2019

Annual Financial
Statements

CONTENTS
Confirmation of Accuracy and Fair Presentation..................................................................................... 2
Accounting Officer’s Statement of Responsibility for Annual Financial Statements........ 3
Independent Assurance Providers’ Limited Assurance
Report on Selected Performance Indicators.............................................................................................. 4
Report of the Board Audit Committee........................................................................................................... 7
Directors’ Report........................................................................................................................................................... 10
Independent Auditor’s Report to Parliament............................................................................................ 20
Statement of Financial Position.......................................................................................................................... 26
Statement of Profit or Loss and Other Comprehensive Income................................................... 27
Statement of Changes in Equity........................................................................................................................ 29
Statement of Cash Flows........................................................................................................................................ 31
Reportable Segments............................................................................................................................................... 32
Geographical Segments......................................................................................................................................... 34
IDC Accounting Policies 2019.............................................................................................................................. 35
Notes to the Financial Statements.................................................................................................................... 51

Icons denoting assuranceRA

Denotes Reasonable
Assurance

1

CONFIRMATION OF ACCURACY AND FAIRPRESENTATIONINTEGRATED REPORT AND ANNUAL
FINANCIAL STATEMENTS FOR THE 2019
FINANCIAL YEAR-END
I hereby acknowledge that the Integrated Report and the Annual
Financial Statements of the Industrial Development Corporationof South Africa Limited (the IDC) has been submitted to the
Auditor-General for auditing in terms section 55(1)(c) of the
PFMA.
I acknowledge my responsibility for the accuracy of theaccounting records and the fair presentation of the financial
statements and confirm, to the best of my knowledge, thefollowing:

ANNUAL FINANCIAL STATEMENTS
The financial statements have been prepared in accordancewith International Financial Reporting Standards (IFRS). Allamounts and information in the Integrated Report and Annual
Financial Statements are consistent with the financial statements
submitted to the auditors for audit purposes.

PERFORMANCE INFORMATION

for the financial year ended 31 March 2019. The performance
information has been reported on in accordance with therequirements of the guidelines on annual reports as issued by
National Treasury. A system of internal control has been designed
to provide reasonable assurance as to the integrity and reliabilityof performance information.

HUMAN RESOURCE MANAGEMENT
The human resource information contained in the respective
tables in the integrated report, fairly reflects the information of
the IDC for the financial year ended 31 March 2019.

IN RESPECT OF MATERIAL ISSUESThe Integrated Report is complete, accurate and free from any
omissions.

PREPARATION OF THE FINANCIAL
STATEMENTS
The financial results have been prepared under the supervisionof Nonkululeko Dlamini CA(SA), the Group’s Chief Financial
Officer.

The performance information fairly reflects the operations, andactual output against planned targets for performance indicators
as per the Corporate Plan of the IDC and approved amendments

TP Nchocho
Chief Executive Officer
29 July 2019

2

BA Mabuza
Chairperson of the Board
29 July 2019

ACCOUNTING OFFICER’S STATEMENT OFRESPONSIBILITY FOR ANNUAL FINANCIAL
STATEMENTS for the Year Ended 31 March 2019
The Accounting Authority is responsible for the preparation of
the IDC’s annual financial statements and for the judgements
made in this information.
The Accounting Authority is responsible for establishing, andimplementing a system of internal control designed to provide
reasonable assurance as to the integrity and reliability of theannual financial statements.

The external auditors are engaged to express an independent
opinion on the annual financial statements of the IDC.
The IDC’s annual financial statements for the year ended
31 March 2019 have been audited by the external auditors andtheir report is presented on page 20.
The annual financial statements of the IDC set out on page 27 topage 118 have been approved.

In my opinion, the annual financial statements fairly reflect theoperations of the IDC for the financial year ended 31 March 2019.

TP Nchocho
Chief Executive Officer
29 July 20193

INDEPENDENT ASSURANCE PROVIDER’S
LIMITED ASSURANCE REPORT ON SELECTED KEY
PERFORMANCE INDICATORSREPORT ON SELECTED KEY PERFORMANCE INDICATORSSUBJECT MATTER

We have undertaken a limited assurance engagement on selectedsustainability key performance indicators (KPIs), as described
below, and that are presented in the 2019 Integrated Report of theIndustrial Development Corporation of South Africa Limited (IDC)
for the year ended 31 March 2019 (the Report). This engagement
was conducted by a multidisciplinary team including specialists
with relevant experience in sustainability reporting.

We are required to provide limited assurance on the following
selected KPIs. The selected KPIs described below have been
prepared in accordance with IDC’s reporting criteria that
accompanies the performance information on the relevant pagesof the Report (the accompanying IDC reporting criteria) and thereporting boundary is IDC’s operations.

Material Issue

Key Performance Indicators

Unit ofMeasurement

Guideline/Criteria

Boundary

Reference
page number

Industrial development•

Value of funding approved

Rand Value (ZAR)

IDC Internal Criteria

IDC only

IDC IR 2019 1

Socio-economic
development•E xpected direct jobs created/saved(approved)Value of funding to Black Industrialists(approved)

Number (#)

IDC Internal Criteria

IDC only

IDC IR 2019 1

Rand Value (ZAR)

IDC Internal Criteria

IDC only

IDC IR 2019 1

 etention - % turnover of employeesRoccupying critical rolesSuccession - % critical roles that haveidentified potential successors for
immediate and/or 1-3 years
Average number of hours training

Percentage (%)

IDC Internal Criteria

IDC only

IDC IR 2019 62

Percentage (%)

IDC Internal Criteria

IDC only

IDC IR 2019 63

Number (#)

IDC Internal Criteria

IDC only

IDC IR 2019 64

Number (#) andPercentage (%)

IDC Internal Criteria

IDC only

IDC IR 2019 73

Text claim

IDC Internal Criteria

IDC only

IDC IR 2019 73•

T otal number and percentage of
operations assessed for risks related
to corruption and the significant risks
identified
Communication and training on anticorruption policies and procedures
Monitoring high risk portfolio

Text claim

IDC Internal Criteria

IDC only

IDC IR 2019 66•

Stakeholder engagement

Text claim

IDC Internal Criteria

IDC only

IDC IR 2019 12

Human Capital

•
•
•
•

Governance,
Regulation and Risk
Management••

Partners

INHERENT LIMITATIONS
Non-Financial performance information is subject to more
inherent limitations than financial information, given thecharacteristics of the subject matters and the methods used
for determining, calculating, sampling and estimating suchinformation. The absence of a significant body of establishedpractice on which to draw allows for the selection of certain
different but acceptable measurement techniques which can
result in materiality and the accuracy of data are subject individualassumptions and judgements. The precision thereof may changeover time. It is important to read the report in the context of thereporting criteria.
Further, because of the test nature and other inherent limitationsof an audit, together with the inherent limitations of internal
control, there is an unavoidable risk that some, even material,
misstatements may not be detected, even though the audit
is properly planned and performed in accordance with the

4International Standard on Assurance Engagements, ISAE 3000 Assurance Engagements other than Audits or Reviews of Historical
Financial Information.
Where the information relies on the factors derived by the
independent third parties, our assurance work would not include
an examination of the derivation of those factors and other third
party information.
OUR INDEPENDENCE AND QUALITY CONTROL
We are independent of the entity in accordance with the sections
290 and 291 of the Independent Regulatory Board for Auditors’
Code of Professional Conduct for Registered Auditors (Revised
January 2018), parts 1 and 3 of the Independent Regulatory Board
for Auditors’ Code of Professional Conduct for Registered Auditors(Revised November 2018) (together the IRBA Codes) and otherindependence requirements applicable.

INDEPENDENT ASSURANCE PROVIDER’S
LIMITED ASSURANCE REPORT ON SELECTED KEY
PERFORMANCE INDICATORS
We have complied with other ethical requirements of the IRBA
Code, which is founded on fundamental principles of integrity,
objectivity, professional competence and due care, confidentiality
and professional behaviour. The IRBA Code is consistent with theInternational Ethics Standards Board for Accountants Code of
Ethics for Professional Accountants.
The Firms applies International Standard on Quality Control
1 (ISQC 1), Quality Control for Firms that Perform Audits andReviews of Financial Statements, and Other Assurance andRelated Services Engagements, and accordingly maintains acomprehensive system of quality control, including documented
policies and procedures regarding compliance with ethicalrequirements, professional standards and applicable legal andregulatory requirements.

sustainability reporting process;•	Inspected documentation to corroborate the statements ofmanagement and senior executives in our interviews;•	
Tested the processes and systems to generate, collate,aggregate, monitor and report the selected KPIs;•	Performed a controls walkthrough of identified key controls;•	
Inspected supporting documentation on a sample basis
and performed analytical procedures to evaluate the data
generation and reporting processes against the reporting
criteria;•	
Evaluated the reasonableness and appropriateness ofsignificant estimates and judgments made by the directors in
the preparation of the selected KPIs; and•	Evaluated whether the selected KPIs presented in the Report
is consistent with our overall knowledge and experience ofsustainability management and performance at IDC.

OUR RESPONSIBILITY
Our responsibility is to express a limited assurance conclusion on
the selected KPIs based on the procedures we have performed
and the evidence we have obtained. We conducted our limited
assurance engagement in accordance with the International
Standard on Assurance Engagements (ISAE) 3000 (Revised),
Assurance Engagements other than Audits or Reviews of Historical
Financial Information, issued by the International Auditing andAssurance Standards Board. That Standard requires that we planand perform our engagement to obtain limited assurance about
whether the selected KPIs are free from material misstatement.
A limited assurance engagement undertaken in accordancewith ISAE 3000 (Revised) involves assessing the suitability inthe circumstances of IDC’s use of its reporting criteria as thebasis of preparation for the selected KPIs, assessing the risks ofmaterial misstatement of the selected KPIs whether due to fraud
or error, responding to the assessed risks as necessary in thecircumstances, and evaluating the overall presentation of theselected KPIs. A limited assurance engagement is substantiallyless in scope than a reasonable assurance engagement in relation
to both risk assessment procedures, including an understandingof internal control, and the procedures performed in response to
the assessed risks. The procedures we performed were based on
our professional judgement and included inquiries, observationof processes followed, inspection of documents, analyticalprocedures, evaluating the appropriateness of quantification
methods and reporting policies, and agreeing or reconciling with
underlying records.
Given the circumstances of the engagement, in performing theprocedures listed above we:•	Interviewed management and senior executives to obtain
an understanding of the internal control environment, risk
assessment process and information systems relevant to the

The procedures performed in a limited assurance engagement
vary in nature and form, and are less in extent than for a reasonableassurance engagement. As a result the level of assurance obtainedin a limited assurance engagement is substantially lower than theassurance that would have been obtained had we performeda reasonable assurance engagement. Accordingly, we do not
express a reasonable assurance opinion about whether IDC’s
selected KPIs have been prepared, in all material respects, inaccordance with the accompanying IDC reporting criteria.
Limited Assurance Conclusion
Based on the procedures we have performed and the evidence
we have obtained and subject to the inherent limitations outlined
elsewhere in this report, nothing has come to our attention
that causes us to believe that the selected KPIs as set out in thesubject matter paragraph for the year ended 31 March 2019 are
not prepared, in all material respects, in accordance with theaccompanying IDC reporting criteria.
OTHER MATTERS
The maintenance and integrity of the IDC’s Website (www.idc.
co.za) is the responsibility of IDC management. Our procedures
did not involve consideration of these matters and, accordingly weaccept no responsibility for any changes to either the informationin the Report or our independent limited assurance report that
may have occurred since the initial date of its presentation on IDC
website.

5

INDEPENDENT ASSURANCE PROVIDER’S
LIMITED ASSURANCE REPORT ON SELECTED KEY
PERFORMANCE INDICATORSRESTRICTION OF LIABILITY
Our work has been undertaken to enable us to express a limited
assurance conclusion on the selected KPIs to the Directors of IDC
in accordance with the terms of our engagement, and for noother purpose. We do not accept or assume liability to any party
other than IDC, for our work, for this report, or for the conclusion
we have reached.  

SizweNtsalubaGobodo Grant Thornton Inc.
Registered Auditor
Per Fikile Zwane
Director
Chartered Accountant (SA)Registered Auditor
31 July 2019

Ngubane and Company (JHB) Inc.
Registered Auditor
Per Nqabisa Ravele
Director
Chartered Accountant (SA)Registered Auditor
31 July 2019

SizweNtsalubaGobodo Grant Thornton Inc.
20 Morris Street East
Woodmead2191

Ngubane and Company (JHB) Inc.
1 Superior Close Off 16th Road
Midrand1685

6

REPORT OF THE BOARD AUDIT COMMITTEE
Report of the Board Audit Committee in terms of Regulations
27(1)(10)(b) and (c) of the Public Finance Management Act
of 1999 (as amended) and requirements of King IV Code ofGovernance

BACKGROUND
The Board Audit Committee (BAC) oversees the Corporation’s
financial reporting process on behalf of the Board of Directors,
specifically with regard to evaluating the adequacy and efficiencyof accounting policies, internal controls, risk management andfinancial reporting processes. In addition, the BAC assesses theeffectiveness of the Internal Auditors and independence andeffectiveness of the External Auditors.
The Corporation’s management has primary responsibility for thefinancial statements, for maintaining effective internal control
over financial reporting and assessing the effectiveness of internal
control over financial reporting.
Responsibilities, composition and functions of the Committee
The Committee’s role and responsibilities include its statutory
duties according to the Public Finance Management Act of1999 (as amended), the requirements of the King IV Code ofGovernance, the Companies Act, 71 of 2008 (as amended) andthe responsibilities assigned to it by the Board.
As a Committee, we report that we adopted the appropriate
formal Terms of Reference as approved by the Board and aresatisfied that we have discharged our responsibilities according to
the Companies Act, King IV and PFMA.
The Committee carried out its functions through attendanceat Audit Committee meetings and discussions with executive
management, Internal Audit, external auditors and external
advisors where appropriate.
We meet at least four times per annum, with the authority toconvene additional meetings as circumstances require.
In executing its key functions and discharging its responsibilities
as outlined in its Terms of Reference during the period underreview, the Committee:•	
Assisted the Board of directors in its evaluation of theadequacy and efficiency of the internal control systems,
accounting practices, information systems, risk management
and auditing processes applied within the Corporation in the
day-to-day management of its business•	
Facilitated and promoted communication between the
Board, management, the external auditors and Internal Audit
Department on matters that are the responsibility of theCommittee•	Introduced measures that, in the opinion of the Committee,
may enhance the credibility and objectivity of the financial
statements and reports prepared with reference to the affairsof the Corporation (and the IDC Group)•	Nominated and recommended for appointment of registeredauditors, SNG-GT and Ngubane & Co, as the Corporation’s
external auditors the firms who, in the opinion of theCommittee, are independent of the IDC•	Determined the fees to be paid to the external auditors andthe auditors’ terms of engagement•	Ensured that the appointment of the external auditors comply
with the Companies Act and any other legislation relating to
the appointment of auditors•	Reviewed legal and compliance matters that could have asignificant impact on the financial statements•	
Monitored internal control frameworks and procedures,
including accounting policies, legislative compliance,
regulatory matters and governance•	Assessed combined assurance from the external auditors,
internal auditors and management and ensured that the
combined assurance received is adequate to address allmaterial risks.

INTERNAL CONTROL
We monitored the effectiveness of the IDC’s internal controls andcompliance with the Enterprise-wide Risk Management Framework(ERMF). The emphasis on risk governance is based on three linesof defence and the BAC uses the regular reports received fromthe three lines of defence (process owners/department heads;
Risk and Compliance Departments, management and Internal
Audit Department) to evaluate the effectiveness of the internal
controls. The ERMF places weight on accountability, responsibility,
independence, reporting, communication and transparency,
internally and with all the IDC’s key external stakeholders.
No findings have come to the attention of the Committee toindicate that any material breakdown in internal controls has
occurred during the financial year under review. The Committee
is of the opinion that the internal accounting controls areadequate to ensure that the financial records may be relied upon
for preparing the consolidated Annual Financial Statements, that
accountability for assets and liabilities is maintained and that thisis based on sound accounting policies, supported by reasonable
and prudent judgements and estimates. The BAC is further of theopinion that the internal controls of the Corporation have beeneffective in all material respects throughout the year under review.
This opinion is based on the information and explanations given
by management regarding various processes and initiatives aimed
at improving the internal control environment and the integrity of
information, discussions with Internal Audit and the independent
external auditors, on the results of their audits.

7

REPORT OF THE BOARD AUDIT COMMITTEE
To formulate its opinion, the Committee:•	Monitored the identification and correction of weaknesses
and breakdowns of systems and internal controls•	Monitored the adequacy and reliability of management
information and the efficiency of management information
systems•	Reviewed quarterly, interim and final financial results andstatements and reporting for proper and complete disclosureof timely, reliable and consistent information•	Evaluated, on an ongoing basis, the appropriateness, adequacyand efficiency of accounting policies and procedures,compliance with generally accepted accounting practice andoverall accounting standards as well as any related changes•	Discussed and resolved any significant or unusual accounting
issues•	
Reviewed reports supplied by management regarding
the effectiveness and efficiency of the credit monitoringprocess, exposures and related impairments and adequacyof impairment provisions to discharge its obligations
satisfactorily•	
Reviewed and monitored all key financial performanceindicators to ensure that they are appropriate and thatdecision-making capabilities are maintained at high levels•	Reported to the Board on the effectiveness of the Corporation’s
internal reporting controls.

EXTERNAL AUDITORSAs a Committee, we recognise the importance of maintaining
the independence of the Corporation’s Independent Auditor,
both in fact and appearance. Each year, the Committee evaluates
the qualifications, performance and independence of the
Corporation’s Independent Auditor and determines whether tore-engage the current Independent Auditor. In doing so, the Audit
Committee considers the quality and efficiency of the services
provided by the auditors, the auditors’ capabilities, technicalexpertise and knowledge of the Corporation’s operations andindustry. Based on this evaluation, the Audit Committee hasretained both SNG-GT and Ngubane & Co as the auditors.
The Committee, in consultation with executive management,
agreed to the engagement letter, terms, audit plan and audit fees
for the financial year ended 31 March 2019.
The Committee:•	Approved the external auditors’ annual plan and related scopeof work•	Monitored the effectiveness of the external auditors in termsof their skills, independence, execution of the audit plan,
reporting and overall performance•	Considered whether the extent of reliance placed on internal
audit by the external auditors was appropriate and whether

8

there were any significant gaps between the internal andexternal audits•	Approved the Non-audit Services Policy that specifies that theexternal auditors are precluded from engaging in non-audit
related services.

FINANCIAL STATEMENTS
We have reviewed the financial statements of the Corporation andthe IDC Group and are satisfied that they comply in all material
respects with IFRS and the requirements of the Companies Act
and PFMA. During the period under review the Committee:•	
Reviewed and discussed the audited Annual Financial
Statements included in this Integrated Report with theexternal auditors, the Chief Executive Officer and the Chief
Financial Officer•	Reviewed the external auditors’ report and management’s
response to the report•	Reviewed any significant adjustments resulting from external
audit queries and accepted unadjusted audit differences•	Reviewed areas of significant judgements and estimates in
the Annual Financial Statements• Received and considered reports from Internal Audit.
Expertise and experience of Finance Function
We have considered and satisfied ourselves of the overall
appropriateness of the expertise and adequacy of resources of the
IDC’s finance function and experience of the senior members ofmanagement responsible for the financial function.

DUTIES ASSIGNED BY THE BOARD
Integrated and sustainability reporting
The BAC fulfils an oversight role regarding the Corporation’s
Integrated Report and the reporting process and considers
the level of assurance coverage obtained from management
and internal and external assurance providers in making its
recommendation to the Board.
We considered the Corporation’s information as disclosed in the
Integrated Report and assessed its consistency with operationaland other information known to Committee members andfor consistency with the Annual Financial Statements. We
discussed the information with management and considered theconclusions of the external assurance provider.
The Committee is satisfied that the sustainability information is,
in all material respects, reliable and consistent with the financial
results. Nothing has come to the attention of the Committee toindicate any material deficiencies in this regard.

REPORT OF THE BOARD AUDIT COMMITTEE
Combined assurance
The Committee is responsible for monitoring the combined
assurance model detailing significant processes, line managementmonitoring, Internal Audit and external assurances. This modelis used to assess the appropriateness of assurance over risks/
controls provided to the Board.
Engagement regarding the extent to which the various assurance
providers rely on each other’s work take place continuously and
we are of the view that adequate coordination occurred between
the external auditors and Internal Audit.
A Combined Assurance Policy is in place that integrates Internal
Audit, Compliance and Risk Management Plans and other external
assurance providers. Furthermore, a Combined Assurance Plan
was approved and used to monitor the activities in relation to the
Combined Assurance Process.
Going concern
The Committee concurs that the adoption of the going concern
assumption in the preparation of the consolidated Annual
Financial Statements is appropriate and sound. This is after theCommittee reviewed a documented assessment by managementof the going concern premise of the Corporation and the IDC
Group.
Governance of risk
The Board has assigned oversight of the Corporation’s risk
management function to a separate Board Risk and Sustainability
Committee. The Chairperson of the BAC attends the Board Risk
Committee meetings as an ex-officio member to ensure that
information relevant to these committees is shared regularly.
The Committee fulfils an oversight role regarding financial
reporting risks, internal financial controls, fraud risk and information
technology risks as they relate to financial reporting. We aresatisfied that the appropriate and effective risk management
processes are in place.
Internal audit
Internal audit forms part of the third line of defence as set out inthe ERMF and engages with the ﬁrst and second lines of defence
to facilitate the escalation of key control breakdowns.

The Audit Committee is responsible for ensuring that the
Corporation’s internal audit function is independent and has
the necessary resources, standing and authority within the
Corporation to discharge its duties. We approved the internal
audit function’s annual audit plan and as a Committee, monitored
and challenged, where appropriate, action taken by managementwith regard to adverse internal audit findings.
The Committee has overseen a process by which Internal Audit has
performed audits according to a risk-based audit plan where theeffectiveness of the risk management and internal controls were
evaluated. These evaluations were the main input considered by
the Board in reporting on the effectiveness of internal controls. The
Committee is satisfied with the independence and effectivenessof the internal audit function.

CONCLUSION
Having considered, analysed, reviewed and debated information
provided by management, Internal Audit and the external
auditors, the Committee confirmed that:•	The internal controls of the group were effective in all material
aspects throughout the year under review•	These controls ensured that the group’s assets had beensafeguarded• Proper accounting records had been maintained• Resources had been utilised efficiently•	The skills, independence, audit plan, reporting and overall
performance of the external auditors were acceptable.
Following our review of the financial statements for the year
ended 31 March 2019, we are of the opinion that they comply
with the relevant provisions of the PFMA, as amended, and IFRS
and that they present fairly the results of the operations, cash flow
and financial position of the Corporation.
We have complied with all the King IV principles, with theinclusion of integrated reporting, evidenced by this issue of the
Corporation’s Integrated Report for the financial year ended March
2019. The Committee is satisfied that it has complied in all material
respects, with its legal, regulatory and other responsibilities.
The BAC recommended this Integrated Report to the Board forapproval.

The Internal Audit Department has a functional reporting line to
the Committee Chairperson, an operational reporting line to the
CEO and full access to other BAC members.
The BAC, with respect to its evaluation of the adequacy andeffectiveness of internal controls, receives reports from Internal
Audit on a quarterly basis, assesses the effectiveness of the internal
audit function and reviews and approves the internal audit plan.

Ms NP Mnxasana
Chairperson of the Board Audit Committee
29 July 2019

9

DIRECTORS’ REPORTINTRODUCTION
The Industrial Development Corporation of South Africa
Limited was established in 1940 by the Industrial Development
Corporation Act, No 22 of 1940. It is a registered public
corporation and a Schedule 2 listed entity in terms of the Public
Finance Management Act (PFMA), No 1 of 1999, and the related
Treasury regulations. This report is presented in accordance withthe provisions of the prescribed legislation and addresses theperformance of the IDC, as well as relevant statutory information
requirements. The Board of Directors is the Accounting Authority
as prescribed in the PFMA.

