, both domestic and international. There was a multiple taxes on us to reduce that. Then it talks about institutional reform. House cleansing at the Central Bank, low interest rate on business loans, infrastructure development and so on. So but again, there are too many things, too many problems. He has to prioritize and we are going to have to speculate. This is what you're seeing. And now the policy or the outcome is what you saw here. But all of a sudden, today, we've had a new pricing regime and the program seems to be at least going on is dealing with it. Now the negative effect is there the risk of a policy backlash. We've seen that. But again, because it is decisive and it has a maximum of 90 days of honeymoon because don't forget there's -- there are the trials going on the petitions and the tribunals and all that. So if it does well, people now say, okay, sure. Why brought itself, there's no need. One, quite you have to remove him; two, if he's to go back for a rerun because he has actually set the stage, people have seen performance he's more likely to win like what you have in Turkey. So that's one of the things you have to look at. So there's no political [indiscernible] he has only 60, 90 days to do and we have to deal with it very quickly. And if there's anybody that can do it, he could. Just like any of the others, but because it has more skin in the game is more likely to want to make sure that he wins. Could there be a disruption to economic activity? Yes, we've seen that, but people are -- there's disruption fatigue in Nigeria right now. So we just want to get things going. How would the reforms look like? We've done some dimensioning. The official exchange rate today is NGN 462. It tested to [ NGN 682 ] and is been back [indiscernible]. We think in a post reform environment, the unified exchange rate to be at about NGN 600 whilst at the same time, the parallel will have about 3% to 5% differential maybe about NGN 650. Petrol price, [ 185 ] today is trading at about NGN 530. And what does that mean? It means that the inducement or the incentive to smuggle across the border, across the Africa, other countries is reduced. So we are reducing essentially the amount of subsidies in the system. Another thing that I want us to think about the price of energy. Today, it's about NGN 72 per kilowatt hour. We think that it could go to about NGN 90 to NGN 95 kilowatt hour the total effect of that is that people will get more quality path, more reliable path and actually, the Nigerian Cosmos will benefit more from that adjustment than what you see. So this is where we see exchange rate convergence identification and it's possible depending on the fact that if you ensure that the supply or the foreign exchange is there, I saw Razia's slides here. As you talked about external reserves. The external reserves Nigeria's gross external reserves, all the other reserves and net external reserves. So we would have to know exactly what the true position is, but I think there's enough to actually support the currency if you allow it be priced properly. So what does this all mean? It means that today, this is what the GDP what we call the secular flow of income. So of the $508 billion, $350 billion is actually [ 100 bit ] consumption. If you move to subsidies today, the private man on the street is going to be losing $26 billion. And the currency adjustment were also given back about $4 billion. The investors are going to be bringing in kind of currency adjustments and all of that, they will get about $9.5 billion increase in value. And government is, of course, going to benefit significantly because from petrol subsidiary mobile. The government will get $10 billion. And from currency adjustment, the government will also get some more. Net exports also is positive. So generally speaking, the effect on the economy is positive but it has to -- the change has to be there, the change has to be sustained, and the change has to be continued. So these are just things that how will it impact on the telcos, fintechs and PSB's. Yes, because of subsidiary mobile, again, because consumers have less money to spend, it depends on the price inelasticity. So once I pay more for petrol, then I would have less to pay for data, to pay for food, pay for -- depends on the relative inelasticity. So people are going to have to make that what we call income adjustment and substitution adjustment for what you consume. Now unification exchange rates means that generally speaking, if the guys today are spending NGN 765 effectively, and it goes to about NGN 630 then net-net, they were getting more money in their pockets. The same thing for power. So at the end of the day, you'll find that the Nigerian consumer probably has more to gain from the reform. And the Nigerian Investor provide our resources back telcos and fintechs will gain more from the post-adjustment environment. So long-term gains, like we said, government revenue increases, foreign investment increases and the digital price, which is a proxy for a regulated price of petroleum is at NGN 620 so that's where -- and this price has gone all the way to NGN 850 in the past 2, 6 months ago. So if that happens, you'll find that net-net, you'll find that you're spending less on diesel, and that's good for the telcos because of the CapEx and everything. What's the outlook on the opportunities, short-term outlook, GDP growth was slow to 2.9% which is not bad compared to the other African country. Inflational claim is about 22%, 20.3% in 2023, begins to slow down eventually because output increases. The official exchange rate will merge about NGN 630. We initially because of fear, it will go all the way to NGN 680 and then it gets to slim go down. One thing that is clear is that between yesterday and in the last 2 days, we've seen the stock market. I appreciate about almost 5% to 7% in some stocks and the leading stock sale. So that means if the stock market is an efficient reflection of future expectations. That means that they have factored in the fact that these reforms are here to stay and will benefit everybody. So what are the big game changing things? The African Continental Free Trade agreement means economies of scale in Africa trade will actually increase, and that's a major thing to look at. The Lekki Deep Sea Port and the Dangote refinery and petrochemical plant will do a lot of things, but it's a necessary condition but not sufficient to solve all the problems. Because what happens is that we take crude out for