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Integrated Report 2016
ANNUAL FINANCIAL STATEMENTS
(continued)
SIX
THREE
ONE
FOUR
TWO
INTEREST RATE RISK
(continued)
Interest rate risk
The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, of
the Group’s profit before tax (through the impact on balances subject to floating rates) in its continuing and discontinued operations:
(Decrease)/Increase in
profit before tax
Change
in rate
%
2016
R’000
2015
R’000
Liabilities
Indian rupee loans*
+1
(55)
(50)
Ghanaian Cedis*
+1
(60)
(106)
South African loans at variable rates
+1
(5 000)
(5 114)
Cash balances
Cash and cash equivalents
+1
2 006
1 474
Bank overdraft
+1
(118)
(3 042)
* Discontinued operations
Credit risk
Financial assets of the Group which are subject to credit risk consist mainly of cash resources, loans receivables and trade receivables.
The maximum exposure to credit risk is set out in the respective cash, loans receivable and accounts receivable notes. The Group’s exposure to
credit risk arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments.
Cash resources are placed with various approved financial institutions subject to approved limits. All these institutions are credit worthy.
The Group trades only with recognised, credit worthy third parties. It is the Group’s policy that all customers who wish to trade on credit terms
are subject to credit verification procedures. Individual credit limits are defined in accordance with an independent assessment. In addition,
90% (2015: 88%) of all debtors balances are covered by credit insurance, decreasing the risk of loss due to non-payment. Receivable balances
are monitored on an on-going basis with the result that the Group’s historical exposure to bad debts is not significant. For transactions that
do not occur in the country of the relevant operating unit, the Group does not offer credit terms without the approval of the Corporate office.
Apart from the South African Government, which comprises 11.7% (2015: 11.1%) or R154.9 million (2015: R139.9 million) of trade receivables,
there are no significant concentrations of credit risk within the Group arising from the financial assets of the Group.
Substantially all debtors are non-interest bearing and repayable within 30 to 90 days.
Debtors are disclosed net of a provision for impairment and credit notes.
Liquidity risk
Although the Group is in a net debt position it has limited exposure to liquidity risk as all obligations in the foreseeable future will be met.
The Group manages its risk to a shortage of funds using planning mechanisms. This considers the maturity of both its financial liabilities and
financial assets and projected cash flows from operations. The Group’s objective is to maintain a balance between continuity of funding and
flexibility through the use of bank overdrafts and bank loans, with facilities in place in South Africa of R1 billion each, respectively.
The maturity profile of the Group’s long-term financial liabilities at 30 June 2016, based on contractual undiscounted payments, is shown in
note 21 and the maturity profile of the trade and other payables in note 23.
The Group has provided guarantees to the amount of R6.2 million at 30 June 2016 (2015: R15.7 million)
Foreign currency risk
As the Group operates in various countries and undertakes transactions denominated in foreign currencies, exposures to foreign currency
fluctuations arise. Exchange rate exposures on transactions are managed within approved policy parameters utilising forward exchange
contracts in conjunction with external consultants who provide financial services to Group companies as well as contributing to the
management of the financial risks relating to the Group’s operations.