NATURE OF BUSINESSThe IDC is a State-owned development finance institution thatprovides financing to entrepreneurs engaged in competitive
industries, follows normal Company policies and procedures in
its operations, pays income tax at corporate rates, and, subject toperformance and in line with its Dividend Policy, pays dividends
to its Shareholder.
The IDC’s vision is to be the primary driving force of commerciallysustainable industrial development and innovation for the
benefit of South Africa and the rest of Africa. Its objective is tolead industrial capacity development. IDC’s priorities are alignedwith government’s policy direction as set out in the National
Development Plan (NDP), New Growth Path (NGP), National
Infrastructure Plan (NIP), Industrial Policy Action Plan (IPAP) andthe Agricultural Policy Action Plan (APAP). The Corporation is
mandated to maximise its development impact through job-richindustrialisation while contributing to an inclusive economy
by amongst others, funding black-owned companies, blackindustrialists, women and youth-empowered enterprises.
As part of its industry development activities, the IDC has equity
interests in several companies operating in a range of industries
throughout the economy. Although the Corporation aims tokeep its shareholding in these companies to levels below 50%,
we do in some instances gain control of these businesses forvarious reasons. Details of trading subsidiaries and joint venturesare set out in the notes to the financial statements.

PUBLIC FINANCE MANAGEMENT ACTThe IDC Board is responsible for the development of the
Corporation’s strategic direction, which is captured in the
Shareholder’s Compact and five-year Corporate Plan, reviewed
on an annual basis to cater for changes both in the internaland external environment. Following agreement with the10

Shareholder Representative, these documents form the basis fordetailed action plans and continuous performance evaluation.
Our business units and departments are therefore guided
by the five-year Corporate Plan to prepare annual businessplans, budgets and capital programmes to meet their strategic
objectives.
Day-to-day management responsibility is vested in line
management through a clearly defined organisational structureand formal, delegated authority.
We have a comprehensive system of internal controls
designed to ensure that we meet corporate objectives and therequirements of the PFMA.
Processes are in place to ensure that where controls fail, thefailure is detected and corrected.

PERFORMANCE MANAGEMENTThe IDC’s performance indicators reflect the Corporation’s
goals as set out earlier in the Director’s Report. Measuresrelated to our key objective of industrial capacity development
are complemented with other indicators that measure ourdevelopment impact, financial sustainability and efficiency,
stakeholder relations, as well as the performance of important
subsidiaries.
Our primary performance evaluation focus is on our financing
activities. The performance measurement system ensures that
the IDC remains aligned to its mandated objectives. We review
performance indicators annually to account for changes in our
external and internal environments and ensure that long-term
objectives will be achieved. Performance indicators and targets
form part of our annual Corporate Plan and are approved by the
Shareholder Representative prior to the start of a financial year.
Targets may also be reviewed mid-year to take into accountperformance achievement in the previous year and potentialchanges in the environment.
Performance targets are set at ‘base’, and ‘target’ levels. The ‘base’defines levels of acceptable performance and the ‘target’ levelsof exceptional performance. Performance targets are set at
corporate, team and individual levels and performance-linked
remuneration is based on the achievement of such targets.
Performance against indicators is measured and reported on
regularly to the IDC’s Executive Committee and the Board.
Regular activity reports and management accounts ensure thattarget deviations can be detected and, if necessary, corrected.

DIRECTORS’ REPORTPERFORMANCE INDICATORSDEVELOPMENT OUTCOMES

The IDC adopted a balanced approach to performancemeasuring and adapted the principles of the balanced scorecard
to support its own objectives and operations. We measureindicators in the following five areas:•	
Development impact•	Financial sustainability•	
Customers/stakeholders•	
Human capital•	Internal processes

In this reporting period, the IDC approved R13.1 billion (2018:
R16.7 billion) and disbursed R11.8 billion (2018: R15.4 billion),
a 22% and 23% decrease respectively. The share of funding forcapacity expansions, projects, and start-ups continues to be thelargest share of total funding approved (2019: 76%; 2018: 73%
of total). There is also a notable increase in the share of funding
to distressed businesses which increased from 13% to 19% in
2019, in value terms – from R2.1 billion to R2.5 billion (from 37
transactions in 2018 to 46 in 2019).

The performance measurement process and outcomes areaudited by internal and external auditors in line with therequirements set by the Auditor General to ensure that targets
are achieved accordingly, and that the overall performance is afair reflection of the Corporation’s activities during the period.
Detailed performance against predetermined indicators for both
short- and long-term targets are shown below.

In line with the overall reduction in funding approved,
performance for most of the development indicators declined(see Figure below). The total number of jobs expected to becreated and saved from IDC’s funding approvals that weresigned during the year decreased by 35% to 17 887 which issignificantly lower than the base level of 28 262. Of the total
number of jobs, 13 329 are expected to be created and 4558 saved. It has been difficult for the IDC to meet the 80%
threshold for jobs expected to be created vs saved in thiscurrent economic environment with 25% of the jobs counted
being saved jobs. Similarly leveraging external funding thus
still requires IDC to increase its share of funding to ensure thatprojects are fully funded.

PERFORMANCE OVERVIEWThe Corporation has unfortunately recorded poor performance
results against 2018/19 short-term and long-term corporate
targets, following an upward trend in recent years as the
economic performance continue to disappoint. IDC has
had some success with overall investment levels in line since2015. Inclusivity outcomes have shown good results for Black
Industrialists, youth and women entrepreneurs. However, theoperating environment has not been conducive to encourage
investment and support the implementation of IDC’s strategy.

Number of jobs expected to becreated / saved - signed

Funding for Black Industrialists, youth, and localisation has also
declined, with only funding for women entrepreneurs andlocalisation meeting and/or exceeding base levels.

Funding signed to Black Industrialists

Saved
Created30 0008
17 88727 49120 15518 010

20 00019 731

25 000

100

9

80

7
6

60

5
15 000
4

2

0

0

4.7

7.8

20
4.9

1

4.5

5 000

40

3

2.3

10 000

0

11

DIRECTORS’ REPORT

Funding approved for Black
Economic Empowerment

Funding signed to women entrepreneurs

3.3

3.0

2.8

3.0

9.6

60

50

2.5
5.8

2.1

40

2.0
30
1.5
20

0.8

1.0

10

0.5
0

Funding signed to youth entrepreneurs

60

1.8
1.6

50
1.4
40

1.2

0

Funding signed to localisation

8.0

80

7.0

70

6.0

60

5.0

50

4.0

40

3.0

30

2.0

20

1.0

10

1.0
30

0

12

0

0

4.7

7.1

0.7

0.9

1.7

0.9

0.2

0.2

10

5.2

0.4

4.5

20

0.6

3.5

0.8

0

DIRECTORS’ REPORT
Accordingly, performance against long-term targets also reflect
below par performance, as they are closely aligned/informedby short-term targets. Information gathered from the IDC
clients during 2019 show that although the number of direct
jobs supported increased by 0.5% to 224 498 jobs, there wasan overall 1.3% decline, when considering indirect jobs andassociated job sectoral multipliers. In this instance, basic metals
and mining have high job multipliers and lost most jobs. Also,with significant decline in short-term direct jobs to be created/saved and funding to black industrialists, long-term indicators
on job efficiency and increase in black owned companies (51%)
were also adversely affected and did not reach desired baselevels.
Making a meaningful contribution to industrial capacity
development remains the key driver of our strategy and IDC
remains committed to contribute meaningfully towards national
efforts to stimulate the economy towards higher levels of
growth. The IDC, working with key stakeholders and partners will
intensify its activities and leveraging private sector participation.

FINANCIAL PERFORMANCEThe IDC and its financing subsidiaries (mini-group) once again
recorded an operating income of R273 million, slightly lower
compared to R399 million operating income in the previous
financial year. Staff costs were 1% lower than in 2018 and 11%
below budget. Other operating expenses also decreased
marginally. The cost-to-income ratio (excluding cash resource
income, impairments costs, sefa grant and income from mature

listed investments) worsened to 50% from 39% in 2018. This isworse than the base that was set at 34.5%, mainly as a result of
lower than anticipated income.
IDC measures the performance of significant subsidiaries as partof its targets to ensure that it gives enough attention to these.
For Foskor, the company’s operating profits are measured as anindication of the success or failure of any turnaround strategies.
Foskor’s loss was significantly lower than the budget, overperforming the target level. This compares favourably with theR763 million loss recorded last year. The success of the Scaw
restructuring is also measured based on the performance of
two of the companies that were carved out of the old structure.
Grinding Media recorded a R55 million profit compared to thebase target of R215 million profit while Cast Products’ loss of R380
million is much worse than the budgeted R254 million loss.
The value of reserves on 31 March 2019 increased by 4.9%
compared to a year ago. This is lower than the yield on longterm government bonds and means that IDC does not achieve
the base for this indicator.

OTHER PERFORMANCE AREAS
The results from the customer satisfaction survey were in linewith expectations. Turnaround times continue to be given as oneof the key areas of customer dissatisfaction. A key focus of the
Corporation is to continue to improve its processes to ensure amore efficient organisation.

13

DIRECTORS’ REPORTPERFORMANCE AGAINST PREDETERMINED OBJECTIVES

Development Impact Perspective

The tables on the next pages show performance against objectives for short- and long-term targets.

14

Theme

Funding
activity

MetricDescription

Value of funding Total value of funding
disbursed
disbursed by IDC

Funding
leveraged

Amount of outside
total funding
attracted foreach rand of IDC
funding. Guarantees
considered as fully
leveraged funding.
10% Moderator.
Jobs
Expected jobs
Expected direct jobs
created / saved created/saved forfunding approvals
with agreements
signedExpected direct Expected direct jobs
jobs createdcreated for funding
approvals withagreements signed asa percentage of total
jobs created/saved
Value of funding
Value of
Economic
empowerment funding to black approvals withagreements signed
industrialists
andfor transactions
tranformation
benefiting blackindustrialists
Value of funding
approvals withagreements signed
for transactions
benefiting black
woman industrialists

WeightBase

TargetActualAchievement20%

R17.2bn

R21.8bn

R11.4bn

Not achieved

RA

1.5:1

PenaltyincurredRA

17 887

Not achieved

RA

75%

Not achieved

RA

R4 680
millionNot achieved

RA

R1 957
millionNo penalty

RA

Moderator

20%

2:1

28 262Moderator

5%

Moderator

34 79580%

R5 527
millionR8 037
millionR829 million

Financial Sustainability

Development Impact Perspective

DIRECTORS’ REPORT
Theme

MetricDescription

Value of funding Value of funding
Economic
approvals withempowerment for womenagreements signed
empoweredandfor transactions
tranformation businesses
benefiting businesses
where women havemore than 25%
shareholding and areoperationally involvedin the business
Value of funding Value of funding
approvals withfor youth
agreements signed
empowered
for transactions
businesses
benefiting businesses
where youth havemore than 25%
shareholding and areoperationally involvedin the business
Value of funding
Localisation
Funding for
agreements signed
localisation
for transactions
initiatives
aimed at inputs into
infrastructure orother government
procurement andcomponents formotor vehicles
Impairments Level of
Impairments as a
impairments
percentage of theportfolio at cost –IFRS9Moderation of
10% on rating forindicator if randvalue of cumulative
impairments as
per balance sheet
exceeded
Impairments as apercentage of theportfolio at cost –IAS39

WeightBase

TargetActualAchievement

5%

R1 200
millionR1 500
millionR2 779millionTargetexceeded

RA

5%

R770 million

R1 000
millionR665
millionNot achieved

RA

5%

R4 664
millionR5 406
millionR4 701
millionBase achieved

RA

5%

24.6%

22.6%

28.4%

Not achieved

RA

R25.3
billionNo penalty

RA

18.8%

Not achieved

RA

Moderator

5%

R27.3 billion

17.2%

15.2%

15

Internal processes Customers/ Stakeholders

Financial Sustainability Perspective

DIRECTORS’ REPORT

16

Theme

Impairments

MetricDescription

Level ofimpairments

Moderation of
10% on rating forindicator if randvalue of cumulative
impairments as
per balance sheet
exceeded(Net interest,
Revenue
Cost andgeneration from dividends, fees
incomeand money market
management assets
income)/(Total assets)
Subsidiary
Foskor financial Foskor operating
performance performance
profits/losses before
capital gains
Operating profit/loss
Effectivenessof Scaw Group (EBITDA) (R’m)
restructuring

WeightModerator

Base

TargetR19.2 billion

ActualAchievement

R16.8
billionNo penalty

RA

5%

4.5%

5%

4.5%

Base achieved

RA

5%(R392 million)(R349
million)(R184
million)TargetexceededRA

2.5%

Grinding
Media: 215

Grinding
Media: 237

R55
millionNot achieved

RA

2.5%

Cast
products:(R254 million)

Cast
products:(R229
million)sefa’s performance rating(R380
million)Not achieved

RA

3.26

Base achieved

RA

sefa
performance

sefa performance
rating5%

Customers

Customer
Satisfaction
Index

Overall customer
satisfaction rating(1-10)

5%

7.8

8.5

7.9

Base achieved

RA

Efficiencies

Cost to income
ratio

Administration
costs, excluding
impairments andproject costs as apercentage of net
interest, dividend
and fee income (excl.
dividend income from
Sasol, Kumba Iron Ore,BHP Billiton, South32, Arcelor Mittal andSappi)

5%

34.5%

24.5%

49.9%

Not achieved

RADevelopment Impact Perspective

DIRECTORS’ REPORT
ThemeIndustrial
capacity
development

Job creation

MetricDescription

WeightBase

TargetActual-15.8%
Growth in
Growth ingross fixedgross fixed
capitalcapitalformation information in
manufacturing manufacturing+ 10% (12.4%)(2.4%)
DisburseModerator Moderator applies if funding
ment
disbursed falls below 3 year
below 3historical average (10%yearModerator on rating for thishistoricalindicator)
average-2.1%
7.5% increase
5%5% increase
Value of IDC
Growth inin thein thefunding in rest offunding
percentage of percentage ofAfricadisbursed to
disbursement disbursement
rest of Africa
into RoA
into RoA(12.4%)(12.1%)-1.3%
Growth in
15%
Growth in
Number of people
Growth inlevels oflevels of
employed at SA
levels of jobs
employment
employment
companies insupported by
the economy in the
IDC’s portfolio and
IDC clients
economy(excl. govt.
calculated impact
employment) (excl. govt.
on indirect jobs
employment)(2.23%)+ 7% (9.23%)
Negative
Moderator Moderator applies if there are
net job losses in IDC clients and growthlevels ofcalculated impact on indirect
employjobs (10% Moderator on rating
ment
for this indicator)-20.0%
10%
Change in the Change in the
Number of jobs
Increased
labour/capital labour/capital
number of jobs expected to beratio of theratio of thecreated per unit created, including
economy + 5% economy +calculatedof funding by
12.5% (7.3%)(-0.2%)
IDC (reduce cost indirect jobs
divided by the
per job)
Negative
Moderator Moderator applies if thevalue of IDC’s SA
numbernumber of jobs created per
funding approvalsof jobs
unit of funding does not rise
(excluding
createdabove three year average (10%funding in the rest
per unit ofmoderation on rating for thisof Africa, and jobs
funding
indicator)
saved)

Growth infunding
disbursed toinvestments
in SA

Value of IDC
funding in SA(excluding
funding in the restof Africa)

20%

Achievement

Not achieved

Not achieved

Not achieved

Not achieved

RA

Not achieved

Not achieved

Not achieved

17

RAHuman Capital

Financial Sustainability

Development Impact Perspective

DIRECTORS’ REPORT
Theme

MetricDescription

Companies
Economic
Increasewith more
empowerment in levels of
empowerment than 50% blackin IDC’s portfolio shareholding forwhich funding isapproved

Strength ofbalance sheet

Growth rate in
IDC’s reserves

Value of IDC
reservesHCsustainability

PeopleSustainability
Index

Composite
index measuring
sustainabilityof IDC’s humancapitalWeightBase

TargetActualAchievement-30.0% Not achieved
Up to 10%increase in
the value of
black-owned
businesses
per annum(10.0%)
Decrease Not achieved
Moderator Moderator applies if the value
in valueof IDC funding approvals toof IDC
companies with more thanfund
50% black shareholding falls
below three year average (-10% approvals
moderation on rating for thisindicator)
4.9%
Not achieved
30%
Yield on long- Yield on longterm govt.
term govt.
bonds + 2%
bonds (9.3%)(11.3%)
10%

10%

Up to 2.5%
increase in
the value of
black-owned
businesses perannum (2.5%)

5% increase in 10% increase
in PSI score
PSI score perannum (74.8%) per annum(78.3%)

66.9%

Not achieved

FUNDINGDIVIDENDS

The IDC sources loan funding mainly from international
development agencies, facilities from commercial banks andbond issuances. The general 2019 funding requirements for the
IDC Mini Group to fund, inter alia, finance advances of R11.8
billion and borrowing redemptions of R6.5 billion, amounted toR18.3 billion (2018: R19.8 billion). These requirements were met
partly out of R8.3 billion of internally generated funds, namely
repayments received and profits. New borrowings amounted toR11.2 billion for the year.

A dividend of R50 million was paid during the financial year.

CORPORATE GOVERNANCE
The IDC’s directors endorse the King IV Report on Corporate
Governance and, during the review period, implemented these
proposals.

18

POST REPORTING DATE EVENTSLISTED SHARES
The value of the Group’s listed shares decreased by R5.8 billion
to R50.4 billion between financial year-end and approval of
the financial statements on 29 July 2019. The main driver ofthe decrease was the drop in Sasol’s share price, which was
attributed to delays at its Lake Charles Chemicals project, basedin Louisiana, USA.

RARA

DIRECTORS’ REPORTSALE OF CAST PRODUCTS

GOING CONCERN

At the beginning of April 2019, the IDC Group disposed of a 15%
stake in Cast Products (Pty) Ltd, a subsidiary that was carved outof the SCAW Group. The IDC shareholding decreased from 100%
to 85%.

The directors assessed the IDC as being a going concern in termsof financial, operational and other indicators. The directors are of
the view that our status as a going concern is assured.

REPORTABLE IRREGULARITY

DIRECTORS AND SECRETARY
The current directors of the IDC are listed below:

A matter of conflict of interest in relation to an executive was
identified during the financial year year ending 31 March
2019 through the Corporation’s post investment reviews. The
Board has taken steps to address the matter in line with the
Corporation’s internal policies. The external auditors then raised
a reportable irregularity, in terms of section 45 of the Auditing
Profession Act, 2005 (Act 26 of 2005) (Auditing Profession Act),for the annual financial period ending 31 March 2019. The Board
is in the process of closing out the irregularity. The finalisation of
the irregularity depends on the recommended sanctions fromthe chairperson of the disciplinary enquiry. The matter pertaining
to the reportable irregularity has been described in note 43 to
the consolidated and separate financial statements. The Board
reiterated that it is in a continuous process of strengthening the
Corporation’s culture and governance.

SHARE CAPITAL
The authorised (R1.5 billion) and issued share capital (R1.4 billion)
remained unchanged during the reporting year.

Executive
TP Nchocho (CEO)Non-Executive
BA Mabuza (Chairperson)
LI Bethlehem
BA Dames
RM Godsell
A KrielSM Magwentshu-Rensburg
NP Mnxasana
M MorePM Mthethwa
ND Orleyn
NE Zalk
P Makwane is the Secretary. The IDC’s registered office is at
19 Fredman Drive, Sandown, 2196.

AUDIT COMMITTEE INFORMATIONThe Audit Committee consists of the following non-executive
directors:
NP Mnxasana (Chairperson)
RM Godsell
SM Magwentshu-Rensburg
M MoreIn addition, R Pitot, is a co-opted member of the committee.

19

INDEPENDENT AUDITOR’S REPORT TO
PARLIAMENTREPORT ON THE CONSOLIDATED AND
SEPARATE FINANCIAL STATEMENTS

for the Audit of the consolidated and separate financial
statements section of our report.

OPINION

We are independent of the Group in accordance with thesections 290 and 291 of the Independent Regulatory Board for
Auditors’ Code of Professional Conduct for Registered Auditors(Revised January 2018), parts 1 and 3 of the Independent
Regulatory Board for Auditors’ Code of Professional Conduct
for Registered Auditors (Revised November 2018) (together the
IRBA Codes) and other independence requirements applicableto performing audits of financial statements in South Africa. We
have fulfilled our other ethical responsibilities, as applicable, in
accordance with the IRBA Codes and in accordance with otherethical requirements applicable to performing audits in South
Africa. The IRBA Codes are consistent with the corresponding
sections of the International Ethics Standards Board for
Accountants’ Code of Ethics for Professional Accountants
and the International Ethics Standards Board for Accountants’
International Code of Ethics for Professional Accountants(including International Independence Standards) respectively.

We have audited the consolidated and separate financial
statements of the Industrial Development Corporation of South
Africa Limited and its subsidiaries (the Corporation / the Group/ the Company) set out on pages 26 to 118, which comprisethe consolidated and separate statements of financial position
as at 31 March 2019, the consolidated and separate statements
of profit or loss and other comprehensive income, statementsof changes in equity, statements of cash flows for the year thenended, as well as the notes to the consolidated and separate
financial statements, including a summary of significant
accounting policies, reportable segments and geographic
segments.
In our opinion, the consolidated and separate financial
statements present fairly, in all material respects, theconsolidated and separate financial position of the Group as
at 31 March 2019, and their financial performance and cash
flows for the year then ended in accordance with International
Financial Reporting Standards (IFRS)and the requirements of the
Public Finance Management Act of South Africa, 1999 (Act No. 1
of 1999) (PFMA)and the Industrial Development Corporation Act
of South Africa, 1940 (Act No 22, 1940 as amended) (IDC Act).

BASIS FOR OPINION
We conducted our audit in accordance with International
Standards on Auditing (ISAs). Our responsibilities under thosestandards are further described in the Auditor’s Responsibilities

We believe that the audit evidence we have obtained is sufficientand appropriate to provide a basis for our opinion.

KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of theconsolidated and separate financial statements for the current
period. These matters were addressed in the context of our auditof the consolidated and separate financial statements as a whole,and in forming our opinion thereon, and we do not provide aseparate opinion on these matters.

Key audit matter
How the matter was addressed in the audit
Expected credit losses (ECL) on Solely Payments of Principal and Interest investments (SPPI)
Refer to note 9, 10, 12 and 13 of the consolidated and separate financial
statements.
This key audit matter is applicable to both the consolidated and separate
financial statements.
SPPI investments represent 18% and 18% of the total assets of the Groupand Company respectively and are considered significant to the separate
and consolidated financial statements.
The estimation of credit losses is inherently uncertain and is subject tosignificant judgement. Furthermore, models used by the accounting
authority to determine expected credit losses require certain inputs thatare not fully observable.

20

Our audit procedures included the following:• 	We reviewed the IFRS 9 framework (classification) and assessed
whether investments are classified in terms of the Company’sbusiness model.
• 	We evaluated the expected credit loss model used by the Groupand Company with specific emphasis on the assumptions usedand determined whether the expected credit losses on SSPI
investments has been calculated in accordance with the relevant
accounting standards.
• 	We paid particular attention to the valuation of, and rights to,security held by the Group and Company by inspecting relevant
supporting documentation on these securities.

INDEPENDENT AUDITOR’S REPORT TO
PARLIAMENT
Key audit matter
How the matter was addressed in the audit
Expected credit losses (ECL) on Solely Payments of Principal and Interest investments (SPPI)The key areas of significant management judgement within the ECL
calculations include:• 	Evaluation of significant increase in credit risk (SICR);• 	Incorporation of macro-economic inputs and forward-looking
information into the SICR assessment and ECL measurement; and• 	Input assumptions applied to estimate the probability of default(PD), exposure at default (EAD) and loss given default (LGD) within
the ECL measurement.
This estimation uncertainty is increased due to the ongoing volatility inSouth Africa and wider regional economy markets.

• 	Where management has used specialists to provide valuations,
we assessed their competence, independence, professional
qualifications and experience.

We assessed whether the inputs used to calculate the expected credit
losses by accounting authority are in accordance with the Company’s
Investment Monitoring Committee Policy by comparing the policy
requirements against what has been applied during the year andassessed whether the conclusions reached were appropriate.
We evaluated the adequacy of the presentation and disclosure in relation
to this key audit matter given the likelihood of management judgmentthat may be applied.

Due to the significance of these judgements on the SPPI provisionbalance and the significance of SPPI in the financial statements, theexpected credit losses was considered a key audit matter.