refining in Rotterdam and bringing back. So the changes are not that significant in terms of ForEx, but it helps in terms of riches in downtime. So it's not a server bullet. But again, the petrochemical part of it, there's the fertilizer part of it, and then there's a refining part of it. But again, the Dangote refinery becomes a hub refinery for the world of Western Central Africa. I think that's what noted. What do we see for financial inclusion and opportunities here? We've seen that there's a lot of -- the payment and settlement system has increased in terms of -- has become more efficient. And just like in Kenya started in 2007 and other African countries we are begin to see that correlation. So we are now beginning to see the effect of this payment and settlement revolution that has taken place in Nigeria, and we like the rest of Africa. The other thing you must note is that the 5G network, there's a lot of investment in CapEx that will -- and the flood of funds that -- let me take it mid studies 1. There is a lot of investment in CapEx. There's a reduction in -- there will be an improvement in power supply, reduction in the price of diesel and therefore, the benefits for financial inclusion and improved payment assessment system and increase in the velocity of secretion of money means that Nigeria begins to benefit from the scale economies and settlement of these transactions and that shift from [ Ricaurte ] to virtual payment system and all that means a lot. Now what kind of reform do we see in terms of the institutions that will be informed about 5 or 8 of them, but the key ones, favorable inline revenue, be number one. Number two will be NNPC, number three, with Central Bank, number four the NCC. So we think that there will be limited regulatory trespass. In other words, NCC will regulate the telcos, the Central Bank will regulate the financial institutions and therefore, and then the rates of interest -- 2 major benefits to the PSBs. One is that they can charge efficiently and reap for the benefits of the investment in CapEx. Two is that the floater phones are coming to them on the financial inclusion and the mobile payment system has to be invested well, they can get a decent return. So when you take the charges on, the increased activity and three, the yield on the -- it becomes -- it's a win-win for the telcos in that area. And because of the regulatory institutional reform, and the segregation of duties between the NCC, Central Bank and others, I think it's actually much more efficient system. So we think the NCC because we are powerful, the Central Bank will go back to monetary policies. There'll be a more efficient payment system and high income from fees charged and the activities will increase. So that's a good news. This is the projection of mobile subscribers and broadband penetration. We're going to see more of that, and there's a lot of investment in this -- in Nigeria because of the new leadership. And no matter what happens in the tribunals, we are going to be seeing the benefits of this. So in summary, I think that, one, GDP growth will follow this trajectory and begin to improve as we go along; two, Nigeria will not slip into a recession, the macro economic problems are well documented, slow growth, high inflation with public finance, but the reforms are going to address this quite aggressively. [indiscernible] will benefit everybody, including the government, people and businesses. Policy reforms will come with short-term pains, but those short-term pains will be pale compared to the gains that are going to come. Telco provider is the benefit in the long run, I think there will be a simplicity, there will be connectivity and there will be -- those are the 2 key things, resoposity, connectivity and also the fact that Nigeria will benefit from a showcase of companies that are in that sector will benefit. [indiscernible] challenges and the fact that we think that over the next 3 to 5 years, Nigeria will head towards currency convertibility. And therefore, the whole idea of moving money around foggable funds, going from one market or the other. The ease of doing business across the West African region will become extremely beneficial to investors. The Dangote refinery will help in terms of creating scale economies. But there's a big risk for one, the obsolescence of oil over the long term, the shift to renewable energy and also the growing irrelevance of OPEC over time. These are some challenges. But in the meantime, in the next 3 to 5 years, we are going to be seeing the benefits of what others spend. So the GDP will slow in 2023 to 2.9%. Long-term growth will be driven by export investment and consumption-led strategies. Inflation will average at about 20.34 % from 18.8% 2022. Disposable income remained low as inflation remains high but as productivity increases, disposable income will increase. And so you will see that, that low drop in disposable income of people will not be as impactful negatively -- impactful as we thought. The minimum wage in Nigeria is NGN 30,000, and that was decided about 4 years ago. We are in for the new round, and that will happen. So you're going to have some wage adjustments to come. The monetary policy rates almost will peak at about [indiscernible] go down. Official exchange rate will grow to about NGN 600 which is a major shift. And then we -- at worst, we see ourselves come in at about NGN 650 at a unified rate. [indiscernible] are pushing towards 60, 80 initially, but then we'll see some struggling there. But in the end, the availability of foreign exchange will boost trade, and trade is the most vibrant sector of the Nigerian economy. Don't forget in Nigeria, economy as an informal segment. So while you have $508 billion as the formal economy, there is 30% informal economy. And that activity level there changes things almost dramatically. And finally, as far as the U.S. African region is concerned, Nigeria continues to dominate that region, both from the informal trade perspective, from a formal trader's perspective, from the export of cement, petrochemicals, fertilizers and the refinery hub. So there are some good signs to come, but there are some risks that are there. The truck is don't vote for Christmas. So the guys who have special interest, who have vested interests are going to push back, what I think that the guys in charge now have been part of the vested interest and they know what it is, it takes a vested interest man to catch a vested interest man. Thank you very much.