Key audit matter
How the matter was addressed in the audit
Valuation of unlisted investments and non-solely payments of principle and interest loans (non SSPI)
Refer to note 9, 10, 12 and 13 of the consolidated and separate financial
statements for detailed disclosure of investments in unlisted shares andnon SPPI loans respectively.
This key audit matter is applicable to both the consolidated and separate
financial statements
Unlisted investments are classified as financial assets at fair value throughother comprehensive income or financial assets through profit or loss
and are significant in context of the consolidated and separate financial
statements.
Non SPPI loans are classified as at fair value through profit and loss andare significant in context of the consolidated and separate financial
statements.
For the Company, significant judgement is applied by management in
the valuation of unlisted equities and non SPPI loans in:
1.
subsidiaries,
2.	associates, joint ventures and partnerships and3.
other entities.

Our audit procedures included the following:•	
We assessed the models used by the accounting authority anddiscount rates applied at year-end, and reperformed a sampleof the valuations by agreeing valuation inputs to independently
sourced data.
•	
We benchmarked inputs used for valuations to current market bestpractices in assessing the appropriateness of the methodologies
applied.
•	
We assessed and challenged the reasonability of cash flows anddiscount rates used in valuing unlisted investments by comparing
them to similar instruments.
•	
We independently recalculated the expected fair values toevaluate if accounting authority’s estimates are within a reasonable
range in comparison with our independent expectation.
•	
We also assessed the disclosures made relating to the valuation ofunlisted investments to ensure consistency with the requirementsof the relevant accounting standards and with the methodologies
applied by the accounting authority.

For the Group, significant judgement is applied by management in thevaluation of unlisted equities and non SPPI loans in other entities.

Key audit matter
How the matter was addressed in the audit
Valuation of unlisted investments and non-solely payments of principle and interest loans (non SSPI)
Significant judgements and assumptions are applied by management invaluing these investments include the following:•	Free cash flows of investees.
•	
Replacement values.
•	Discount or premium applied to the Industrial Development
Corporation of South Africa Limited’s stake in investees.
•	
Debt weighting – this is the target interest- bearing debt level.
•	Realisable value of assets.
•	
Probabilities of failure in using the Net Asset Value-model.
Due to the significant judgment applied by accounting authority and theextensive audit work that had to be performed, the valuation of unlisted
investments and non SPPI loans was considered a key audit matter.

21

INDEPENDENT AUDITOR’S REPORT TO
PARLIAMENT
Key audit matter
How the matter was addressed in the audit
Impairment of cash generating units at Foskor Proprietary Limited (Foskor)
Refer to note 1.10 and note 3 of the consolidated financial statements fordetailed disclosure of the impairments of assets.
This key audit matter is applicable to the consolidated financial
statements.
Included in (account balance) is a cash-generating unit (CGU) at Foskor,a subsidiary of the Industrial Development Corporation of South Africa
Limited.
Significant judgements and assumptions applied by the Group, in the
impairment of the CGU include the following:•	
Risks specific to future cash flows•	
Reasonableness of net asset value•	
WACC assessment•	
Reasonability of the assumptions and inputs•	Sensitivity analysis

Our audit procedures included the following:•	
We challenged the Group’s impairment assessment by
involving our own internal valuation team and recalculated
the impairment assessment.
•	
We assessed the reasonability of the Group’s weighted
average cost of capital (WACC) by comparing the factors
used in determining the WACC to requirements per relevant
accounting standards.
•	
We evaluated the reasonability of cash flows based on
the selling price used by the Group in its assessment by
independently assessing the underlying factors giving rise tothese inputs and whether these factors were reasonable.

This estimation uncertainty is increased due to the ongoing volatility inSouth Africa and wider regional economic markets.
Due to the significant judgment applied by management and theextensive audit work that had to be performed, the impairment of cashgenerating unit at Foskor, was considered a key audit matter.

RESPONSIBILITY OF THE ACCOUNTING AUTHORITY FOR THE FINANCIAL STATEMENTS
The board of directors, which constitutes the accounting authority is responsible for the preparation and fair presentation of theconsolidated and separate financial statements in accordance with IFRS and the requirements of the PFMA and the IDC Act, and forsuch internal control as the accounting authority determines is necessary to enable the preparation of consolidated and separate
financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated and separate financial statements, the accounting authority is responsible for assessing the Group’s
ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basisof accounting unless the appropriate governance structure either intends to liquidate the Group or to cease operations, or has no
realistic alternative but to do so.

AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED AND SEPARATE FINANCIAL
STATEMENTS
Our objectives are to obtain reasonable assurance about whether the consolidated and separate financial statements as a whole arefree from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonableassurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the ISAs will always detecta material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or inaggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated andseparate financial statements.
A further description of our responsibilities for the audit of the consolidated and separate financial statements is included in theannexure to this auditor’s report.

22

INDEPENDENT AUDITOR’S REPORT TO
PARLIAMENTREPORT ON THE AUDIT OF THE ANNUALPERFORMANCE REPORTOTHER MATTERS
We draw attention to the matters below. Our opinions are notmodified in respect of these matters.

INTRODUCTION AND SCOPE
In accordance with the Public Audit Act of South Africa, 2004
(Act No. 25 of 2004) (PAA) and the general notice issued in terms
thereof, we have a responsibility to report material findings on
the reported performance information against predetermined
objectives for selected objectives presented in the annual
performance report. We performed procedures to identify
findings but not to gather evidence to express assurance.
Our procedures address the reported performance information,
which must be based on the approved performance planningdocuments of the public entity. We have not evaluated thecompleteness and appropriateness of the performanceindicators / measures included in the planning documents. Our
procedures also did not extend to any disclosures or assertions
relating to planned performance strategies and information in
respect of future periods that may be included as part of thereported performance information. Accordingly, our findings do
not extend to these matters.

Achievement of planned targets
Refer to the annual performance report on pages 14 to 18 for
information on the achievement of planned targets for the year.
Adjustment of material misstatements
We identified a material misstatement in the annual performance
report submitted for auditing. The material misstatement was on
the reported performance information of financial sustainability.
As management subsequently corrected the misstatement,
we did not raise any material findings on the usefulness andreliability of the reported performance information.

REPORT ON THE AUDIT OF COMPLIANCE WITH
LEGISLATIONINTRODUCTION AND SCOPE

We evaluated the usefulness and reliability of the reported
performance information in accordance with the criteria
developed from the performance management and reporting
framework, as defined in the general notice, for the following
selected objectives presented in the annual performance reportof the public entity for the year ended 31 March 2019:
Predetermined objectives
Development impact
Financial sustainability
Customer / stakeholders
Internal processes

Pages in the annual
financial statements
14 - 18
14 - 18
14 - 18
14 - 18

We performed procedures to determine whether the reported
performance information was properly presented and whether
performance was consistent with the approved performanceplanning documents. We performed further procedures todetermine whether the indicators and related targets were
measurable and relevant, and assessed the reliability of thereported performance information to determine whether it was
valid, accurate and complete.
We did not raise any material findings on the usefulness andreliability of the reported performance information for theobjectives indicated above.

In accordance with the PAA and the general notice issued interms thereof, we have a responsibility to report material findingson the compliance of the public entity with specific matters in
key legislation. We performed procedures to identify findings but
not to gather evidence to express assurance.
The material findings on compliance with specific matters in key
legislations are as follows:
Annual financial statements
The financial statements submitted for auditing were notprepared in accordance with the prescribed financial reporting
framework, as required by section 55(1)(b) of the PFMA.
Material misstatements of disclosure items identified by theauditors in the submitted financial statement were corrected,
resulting in the financial statements receiving an unqualified
audit opinion.
OTHER INFORMATION
The accounting authority is responsible for the other information.
The other information comprises the information included in
the annual report, which includes the confirmation of accuracy
and fair presentation, the accounting officer’s statement ofresponsibility of annual financial statements, the report of theboard audit committee and the directors’ report. The other23

INDEPENDENT AUDITOR’S REPORT TO
PARLIAMENT
information does not include the consolidated and separate
financial statements, the auditor’s report and those selected
objectives presented in the annual performance report that havebeen specifically reported in this auditor’s report.
Our opinion on the financial statements and findings on thereported performance information and compliance withlegislation do not cover the other information and we do not
express an audit opinion or any form of assurance conclusion
thereon.

INTERNAL CONTROL DEFICIENCIES
We considered internal control relevant to our audit of theconsolidated and separate financial statements, reported
performance information and compliance with applicablelegislation; however, our objective was not to express any form ofassurance on it. We did not identify any significant deficiencies ininternal control.
REPORTABLE IRREGULARITY

In connection with our audit, our responsibility is to read theother information and, in doing so, consider whether the otherinformation is materially inconsistent with the consolidated
and separate financial statements and the selected objectives
presented in the annual performance report, or our knowledge
obtained in the audit, or otherwise appears to be materially
misstated.

In accordance with our responsibilities in terms of sections
44(2) and 44(3) of the Auditing Profession Act, we report that
we have identified a reportable irregularity in terms of the
Auditing Profession Act. We have reported such matter tothe Independent Regulatory Board for Auditors. The matter
pertaining to the reportable irregularity has been described innote 43 to the consolidated and separate financial statements.

If based on the work we have performed, we conclude that
there is a material misstatement in this other information, weare required to report that fact. We have nothing to report in thisregard.

AUDIT TENURE

Ngubane and Company (JHB) Inc.
Registered Auditor

SizweNtsalubaGobodo Grant Thornton Inc.
Registered Auditor

Per Nqabisa Ravele
Director
Chartered Accountant (SA) Registered Auditor

Per Nhlanhla Sigasa
Director
Chartered Accountant (SA) Registered Auditor

31 July 201931 July 2019

Ngubane and Company (JHB) Inc.
Ngubane House 1 Superior Close Midrand
1685

SizweNtsalubaGobodo Grant Thornton Inc.
SNG Grant Thornton Office Park 20 Morris Street East Woodmead
2191

24

In terms of the IRBA rule published in Government Gazette
Number 39475 dated 4 December 2015, we report that
Ngubane and Company (JHB) Inc. and SizweNtsalubaGobodo
Grant Thornton Inc. have been the auditors of the Industrial
Development Corporation of South Africa Limited for 2 years and12 years respectively.

INDEPENDENT AUDITOR’S REPORT TO
PARLIAMENT
ANNEXURE – AUDITOR’S RESPONSIBILITY
FOR THE AUDITAs part of an audit in accordance with the ISAs, we exercise
professional judgement and maintain professional scepticism
throughout our audit of the consolidated and separate financial
statements, and the procedures performed on reported
performance information for selected objectives and on theGroup’s compliance with respect to the selected subject matters.

FINANCIAL STATEMENTS
In addition to our responsibility for the audit of the consolidated
and separate financial statements as described in the auditor’sreport, we also:•	
identify and assess the risks of material misstatement of theconsolidated and separate financial statements, whether
due to fraud or error, design and perform audit procedures
responsive to those risks, and obtain audit evidence thatis sufficient and appropriate to provide a basis for our
opinion. The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting fromerror, as fraud may involve collusion, forgery, intentionalomissions, misrepresentations, or the override of internal
control.
•	
obtain an understanding of internal control relevant to theaudit to design audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group’s internal control.
•	evaluate the appropriateness of accounting policies used
and the reasonableness of accounting estimates andrelated disclosures made by the accounting authority.
•	
conclude on the appropriateness of the accounting
authority’s use of the going concern basis of accounting
in the preparation of the financial statements. We
also conclude, based on the audit evidence obtained,
whether a material uncertainty exists related to events orconditions that may cast significant doubt on the Industrial
Development Corporation of South Africa Limited and its
subsidiaries ability to continue as a going concern. If weconclude that a material uncertainty exists, we are required
to draw attention in our auditor’s report to the related

disclosures in the financial statements about the material
uncertainty or, if such disclosures are inadequate, to modify
the opinion on the financial statements. Our conclusions
are based on the information available to me at the date of
the auditor’s report. However, future events or conditions
may cause a Group to cease to continue as a going
concern.
•	evaluate the overall presentation, structure and content
of the financial statements, including the disclosures, andwhether the financial statements represent the underlying
transactions and events in a manner that achieves fairpresentation.
•	obtain sufficient appropriate audit evidence regarding
the financial information of the entities or businessactivities within the Group to express an opinion on the
consolidated financial statements. We are responsible forthe direction, supervision and performance of the Groupaudit. We remain solely responsible for our audit opinion.

COMMUNICATION WITH THOSE CHARGED WITH
GOVERNANCE
We communicate with the accounting authority regarding,among other matters, the planned scope and timing of theaudit and significant audit findings, including any significant
deficiencies in internal control that we identify during our audit.
We also confirm to the accounting authority that we havecomplied with relevant ethical requirements regarding
independence, and communicate all relationships and othermatters that may reasonably be thought to have a bearing on
our independence, and where applicable, related safeguards.
From the matters communicated with the accounting authority,
we determine those matters that were of most significance inthe audit of the consolidated and separate financial statementsof the current period and are therefore the key audit matters.
We describe these matters in our auditor’s report unless law or
regulation precludes public disclosure about the matter or when,in extremely rare circumstances, we determine that a mattershould not be communicated in our report because the adverse
consequences of doing so would reasonably be expected tooutweigh the public interest benefits of such communication.

25

Statement of Financial Position

Annual Financial Statements for the Year Ended 31 March 2019

Figures in Rand million
AssetsCash and cash equivalents
Derivative financial instruments
Trade and other receivables
Inventories
Current tax receivable
Loans and advances
Investments
Non-current assets held for sale and assets of disposal groups
Investments in subsidiaries
Investments in associates
Deferred tax
Investment property
Property, plant and equipment
Biological assets
Intangible assets
Total Assets
Equity and Liabilities
EquityEquity Attributable to Equity Holders of Parent
Share capital
Reserves
Retained income

Note(s)
16
11
15
14

26

2018

Company
2019
2018

9 809
1
3 865
2 051
273
25 88060 32036
32 752
1 885
290
7 343
93
9
144 607

6 156
142
3 351
1 748
270
30 66057 5164 508
23 972
487
403
7 683
52
10
136 958

9 233
2 084
1
252
27 93236 29647 43232 1293758
155 454

5 726
108
1 257
4
270
28 56435 94146 39523 62332
54
141 97418

1 393
50 86943 34095 602(299)
95 3031 393
45 09745 53392 02384
92 107

1 393
68 41023 29493 09793 097

1 393
59 09427 29887 78587 785

16
11
36

49
39
3 042
5
375
39 486
5 747
194
366
1
49 304
144 607

19
139
3 379
8
384
2 108
33 2174 707
888
244 851
136 958

17
1 078
183
54 1256 719
194
41
62 357155 454

126
1 097
2
188
46 7236 012
41
54 189141 974

12
13
28
9
10
42
6
5
7
8

Non-controlling interest
Total Equity
Liabilities
Bank overdraft
Derivatives
Trade and other payables
Current tax payable
Retirement benefit obligation
Liabilities of disposal groups
Borrowings
Deferred tax
Financial Guarantees
Provisions
Share-based payment liability
Total Liabilities
Total Equity and Liabilities

Group
2019

37
28
19
42
25
29
30

Statement of Profit or Loss and Other
Comprehensive Income
Annual Financial Statements for the Year Ended 31 March 2019

Figures in Rand million
Continuing operations
Revenue
Cost of sales
Gross profit
Other income
Profit (loss) on sale of financial assets
Loss on financial assets classified as FVTPL
Expected credit losses
Financial assets written off
Operating expenses
Operating profit
Finance costs
Non-administrative income
Income from equity accounted investments
Profit (loss) before taxation
Taxation
Profit (loss) from continuing operations
Discontinued operations(Loss) from discontinued operations
Profit (loss) for the year

Note(s)
20&21

23

32
22
31

33

28

Group
2019

2018

Company20192018

17 910(8 307)
9 603
234
68
(607)
(611)
(2 430)(3 930)2 327(2 825)
644
146
574
720

14 223(6 226)
7 997
1 594
2 383
(6 957)5 017(2 433)
378
419
3 381
381
3 762

8 179
8 179
28
(7)
(1 168)(1 313)(2 300)(1 670)
1 749(2 573)
(824)
354
(470)

6 638
6 638
1 423
2 383
(6 438)4 006(2 492)
378
1 892
201
2 093

720

(538)
3 224

(470)

2 093

-

5

-

-

21
10 581(1 556)
9 046

2
1
8

24
15 463(2 169)13 318

12
12

728
-

(149)
937
(405)

-

2 187
60

728
9 774
10 494

145
528
536
3 760

13 31812 848

(331)
1 916
1 928
4 021

Other comprehensive income:Items that will not be reclassified to profit or loss:
Share of comprehensive income of equity accounted
Investments
Remeasurements on net defined benefit liability/asset
Fair value movements on equity instruments
Income tax relating to items that will not be reclassified
Total items that will not be reclassified to profit or loss
Items that may be reclassified to profit or loss:
Exchange differences on translating foreign operations
Available-for-sale financial assets adjustments
Share of comprehensive income of equity accounted
investments
Income tax relating to items that may be reclassified
Total items that may be reclassified to profit or loss
Other comprehensive income for the year net of taxation
Total comprehensive income for the year

39

27

Statement of Profit or Loss and Other
Comprehensive Income
Annual Financial Statements for the Year Ended 31 March 2019

Figures in Rand million
Profit for the year attributable to:
Owners of the Parent
Non-controlling interest

Total comprehensive income for the year attributable to:
Owners of the parent
Non-controlling interest

28

Note(s)

Group
2019

2018

Company
2019
2018

1 103
(383)
720

3 440
(216)
3 224

(470)
(470)

2 093
2 093

10 885(391)
10 494

3 976
(216)
3 760

12 85012 850

4 021
4 021

Statement of Changes in Equity
Annual Financial Statements for the Year Ended 31 March 2019
Group
Share
capitalFigures in Rand million
Balance at 01 April 2017
Other comprehensive income
Total comprehensive income
for the year
Minority interest
Fair value adjustments
Dividends
Changes in ownership interest control not lost
Total contributions by anddistributions to owners ofcompany recognised directlyin equity
Balance at 01 April 2018
Comprehensive income
Total comprehensive income
for the year
IFRS 9 transitional
Transactions with othershareholders
Share of equity accounted
investments
Fair value adjustments
Day 1 gain on liabilities
Dividends
Reclassification adjustments
Amortised gain on bonds
Total contributions by anddistributions to owners ofcompany recognised directlyin equity
Balance at 31 March 2019

Foreign Associated Revaluation Common Other Share- Retained
Non
Total
currency
entities
reserve control reservebased Earnings Controlling Equity
translation
reserve
reserve
payment
interest
reserve
reserve

1 393
-

1 746
(548)
(548)

909
5
5

39 951
1 077
1 077

1 657
-

(6)
2
2

304
-

42 1433 440
3 440

193 88 290(216) 3 760(216) 3 760

-

-

-

-

-

-

-

(50)
-

107
-

107
(50)
-

-

(548)

5

1 077

-

2

-

3 390

(109)

3 817

1 393
-

1 198
-

914
-

41 028
-

1 657
-

(4)
21
21

304
-

45 533712
712

84 92 107
8
741
8
741

-

-

-

(1 713)----(5 377)-- (7 090)(391) (391)

-

728

-

-

-

-

-

-

-

728

-

728

-

9 025
(2 289)
5 023

-

-

-

378
(50)
2 289
(145)
(2 905)

(391)

9 025
378
(50)
(145)
2 455

1 393

1 926

914

46 051

1 657

17

304

43 340(299) 95 303

29

Statement of Changes in Equity
Annual Financial Statements for the Year Ended 31 March 2019
Company
SharecapitalFigures in Rand million
Balance at 01 April 2017
Profit for the year
Other comprehensive
incomeTotal comprehensive
income for the year
Dividends
Total contributions by anddistributions to ownersof company recognised
directly in equity
Balance at 01 April 2018
Total comprehensive Lossfor the year
IFRS 9 transition impact
Fair value adjustments
Reclassification adjustments
Dividends
Day 1 gain on bonds
Amortisation of gains on
bonds
Total contributions by anddistributions to ownersof company recognised
directly in equity
Balance at 31 March 2019
Note(s)Foreign Associated Revaluation Common Other Share- RetainedNoncurrency
entities
reserve control reservebased Earnings Controllingtranslation
reserve
reserve
payment
interest
reserve
reserve

Total

1 393
-

-

(35)
60

55 961
1 856

1 222
-

18
12

-

25 2552 093--

83 814
2 093
1 928

-

-

60

1 856

-

12

-

2 093

-

4 021

-

-

60

1 856

-

12

-

(50)
2 043

-

(50)
3 971

1 393
-

-

25
-

57 817
-

1 222
-

30
24

-

27 298(470)-

87 785
(446)

-

-

-

(1 713)13 294(2 289)----(5 891)
2 289
(50)
263
(145)

-

(7 604)13 294
(50)
263
(145)

-

-

-

9 292

-

-

-

(3 534)

-

5 758

1 393
18

-

25

67 109

1 222

54

-

23 294-93 097

The accounting policies on page 35 and the notes on pages 51 to 118 form an integral part of the financial statements.
* The translation deficit represents the cumulative position of translation gains and losses arising from the conversion of the net assetsof the foreign subsidiary companies, and also the long term loan to a subsidiary company, to the reporting currency.

30

Statement of Cash Flows

Annual Financial Statements for the Year Ended 31 March 2019
Group
2019

2018

Company
2019
2018

24

(2 106)4 465
3 383(2 825)(31)(3 781)
6 264
5 369

36
3 374
2 855
(2 318)453(7 511)
2 850
(261)

(2 233)4 486
3 306(2 573)16(5 492)
7 400
4 910

(359)
3 445
2 832
(2 249)264(6 510)
4 170
1 593

5
5

(1 440)
274
(1)
87
(2)
(3 322)
(72)
37
2 744
(1 694)(1 719)355(4)(2 077)
(66)
(18)
2 381
(1 148)(170)
142(4 069)2 744(1 353)(21)(4 799)(38)
2 381(2 477)

Cash flows from financing activities
Dividends paid
Net cash from financing activities

(50)
(50)

(50)
(50)

(50)
(50)

(50)
(50)

Total cash movement for the year
Cash at the beginning of the year
Total cash at end of the year

3 623
6 137
9 760

(1 459)
7 596
6 137

3 507
5 726
9 233

(934)
6 660
5 726

Figures in Rand million
Cash flows from operating activities
Cash (used in)/generated from operations
Interest received
Dividend income
Finance costs
Tax (paid) refunded
Increase on operating assets
Increase in operating liabilities
Net cash from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Proceeds on sale of property , plant and equipment
Purchase of investment property
Sale of investment property
Purchase of intangible assets
Acquisition of investments
Purchase of other financial assets
Purchase of biological assets
Sale of biological assets
Proceeds on realisation of investments
Net cash from investing activities

Note(s)

8

7
7

16

31

Reportable segments

Annual Financial Statements for the Year Ended 31 March 2019
Industrial Development
Corporation
Figures in Rand million
IncomeInterest received
Dividends received
Fee income
Farming, manufacturing and mining income
Revenue *Share of profits of equity-accounted investments
Other income
Net capital gains
ExpensesFinancing costs
Operating expenses
Share of losses of equity-accounted investments
Taxation
Depreciation
Project feasibility expenses
Net movement in impairments
Impairment of property, plant and equipment
Profit/(Loss) from discontinued operations
Profit for the year
Total assets
Interest in equity-accounted investments
Total liabilities
Capital expenditure
Capital expenditure commitments*All revenue is from external customers.

32

Other financing
activities

Foskor (Pty) Limited

2019

2018

2019

2018

2019

2018

4 486
3 306
387
8 179
28
(7)

3 445
2 832
361
6 638
1 423
2 383

111
737
43
891
16
-

147
683
93
923
45
17
11

33
5 429
5 462
91
(0)

34
5 893
5 927
(5)
82
-

(2 573)(1 546)
354
(24)
(100)
(4 781)(470)
155 454
32 12962 357170-(2 492)
(979)
201
(22)
(129)
(4 930)2 093
141 974
23 62354 189
21
-

(41)
(274)
(6)
3
(36)
(151)
402
39 647
914
2 880
3
-

(34)
(397)
(9)
(4)
(110)
442
37 044
992
2 994
4
-

(259)
(5 317)
288
(353)
(88)
7 736
25
2 810
468
238

(79)
(6 311)
188
(336)
(229)
(763)
8 341
3 949
728
-

Scaw South Africa,
Grinding Media andCast Products
2019
2018

Other*

Total

2019

2018

2019

2018

3 211
3 211
-

1
3 554
3 555
2 078
-

(165)
(660)
2
990
167
650
99
75

(253)
(660)
(2)
(1 905)(2 820)379(2 409)
(11)

4 465
3 383
432
9 630
17 910
650
234
68

3 374
2 855
452
7 542
14 223
419
1 191
2 383

(19)
(3 499)(28)(335)(1 633)
784
319
-

(94)
(3 820)
(113)
(5)
(74)
1 527
5 575
10 037
90
-

67
(875)
(43)
(210)
1 284
1 214
(56 597)(316)(19 527)
480
235

266
2 628
1
(38)
2 388
5
(464)
(75)
(55 977)(643)(26 318)876
16(2 825)(11 514)
(6)
574
(623)
100
(3 648)720
144 60732 75249 3041 440
473(2 433)(8 879)
381
(513)
(129)
(2 652)
(229)
(538)
3 224
136 958
23 97244 851
1 719
16

33

Geographical segments

Annual Financial Statements for the Year Ended 31 March 2019

Figures in Rand million
IncomeInterest received
Dividends received
Fee income
Farming, manufacturing andmining income
Revenue
Share of profits of equityaccounted investments
Other income
Net capital gains
ExpensesFinancing expenses
Operating expenses
Share of losses of equityaccounted investments
Taxation
Depreciation
Impairment of property,
plant and equipment
Net movement in
impairments
Project feasibility expenses
Impairment reversal
Profit for the year
Total assets
Interest in equity-accounted
investments
Total liabilities
Capital expenditure
Capital expenditurecommitments

South Africa
2019
2018

Other*
2019

2018

Total
2019

2018

3 645
2 544
432
9 585

2 757
2 281
454
7 354

820
776
45

617
515
61

63
-

59
125

4 465
3 383
432
9 630

3 374
2 855
454
7 540

16 206644

12 846
(11)

1 641
-

1 193
430

63
-

184
-

17 910644

14 223
419

232
68

1 584
2 383

-

-

1
-

10
-

234
68

1 594
2 383

(2 824)(11 470)-(2 433)(9 089)
-

(1)
(44)
-

(2)
(59)

-

(1)
(132)

(2 825)(11 514)-(2 433)(9 092)
(191)

574
(623)
-

381
(512)
(229)

-

-

-

-

574
(623)
-

381
(512)
(229)

(3 648)(2 652)

-

-

-

-

(3 648)(2 652)

(100)
(941)
127 723
32 752

(129)
(538)
1 601
124 426
20 731

1 596
15 392-

1 596
10 185
3 241

64
1 492
-

61
2 347
-

(100)
720
144 60732 752

(129)
(538)
3 224
136 958
23 97249 2911 440
473

44 792
1 719
16

13
-

18
-

-

41
-

49 3041 440
473

44 851
1 719
16

Other – includes all countries outside the African continent

34

Rest of Africa
2019
2018

IDC ACCOUNTING POLICIES 2019
1. Accounting policies

related ‘Clarifications to IFRS 15 Revenue from Contracts
with Customers’ (hereinafter referred to as ‘IFRS 15’) replace
IAS 18 ‘Revenue’, IAS 11 ‘Construction Contracts’, and several
revenue-related Interpretations. The new Standard has
been applied retrospectively without restatement, withthe cumulative effect of initial application recognised
as an adjustment to the opening balance of retained
earnings at 1 April 2018. In accordance with the transition
guidance, IFRS 15 has only been applied to contracts thatare incomplete as at 1 April 2018. Impact of IFRS 15 was not
significant on the financial statements.

T he Industrial Development Corporation of South Africa
Limited (IDC, Company or Corporation) is domiciled inSouth Africa. The consolidated financial statements for theyear ended 31 March 2019 comprise the IDC, its subsidiaries
and the Group’s interest in associates and jointly controlled
entities (referred to as the Group).
T he financial statements were authorised for issue by the
directors on 29 July 2019.
1.1 Statement of compliance
The separate and consolidated financial statements havebeen prepared in accordance with and comply with
International Financial Reporting Standards (IFRS) and its
interpretations adopted by the International AccountingStandards Board (IASB) as well as the requirements of the
Public Finance Management Act 1 of 1999 (PFMA).
1.2 Basis of preparation
The separate and consolidated financial statements arepresented in South African Rand, which is the Company’sfunctional currency, rounded to the nearest million.
T hese consolidated financial statements are prepared on
the historical cost basis, except for the following:•	Derivative financial instruments are measured at fairvalue•	Financial instruments designated at fair value throughother comprehensive income are measured at fair value•	Financial instruments classified at fair value throughprofit or loss are measured at fair value•	Investments in subsidiaries, associates and jointlycontrolled entities are carried at fair value in theseparate financial statements of the company•	Biological assets are measured at fair value less costs
to sell•
Investment property is measured at fair value•	Land and buildings are measured at revalued
amount, being its fair value at the date of revaluation
less subsequent accumulated depreciation andaccumulated impairment losses•	Aircrafts are measured at fair value, less subsequentaccumulated depreciation and accumulated
impairment losses•	Non-current assets held-for-sale are measured at fairvalue less cost to sell
1.3	New Standards, amendments and interpretations toexisting standards
1.3.1 New Standards adopted as at 1 April 2018a)	IFRS 15 ‘Revenue from Contracts with Customers’
IFRS 15 ‘Revenue from Contracts with Customers’ and theb)

IFRS 9 ‘Financial Instruments’IFRS 9 replaces IAS 39 ‘Financial Instruments: Recognition
and Measurement’. It makes major changes to the previous
guidance on the classification and measurement offinancial assets and introduces an ‘expected credit loss’model for the impairment of financial assets.
 hen adopting IFRS 9, the Group has applied transitionalW
relief and opted not to restate prior periods. Differences
arising from the adoption of IFRS 9 in relation toclassification, measurement, and impairment arerecognised in retained earnings.
IFRS 9 also contains new requirements on the applicationof hedge accounting. The new requirements look toalign hedge accounting more closely with entities’ risk
management activities by increasing the eligibilityof both hedged items and hedging instruments andintroducing a more principles-based approach toassessing hedge effectiveness. The Group applies the newhedge accounting requirements prospectively and all
hedges qualify for being regarded as continuing hedging
relationships.
The adoption of IFRS 9 has impacted the following areas:• 	the classification and measurement of the Group’s
financial assets.
• 	investments in listed equity securities and the equity
investments in subsidiaries previously classified asavailable-for-sale (AFS) investments under IAS 39 are
now designated to be measured at fair value throughother comprehensive income.
• 	the impairment of financial assets applying the
expected credit loss model. This affects the Group’s
investments in debt-type assets and trade receivables
measured at amortised cost.
 econciliation of statement of financial position balances
R
from IAS 39 to IFRS 9 at 1 April 2018:T he comparatives figures for financial assets were preparedbased IAS 39.

35

IDC ACCOUNTING POLICIES 2019
1.3.2	Standards, amendments and Interpretations to existingStandards not yet effective or early adopted by theGroupAt the date of authorisation of these financial statements,
several new, but not yet effective, Standards, amendments
to existing Standards, and Interpretations have been
published by the IASB. None of these Standards,
amendments or Interpretations have been adopted earlyby the Group.
 anagement anticipates that all relevant pronouncementsMwill be adopted for the first period beginning on or after
the effective date of the pronouncement. New Standards,
amendments and Interpretations neither adopted nor
listed below have not been disclosed as they are notexpected to have a material impact on the Group’s financial
statements.

IDC group has made an irrevocable election at initialrecognition to classify investments in ordinary shares asfinancial assets at FVOCI.
T he classification for debt instruments is determined byboth:•	the entity’s business model for managing the financial
asset•	the contractual cash flow characteristics of thefinancial asset.
 ll income and expenses relating to financial assets thatA
are recognised in profit or loss are presented within financecosts, finance income or other financial items, except for
impairment of trade receivables which is presented within
other expenses.
1.4.3 Subsequent measurement of financial assetsa)

IFRS 16 ‘Leases’IFRS 16 will replace IAS 17 ‘Leases’ and three relatedInterpretations. It completes the IASB’s long running projectto overhaul lease accounting. Leases will be recorded in thestatement of financial position in the form of a right-of-use
asset and a lease liability. There are two important reliefs
provided by IFRS 16 for assets of low value and short-termleases of less than 12 months. IFRS 16 is effective fromperiods beginning on or after 1 March 2019. Early adoption
is permitted; however, the Group have decided not to early
adopt. IDC does not anticipate a significant impact on theannual financial statements.

1.4 Financial instruments
1.4.1 Recognition and derecognition
Financial assets and financial liabilities are recognised when
the Group becomes a party to the contractual provisions of
the financial instrument. Financial assets are derecognised
when the contractual rights to the cash flows from thefinancial asset expire, or when the financial asset andsubstantially all the risks and rewards are transferred.
1.4.2 Classification and initial measurement of financial assets
Financial assets are initially measured at fair value adjusted
for transaction costs (where applicable). As with theinitial recognition of financial instruments, the fair value isdetermined by applying the guidance set out in IFRS 13.
F inancial assets, other than those designated and effective
as hedging instruments, are classified into the following
categories:•
amortised cost;•fair value through profit or loss (FVTPL);•	fair value through other comprehensive income (FVOCI).

36

1.4.3.1
Financial assets at amortised cost
Financial assets are measured at amortised cost if the assets
meet the following conditions (and are not designated as
FVTPL):•	they are held within a business model whose
objective is to hold the financial assets and collect its
contractual cash flows•	the contractual terms of the financial assets give rise
to cash flows that are solely payments of principal andinterest (SPPI) on the principal amount outstanding.
T he amortised cost of a financial instrument is the amountat which the financial instrument is measured on initialrecognition minus principal repayments, plus or minus
the cumulative amortisation using the effective-interest
method of any difference between the initial contractual
amount and the maturity amount, less any cumulative
impairment losses.
T he effective-interest rate is the rate that exactly discounts
estimated future cash payments or receipts through the
expected life of the financial asset or financial liability
to the gross carrying amount of a financial asset (i.e. its
amortised cost before any impairment allowance) or to theamortised cost of a financial liability. The calculation does
not consider ECLs and includes transaction costs, premiums
or discounts, fees and points paid or received that are
integral to the effective interest rate, such as origination
fees. For purchased or originated credit impaired financial
assets (assets that are credit-impaired at initial recognition)
the group calculates the credit-adjusted effective interest
rate, which is calculated based on the amortised cost of
the financial asset instead of its gross carrying amount andIDC ACCOUNTING POLICIES 2019
incorporates the impact of the ECLs in estimated future
cashflows.
 hen the group revises the estimates of future cashflows,W
the carrying amount of the respective financial asset or
financial liability is adjusted to reflect the new estimate,discounted using the original effective interest rate. Anychanges are recognised in profit or loss.
IDC group loans and advances and preference sharesthat meet the above criteria are measured at amortised
cost. Cash and cash equivalents; trade and most otherreceivables also fall into this category of financial
instruments.
1.4.3.2	Financial assets at fair value through profit or loss
(FVTPL)Financial assets that are held within a different businessmodel other than ‘hold to collect’ or ‘hold to collect and sell’are categorised at fair value through profit and loss. Further,irrespective of business model financial assets whose
contractual cash flows are not solely payments of principal
and interest are accounted for at FVTPL. All derivative
financial instruments fall into this category, except for those
designated and effective as hedging instruments.
 ssets in this category are measured at fair value withA
gains or losses recognised in profit or loss. The fair valuesof financial assets in this category are determined byreference to active market transactions or using a valuation
technique where no active market exists, refer to note 1.28.
1.4.4 Impairment of financial assets
IFRS 9’s impairment requirements use more forwardlooking information to recognise expected credit losses– the ‘expected credit loss (ECL) model’. This replaces IAS
39’s ‘incurred loss model’. Instruments within the scope ofthe new requirements included loans and other debt-typefinancial assets measured at amortised cost, cash and cash
equivalents, trade receivables, contract assets recognised
and measured under IFRS 15 and loan commitments andsome financial guarantee contracts (for the issuer) that are
not measured at fair value through profit or loss.
 ecognition of credit losses is no longer dependent onR
the group’s first identifying a credit loss event. Instead
IDC considers a broader range of information whenassessing credit risk and measuring expected credit losses,
including past events, current conditions, reasonable andsupportable forecasts that affect the expected collectabilityof the future cash flows of the instrument.

In applying this forward-looking approach, financial assets
are broken down into these three-stages to determine theamount of impairment to be recognised as expected credit
losses (ECL) at each reporting date as well as the amount ofinterest revenue to be recorded in future periods:– 	Stage 1: Performing loan (Credit risk has notincreased significantly since initial recognition –recognise 12 months ECL, and recognise interest on agross basis);– 	Stage 2: Underperforming loan (Credit risk has
increased significantly since initial recognition –recognise lifetime ECL, and recognise interest on agross basis);– 	Stage 3: Non-performing loan (Financial asset iscredit impaired – recognise lifetime ECL, and presentinterest on a net basis (i.e. on the gross carrying
amount less credit allowance).
 easurement of the expected credit losses is determinedMby a probability-weighted estimate of credit losses over the
expected life of the financial instrument.
 s SICR is assessed on a business partner level, as opposedA
to a contract level, contagion is implicitly allowed for. SICR
is driven by deterioration in credit risk, being added on
the watchlist and arrears greater than 30 days. Business
partners that have been flagged as being in Workout andRestructuring and those handed over to Legal Services forcollection are non-performing and are moved to Stage
3 irrespective of the arrears amounts. When a business
partner’s credit rating, account or economical standing that
improves, they will meet the criteria for curing. That will
result in the instrument or exposure to return to a lower
stage. Where exposure is less than R100 million the curing
period is 3 months and where exposure is R100 million ormore the curing period is 12 months.
T he stages of ECL can be overridden in instances of technicalarrears, deferments in process, in instances where a business
partner is transferred to Workout and Restructuring andLegal Services department and lastly where there is evidence
indicating deterioration in credit risk or debt serviceability.
Stage overrides are approved by the IMC SPPI anddocumented. IDC also applies the 3-stage impairment model
to financial guarantees and loan commitments.
•	The ECL is calculated by taking into account theProbability of Default, Exposure At Default, Loss Given
Default and Macro-economic conditions forecasts.
Probabilty of Default (PD) - is the likelihood of an
account defaulting within a specified month of its
term;

37

IDC ACCOUNTING POLICIES 2019
instruments in cash flow hedge relationships. Thesearrangements have been entered into to mitigate foreign
currency exchange risk arising from certain highly probabletransactions denominated in foreign currency.

•	Exposure at Default (EAD) - is the total value a bank is
exposed to when a loan defaults;•	Loss Given Default (LGD) - is the proportion of
the exposure that is most likely to be recovered,considering the security held against the exposure.
T rade receivables, cash and cash equivalents andcontract assets that do not contain a significant financing
component, we use a simplified impairment approach e.g.
financial assets with a credit rating or trade receivables witha maturity of 12 months or less.
1.4.5	Classification and measurement of financial liabilities
As the accounting for financial liabilities remains largely
the same under IFRS 9 compared to IAS 39, the Group’s
financial liabilities were not impacted by the adoption of
IFRS 9. However, for completeness, the accounting policy isdisclosed below.

1.5 Investments in subsidiaries
Subsidiaries are entities controlled by the IDC. The Group‘controls’ an investee if it is exposed to, or has rights to,variable returns from its involvement with the investee andhas the ability to affect those returns through its powerover the investee. The financial statements of subsidiaries
are included in the consolidated financial statementsfrom the date on which control commences until thedate when control ceases. Investments in subsidiaries in
the Company’s separate financial statements are carriedat fair value as financial assets designated through othercomprehensive income (FVOCI).
i)

Business combinations
The acquisition method is used to account for theacquisition of subsidiaries by the Group. The cost of an
acquisition is measured as the fair value of the assets
given, equity instruments issued and liabilities incurred orassumed at the date of exchange. The assets, liabilities andcontingent liabilities acquired are assessed and includedin the statement of financial position at their estimatedfair value to the Group. If the cost of acquisition is higher
than the net assets acquired, any difference between the
net asset value and the cost of acquisition of a subsidiary istreated in accordance with the Group’s accounting policy
for goodwill. If the cost of acquisition is less than the fairvalue of the net assets of the subsidiary acquired, thedifference is recognised directly in profit or loss.

ii)

Transactions eliminated on consolidation
Intercompany transactions, balances and unrealised gains
on transactions between Group companies are eliminatedon consolidation.

T he Group’s financial liabilities include borrowings, tradeand other payables and derivative financial instruments.
F inancial liabilities are initially measured at fair value, and,
where applicable, adjusted for transaction costs unless theGroup designated a financial liability at fair value throughprofit or loss.
S ubsequently, financial liabilities are measured at amortised
cost using the effective interest method except forderivatives and financial liabilities designated at FVTPL,
which are carried subsequently at fair value with gains orlosses recognised in profit or loss (other than derivative
financial instruments that are designated and effective as
hedging instruments).
 ll interest-related charges and, if applicable, changes in anA
instrument’s fair value that are reported in profit or loss areincluded within finance costs or finance income.
1.4.6	Derivative financial instruments and hedge accounting
IDC applies the new hedge accounting requirements
in IFRS 9 prospectively. All hedging relationships thatwere hedging relationships under IAS 39 at the 31 March2018 reporting date meet the IFRS 9’s criteria for hedge
accounting at 1 April 2018 and are therefore regarded ascontinuing hedging relationships.
 erivative financial instruments are accounted for at fairDvalue through profit and loss (FVTPL).
F or the reporting periods under review, IDC has notdesignated forward currency contracts as hedging

38

 nrealised losses are eliminated in the same way asUunrealised gains, but only to the extent that there is noevidence of impairment.
iii)

Non-controlling interests
Non-controlling interests (NCI) are measured at their
proportionate share of the acquiree’s identifiable net assets
at the acquisition date. Changes in the Group’s interestin a subsidiary that do not result in a loss of control areaccounted for as equity transactions.

IDC ACCOUNTING POLICIES 2019
iv)

Loss of control
When the Group loses control over a subsidiary, itderecognises the assets and liabilities of the subsidiary,
and any related NCI and other components of equity. Any
resulting gain or loss is recognised in profit or loss. Anyinterest retained in the former subsidiary is measured at fairvalue when control is lost.

1.6 Consolidated Structured entities
The Group has established a number of consolidated
structured entities (CSEs) for trading and investment
purposes. CSEs are entities that are created to accomplish
narrow and well defined objectives. A CSE is consolidated if,
based on an evaluation of the substance of the relationshipwith the Group and the Group has control over the
CSE. CSEs are the Group entities which are designed sothat voting rights are not relevant to the determinationof power, but instead other rights are relevant. CSEs
controlled by the Group are generally those establishedunder terms that impose strict limitations on the decisionmaking powers of the CSEs’ management and that result in
the Group receiving the majority of the benefits related to
the CSEs’ operations and net assets.
Investments in CSEs in the Company’s separate financial
statements are carried at fair value.
1.7 Investments in associates
Investments in associates are all entities over which theGroup has significant influence but not control, generallyaccompanying a shareholding of between 20% and 50% of
the voting rights. Investments in associates are accounted
for using the equity method of accounting and are initiallyrecognised at cost. The Group’s investment in associates
includes goodwill identified on acquisition, net of any
accumulated impairment loss.
T he Group’s share of its associates’ post-acquisition profits
and losses is recognised in profit or loss, and its share of
post-acquisition movements in reserves is recognisedin other comprehensive income. The cumulative postacquisition movements are adjusted for against thecarrying amount of the investment. When the Group’s shareof losses in an associate equals or exceeds its interest in
the associate, including any other unsecured receivables,
the Group does not recognise further losses, unless it has
incurred obligations or made payments on behalf of theassociate.

investment to the extent of the Group’s interest in theinvestment. Unrealised losses are eliminated only to theextent that there is no evidence of impairment.
Investments in associates in the Company’s separate
financial statements are carried at fair value.
1.8 Joint ventures and partnerships
Joint ventures and partnerships are those entities overwhose activities the Group has joint control, whereby theGroup has rights to the net assets of the arrangement,
rather than rights to its assets and obligations for its
liabilities.
T he consolidated financial statements include the Group’s
share of the total recognised gains and losses of joint
ventures on an equity accounted basis, from the datethat joint control is established by contractual agreement
until the date that it ceases. When the Group’s share oflosses exceeds its interest in a joint venture, the Group’s
carrying amount is reduced to nil and recognition of further
losses is discontinued except to the extent that the Grouphas incurred legal or constructive obligations or madepayments on behalf of a joint venture.
 nrealised gains and losses arising from transactions withU
equity-accounted joint ventures and partnerships are
eliminated against the investment to the extent of theGroup’s interest in the investment.
Investments in joint ventures and partnerships in the
Company’s separate financial statements are carried at fairvalue.
1.9 Intangible assetsa) Goodwill
Business combinations are accounted for using theacquisition method as at the acquisition date.
The Group measures goodwill at the acquisition date as:•
The fair value of the consideration transferred; plus•	The recognised amount of any non-controllinginterests in the acquire; plus
•	If the business combination is achieved in stages, thefair value of the pre-existing equity interest in theacquire; less•	The net recognised amount (generally fair value)of the identifiable assets required and the liabilities
assumed.

 nrealised gains and losses arising from transactions withU
equity-accounted investments are eliminated against the39

IDC ACCOUNTING POLICIES 2019 hen the excess is negative, a bargain purchase gain isW
recognised immediately in profit and loss.

fair values can be measured reliably. The cost of suchintangible assets is their fair value at the acquisition date.

S ubsequent to initial recognition, goodwill is measured
at cost less accumulated impairment losses. Impairment
losses on goodwill are recognized in profit or loss anddetermined in accordance with the impairment of nonfinancial assets.

S ubsequent to initial recognition, intangible assets acquired
in a business combination are measured at cost lessaccumulated amortisation and accumulated impairment
losses, on the same basis as intangible assets acquired
separately.

T he consideration transferred does not include amounts
related to the settlement of pre-existing relationships. Suchamounts are generally recognised in profit or loss.
T ransaction costs, other than those associated with theissue of debt or equity securities, that the Group incurs inconnection with a business combination are expensed as
incurred.
 ny contingent consideration payable is measured at fairAvalue at the acquisition date. If the contingent consideration
is classified as equity, then it is not remeasured, and thesettlement is accounted for within equity. Otherwise,
subsequent changes in the fair value of the contingent
consideration are recognised in profit or loss.
If share-based payment awards (replacement awards)
are required to be exchanged for awards held by theacquiree’s employees (acquirees’ awards) and relate topast services, then all or a portion of the amount of theacquirer’s replacement awards is included in measuring
the consideration transferred in the business combination.
This determination is based on the market-based value ofthe replacement awards compared to the market-basedvalue of the acquiree’s awards and the extent to which thereplacement awards relate to past and/or future service.

1.10 Impairment of non-financial assets
At each reporting date, the Group reviews the carrying
amounts of its non-financial assets (other than biologicalassets, land and buildings, deferred tax assets andinvestment property,) to determine whether there is any
indication of impairment. If any such indication exists, thenthe asset’s recoverable amount is estimated. Goodwill istested annually for impairment.
F or impairment testing, assets are grouped together into
the smallest group of assets that generates cash inflows
from continuing use that is largely independent of the cash
inflows of other assets or cash-generating units (CGUs).
Goodwill arising from a business combination is allocatedto CGUs or groups of CGUs that are expected to benefit
from the synergies of the combination.
T he ‘recoverable amount’ of an asset or CGU is the greaterof its value in use and its fair value less costs to sell. ‘Value in
use’ is based on the estimated future cash flows, discounted
to their present value using a pre-tax discount rate thatreflects current market assessments of the time value ofmoney and the risks specific to the asset or CGU.
 n impairment loss is recognised if the carrying amount ofA
an asset or CGU exceeds its recoverable amount.

b)

Intangible assets acquired separately
Intangible assets acquired separately are measured on
initial recognition at cost. Following initial recognition,
intangible assets are carried at cost less any accumulated
amortisation and accumulated impairment losses, if any.
Amortisation is charged on a straight-line basis over theestimated useful lives of the intangible assets which
do not exceed four years. The estimated useful life andamortisation method are reviewed at the end of eachannual reporting period, with the effect of any changes
being accounted for on a prospective basis.

Impairment losses are recognised in profit or loss. They
are allocated first to reduce the carrying amount of any
goodwill allocated to the CGU, and then to reduce thecarrying amounts of the other assets in the CGU on a pro
rata basis.
An impairment loss in respect of goodwill is not reversed.
For other assets, an impairment loss is reversed only to theextent that the asset’s carrying amount does not exceed
the carrying amount that would have been determined,
net of depreciation or amortisation if no impairment loss
had been recognised.

c)

Intangible assets acquired in a business combination
Intangible assets acquired in a business combination are
identified and recognised separately from goodwill where
they satisfy the definition of an intangible asset and their

 ny impairment loss of a revalued asset is treated as aA
revaluation decrease.