It takes a vested -interest man to catch a vested interest man. Mr. Rewane, please join me on stage and a grab a seat, and I'd also like to call the CEO of MTN Nigeria. He's been steering the ship there for a long, long time in this role since 2021, but has been with MTN Nigeria since 2006. Of course, Mr. Karl Toriola and the 2 of them and myself are going to take some questions from you if you are dialing in the webcast, please share your questions on the Q&A panel that's below your screen. And of course, for everybody in the room, please just raise your hands and the roving mics will get to you as soon as possible. Mr. Rewane let me start with you and talk about this vested interest man. A lot of people, a lot of analysts and a lot of role players, especially when it comes to our continent, there's a big kind of indexation to politics just because generally, as Africans, we seem to have not always gotten the political side of things, the best of ways. And every time there's a new President, there's almost like this new hope. And you are quite sober in your analysis. There were some very positive things you said, and you had some warnings. And I'm keen to hear your personal views of what do you think becomes the Nigeria post these elections? Inflation doesn't seem to be abating. There's lots of talk about President Tinubu's cabinet and his choices of the people he will come in with. You've already said he is a man who knows how to pick a good team. But outside of the presentation, what are your thoughts?

Well, I think the presentation actually captures it. So I'm being brutally frank. The truth is that I think -- it takes a vested interest man to know how to catch. That's first. Secondly, it has a lot more to lose both personally and from a reputational perspective than any other person because he has investments, right, he has a lot of investments on the ground. And during the [indiscernible] he was a victim of -- he knows what the people backlash could mean. So the best not to crush it, but to prevent it from happening. The only way to prevent it from happening is to ensure one that institutions are informed and that policies actually give you the positive outcomes -- is the value at risk for tunable or any of the other candidates for that matter is much higher than the value at risk for the guys who are just with vested interest out there because you now have political risk and you have economic risk and has personal capital risk in all cases. So it's a no-brainer. The truth is that everything, nobody benefits from a crisis situation. And the best people to prevent the crisis, are those who can read it and can react as no lead or lag time.

You mentioned the point about his planned reforms on the repatriation of profits. That's been a big topic over the years for the MTN Group and widely covered by many of the people in this room. Do you think these reforms are going to work? And if so, why?

Let me tell you why. The thing is that if you look at Nigeria's balance of payments, you have a line that is visible tradables values, sell oil, cocoa, cashew and others. Then you have the invisible flows, which are the [indiscernible] are coming from Nigeria outside. Then you have investment flows from musicians, the entertainment area. So if you look at the trend, you'll find that the -- that part that comes from oil and gas is reducing relative to the visible flows. And the reason why the invisible flows have not been reflected because of the rationing and the dangerous policies of stopping all the exchange rate controls, once you lift those controls those flows will come in, and Nigeria will have enough to meet those repartition things. And I think MTN Group and other investors who have no fears about the fact that if I bring my money in, I'll be able to get my money out, right, rather than just having all these restrictions. But you see the restrictions are part of the institutional dividends that have taken place. So you would have to not only change the people because that's not -- you can change the boot from now to tomorrow -- it won't change anything. You must reform the institutions. And like I said earlier in this discussion, mental adjustment is much more difficult than the fiscal adjustment, the financial adjustment.

All right. Karl, if the way MTN Nigeria has been covered by analysts over, let's call it, a decade, maybe 1.5 decades, I would summarize it as -- the investment community has a love and hate relationship with MTN Nigeria. When it pumps, it really pumps and everybody loves it. But every once in a while, there's like a little screwdriver that goes into the works and everybody goes, "Oh, no. Now what's going to happen to MTN Nigeria?" When you hear about these reforms that have been quite well articulated by [indiscernible], what do you think of the current situation? And how does that for you work out in terms of the opportunities that lie ahead?