40

IDC ACCOUNTING POLICIES 20191.11 Foreign currency translationa) Transactions and balancesTransactions in foreign currencies are translated into South
African Rand at the foreign exchange rate prevailing at thedate of the transaction. The foreign currency gain or loss onmonetary items is the difference between amortised costin the functional currency at the beginning of the period,
adjusted for effective interest and payments during theperiod, and amortised cost in foreign currency translated
at the exchange rate at the end of the reporting period, if
applicable.
 onetary assets and liabilities denominated in foreignMcurrencies at the reporting date have been translated
into South African Rand at the rates ruling at that date.
Non-monetary assets and liabilities that are measured interms of historical cost in a foreign currency are translatedusing the exchange rate at the date of the transaction.
Non-monetary assets and liabilities denominated in foreign
currencies that are stated at fair value are translated to Randat foreign exchange rates ruling at the dates the fair value
was determined.
F oreign currency differences are recognized in profit andloss, except for FVOCI investments.
b)

Financial statements of foreign operations
All foreign operations have been accounted for as foreign
operations. Assets and liabilities of foreign operations,
including goodwill and fair value adjustments arising on
consolidation are translated into South African Rand at
foreign exchange rates ruling at the reporting date. Income
and expenses are translated at the average foreign exchange
rates, provided these rates approximate the actual rates, forthe year. Exchange differences arising from the translation offoreign operations are recognised in other comprehensive
income. When a foreign operation is disposed of, in part or in
full, the relevant amount in the foreign currency translation
reserve is transferred to profit or loss.

1.12 Investment property
Investment property is property held either to earn rental
income or for capital appreciation, or both.
a)MeasurementInvestment property is measured initially at cost, includingtransaction costs and directly attributable expenditure inpreparing the asset for its intended use. Subsequently, allinvestment properties are measured at fair value. Fair value
is the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between
market participants at the measurement date.

 aluation takes place annually, based on the aggregate
Vof the net annual rental receivable from the properties,
considering and analysing rentals received on similar
properties in the neighborhood, less associated costs(insurance, maintenance, repairs and management fees). A
capitalisation rate which reflects the specific risks inherent
in the net cash flows is applied to the net annual rentals toarrive at the property valuations.
 ains or losses arising from a change in fair value areGrecognised in profit or loss.
E xternal, independent valuers having appropriate,
recognised professional qualifications and recent
experience in the location and category of the property
being valued are used to value the portfolio.
 hen the use of a property changes such that it isW
reclassified as property and equipment, its fair value at thedate of reclassification becomes its cost for subsequentaccounting.
1.13 Property, plant and equipmenta) Measurement
All items of property, plant and equipment recognised
as assets are measured initially at cost. Cost includes
expenditures that are directly attributable to the acquisitionof the asset. The cost of self-constructed assets includes
the cost of material and direct labour and any other costdirectly attributable to bringing the asset to a working
condition for its intended use, and the cost of dismantling
and removing the items and restoring the site on
which they are located. Except for land, buildings andaircraft all other items of property, plant and equipment
are subsequently measured at cost less accumulated
depreciation and any accumulated impairment losses.
L and, buildings and aircraft are subsequently measured
at fair value less accumulated depreciation and any
accumulated impairment losses. Land, buildings andaircraft are revalued by external, independent valuers.
Valuers have appropriate recognised professional
qualifications and recent experience in the location andcategory of the property being valued are used to value
the portfolio.
 ny surplus in excess of the carrying amount is transferredA
to a revaluation reserve net of deferred tax. Surpluses onrevaluation are recognised in profit or loss to the extent
that they reverse revaluation decreases of the same assets
recognised as expenses in the previous periods.

41

IDC ACCOUNTING POLICIES 2019 ecreases in revaluation are charged directly against theDrevaluation reserves only to the extent that the decrease
does not exceed the amount held in the revaluation
reserves in respect of that same asset, otherwise they arerecognised in profit or loss.

d) ains or losses arising from de-recognition are determinedG
as the difference between the net disposal proceeds andthe carrying amount of the item of property, plant andequipment and included in profit or loss when the items
are derecognised. When revalued assets are sold, theamounts included in the revaluation reserve are transferred
to retained income.

 here parts of an item of property, plant and equipment
W
have significantly different useful lives, they are accounted
for as separate items of property, plant and equipment.
Although individual components are accounted forseparately, the financial statements continue to disclose asingle asset.
b)c)Subsequent cost
The Group recognises the cost of replacing part of such an
item of property, plant and equipment in carrying amountwhen that cost is incurred if it is probable that the future
economic benefits embodied with the item will flow to theGroup and the cost of the item can be measured reliably.
All other costs are recognised in profit or loss as an expense
as they are incurred.
Depreciation
Depreciation is recognised in profit or loss on a straight-line
basis, based on the estimated useful lives of the underlying
assets. Depreciation is calculated on the cost less any
impairment and expected residual value of the asset. Landis not depreciated.
T he estimated useful lives for the current and comparative
periods are as follows:
Item 		Average useful life
Buildings and infrastructure
Building structure
50 yearsElevators
10 years
Plant and machinery
Aircraft
Heavy plant and machinery
Equipment

5 years
10-20 years
8-10 years

Other property, plant and equipment
Motor vehicles
Office furniture and equipment

1-6 years
1-6 yearsT he residual values, useful lives and depreciation method
are re-assessed at each financial year-end and adjusted if
appropriate.

42

De-recognition
The carrying amount of items of property, plant andequipment are derecognised on disposal or when no future
economic benefits are expected from their use or disposal.

1.14 Biological assets
A biological asset is a living animal or plant.
a)Measurement
 biological asset is measured initially and at reportingA
date at its fair value less costs to sell. If the fair value ofa biological asset cannot be determined reliably at thedate of initial recognition, it is stated at cost less any
accumulated depreciation and impairment losses.
 ains or losses arising on the initial recognition of aG
biological asset at fair value less costs to sell, and from achange in fair value less costs to sell of biological assets, areincluded in profit or loss in the period in which they arise.

1.15 Leasesa) Finance leases
L eases of assets under which the lessee assumes all therisks and benefits of ownership are classified as financeleases.
i.
Finance leases - Group as lessee
Finance leases are recognised as assets and liabilities in thestatement of financial position at amounts equal to the fairvalue of the leased property or, if lower, the present value ofthe minimum lease payments. The corresponding liability
to the lessor is included in the statement of financial
position as a finance lease obligation.
T he discount rate used in calculating the present value ofthe minimum lease payments is the interest rate implicitin the lease. The lease payments are apportioned between
the finance charge and reduction of the outstanding
liability. The finance charge is allocated to each period
during the lease term so as to produce a constant periodic
rate on the remaining balance of the liability.

IDC ACCOUNTING POLICIES 2019
ii. Finance leases - Group as lessor
The Group recognises finance lease receivables in thestatement of financial position.

1.17 Inventoriesa) Spares and consumables
Spares and consumables are valued at the lower of costand net realisable value, on a weighted average method.

F inance income is recognised based on a pattern reflecting
a constant periodic rate of return on the Group’s net
investment in the finance lease.
b)T he cost of inventories comprises all costs of purchase,conversion and other costs incurred in bringing theinventories to the present location and condition.

Operating leases
Leases of assets under which the lessor effectively retains
all the risks and benefits of ownership are classified as
operating leases.
i.
Operating leases - Group as lessee
Lease payments arising from operating leases arerecognised in profit or loss on a straight-line basis overthe lease term. Lease incentives received are recognised
in profit or loss as an integral part of the total lease expense.
ii. Operating leases - Group as lessor
Receipts in respect of operating leases are accounted for as
income on the straight-line basis over the period of the lease.
T he assets subject to operating leases are presented in thestatement of financial position according to the nature of
the assets.

c)	Determining whether an arrangement contains a leaseAt inception of an arrangement, the Group determines
whether such an arrangement is or contains a lease. A
specific asset is the subject of a lease if fulfillment of thearrangement is dependent on the use of that specified
asset. An arrangement conveys the right to use the asset if
the arrangement conveys to the Group the right to control
the use of the underlying asset.
 t inception or upon re-assessment of the arrangement,A
the Group separates payments and other consideration
required by such an arrangement into those for the leaseand those for other elements on the basis of their relative
fair values. If the Group concludes for a finance lease that it
is impracticable to separate the payments reliably, an asset
and a liability are recognised at an amount equal to the fairvalue of the underlying asset. Subsequently the liability is
reduced as payments are made and an imputed financecharge on the liability is recognised using the Group’s
incremental borrowing rate.
1.16 Share capitalOrdinary shares are classified as equity. Incremental costs
directly attributable to the issue of the ordinary shares arerecognised as a deduction from equity, net of any tax effects.

 bsolete, redundant and slow-moving items of spares andO
consumable stores are identified on a regular basis andwritten down to their net realisable value.
 et realisable value is the estimated selling price in theNordinary course of business, less the costs of completionand selling expenses.
b)

Raw materials, finished goods and phosphate rock
Raw materials, finished goods and phosphate rock are valued
at the lower of cost of production and net realisable value.
 ost of production is calculated on a standard cost basis,
C
which approximates the actual cost and includes the
production overheads. Production overheads are allocatedon the basis of normal capacity to finished goods.
The valuation of inventory held by agents or in transit
includes forwarding costs, where applicable.

1.18 Provisions
Provisions are recognised when:•	The Group has a present obligation as a result of apast event;•	It is probable that an outflow of resources embodying
economic benefits will be required to settle theobligation; and•A reliable estimate can be made of the obligation.
 rovisions are determined by discounting the expectedP
future cash flows at a pre-tax rate that reflects current
market assessments of the time value of money and therisks specific to the liability. The unwinding of the discountis recognised as finance cost. Where some or all of theexpenditure required to settle a provision is expected
to be reimbursed by another party, the reimbursement
shall be recognised when, and only when, it is virtuallycertain that reimbursement will be received if the entity
settles the obligation. The reimbursement shall betreated as a separate asset. The amount recognised forthe reimbursement shall not exceed the amount of theprovision. Provisions are not recognised for future operating
losses.

43

IDC ACCOUNTING POLICIES 2019 constructive obligation to restructure is recognised whenA
an entity:•	Has a detailed formal plan for the restructuring,
identifying at least:
The business or part of a business concerned
The principal locations affected-	The location, function, and approximate numberof employees who will be compensated forterminating their services
The expenditures that will be undertaken
When the plan will be implemented-	Has raised a valid expectation in those affectedthat it will carry out the restructuring by starting
to implement that plan or announcing its mainfeatures to those affected by it.
a)Decommissioning provision
The decommissioning provision includes estimated costs
for the rehabilitation or restoration of any sites, land or
location as a result of prior business activity. The obligation
to make good environmental or other damage incurredin installing an asset is provided in full immediately, as thedamage arises from a past event.
If an obligation to restore the environment or dismantle anasset arises on the initial recognition of the asset, the costis capitalised to the asset and amortised over the usefullife of the asset. The cost of an item of property, plant andequipment includes not only the ‘initial estimate’ of thecosts relating to dismantlement, removal or restoration ofproperty, plant and equipment at the time of installing theitem but also amounts recognised during the period of use,for purposes other than producing inventory.
If an obligation to restore the environment or dismantle anasset arises after the initial recognition of the asset, thena provision is recognised at the time that the obligationarises.

b)

Onerous contracts
A provision for onerous contracts is recognised whenthe expected benefits to be derived by the Group from acontract are lower than the unavoidable cost of meeting its
obligations under the contract. The provision is measured
at the present value of the lower of the expected cost of
terminating the contract and the expected net cost ofcontinuing with the contract.
 efore a provision is established, the Group recognises any
Bimpairment loss on the assets associated with the contract.

44

1.19 Contingent liabilities and commitmentsa) Contingent liabilities
A contingent liability is a possible obligation that arises
from past events and whose existence will be confirmed
only by the occurrence or non-occurrence of one or more
uncertain future events not wholly within the control of theGroup.
 ontingent liabilities are not recognised in the statement
Cof financial position of the Group but disclosed in the notes.
 fter their initial recognition contingent liabilities
A
recognised in business combinations that are recognised
separately are subsequently measured at the higher of:•
The amount that would be recognised as a provision•	The amount initially recognised less cumulative
amortisationb)Commitments
Items are classified as commitments where the Group has
committed itself to future transactions. Commitments are
not recognised in the statement of financial position of theGroup but disclosed in the notes.

1.20 Taxationa) Current tax assets and liabilities
Current tax for current and prior periods is, to the extent
unpaid, recognised as a liability. If the amount already paidin respect of current and prior periods exceeds the amountdue for those periods, the excess is recognised as an asset.
 urrent tax liabilities (assets) for the current and priorC
periods are measured at the amount expected to be paidto (recovered from) the tax authorities, using the tax rates(and tax laws) that have been enacted or substantively
enacted by the end of the reporting period.
b)

Income tax
Current and deferred taxes are recognised as income or an
expense and included in profit or loss for the period, except
to the extent that the tax arises from:•	A transaction or event which is recognised, in the sameor a different period, to other comprehensive income•
A business combination
 urrent tax is charged or credited in profit or loss, exceptCwhen it relates to items credited or charged directly toequity or other comprehensive income, in which casethe current tax is also recognised in equity or othercomprehensive income.

IDC ACCOUNTING POLICIES 2019
revenue with contracts with customers, IDC follows a 5-stepprocess:•
Identifying the contract with a customer;•
Identifying the performance obligations;•
Determining the transaction price;•	Allocating the transaction price to the performanceobligations;•	Recognising revenue when/as performanceobligation(s) are satisfied.

 urrent tax also includes any adjustment to tax payable inCrespect of previous years.
c)Deferred tax
Deferred tax is recognized in respect of temporary
differences between the carrying amounts of assets andliabilities for financial reporting purposes and the amounts
used for taxation purposes. Deferred tax is recognised for
all taxable temporary differences between the carrying
amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes.

a)Sales to customers
IDC group revenue from sale of goods comprises of vast
category of products, such as phosphate rocks and acids,
grinding media balls, cast steel products and others, due
the different industries the subsidiaries operate in. Revenue
is recognised at the point in time when control of the asset
is transferred to the customer, generally on delivery of such
goods. IDC enters these contracts with customers as theprincipal and applies the 5-steps identified by IFRS 15 to
identify the revenue to be recognized (stated above) for
each contract.

b)

Dividends
 ividend income is recognised when the right to receiveD
payment is established on the ex-dividend date for equity
instruments and is included in dividend income.

c)Interest
Interest income and expense are recognised in profit or loss
using the effective-interest method taking into accountthe contractual expected timing and amount of cashflows.
The effective-interest method is a method of calculating
the amortised cost of a financial asset or financial liability(or group of financial assets or financial liabilities) and of
allocating the interest income or interest expense over
the relevant period. Interest income and expense include
the amortisation of any discount or premium or other
differences between the initial carrying amount of aninterest-bearing financial instrument and its amount atmaturity calculated on an effective-interest-rate basis.

d)

Fees
IDC earns fees and commissions from a range of services it
provides to clients and these are accounted for as follows:•	Income earned on the execution of a significant act, mainly granting of credit and managing of funds,
is recognised when the significant act has been
performed.
•	Income earned from the provision of services isrecognised as the service is rendered (i.e over time)by reference to the stage of completion of the service,measured using an output method.

 eferred tax assets are recognised to the extent that it isD
probable that future taxable profit will be available against
which unused tax deductions can be utilised. Deferred tax
assets are reviewed at each reporting date and are reduced
to the extent that it is no longer probable that the related
tax will be realised.
 eferred tax is not recognised if the temporary differencesD
arise on the initial recognition of goodwill or from the initialrecognition (other than in a business combination) of otherassets and liabilities in a transaction that affects neither
taxable income nor accounting income. Deferred tax is also
not recognised in respect of temporary differences relating
to investments in associates, subsidiaries and joint ventures
to the extent that it is probable that they will not reverse in
the foreseeable future and the timing of the reversal of thetemporary difference is controlled.
 eferred tax is measured at the tax rates that are expectedD
to be applied to temporary differences when they reverse,
based on the laws that have been enacted or substantively
enacted by the reporting date.
 eferred tax is charged or credited in profit or loss, exceptDwhen it relates to items credited or charged directly toequity or other comprehensive income, in which casethe deferred tax is also recognised in equity or othercomprehensive income.
 eferred tax assets and liabilities are offset if there is aDlegally enforceable right to offset current tax liabilities
and assets, and they relate to taxes levied by the same tax
authority on the same taxable entity, or on different tax
entities, but they intend to settle current tax liabilities andassets on a net basis or their tax assets and liabilities will be
realised simultaneously.
1.21 Revenue
Revenue comprises sales to customers, dividends, interestand fee income. To determine whether to recognise

45

IDC ACCOUNTING POLICIES 2019T he liability in respect of defined benefit pension plans is
the present value of the defined benefit obligation at thereporting date less the fair value of plan assets. The defined
benefit obligation is calculated annually by independentactuaries using the projected unit credit method.
The present value of the defined benefit obligation isdetermined by discounting the estimated future cash
outflows using interest rates of government securities
that have terms to maturity approximating the termsof the related liability. Actuarial gains and losses arisingfrom experience adjustments and the effects of changes
in actuarial assumptions to the defined benefit plans arerecognised fully in other comprehensive income.

•	Income that forms an integral part of the effective
interest rate of a financial instrument is recognised
as an adjustment to the effective interest rate andrecognised in revenue other than from contracts withcustomers.
•	Fees charged for servicing a loan are recognised inrevenue as the service is provided.
T he comparatives figures for revenue were prepared based
IAS 18.
1.22 Borrowing costs
Borrowing costs are expensed in the period in which they
are incurred, except to the extent that they are capitalised
when directly attributable to the acquisition, construction
or production of a qualifying asset.
1.23 Employee benefitsa) Post-retirement medical benefits
Some Group companies provide post-employment
healthcare benefits to their retirees. The entitlement topost-employment healthcare benefits is based on theemployee remaining in service up to retirement age. The
expected costs of these benefits are accrued over theperiod of employment, using the projected unit of credit
method. Valuations of these obligations are carried out
annually by independent qualified actuaries.
b)

Defined contribution plans
The majority of the Group’s employees are members ofdefined contribution plans and contributions to theseplans are recognised in profit or loss in the year to which
they relate.
 defined contribution plan is a pension plan under whichA
the Group pays fixed contributions into a separate entity(a fund) and under which the Group will have no legal orconstructive obligations to pay further contributions if thefund does not hold sufficient assets to pay all employees
benefits relating to employee service in the current andprevious periods.

c)

46

Defined benefit plans
The Group operates a defined benefit and a defined
contribution plan, the assets of which are held in separate
trustee-administered funds. The schemes are generally
funded through payments to insurance companies ortrustee-administered funds as determined by periodic
actuarial valuations. A defined benefit plan is a pension
plan that defines an amount of pension benefit to beprovided, usually as a function of one or more factors suchas age, years of service and compensation.

 ast-service costs are recognised immediately in profit orPloss when they occur.
d)

Short-term employee benefits
Short-term employee benefit obligations are measured
on an undiscounted basis and are expensed as the related
services are provided. A liability is recognised for theamount expected to be paid under short-term cash bonus
or profit-sharing plans if the Group has a present obligation
to pay this amount as a result of past service provided by
the employee, and the obligation can be estimated reliably.

1.24 Segment reportingAn operating segment is a component of the Group thatengages in business activities from which it may earnrevenues and incur expenses, including revenue andexpenses that relate to transactions with any of the Group’s
other components, whose operating results are reviewed
regularly by the executive committee to make decisions
about resources allocated to each segment and assess its
performance, and for which discreet financial information
is available.
1.25 Discontinued operations and non-current assets heldfor-salea) Discontinued operations
A discontinued operation is a component of the Group’sbusiness that represents a separate major line of businessor geographical area of operations or is a subsidiaryacquired exclusively with a view to resale.
 lassification as a discontinued operation occurs uponC
disposal or when the operation meets the criteria to beclassified as held-for-sale, if earlier. A disposal group that is
to be abandoned may also qualify.
b)

Non-current assets held for sale
Non-current assets and disposal groups are classified as

IDC ACCOUNTING POLICIES 2019held for sale if their carrying amount will be recovered
through a sale transaction rather than continuing use. This
classification is only met if the sale is highly probable andthe assets are available for immediate sale.
c)Measurement
Immediately before classification as held-for-sale, themeasurement of the assets (and all assets and liabilities
in a disposal group) is brought up-to-date in accordancewith the applicable IFRS. Then, on initial classification asheld for sale, the non-current assets and disposal groups
are recognised at the lower of carrying amount and fairvalue less costs to sell. Any impairment loss on a disposalgroup is first allocated to goodwill and then to remaining
assets and liabilities on a pro rata basis, except that noloss is allocated to inventories, financial assets, deferred
tax assets, employee benefit assets, investment property
and biological assets, which continue to be measured inaccordance with the Group’s accounting policies.

 ther related party transactions are also disclosed in termsOof the requirements of IAS 24.
1.27 Share based payments
A Group company operates an equity-settled share basedplan and a cash-settled share based plan.
T he equity settled share-based payments vest immediately,
the reserve was recognised in equity at grant date.
T he cash-settled plan was entered into with one of theGroup company’s employees, under which the company
receives services from employees by incurring the liability
to transfer cash to the employees for amounts that are
based on the value of the company’s shares. The fair valueof the transaction is measured using an option pricing
model, taking into account all terms and conditions. The fairvalue of the services received in exchange for the grant of
the options is recognised as an expense. The total amountto be expensed is determined by reference to the fair valueof the options granted:•
Including any market performance conditions•	Excluding the impact of any service and non-market
performance vesting conditions•
Including the impact of any non-vesting conditions

Impairment losses on initial classification as held-forsale are included in profit or loss, even when there isa revaluation. The same applies to gains and losses onsubsequent measurement.
d)Reclassification
The non-current assets held-for-sale will be reclassified
immediately when there is a change in intention to sell. At
that date, it will be measured at the lower of its carrying
value before the asset was classified as held for sale,adjusted for any depreciation, amortisation or revaluations
that would have been recognised had the asset not beenclassified as held-for-sale and its recoverable amount at thedate of the subsequent decision not to sell.

1.26 Related parties
The IDC operates in an economic environment together
with other entities directly or indirectly owned by the South
African government. Only parties within the national sphereof government will be considered to be related parties.
K ey management is defined as individuals with theauthority and responsibility for planning, directing andcontrolling the activities of the entity. All individuals fromthe level of executive management up to the Boardof Directors are regarded as key management per thedefinition of the standard. Close family members of key
management personnel are considered to be thosefamily members who may be expected to influence, or be
influenced by key management individuals in their dealings
with the entity.

T he services received by the company are recognised
as they are received and the liability is measured at fairvalue. The fair value of the liability is re-measured at eachreporting date and at the date of settlement. Any changes
in the fair value are recognised in profit or loss for theperiod.
1.28 Determination of fair values
A number of the Group’s accounting policies anddisclosures require the determination of fair value, for bothfinancial and non-financial assets and liabilities.
F air values have been determined for measurement
and / or disclosure purposes based on the following
methods. When applicable, further information about theassumptions made in determining fair values is disclosed in
the notes specific to that asset or liability.
a)Financial assets and liabilities
‘Fair value’ is the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement datein the principal or, in its absence, the most advantageous
market to which the Group has access at that date. The fairvalue of a liability reflects its non-performance risk.

47

IDC ACCOUNTING POLICIES 2019 hen available, the Group measures the fair value of anW
instrument using the quoted price in an active market
for that instrument. A market is regarded as active iftransactions for the asset or liability take place with
sufficient frequency and volume to provide pricing
information on an ongoing basis.

derive from the property. These benefits are expressed inmonetary terms and are based upon the estimated rentals
for the property in an orderly transaction between market
participants. The usual property outgoings are deducted toachieve a net rental, which is then capitalised at a rate an
investor, would require receiving the income.

If there is no quoted price in an active market, then theGroup uses valuation techniques that maximise the useof relevant observable inputs and minimise the use ofunobservable inputs. The chosen valuation techniqueincorporates all of the factors that market participants
would take into account in pricing a transaction.

ii. Comparative method
The method involves the identification of comparable
properties sold in the area or in a comparable location
within a reasonable time. The selected comparable
properties are analysed and compared with the subject
property. Adjustments are then made to their values toreflect any differences that may exist. This method is basedon the assumption that a purchaser will pay an amountequal to what others have paid or are willing to pay.

T he best evidence of the fair value of a financial instrument
at initial recognition is normally the transaction price – i.e.
the fair value of the consideration given or received. If theGroup determines that the fair value at initial recognitiondiffers from the transaction price and the fair value isevidenced neither by a quoted price in an active market
for an identical asset or liability nor based on a valuation
technique that uses only data from observable markets,then the financial instrument is initially measured at fairvalue, adjusted to defer the difference between the fairvalue at initial recognition and the transaction price.
Subsequently, that difference is recognised in profit or loss
on an appropriate basis over the life of the Instrument but
no later than when the valuation is wholly supported byobservable market data or the transaction is closed out.

iii. Residual land valuation method
This method determines the residual value which is theresult of the present value of expected inflows less all
outflows (including income tax) less the developer’s
required profits. This is the maximum that the developer
can afford to pay for the real estate. This residual value is intheory also the market value of the land.
e)Non-derivative financial liabilities
Fair value, which is determined for disclosure purposes, iscalculated based on the present value of future principal
and interest cash flows, discounted at the market rate ofinterest at the reporting date. In respect of the liability
component of convertible notes, the market rate of interest
is determined by reference to similar liabilities that do nothave a conversion option. For finance leases the market
rate of interest is determined by reference to similar leaseagreements.

f)Share-based payment transactions
A Group company entered into a Business AssistanceAgreement, which is considered to be an equity-settled,share-based payment transaction. The fair value of thetechnical and business services received in exchange
for the grant of equity instruments is recognised as an
expense. The total amount to be expensed over the vesting
period is determined by reference to the fair value ofthe equity instruments granted, excluding the impact of
any non-market vesting conditions. Non-market vesting
conditions are included in assumptions about the numberof equity instruments that are expected to vest.

T he Group recognises transfers between levels of the fairvalue hierarchy as of the end of the reporting period during
which the change has occurred.
b)

Property, plant and equipment
The market value of land and buildings is the estimatedamount that would be received to sell an asset in anorderly transaction between market participants at themeasurement date.

c)

Intangible assets
The fair value of other intangible assets is based on the
discounted cash flows expected to be derived from the use
and eventual sale of the assets.

d)

Investment property
Valuation methods and assumptions used in determining
the fair value of investment propertyi.
Capitalisation method
The value of the property reflects the present value of thesum of the future benefits which an owner may expect to48

1.29 Use of estimates and judgements
Estimates and judgements are continually evaluatedand are based on historical experience and other factors,

IDC ACCOUNTING POLICIES 2019SPPI some judgements were made. Based on common
law in South Africa, loans with no repayment terms are
deemed to be payable on demand. This meant that someshareholder loans met the definition of SPPI.

including expectations of future events that are believed tobe reasonable under the circumstances.
T he Group makes estimates and assumptions concerning
the future. The resulting accounting estimates will, bydefinition, rarely equal the related actual results. The
estimates and assumptions that have a significant risk of
causing a material adjustment to the carrying amountsof assets and liabilities within the next financial year are
outlined below.
a)b)Income taxes
Significant judgement is required in determining theworldwide provision for income taxes. There are manytransactions and calculations for which the ultimate tax
determination is uncertain during the ordinary course ofbusiness. The group recognises liabilities for anticipated tax
audit issues based on estimates of whether additional taxes
will be due. Where the final tax outcome of these matters
is different from the amounts that were initially recorded,
such differences will impact the income tax and deferred tax
provisions in the period in which such determination is made.
Fair value of financial instruments
The fair value of financial instruments that are not tradedin an active market is determined by using valuation
techniques. The Group uses its judgement to makeassumptions that are mainly based on market conditions
existing at each reporting date.

d)Post-employment obligations
Significant judgement and actuarial assumptions
are required to determine the fair value of the postemployment obligations. More detail on these actuarial
assumptions is provided in the notes to the financial
statements.

e)Environmental rehabilitation liabilityIn determining the environmental rehabilitation liability, an
inflation rate of 4.5% (2018: 3.8% was assumed to increase
the rehabilitation liability for the next 30 years, and a rateof 8.6% (2018: 7.99%) to discount that amount to present
value. The assumed discount rate of 8.6% is a risk-free rate.

f)Fair value of share-based payments
The fair value of equity instruments on grant date isdetermined based on a simulated company value, using
the Geometric Brownian Motion model. The valuation
technique applied to determine the simulated company
value is part of the Monte Carlo simulation methodology.

g)Impairment of assets
The Group follows the guidance of IAS 36, Impairmentof Assets to determine when an asset is impaired. This
determination requires significant judgement. In making
this judgement, the group evaluates the impairment
indicators that could exist at year end, such as significant
decreases in the selling prices of finished goods, significant
decreases in sales volumes and changes in the international
export regulatory environment.

h)Transfer of function
The transfer of function does not fall within the scope of
IFRS therefore management used judgement to formulate
the accounting treatment of these transactions. At the timeof transfer, all assets and liabilities were deemed to be of
the same quality and value to the receiving entity as they
were to the transferring entity. Both entities applied similargroup accounting policies therefore the values of the assets
and liabilities would be similar.

L isted equities are valued based on their listed value (fairvalue) on 31 March 2019.
 nlisted equities are valued based on various valuationUmethods, including free cash flow, price earnings (PE) andnet asset value basis (NAV) bases.
J udgements and assumptions in the valuations andimpairments include determining the:•Free cash flows of investees•
Replacement values•	Discount or premium applied to the IDC’s stake ininvestees•
Sector/subsector betas•	Debt weighting - this is the target interest bearing
debt level•
Realisable value of assets•
Probabilities of failure in using the NAV-modelc)

Loans with no repayment terms
Certain shareholder loans have no repayments terms. Whenassessed under IFRS 9 whether they meet the criteria for1.30 Transfer of functionsa) Between entities under common controli.
Recognition
The receiving entity recognises the assets and liabilities
acquired through a transfer of functions on the effective
date of the transfer. All income and expenses that relate

49

IDC ACCOUNTING POLICIES 2019
to the functions transferred are also recognised from theeffective date of the transfer. The recognition of theseincome and expenses are governed by the accounting
policies related to those specific income and expenses andaccordingly this policy does not provide further guidance
thereon.
ii. Measurement
Assets and liabilities acquired, by the receiving entity,
through a transfer of functions are measured at initialrecognition at the carrying value that they were transferred.
The difference between the carrying value of the assets
and liabilities transferred and any consideration paid for theassets and liabilities transferred is recognised in equity. The
carrying value at which the assets and liabilities are initiallyrecognised is therefore the deemed cost thereof. Therefore,
the subsequent measurement of these assets and liabilities
the accounting policies relevant to those assets and50

liabilities are followed. Accordingly, this accounting policy
does not provide additional guidance on the subsequent
measurement of the transferred assets and liabilities.
iii. Derecognition
The transferring entity derecognises the assets andliabilities on the effective date of the transfer of functions.
These transferred assets and liabilities are measured attheir carrying values upon derecognition. The resulting
difference between the carrying value of the assets andliabilities transferred and any consideration received for theassets and liabilities transferred is recognised in equity.
1.31 Preparation of the annual financial statements
The financial results have been prepared under thesupervision of Nonkululeko Dlamini CA (SA), the Group’s
Chief Financial Officer.

Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 2019
1. Changes in accounting policies
IFRS 9 ‘Financial Instruments’
IFRS 9 replaces IAS 39 ‘Financial Instruments: Recognition and Measurement’. It makes major changes to the previous guidance on theclassification and measurement of financial assets and introduces an ‘expected credit loss’ model for the impairment of financial assets.
When adopting IFRS 9, the Group has applied transitional relief and opted not to restate prior periods. Differences arising from theadoption of IFRS 9 in relation to classification, measurement and impairment are recognised in retained earnings.
The adoption of IFRS 9 has impacted the following areas:−	The classification and measurement of the Group’s financial assets. The Group holds financial assets to hold and collect theassociated cash flows. Most of the Group’s loans and advances, which were previously classified as ‘Loans and Receivables’ under
IAS 39 continue to be accounted for at amortised cost as they meet the held to collect business model and contractual cash
flow characteristics test (SPPI test) in IFRS 9. Those that do not meet this test are accounted for at fair value through profit or loss
(FVTPL) - Note 2.
−	Investments in both listed and unlisted equities, previously classified as available-for-sale (AFS) investments under IAS 39, arenow measured at fair value through other comprehensive income (OCI) as the cash flows are not solely payments of principal
and interest (SPPI). The Group elected to irrevocably designate equity investments at fair value with changes presented in othercomprehensive income (OCI). In addition, all gains and losses upon derecognition will no longer be recycled to profit and loss Note 2.
−	Preference shares, previously classified as available-for-sale (AFS) investments under IAS 39, are now classified at fair value
through profit or loss (FVTPL) if they do not meet the SPPI test, otherwise they are held at amortised cost. Fair value adjustments
accumulated under IAS 39 on the latter were reversed in order to recognise the financial assets at amortised cost and expectedcredit losses raised. The table below reflects preference shares which were reclassified to amortised cost and what their fair values
would have been under IAS 39. IAS 39 impairments are also compared to IFRS 9 expected credit loss allowances.
Preference shares: Company & Group
Balance :31 March 2019
Impairment / ECL
Carrying amount

Fair value (IAS 39)
7 614-1 427
6 187

Amortised cost (IFRS 9)
8 157-1 7146 443−	The impairment of financial assets is determined applying the expected credit loss model. This affects the Group’s tradereceivables and investments in debt-type assets measured at amortised cost. For contract assets arising from IFRS 15 and tradereceivables, the Group applies a simplified model of recognising lifetime expected credit losses as these items do not have asignificant financing component - Note 2.
On the date of initial application, 1 April 2018, the financial instruments of the Group were reclassified as follows:51

Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 2019
1. Changes in accounting policies (continued)
Group
Other
reserves
impact--30 66030 660(30 660)(4 467)(4 467)-57 516-57 516
1 430(1 430)50 626(50 626)
5 460(5 460)-(1 886)(1 886)-55 6301 430
50 626
3 574
-

(334)
(334)
-

(1 552)(1 552)-

Investments in associates
FV through Profit and Loss
From available for sale (IAS 39)
From amortised cost (IAS 39)
FV through OCI
From available for sale (IAS 39)
Amortised cost
From available for sale (IAS 39)
Fair value adjustment reversal
From amortised cost (IAS 39)

23 972-23 972
1 490(75)(1 415)15 057(15 057)(7 425)(333)(7 092)(1 592)(1 592)-22 380
1 490
15 0575 833-(1 430)(1 430)
-

(162)
(162)
-

Cash and cash equivalents
Derivative financial instruments
Trade and other receivables
Other assets
Total assets

6 156
142
3 351
15 161
136 958

-

(5)
-

6 156
142
3 346
15 161129 008(5)(6 236)(1 714)

Share capital
Reserves
Retained income
Minority interest
Equity1 393
45 09745 533
84
92107

-

1 713
(5 377)-1 393
43 38440 15684
85 017(5 377)(5 377)(1 713)(1 713)

Other financial liabilities
Financial guarantee

33 217--247-

33 464---

Other liabilities
Total liabilities
Total equity and liabilities

11 63444 851
136 958-(1 107)(860)-

10 52743 991129 008

1 107
860(6 236)(1 713)Figures in Rand million
Loans and advances
Amortised cost
From amortised cost (IAS 39)
Investments
FV through Profit and Loss
From available for sale (IAS 39)
FV through OCI
From available for sale (IAS 39)
Amortised cost
From available for sale (IAS 39)
Fair value adjustment reversal

Reclassification Measurements

Retainedearnings
impact(4 467)(4 467)-IFRS 9as at 1 April
2019
26 19326 193-

IAS 39as at 31
March 2018
30 660Investments in subsidiaries

52

Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 2019
Company
Other
reserves
impact-28 56428 564(28 564)(4 361)(4 361)-35 941-35 9411 430(1 430)29 051(29 051)
5 460(5 460)(1 886)(1 886)-34 0551 430
29 051
3 574
-

(334)
(334)
-

(1 552)(1 552)

Investments in subsidiaries
FV through Profit and Loss
From available for sale (IAS 39)
From amortised cost (IAS 39)
FV through OCI
From available for sale (IAS 39)
Amortised cost
From available for sale (IAS 39)
From amortised cost (IAS 39)

46 395-46 3954 932(558)(4 375)37 658(37 658)
3 805
(500)
(3 305)

(621)
(621)
-

45 7744 932
37 658
3 184
-

(621)
(621)
-

-

Investments in associates
FV through Profit and Loss
From available for sale (IAS 39)
From amortised cost (IAS 39)
FV through OCI
From available for sale (IAS 39)
Amortised cost
From available for sale (IAS 39)
From amortised cost (IAS 39)

23 623-23 623
1 490(75)(1 415)15 057(15 057)
7 077
(333)
(6 743)(1 592)(1 592)-22 032
1 490
75
1 415
15 05715 0575 485-(1 430)(1 430)
-

(162)
(162)
-

Cash and cash equivalents
Derivative financial instruments
Trade and other receivables
Other assets
Total assets

5 726
108
1 257
360
141 974

-

(5)
-

5 726
108
1 252
360
133 510(5)(6 751)(1 713)

Share capital
Reserves
Retained income
Equity1 393
59 09427 29887 785-(1 713)(5 891)(7 604)1 393
57 38121 40780 181(5 891)(5 891)(1 713)(1 713)

Other financial liabilities

46 723-247

46 970(247)-

Other liabilities
Total liabilities
Total equity and liabilities

7 466
54 189141 974-(1 107)
(860)
-

6 359
53 329133 5101 107
860(6 751)(1 713)Figures in Rand million
Loans and advances
Amortised cost
From amortised cost (IAS 39)
Investments
FV through Profit and Loss
From available for sale (IAS 39)
FV through OCI
From available for sale (IAS 39)
Amortised cost
From available for sale (IAS 39)

Reclassification Measurements

Retainedearnings
impact(4 361)(4 361)-IFRS 9as at 1 April
2019
24 20324 203-

IAS 39as at 31
March 2018
28 564-53

Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 2019
1. Changes in accounting policies (continued)
IFRS 9 requires an assessment to be performed of the credit risk of a financial asset at valuation date, compared to the credit
risk at inception to determine whether a significant increase in credit risk (“SICR”) has occurred. As such, all financial assets thatmeet SPPI are assessed for SICR at each reporting date. The SICR assessment is done at business partner level, implying a level ofcontagion.
−	Stage 1 assets are considered performing Credit risk has not increased significantly since initial recognition. A 12 months
ECL / expected loss allowance is recognized for stage 1 assets.
−	Stage 2 assets are considered to be underperforming as credit risk has increased significantly since initial recognition, but
are not credit impaired. A lifetime ECL / loss allowance is recognized for stage 2 assets.
−	Stage 3 assets are classified as nonperforming and credit impaired. A lifetime ECL / expected loss allowance is recognized
for all stage 3 assets.
The tables below reflect the amortised cost and staging of the Group’s financial instruments.
Group
Loans & Advances
Low riskMedium risk
High risk
Subtotal
Expected credit losses
Amortised cost
ECL coverage ratio (%)
Guarantees
Low riskMedium risk
High risk
Total

Stage 1(12 months ECL)
9 524
5 069
8 399
22 992-2 69420 298
12

Stage 2
(Lifetime ECL)

Stage 1(12 months ECL)

Stage 2
(Lifetime ECL)

Stage 3
(Lifetime ECL)

640
439
969
2 048
-381
1 667
19

13
2
14
29

Total

486
1 959
8 098
10 543(6 628)
3 915
63Stage 3
(Lifetime ECL)

36
11
47

10 650
7 467
18 49135 583(9 703)25 880
27
Total

81
1
36
118

130
3
61
194

Company
Loans & Advances
Low riskMedium risk
High risk
Subtotal
Expected credit losses
Amortised cost
ECL coverage ration (%)

54

Stage 1(12 months ECL)
9 524
5 069
8 399
22 992-2 69420 298
12

Stage 2
(Lifetime ECL)
640
439
969
2 048
(381)
1 667
19

Stage 3
(Lifetime ECL)
486
1 959
9 381
11 826(5 859)
5 967
50

Total
10 6507 467
18 74936 866(8 934)27 93224

Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 2019

Guarantees
Low riskMedium risk
High risk
Total

Stage 1(12 months ECL)

Stage 2
(Lifetime ECL)
13
2
14
29

Stage 3
(Lifetime ECL)
36
11
47

Total
81
1
36
118

130
3
61
194

IFRS 15 impact
T his IFRS introduces a new revenue recognition model for contracts with customers and establishes a comprehensive
framework for determining whether, how much and when revenue is recognised. IFRS 15 also includes extensive new disclosure
requirements; and the Group have adopted IFRS 15 on 1 April 2018. Due to the transition methods adopted by the Group in
applying these standards, comparative information throughout these consolidated financial statements has not been restatedto reflect the requirements of the new standards.
It replaced IAS 18 Revenue, IAS 11 Construction Contracts and related interpretations. Under IFRS 15, revenue is recognised
when a customer obtains control of the goods.
 ue to the nature of the Groups operations, the adoption of IFRS 15 did not have a material impact on the Group, the majority
Dof the impact was contained to enhanced and additional disclosures required by the standard, and no quantitative impact wasobserved.
T he Group adopted IFRS 15 using the cumulative effect method, with the effect of initially applying this standard recognised at
the date of initial application (i.e. 1 April 2018). Accordingly, the information presented for the year ended March 2018 has notbeen restated – i.e. it is presented, as previously reported, under IAS 18 and related interpretations.
Foskor Impact - Revenue
 evenue comprises the fair value of the consideration received or receivable for the sale of goods in the ordinary course of theRGroup’s activities. Revenue is shown net of Value Added Tax (VAT), returns, rebates and discounts and after eliminating sales
within the Group.
T he Group recognises revenue when the amount of revenue can be reliably measured and when it is probable that future
economic benefits will flow to the entity and specific criteria have been met for each of the Group’s activities, as described
below. The amount of revenue is not considered to be reliably measurable until all contingencies relating to the sale havebeen resolved. The Group bases its estimates on historical results, taking into consideration the type of customer, the type oftransaction and the specifics of each arrangement.
F oskor’s core business is the beatification of phosphate rock at the Mining Division and the manufacture and supply ofstandard merchant grade phosphoric acid and related granular fertiliser products at the Acid Division. Approximately 70%of the phosphate rock concentrate is railed to the Acid Division for processing into phosphoric acid, which is then used asa raw material in the production of granular fertiliser. About 50% of the phosphoric acid sales are exported, while granularfertiliser sales are mainly to the local market. The group generates its revenue based on various contractual arrangementswith its customers from the major sources listed below. These sources provide context to the Group’s activities and attempt toaggregate revenue by nature, extent, timing and risk.
T he following table provides information about the nature and timing of the satisfaction of performance obligations in contracts
with customers, including significant payment terms, and the related revenue recognition policies as well as critical judgements
and estimates made by management in the selection and application of its accounting polices related to each major revenue

55

Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 2019
1. Changes in accounting policies (continued)
source. Revenue is shown net of indirect taxes, estimated returns, rebates and discounts, and after eliminating sales within theGroup.
Revenue Source

Performance
Recognition
obligations
Mining Division Revenue
Recognised at theSales of Phosphate Sale of Phosphate
point of transfer
Rock and Magnetite
Rock andof control which is
products per metric
Magnetite
generally at the point
tonne sold to local
and export customers. of loading at Foskor’s
Mine for local sales
Local customers
include all customers and at loading point
within the borders of for export shipments.
South Africa, while
export includes all
customers outside ofSouth Africa.

Acid Division Revenue
Sale of Granular
Sale of Granulation
Fertiliser
fertiliser products per
metric tonne soldto local and export
customers. Local
customers include
all customers within
the borders ofSouth Africa, while
export includes all
customers outside ofSouth Africa.

56

Recognised at the
point of transfer ofcontrol which is
generally at the pointof loadingat Foskor’s
Acid plant for local
sales and at Richards
Bay harbour loading
point for export
shipments.

Measurement andterms of sale

Critical estimates and judgements applied

Measured at theManagement have assessed the point
price per ton as per of transfer of control based on their
Foskor’s standard
understanding of the critical terms andselling price, lessconditions of sale, this assessment has
any discounts or
concluded that control is transferred at therebates to which
Foskor Mine or loading points at harbours
the customer
in Maputo and Richards Bay. This is due toqualifies. Payment management being of the view that at thisterms are generally point the customer has obtained physical30-60 days.
possession of the product and accepted
the risks and rewards associated therewith.
The estimated potential rebate/ discountamount is only refunded to customers on aperiodic basis. Management have estimatedthepotentialeffects ofthese arrangements
and constrained revenue accordingly.
Measured at theprice per ton as per
Foskor’s standard
selling price, lessany discounts orrebates to which
the customer
qualifies. Payment
terms are generally
30-60 days.

Management have assessed the pointof transfer of control based on theirunderstanding of the critical terms andconditions of sale, this assessment has
concluded that control is transferred at the
Foskor Acid Plant or loading point at harbourin
Richards Bay.This is duetomanagementbeingof the viewthat at this pointthe customer
has obtained physical possession of the
product and accepted the risks and rewards
associated therewith.
The estimated potential rebate/discountamount is only refunded to customers on aperiodic basis.
Management have estimated the potential
effects of these arrangements andconstrained revenue accordingly.

Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 2019

Revenue Source

Performanceobligations
Acid Division Revenue (contined)
Sale of Phosphoric
Phosphoric andAcid and Sulphuric
Sulphuric Acid
Acid products per
sales
metric tonne soldto local and export
customers. Local
customers include
all customers within
the borders ofSouth Africa, while
export includes all
customers outside ofSouth Africa.
Sulphur, Ammonia Sale of Sulphur,& Gypsum Sales
Ammonia andGypsum products per
metric tonne sold to
local. Local customers
include all customers
within the borders ofSouth Africa.
Other income
Sundry/Other
Other revenue is
Revenueincome earned from
customers within
South Africa andcustomers outside
South Africa.
Royalties
Royalties is earnedin accordancewith substance ofagreement.

Recognition

Measurement andterms of sale

Critical estimates and judgements applied

Recognised at the
point of transfer ofcontrol which is
generally at the pointof loadingat Foskor’s
Acid plant for local
sales and at Richards
Bay harbour loading
point for export
shipments.

Measured at theprice per ton as per
Foskor’s standard
selling price, lessany discounts orrebates to which
the customer
qualifies. Payment
terms are generally
30-60 days.

Management have assessed the pointof transfer of control based on theirunderstanding of the critical terms andconditions of sale, this assessment has
concluded that control is transferred at the
Foskor Acid Plant or loading point at harbourin
Richards Bay.This is duetomanagementbeingof the viewthat at this pointthe customer
has obtained physical possession of the
product and accepted the risks and rewards
associated therewith.
The estimated potential rebate/discountamount is only refunded to customers on aperiodic basis.
Management have estimated the potential
effects of these arrangements andconstrained revenue accordingly.

Recognised
when the right toreceive payment isestablished.

Measured at theagreed price andpayment terms are
generally 30-60
days.

Management have assessed the mannerof service and agreed price based on theunderstanding of the terms and conditionsof service rendered.

Recognised on an
accrual basis inaccordance withthe substance of therelevant agreements.

Measured at
the agreed
performance
declaration andpayment terms are
generally 30-60
days.

Management have assessed the manner inwhich royalties are declared based on theunderstanding of the terms and conditionsof the agreement.

57

Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 2019
2. Financial assets and liabilities
The table below sets out the Group’s classification of each class of financial assets and liabilities, and their fair values.

58

Figures in Rand million
Group - 2019
Cash and cash equivalents
Loans and advances to clients
Investments - listed equities
Investments - unlisted equities
Investments - preference shares
Derivative assets
Trade and other receivables
Loans
Derivative liabilities
Bank overdrafts
Trade and other payables
Total

Note(s)

FVTPL

FVOCI

Amortised cost

Total

Fair value

16
12
13
13
13
11
15
19
11
16
36

4 447
1 346
1
39
5 833

54 8604 114
58 9749 809
25 880
4 949
3 824
39 48649
2 661
86 6589 809
30 32754 860
4 114
6 295
1
3 824
39 4863949
2 661
151 465

9 809
30 32754 860
4 114
6 313
1
3 824
39 4863949
2 661
151 483

Figures in Rand million
Company - 2019
Cash and cash equivalents
Loans and advances to clients
Investments - listed equities
Investments - unlisted equities
Investments - preference shares
Trade and other receivables
Loans
Derivative liabilities
Trade and other payables
Total

Note(s)

FVTPL

FVOCI

Amortised cost

Total

Fair value

16
12
13
13
13
15
19
11
36

4 448
1 364
5 812

30 8904 060
34 9509 233
27 9324 949
2 074
54 125797
99 1109 233
32 38030 890
4 060
6 313
2 074
54 12517797
139 889

9 233
32 38030 890
4 060
6 313
2 074
54 12517797
139 889

Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 2019

Note(s)Group - 2018
Cash and cash equivalents
Loans and advances to clients
Investments - listed equities
Investments - unlisted
equities
Investments - preference
sharesDerivative assets
Trade and other receivables
Loans
Derivative liabilities
Bank overdrafts
Trade and other payables
Total

Availablefor- sale

Other
amortised
cost

Total

Fair value

16
12
13
13

-

6 156
30 660-45 621
5 005

-

6 156
30 66045 6215 005

6 156
29 87445 621
5 005

13

-

-

6 890

-

6 890

6 890

11
15
19
11
16
36

142
139
281

1 800
38 61657 51633 21719
2 875
36 111142
1 800
33 217139
19
2 875
132 524142
1 800
30 258139
19
2 875
128 779

Held for Loans andtrading receivables

Availablefor- sale

Other
amortised
cost

Total

Fair value

Note(s)Company - 2018
Cash and cash equivalents
Loans and advances to clients
Investments - listed equities
Investments - unlisted
equities
Investments - preference
sharesDerivative assets
Trade and other receivables
Loans
Derivative liabilities
Trade and other payables
Total

Held for Loans andtrading receivables

16
12
13
13

-

25 72628 564-24 1424 909-

25 72628 56424 1424 909

25 72627 91824 142
4 909

13

-

-

6 890

-

6 890

6 890

11
15
19
11
36

108
126
234

1 254
55 54435 94146 723714
47 437108
1 254
46 723
126714
139 156108
1 254
44 158126714
135 94559

Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 2019
3. Financial risk management
Financial riskT his risk category encompasses losses that may occur as a result of the way the IDC is financed and its own financing orinvestment activities. Financial risk includes credit and settlement risk related to the potential for counterparty default, market
risk related to volatility in interest rates, exchange rates, commodity and equity prices, liquidity / funding risk related to the cost of
maintaining various financial positions as well as financial compliance risk. Other financial risks faced by the Corporation include
the risk of concentration of investments in certain industries and/or regions as well as the risk of over-dependency in relation
to income on a limited number of exposures or counterparties and/or financial products and the risk of margin erosion due toinappropriate pricing relative to the cost of funding and the risk assumed. The management of these risk areas is therefore critical
for the IDC.
Credit riskT his refers to the risk that a counterparty to a financial transaction will fail to meet its obligations in accordance with the agreed
terms and conditions of the underlying contract, thereby causing the asset holder to suffer a financial loss. Credit risk, as definedby the IDC, comprises the potential loss on loans, advances, guarantees, quasi- equity and equity investments due to default.
Credit risk arises as a result of the Corporation’s lending activities as well as the placement of deposits with financial institutions.
Approach to Managing Credit RiskT he IDC endeavors to maintain credit risk exposure within acceptable parameters, managing the credit risk inherent in the entire
portfolio as well as the risk associated with individual clients or transactions. The effective management of credit risk is a criticalcomponent of a comprehensive approach to risk management and is essential to the long-term success of the Corporation. Thisis the dominant risk within the IDC as the providing lending and/or financing activities represent the Corporation’s core business.
Managing Credit Risk Concentration
 isk concentrations can arise in a financial organisation’s assets, liabilities or off-balance sheet items, through the execution orRprocessing of transactions (either product or service), or through a combination of exposures across these broad categories. The
potential for loss reflects the size of the position and the extent of loss given a particular adverse circumstance.
T he IDC can be exposed to various forms of credit risk concentration which, if not properly managed, may cause significant
losses that could threaten its financial health. Accordingly, the IDC considers the management (including measurement andcontrol) of its credit concentrations to be of vital importance. There is recognition in Basel II that portfolios of financial institutions
can exhibit credit concentrations and that prudently managing such concentrations is one of the important aspects in effective
credit risk management.
 owever, despite the recognition of credit concentrations as important sources of risk for portfolios, there is no generallyH
accepted approach or methodology for dealing with the issue (including measurement) of concentration particularly withrespect to sector or industry concentration. Concentrations within a lending and/or investment portfolio can be viewed ina variety of ways: by borrower, product type, collateral type, geography, industry / sector and any other variable that may be
associated with a group of credits.
Investment or credit concentrations are considered to be a large group of exposures that respond similarly to the same stresses.
These stresses can be:
Sensitivity to a certain industry or economic factors;
Sensitivity to geographical factors, either a single country or region of interlinked countries;
Sensitivity to the performance of a single company or counterparty; and/or
Sensitivity to a particular risk mitigation technique, e.g. a particular collateral type.

60

Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 2019T he IDC has various established methodologies for the management of the credit concentrations it is exposed to and has
established risk concentration limits, thresholds and policies for:
Exposure to a single obligor;
A counterparty or group of related parties / entities;
Geographical locations; andIndustries.
T he concentration limits and thresholds are reviewed on an annual basis or sooner should the need arise. The status of the IDC
investment book is reported to IDC executive management, the Board Risk and Sustainability Committee and the IDC Board on aregular basis.
Single name (single obligor) and Counterparty (related party) limitsT he need for singe name and counterparty limits are to identify and protect the IDC’s Statement of Financial Position andStatement of Comprehensive Income from significant losses/volatility which threaten financial sustainability, should a Business
Partner or counterparty default or experience material loss in value. A single Business Partner represents a single obligor or single
legal entity to whom the IDC has a credit exposure to, while a counterparty is defined as a group of related parties / entities.
 lients which have one or more of the following similarities with another client which IDC has or had a credit exposure to areCconsidered counterparties if one or more of the following are present:
Shareholding of more than 50%:
Management control:
Revenue or expenses reliance of 51% or more; and/or
Provision of security for 51% or more of IDC’s exposure.
Africa portfolio and regional limits and country thresholds
 ountry risk refers to risk(s) associated with investing or lending in a country, arising from possible changes in the business
C
Country risk refers to risk(s) associated with investing or lending in a country, arising from possible changes in the businessenvironment that may adversely affect operating profits or the value of assets in the host country. These risks include politicalrisk, exchange rate risk, economic risk, sovereign risk and transfer risk, and an investment’s returns could suffer as a result ofpolitical changes or instability in a country.
T he focus of the IDC’s activities in the African continent is determined by its mandate and managed through our investment
criteria and regional investment limits, including country thresholds. Country thresholds, enables effective risk managementof country concentration risk. The IDC’s objectives are to contribute to the economic integration and industrial development
in SADC and the Rest of Africa. The IDC views Africa in terms of South Africa, the Southern African region and the Rest of Africa.
This distinction is evident from the importance that the South African Government places on Southern Africa relative to the restof the Continent. As such the Corporation’s activities are weighted in favor of Southern Africa in terms of budget allocation andresultant exposure. In order for IDC to achieve its mandate in the Southern African region and Rest of Africa, the Corporation
focuses on being a catalyst for sustainable economic change.
 iven the importance of the IDC’s mandate and its objectives, in conjunction with the consistent improvement of the AfricanG
economic landscape, both in performance and risk profile, Portfolio and Regional Limits and Country Thresholds are reviewed atleast on an annual basis in order to support and enhance the developmental objectives of the IDC’s strategy as well as its visionand mission statement.
Should approval of a transaction result in breach of a limit explicit approval is required from the Board Investment
Committee.
Risk Appetite and Risk Tolerance Process ne of the key practices of risk management is the determination and quantification of an organisation’s risk appetite basedO
on what is of strategic importance. IDC continuously makes improvements to the process to ensure that it is applicable to the
Corporation and its strategic intent.
T he setting of an effective risk appetite is considered one of the key building blocks to establishing a sound risk management
framework. Risk appetite is defined as the amount and type of risk that an organisation is willing to pursue or retain. The

61

determination of the IDC’s risk appetite plays an important role in its ERM activities. It is also considered by the IDC to be aleading best practice methodology to assist it to achieve its strategic objectives while maintaining a sound platform for future
viability and continued growth.
Defining the level of risk the IDC is comfortable with assists it to:- Make better informed business decisions;- Focus on those risks that exceed the defined appetite for risk;- Develop a business culture with a high awareness of risk; and- Strike a balance between daring and prudence.
T he IDC’s risk appetite is linked and aligned to its mandate and business objectives and is an agreement between its businessgoals and the related risks. Risk tolerance is considered an integral part of the process and is an organisation’s readiness to bear
the risk after risk mitigation, in the pursuit of its strategic objectives. The setting of risk appetite and tolerance levels aids
operational decision making and strategic planning and provides management with the information to determine whether therisk profiles of current and potential activities are either financially acceptable or require additional risk management measures
to reduce the volatility to within risk appetite limits. Hence, it helps management to allocate resources and management timeto the most significant risks. The use of risk appetite also ensures that management does not make conservative decisions that
expose the organisation to insufficient risk and hence generate inadequate returns on capital.
The IDC’s Risk Appetite and Tolerance Process incorporate the five steps set out below:
1. E stablish Key Risk Indicator (KRI) per risk: For each of the risks identified in step 2 of the risk assessment process, one or more
KRI is established. The KRI can be financial and non-financial, qualitative or quantitative. A KRI is related to a specific risk and isan indicator that provides an effective monitoring tool to measure changes in risk levels and keep management appraised ofshifts in established patterns. Measurement of the KRI is used to answer the question: “How is our risk profile changing and isit within our desired tolerance levels?”
2. E stablish risk appetite thresholds per KRI: The IDC has determined its risk appetite thresholds based on its strategic objectives,
corporate values, organisational and control dimensions. Risk appetite, at the IDC, is defined as the amount of risk exposure, or
potential adverse impact from an event that the IDC is willing to accept / retain. For each risk, the IDC risk appetite thresholds
are determined on three simple levels: appetite for the risk, tolerate the risk or avoid the risk. Once a risk threshold has beenbreached or KRI indicates that breach is eminent, risk management treatments and business controls are considered /implemented to bring the exposure level back to within an acceptable range.
3. R eview the results with the risk owners: Once KRI and risk appetite / tolerance levels have been set per risk, a review of the
combined results is undertaken with each of the risk owners. The actual result for each of the risks is calculated and comparedto the risk appetite thresholds. During this process each individual risk is assessed.
4. C ompare risk measurement outcomes with results from the annual risk assessment: The next step is to assess how the risk
appetite outcomes compare to the risk profile established through the annual risk assessment. This assessment is achieved
through a gap analysis and focuses on what is considered to be the most important risks.
5. S ummarise key findings: An analysis and comparison of the risk appetite thresholds with the actual results are undertaken to
identify the key risks facing the IDC.
Geographical analysis

Figures in Rand million
Carrying amount as per
Note 10 and 9
Concentration by
location:
South Africa
SADC
Rest of Africa
Outside Africa

Group
Loans and advances Investment Securities
to clients
2019
2018
2019
2018
25 88030 66060 32057 51618 2862 425
5 169
25 88022 5052 605
5 550
30 66058 199856
1 265
60 32055 184
712
164
1 456
57 516Company
Loans and advances Investment Securities
to clients
2019
2018
2019
2018
27 93228 56436 29635 94120 337
2 425
5 169
1
27 93220 4092 605
5 550
28 56434 175856
1 265
36 29633 609
712
164
1 456
35 941

 arrying value of equity instruments classified as FVOCI and preference shares classified as either amortised cost or FVTPL,
C
excluding investments in subsidiaries, associates and joint ventures.

62Economic industry limits
 anaging industry concentration remains one of the key strategic priorities of the Corporation. Concentration risk in the context
Mof industries generally results from an uneven distribution of an institution’s exposure to specific industries which can generate
losses large enough to jeopardise its solvency or profitability. Concentrations of credit exposures in industries can pose risks tothe earnings and capital of any financial institution in the form of unexpected losses. One of the risk management techniques tomanage industry risk concentration entails the establishment of concentration limits and the monitoring and analysis thereof.
The monitoring and limiting of the concentration of exposures in certain industry is necessary to reduce the risk of an exposure
to a significant downturn in a particular industry in time, and thus to be able to void losses, as far as possible, by implementing
counter measures (e.g. withdrawing from, reducing or hedging certain exposures). Experience has shown that the earlier risks are
identified, the more effectively it can be countered.
 lthough the IDC’s business cuts across a number of industries, it could be exposed to concentration risk by virtue ofA
disproportionately large exposures in any of these industries. Managing and monitoring such concentrations to limit downsidepotential is therefore an integral part of an effective risk management processes. To avoid undue losses due to associatedexposures, the IDC strives to identify potential common risk factors and minimise its aggregate exposure to these risk factors.
T he goal of industry limits is for the IDC to attempt to diversify or at least identify its portfolio concentrations based on exposures
to industries and to identify concentrations of exposures that could become closely related, especially during a crisis. This
provides an important mechanism to protect the long term financial sustainability of the IDC. The key challenge to establishingan industry limit methodology is to ensure that it is effective in protecting the institution from credit events and is practical in its
enforcement without restricting investment activities. The establishment of industry limits is aligned with the overall strategy of
the IDC (including its risk appetite).
Industry analysis

Figures in Rand million
Carrying amount as per Note
10 and 11
Concentration by Industry:
Agriculture and Food
Chemicals and Petroleum
Finance & Insurance
Metals and Machinery
MiningOther Manufacturing
Other Services
Trade, Catering andAccommodation
Transport, Communicationand Utilities

Group
Loans and advances Investment Securities
to clients
2019
2018
2019
2018
25 88030 66060 22457 516Company
Loans and advances Investment Securities
to clients
2019
2018
2019
2018
27 93228 56436 29635 941

2 742
2 184
1 608
5 718
2 654
1 473
1 171

4 402
1 954
1 877
5 236
2 680
1 867
1 287

18
24 26854
9 843
22 963
130
2 585

262
22 12498
9 656
17 786
626
4 211

2 722
2 184
1 516
5 624
2 649
1 473
1 203

2 774
1 954
1 732
4 953
2 680
1 867
1 287

18
298
1
9 843
22 963
130
2 585

262
646
1
9 656
17 786
626
4 211

2 785

3 367

104

266

2 712

3 367

104

266

5 545
25 880

7 990
30 660355
60 3202 487
57 5167 849
27 9327 950
28 564354
36 2962 487
35 941

 arrying value of equity instruments classified as FVOCI and preference shares classified as either amortised cost or FVTPL,
C
excluding investments in subsidiaries, associates and joint ventures.
Internal rating model and pricing
T he changing banking regulatory requirements and increased focus by international and local DFIs to incorporate Basel II bestpractice risk management makes it increasingly important for IDC to regularly measure credit risk and ensure that risk costs aretransparent and appropriately accounted for. IDC therefore updated and redesigned its Project Finance and SME/Middle market
rating and pricing methodologies and models with the assistance of consultants. These models were fully implemented during
the 2017 financial year.
T he rating and pricing methodology follows a two-step approach namely; rating which is incorporated into the pricing solution
for all credit transactions
The models offer amongst others, the following key value added features:-	Calculation of an Expected Loss (EL), where EL = (PD*EAD*LGD), which is included as a risk margin in the price of a facility
based on the client’s riskiness

63

Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 2019
3. Financial risk management (continued)-	Customised qualitative factors based on consultation with industry specialists in the business units to reflect specific IDC
industry focus, when rating a client;-	Objectively determine the credit quality of individual clients as well as the portfolio;-	Quantification of the development score impact into a ZAR amount;
The key objectives of internal rating methodologies and related rating models are:
To assess the overall credit or investment risk on a quantitative and objective basis;
To objectively determine the credit quality of individual clients as well as the portfolio;
To aid in portfolio analysis;
To allow migration analysis of individual clients as well as the portfolio; andTo assist in identifying which clients are due for review.

T he IDC loan book is reviewed on a regular basis, by IMC SPPI, which monitors and manages the quality and arrears on a proactive
basis. IFRS 9 requires an assessment to be performed of the credit risk of a financial asset at the valuation date, compared to thecredit risk as at inception to determine whether a significant increase in credit risk (“SICR”) has occurred.
 s such, all financial assets that meet SPPI are assessed for SICR at each reporting period. The SICR assessment is done at businessApartner level, implying a level of contagion.
-	Stage 1 assets are considered performing - Credit risk has not increased significantly since initial recognition. A 12 months ECL/ loss allowance is recognized for stage 1 assets.
-	Stage 2 assets are considered underperforming as credit risk has increased significantly since initial recognition, but are notcredit impaired. A lifetime ECL / loss allowance is recognized for stage 2 assets.
-	Stage 3 assets are non-performing and considered credit impaired. A lifetime ECL / loss allowance is recognized for all stage
3 assets.
A business partner is considered to have experienced SICR and will transition to stage 2 when:-	Amounts past due (arrears), exceed 30 days (rebuttable presumption);-	The business partner is on the IDC’s watch list and is categorized as a ‘high’ risk; or-	A deterioration in probability of default occurred.
 usiness partners that have been flagged as being in Workout and Restructuring and those handed over to Legal Services forBcollection are considered credit impaired / non-performing and are transitioned to Stage 3 together with business partners thatmeets the default definition:
 financial asset is considered in default when the amount in arrears for more than 90 days exceeds 0.5% of the business partner’sAtotal exposure. Business partners may transition from stage 3 to stage 2 if there are indications that the business partner has cured,
provided the predetermined cure rules are met:-	For exposures below R100 million the curing period is 3 months;-	For exposures exceeding R100 million and for clients in Workout and Restructuring and Legal, the cure period is 12 months.
Watch list:
IDC includes a client on its watch list where the SPPI exposure exceeds R50 million. A qualitative risk assessment is performed todetermine the risk category (Red – high risk; Amber – medium risk or Green – low risk). Business partners allocated a ‘high’/red risk
indicator displays high default/repayment risk. The following categories of qualitative factors are considered in determining thewatch list risk category:-	Business risk
-	Financial risk
-	Economic risk

64

Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 2019

Write-offs:
IDC writes off financial assets in a number of instances, including:-	When all reasonable short term and medium term recovery efforts have been exhausted or the legal collections or litigationroute have been exhausted;-	When all liquid assets have been realized and the proceeds thereof have been allocated to the outstanding exposure;-	When the cost of further recovery efforts outweighs the benefits or further recovery efforts are not economically viable
Forward looking information:
A reasonable and supportable forecasts of future events and economic conditions at the reporting date is incorporated in thecalculation of expected credit losses / loss allowances. Forward-looking macroeconomic information is introduced to allow loss
allowances to automatically adjust to allow for future macroeconomic conditions. Macro-economic information for three scenarios,base case, pessimistic and optimistic views, are taken in consideration.
The correlation between the IDC’s historical default experience and a range of macro-economic indicators were assessed andindicators that are most likely to impact on the default propensity of IDC BP’s were selected to be applied in the calculation of loss
allowances:-	Household consumption-	Gross fixed capital formation-	Exports-	PPI-	IDC commodity index (calculated by R&I based on the IDC’s commodity mix).
Renegotiated loansL oans with renegotiated terms are loans that have been restructured due to deterioration in the borrower’s financial position andwhere the Group has made concessions that it would not otherwise consider. In most instances loans in stage 3 are considered
for restructuring. Once the loan is restructured it remains in stage 3 until the loan has cured / the performance post restructuring
is considered satisfactory.
CollateralT he Group holds collateral against loans and advances to clients in the form of mortgage bonds over property, other registeredsecurities over assets and guarantees. The fair values of underlying assets are based on the value of collateral assessed at the timeof borrowing and subsequent valuations by the IDC Fixed Asset Valuation Department.
The fair values of collateral held against financial assets is shown below:

IDC financing activities* (R’m)
Against impaired assets
General notarial bondSpecial notarial bonds
Mortgage bond
Other
Gross value of impaired loans

IDC financing activities* (R’m)
Against loans in arrears and not impaired
General notarial bond

Group
2019
4 213
3 399
7 590
72
15 27417 363

2018
16
300
1 032
78
1 426
7 835

Company
2019
4 213
3 399
7 590
72
15 27417 346

2018
16
300
1 032
78
1 426
7 101

Group
2019

2018

Company
2019

2018

5 412

1 069

5 412

1 069

65

Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 2019
3. Financial risk management (continued)
Mortgage bondSpecial notarial bonds
Other
Gross value of impaired loans

10 37122 301190
38 27423 863

200
305
7
1 581
1 057

10 37122 301190
38 27423 863

200
305
7
1 581
1 028

Liquidity riskL iquidity risk refers to the risk that the Corporation will not be able to meet its obligations as they become due, increase infinancing assets, including commitments and any other financial obligations (funding liquidity risk), or will only be able to do so
at materially disadvantageous terms (market liquidity risk). Liquidity risk is governed by the Liquidity and Liquidity Risk Premia
policy and the Asset and Liability Committee (ALCO). ALCO provides the objective oversight and makes delegated decisions
within the prudential guidelines and policies established by the Board related to liquidity risk exposures.
Sources of liquidity risk include:
Unpredicted accelerated drawdowns on approved financing or call-ups of guarantee obligations;
Inability to roll and/or access new funding;
Unforeseen inability to collect what is contractually due to the Corporation;
Liquidity stress at subsidiaries and/or other SOE’s;
A recall without due notice of on-balance sheet funds managed by the Corporation on behalf of 3rd parties;
A breach of covenant(s), resulting in the forced maturity of borrowing(s); andInability to liquidate assets in a timely manner with minimal risk of capital losses.
Day-to-day liquidity management is performed by Corporate Treasury within Board approved treasury limits, such that:-	At all times, there is sufficient readily-available liquidity to meet probable operational cash flow requirements for a rolling
three months period; andExcess liquidity is minimised in order to limit the consequential drag on profitability
L iquidity coverage ratios aim to ensure that suitable levels of unencumbered high-quality liquid assets are held to protect against
unexpected, yet plausible liquidity stress events. Two separate liquidity stresses are considered:First, an acute three-month liquidity stress impacting strongly on both funding and market liquidity; andSecondly, a protracted twelve-month liquidity stress impacting moderately on both funding and market liquidity.
 pproved high-quality liquid assets include cash, near-cash, committed facilities, as well as a portion of the Corporation’s listedA
equity investments, after applying forced-sale discounts.
Consolidated local and foreign currency liquidity coverage

3-months
Scenario 1

12-months
Scenario 2

2019
Approved high-quality liquid assets
11,823.1
11,823.1
Net stressed outflows(11,161.4)(11,068.7)
Liquidity coverage ratios (%)
105.9
106.8
2018
Approved high-quality liquid assets
13,763.1
13,763.1
Net stressed outflows(9,428.4)(11,068.1)
Liquidity coverage ratios (%)
146.0
124.3
Structural liquidity mismatch ratios aim to ensure adequate medium to long-term liquidity mismatch capacity by maintaining
a stable funding profile. This is done by restricting, within reasonable levels, potential future borrowing requirements as apercentage of total funding-related liabilities. A robust funding structure reduces the likelihood that the Corporation’s liquidity
position would deteriorate in the event of a disruption to its sources of funding. The structural liquidity mismatch is based on

66Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 2019conservative cash flow profiling with the added assumption that liquidity in the form of high-quality liquid assets are treated asreadily available (i.e. recognised in the first-time bucket).
Consolidated local and foreign currency structural liquidity mismatch
(SLM)
2019
Cumulative liquidity positive variance
Funding related liabilities
SLM (%)
2018
Cumulative liquidity positive variance
Funding related liabilities
SLM (%)

0-18 months

18-24 months

24-36 months

8 005,730 255,1
26,5

10 735.6
25 539,242,0

4 428.4
22 487,719,7

2 629,3
19 897,5
13,2

1 416,019 238,2
7,4

7 735,1
15 689,549,3Market risk
 arket risk is the risk that the value of a financial position or portfolio will decline due to adverse movements in market rates. In
Mrespect of market risk, the Corporation is exposed to liquidity risk, equity price risk, interest rate risk and exchange rate risk.
Market risk is governed by the Asset and Liability Management policy and the Asset and Liability Committee (ALCO)
provides the objective oversight and makes delegated decisions related to market risk exposures.
Interest rate riskInterest rate risk is the risk that adverse changes in market interest rates may cause a reduction in the Corporation’s future netinterest income and/or economic value of its shareholder’s equity.
T he Corporation’s interest rate risk is a function of its interest-bearing assets and liabilities. The primary sources of interest rate risk
include:-	Repricing risk: which results from interest-bearing assets and liabilities which reprice within different periods. Thisalso
includes the endowment effect caused by an overall quantum difference between interest-bearing assets and liabilities;-	Basis risk: due to the imperfect correlation between interest rate changes (spread volatility) on interest-bearing assets andliabilities which reprice within the same period;-	Yield curve risk: arising from unanticipated yield curve shifts (i.e. twists and pivots); and-	Optionality: due to the presence of embedded options in assets (i.e. prepayment) and liabilities (i.e. early settlement) which
may be exercised based on interest rate considerations.
T he sensitivity to interest rate shocks and/or changes in interest-bearing balances is measured by means of earnings andeconomic value approaches. The former focuses on quantifying the impact on net interest income over the next twelve months
whereas the latter is used to gauge the impact on the fair market values of assets, liabilities and equity.
Interest rate sensitivity mismatch - Finance activities
RSA and RSL (Rate sensitive assets and rate sensitive liabilities)

67

Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 2019
3. Financial risk management (continued)
Interest rate sensitivity mismatch - March 2019
Cumulative liquidity positive variance
SA Rand
US Dollar
Euro
Interest rate sensitivity mismatch - March 2018
Cumulative liquidity positive variance
SA Rand
US Dollar
Euro

0-3 months

4-6 months

7-12 months

7 154,5(203,7)(2,4)

6 687,9(306,4)27,4

6 701,0(298,3)24,7

7 428,8(109,4)(18,6)

7 479,1(295,3)9,9

7 519,1(286,2)
7,3

	Furthermore, interest rate risk management is monitored through the sensitivity analysis done to the financial assets andliabilities. A 100 basis points (bps) increase/(decrease) in market interest rates resulted in the following sensitivities:
Figures in Rand million
2019+ 100 bps rate shock- 100 bps rate shock2018+ 100 bps rate shock- 100 bps rate shock

Rand

US Dollar

Euro

78,5
(78,5)

(2,3)
2,3

0,13
(0,13)

79,7(79,7)

(1,9)
1,9

0.03
(0.03)

Effect of a 100 basis point increase/(decrease) in market rates
Exchange rate risk
	Exchange risk is the risk that adverse changes in exchange rates may cause a reduction in the Corporation’s future earnings and/or its shareholders equity.
	In the normal business, the Corporation is exposed to exchange rate risk, through its trade finance book and exposure toinvestments in and outside Africa. The risk is further divided into:-	Translation risk: refers to the exchange rate risk associated with the consolidation of offshore assets and liabilities or thefinancial statements of foreign subsidiaries for financial reporting purposes;-	Transaction risk: arises where the Corporation has cash flows/transactions (i.e. a monetary asset or liability, off-balance
sheet commitment or forecasted exposure) denominated in foreign currencies whose values are subject to unanticipatedchanges in exchange rates.
	Any open (unhedged) position in a specific currency gives rise to exchange rate risk. Open positions can be either short (i.e. theCorporation will need to buy foreign currency to close the position) or long (i.e. the Group will need to sell foreign currency toclose the position) with the net open foreign currency position referring to the sum of all open positions (spot and forward) in a
specific currency.
For purposes of hedging, net open foreign currency positions are segmented into the following components:-	All exposures related to foreign currency denominated lending and borrowing; and-	All foreign currency denominated payables in the form of operating and capital expenditure, as well as foreign currency
denominated receivables in the form of dividends and fees.
The Group’s foreign currency mismatch per currency as at 31 March 2019 is shown as per tables below:
Net open foreign currency positions - 201968

Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 2019

- Loans (assets)- Derivative hedges (FEC’s)- Borrowings (liabilities)
Other net (payables) / receivables

US Dollar
485,0
67,2
(566,2)(8,0)(21,8)

Euro
47,5
20,2
(70,6)
(1,3)
(4,2)

4,5
465,9
134,3
(595,7)
(5,5)
10,0

1,0
43,5
59,7
(102,2)
(2,1)
(3,1)

Net open foreign currency positions - 2018
Foreign currency lending and borrowing- Loans (assets)- Derivative hedges (FEC’s)- Borrowings (liabilities)
Other net (payables) / receivables
Net open foreign currency positions

T he Corporation does not hedge its exchange rate risk on foreign currency denominated shareholder loans, equity and quasi
equity investments.
Equity price riskE quity price risk is the risk that adverse movements in equity prices may cause a reduction in the value of the Corporation’s
investments in listed and/or unlisted equity investments, and therefore also its future earnings and/or value of its shareholders
equity.
Sources of equity price risk include:-	Systematic risk or volatility in relation to the market as a whole; and-	Unsystematic risk or company-specific risk factors.
T he investment portfolio’s beta is used as an indication of systematic risk which is not diversifiable. In light of the long-term
nature of the Corporation’s investments, unsystematic risk is managed by means of diversification.
S ensitivity analysis were performed on the Corporation’s equity portfolio, to determine the possible effect on the fair value
should a range of variables change, e.g. cash flows, earnings, net asset values etc. These assumptions were built into theapplicable valuation models.
In calculating the sensitivities for investments the key input variables were changed in a range from -10% to +10%. The effectof each change on the value of the investment was then recorded. The key variables that were changed for each valuation
technique were as follows:-	Discounted cash flow: Net income before interest and tax-	Price earnings: Net income-	Listed companies: Share price-	Forced sale net asset value: Net asset value.

F rom the table below it is evident that a 10% increase in the relevant variables, will have a R9 483 million increase in the equity
values as at 31 March 2019 (2018: R10 821 million) and a 10% decrease will lead to a R9 483 million decrease in the equity values(2018: R10 003 million).
Period31March, 2019
31 March, 2018

10% increase 10% decrease
R 9 483m
R 9 483m
R 10 821m
R 10 003m

69Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 2019
3. Financial risk management (continued)
Operational riskT he IDC has adopted the Basel II (2004) definition for operational risk, which is defined as the risk of loss resulting frominadequate or failed internal processes, people and systems and from external events. This definition includes legal risk but
excludes systemic and reputational risk. This risk category relates to the IDC’s reliance on systems, processes and people.
The seven main operational risks identified are:-	Internal theft and fraud;-	External theft and fraud;-	Employment practices and workplace safety;-	Clients, products and business practices;-	Damage to physical assets;-	Business disruption and system failures; and-	Execution delivery and process management.
Approach to managing operational riskT he purpose of operational risk management in IDC is to reduce the likelihood and consequences of avoidable operational risk
events. An operational risk management framework, which has been approved by the IDC Board, has been developed to ensurethat operational risks are consistently and comprehensively identified, assessed, mitigated, controlled, monitored and reported.
The IDC operational risk management framework comprises:-	The operational risk strategy and policies;-	The risk governance process;-	Risk identification and assessment;-	Risk measurement;-	Risk assurance;-	Risk execution and monitoring;-	Risk reporting; and-	Risk mitigation.
The IDC safeguards itself against operational risks through:-	A defined operational risk framework and operational risk policy;-	Regularly updating systems and procedures which are subject to approval by the Internal Audit Committee;-	Regular internal and external audits;-	Identifying operational risk at departmental and functional levels;-	Regular review of the comprehensive Business Continuity Plan (BCP) which incorporates a Disaster Recovery
Plan (DRP) for Information Technology (IT) recovery and a working Business Continuity Management Office that meets regularly;-	Insurance of fidelity guarantees, legal risks, public liability and other identified insurable risks including those of fixed assets
which coverage is reviewed annually;-	The commitment of all employees to a code of conduct that encourages honesty, integrity and effectiveness.
-	Functional area and business unit specific operational risk registers have been completed for all functions in IDC. Each of
the completed operational risk registers were analysed to achieve a more complete understanding of the operational risk
profile of the Corporation and the top operational risks identified. RMD is in the process of collecting data on all material
operational risks losses and intends to develop a basic loss database for the Corporation in the next financial year.
Fraud and Corruption PreventionT he IDC has a fraud prevention plan in place and a Fraud and Corruption Prevention Committee comprising staff from the Internal
Audit, Legal Services and International Finance, Financial Management, RMD, Operations and Human Capital Departments that70

Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 2019

meet regularly. The IDC’s fraud prevention plan forms part of its Corporate Crime Prevention and Detection Plan.
Business Continuity Management
Business Continuity Management (BCM) is included in the managing of Operational Risk. BCM aims to ensure that the
Corporation is able to absorb, respond and recover from disruptions resulting from major business interruption events anddisasters. In order for the BCM objectives to be achieved, RMD works in partnership with other departments and SBU’s.
 CM has dual reporting to the Corporate Risk Division and the BCM Forum. The Chief Risk Officer has functional responsibility forB
BCM while the BCM Forum is a monitoring body.
The roles and activities of the BCM Forum include the following-	Assumes ownership of business continuity efforts within the IDC, ensures effective management of business continuity
and that the principles of business continuity management are reflected in all key policies, strategies and decision making
processes;-	Ensures that the business continuity framework remains current and relevant to the IDC;-	Defines the business continuity strategy to manage BCM risks through a core team in coordination with-	Departments, SBU’s and the BCM Coordinator;-	Approves and reviews the business continuity policy, strategies and plans prior to EXCO submission;-	Approves BCM programme management and Emergency Command and Control Structure;-	Clarifies roles and responsibilities of the BCM program participants;-	Monitors BCM capabilities through internal and external BCM audit reports; and-	Oversees the BCM process.
F or the purposes of BCM function development and management, the IDC has adopted British Standard BS25999 guideline,
which is a BCM standard published by the British Standards Institution (BSI). In addition to the BS25999 standard, the function is
also governed by the IDC’s BCM Policy and aligned to the Business Continuity Institute’s Global Good Practice Guideline 2010
(GPG). The guideline provides five phases of the BCM lifecycle which are widely adopted in the industry and provides a baseline
for the purpose of common language in BCM.
GOVERNANCE RISK overnance risk at the IDC is defined as the risk of loss resulting from inadequate legal, procurement, regulatory or complianceGcontrols.
Approach to Managing Governance Risk
The management of the Corporation’s governance risk include:-	Completion of Corporate Governance compliance checklists;-	The client due diligence process which includes a legal due diligence;-	Client reviews by Post Investment Monitoring Department;-	System restrictions for data capture, formatting and updates;-	Approval of all non-standard legal documents by the General Council and Divisional Executive: Legal and Post Investment;-	Obtaining external legal advice where appropriate;-	Continuous monitoring of new legislation and its application within the IDC context and policy manual updates;-	Compliance awareness training and reviewing of regulatory compliance policies, procedures and reporting; and-	The establishment of a Compliance Committee.
INFORMATION TECHNOLOGY GOVERNANCE RISK

71

Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 2019
3. Financial risk management (continued)
Information Technology (IT) Governance risk is defined as the risk of loss resulting from inadequate or failed IT processes.
The risk includes the failure of monitoring and evaluation processes resulting in non-compliance with legislation or internal
processes and breach of security, business disruption and systems failure resulting in the inability to recover data andnon-availability of IT applications. Other risks include poor service delivery from IT systems and failure of acquisition andimplementation processes resulting in the non-alignment between business needs and IT solutions.
Recovery of IT is addressed in the Disaster Recovery Plan and other risks are addressed by:-	The IT security policy;-	Prudent and scrupulous recruitment policies; and-	Internal audit reviews of all information technology aspects, e.g. strategy, systems development, change management,
hardware and software contracts and security policy.
Approach to Managing IT Governance Risk
The Corporation accepts that technology has a fundamental impact on the way in which business is conducted andbusinesses are measured. Therefore, IDC ensures that:-	Risks associated with the IT environment and projects are continuously evaluated and appropriate plans are in place andimplemented to mitigate these risks to an acceptable level;-	IT expenditure is motivated by sound commercial principles rather than strategic instinct only i.e. that the businessstrategies and IT strategies are aligned;-	A long-term IT plan is developed and the appropriateness thereof is reviewed to ensure that it supports and does notinhibit the long-term strategy of the Corporation;-	Developments in the IT industry are continuously monitored and the potential impact thereof on the Corporation’s longterm strategy is evaluated; and-	The necessary skills are in place to ensure that the internal control systems are adequately applied across the entire IT
environment.
Capital managementT he IDC is accountable to its sole shareholder, the Economic Development Department. The performance as well as
management of IDC capital is supported by the agreement between the Corporation and the shareholder in a form of the
Shareholder’s Compact which outlines the agreements between the two parties.
Regulatory capital
IDC is not required by law to keep any level of capital but has to utilise its capital to achieve the shareholder’s mandate. The IDC
Act of 1940, as amended, dictates that IDC can be geared up to a 100% of its capital.
Risk appetiteT he Board approved risk appetite limit serves as a monitoring tool to ensure that the impact of investment activities in the
Corporation do not have a negative impact on the Corporation’s financial position.

72

Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 2019
4. Fair value information
Figures in Rand million
Group 2019
Derivative assets
Biological assets
Investment property
Land and buildings
Listed shares
Unlisted shares
Preference shares
Derivative liabilities
Group 2018
Derivative assets
Biological assets
Investment property
Land and buildings
Listed shares
Unlisted equities
Preference shares
Derivative liabilities
Company 2019
Investment property
Listed shares
Unlisted shares
Preference shares
Investments in subsidiaries
Investments in associates
Derivative liabilities
Company 2018
Derivative assets
Investment property
Listed shares
Unlisted shares
Preference shares
Investments in subsidiaries
Investments in associates
Derivative liabilities

Level 1

Level 2

Level 3Total

54 86054 860
-

1
1
39

93
290
1 850
4 114
1 346
7 693
-

1
93
290
1 850
54 8604 114
1 346
62 554-45 62145 621
-

142
142
139

52
403
2 389
5 005
6 890
14 739
-

142
52
403
2 389
45 6215 005
6 890
60 502139

30 89023 9701 374
56 234
-

17

37
4 060
1 346
23 46218 38947 294-37
30 8904 060
1 346
47 43219 763103 528-

24 14221 4791 648
47 269
-

108
108
126

32
4 909
6 890
24 916
21 97558 722-10832
24 1424 909
6 890
46 39523 623106 099
126

73

Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 2019
4. Fair value information (continued)
Reconciliation of assets and liabilities measured at level 3
Note(s)Openingbalance

Gains/
lossesrecognised
in profit or
loss

Gains/losses
recognisedin othercomprehensive
incomePurchases

Sales

IFRS 9reclassification toamortised
cost

Closingbalance

Group - 2019
AssetsBiological assets
Land and buildings
Unlisted shares
Preference shares
Investment Property

7
5
13
13
6

52
2 389
4 949
6 895
403
14 688

7
(54)
99
52

3
781
(9)
(841)

71
60
679
1
811

(37)
(548)
(54)
(105)
(744)

(6 327)(6 327)

93
1 850
414
1 346
290
7 693

Group - 2018
AssetsBiological assets
Land and buildings
Unlisted shares
Preference shares
Investment property

7
5
13
13
6

51
3 488
7 335
7 148
366
18 388

1
(30)
128
52
37
188

(1 336)(2 227)(1 258)(4 877)

321
1 258
948
2 532

(54)
(1 489)(1 543)

-

52
2 389
5 005
6 890
403
14 739Note(s)Openingbalance

Gains/
lossesrecognised
in profit or
loss

Gains/losses
recognisedin othercomprehensive
incomePurchases

Sales

IFRS 9reclassification toamortised
cost

Closingbalance

13
13
9

4 909
6 890
22 705

(402)
61

(817)
(51)

117
747

(149)
(193)
-

(4 949)
-

4 060
1 346
23 46210
6

21 97532
56 511(4 597)5(4 904)(631)(1 499)

1 623
2 487

19
(323)

(4 949)18 38937
47 294

13
13
9

7 315
7 148
23 337

86
(256)
201

(2 255)
(186)
2 587

562
514
520

(799)
(330)
(1 729)

-

4 909
6 890
24 91610
6

17 39115
55 206(2 698)17(2 650)

4 950
5 096

2 332
3 928

(2 858)-21 97532
58 722Company - 2019
AssetsUnlisted shares
Preference shares
Investments in
subsidiaries
Investments in associates
Investment property

Company - 2018
AssetsUnlisted shares
Preference shares
Investments in
subsidiaries
Investments in associates
Investment property

74

Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 2019

Valuation processes applied by the GroupT he Group’s main instruments of monitoring the performance of its investee companies are through quarterly IMC meetings,
including but not limited to the PACS (payment and collection system) regular client review visits, as well as by way of analysis ofmanagement accounts and audited financial statements.
T he Post Investment Monitoring Department (PIMD) creates a focused approach to the monitoring of IDC investments. One of
the key monitoring activities is the IMC Equity meetings, wherein the calculations of fair values and impairments are assessed
and approved by the Committee. The IMC Equity Meetings are normally held three times per financial year, in April, August andDecember for reporting periods of February, June and September respectively.
Valuation techniques using observable inputs
T he Group measures fair values using the following fair value hierarchy, which reflects the significance of the inputs used in
making the measurements:
Level 1Instruments valued with reference to unadjusted quoted prices for identical assets or liabilities in active markets where thequoted price is readily available and the price represents actual and regularly occurring market transactions on an arm’s length
basis. An active market is one in which transactions occur with sufficient volume and frequency to provide pricing information
on an ongoing basis. These include listed shares.
Level 2Instruments valued using inputs other than quoted prices as described above for Level 1 but which are observable for the
instrument, either directly or indirectly, such as:••••

Quoted price for similar assets or liabilities in an active market;
Quoted price for identical or similar assets or liabilities in inactive markets;
Valuation model using observable inputs; andValuation model using inputs derived from/corroborated by observable market data.

These include derivative financial instruments, investment properties and option pricing models.
Valuation techniques using unobservable inputs
Level 3Instruments valued using inputs not based on observable data and the unobservable inputs have a significant effect on the
instruments’ valuation. This category includes instruments that valued based on quoted prices for similar instruments for whichsignificant unobservable adjustments or assumptions are required to reflect differences between the instruments.
 aluation techniques include price earnings, net present value and discounted cash flow models, comparison with similarV
instruments for which market observable prices exist and other valuation models. Assumptions and inputs used in valuation
techniques include risk-free and benchmark interest rates and discount rates.
T he objective of valuation techniques is to arrive at a fair value measurement that reflects the price that would be received to sell
the asset or paid to transfer the liability in an orderly transaction between market participants at the measurement date.

75

Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 2019
4. Fair value information (continued)
Price Earnings (PE) Valuation
The PE valuation method is the first valuation option, but has only been used in respect of companies with:•	At least 2 years’ profit history;•	Forecast/Budgeted steady growth in profits;•	Is low risk;•
Has a good year on year performance; and•a long history of consistent return - operating in an industry that is not prone to fluctuations.
Free Cash Flow Valuation (FCF)
FCF is the most widely used valuation method by the Group on its Level 3 financial instruments. The below approach is followed:•	All inputs are substantiated, especially in instances where there are prior year losses;•	This method is used without exception for valuing all projects and start-ups unless the going concern principle is in doubt.
In the case where a project has a limited remaining life (e.g. Mining operations or single contract with a determined end), a
separate “Limited Life” FCF model is used.
Net Asset Value Valuation (NAV)
Forced-Sale basis
The Group uses the Forced-Sale NAV method in the following circumstances:•	Where the going concern assumption is not applicable; or•	Where it has been motivated that no other model is appropriate.
NAV - Going ConcernT he Group uses NAV (without applying forced sale) where it can be motivated that no other model is appropriate based on thefollowing conditions:•	An entity is consistently making losses and not meeting budgets (excluding start-up operations);•	An entity has material variances between actual and budgeted figures;•	An entity operates in high volatile sector making it almost impossible to budget;•	An entity has completed all studies necessary to implement a project but has however not yet secured the necessary
capital to fully fund the implementation of the project;•	An entity is not fully funded and there is no clear indication that it will obtain the necessary funding to complete theproject/expansion/continue operations.

76

Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 2019

Quantitative information about fair value measurements using significant unobservable inputs (Level 3)
Description
Equity Instruments
All sectors
Agro-processing

Valuation techniques

Discounted cash flow

Price-earning valuation

Basic Metals and Mining

Discounted cash flow

Basic and Speciality Chemicals

Discounted cash flow

Automotive

Discounted cash flow

Light Manufacturing & Tourism Discounted cash flow

Heavy Manufacturing

Discounted cash flow

Chemical Products

Discounted cash flow

New Industries

Discounted cash flow

Unobservable input
Risk-free rate
Expected long term growth
Cost of Debt
Discount factor
Sector beta
Industry/sector PE ratio
Risk Adjusted PE ratio
Expected long term growth
Cost of Debt
Discount factor
Sector beta
Cost of Debt
Discount factor
Sector beta
Cost of Debt
Discount factor
Sector beta
Cost of Debt
Discount factor
Sector beta
Cost of Debt
Discount factor
Sector beta
Cost of Debt
Discount factor
Sector beta
Cost of Debt
Discount factor
Sector beta

Range
8.87%
4.50%
5.1% - 12.7%
7.7% - 23.4%
1.1% - 1.5%
16.5% - 23.2%
6.9% - 14.2%
4.5%
4.1% - 12.8%
6.7% - 21.5%
1.00
4.5% - 11.9%
4.9% - 14.0%
1.00
6.3% - 13.9%
12.6% - 16.9%
1.00
9.9% - 12.5%
8.0% - 16.1%
1.00
3.8% - 9.5%
13.7% - 20.2%
1.00 - 1.01
7.9% - 12.5%
14.1% - 21.5%
1.00
7.9% - 15.4%
5.6% - 21.5%
1.00

Discounted cash flowS ignificant increases in any of the inputs in isolation would result in lower fair values. Significant decreases in any of the inputs in
isolation would result in higher fair values.
Price-earning valuation
The fair value would increase (decrease) if:
The risk-adjusted PE ratio were higher (lower) or
The expected long term growth were higher (lower)77

Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 2019
5. Property, plant and equipment
Figures in Rand million
Group

Land and buildings
Plant and machinery
Furniture and fixtures
Motor vehicles
Bearer plants
Asset under construction
Total

Cost orrevaluation
2 485
9 298
343
20
206
1 333
13 6852019
Accumulated
depreciation(635)(5 443)
(247)
(14)
(3)
(6 342)Carrying
value
1 850
3 855
96
6
203
1 333
7 343

Cost orrevaluation
3 013
8 593
217
36
205
1 121
13 1852018
Accumulated
depreciation(624)(4 687)(165)(26)(5 502)Carrying
value
2 389
3 906
52
10
205
1 121
7 683

Cost orrevaluation
131
136
10
2
279

2019
Accumulated
depreciation
(126)
(88)
(7)
(221)

Carrying
value
5
48
3
2
58

Cost orrevaluation
132
111
8
2
253

2018
Accumulated
depreciation
(120)
(73)
(6)
(199)

Carrying
value
12
38
2
2
54

Company

Plant and machinery
Furniture and fittings
Motor vehicles
Asset under construction
Total

Reconciliation of property, plant and equipment - Group - 2019
Opening Additions Disposals Transfers
balanceLand and buildings
Plant and machinery
Furniture and fixtures
Motor vehicles
Bearer plants
Asset Under Construction

2 389
3 906
52
10
205
1 121
7 683

60
894
126
3
140
217
1 440

(64)
(1)
(5)
(135)
(14)
(219)

(484)
(461)
2
(1)
(6)
9
(941)

Foreign Revaluations Depreciation
Exchange
Movements
(1)
3
(53)
(484)
(84)
(1)
(1)
(1)
3
(623)

Total

1 850
3 855
96
6
203
1 333
7 343

Reconciliation of property, plant and equipment - Group - 2018Land and buildings
Plant and machinery
Furniture and fixtures
Motor vehicles
Bearer plants
Asset Under Construction
Capitalised Borrowing Costs

78

Opening Additions Disposals Transfers Revaluations Impairment Depreciation
balanceloss & Impairment
3 488
224
(1 147)
(124)
(3)
(49)
5 183
1 008
(325)
(1 289)
(229)
(442)
35
34
1
(18)
56
6
(47)
(5)
181
39
(20)
8
(3)
662
408
(11)
62
8
(8)
9 613
1 719
(356)
(2 420)
(124)
(232)
(517)

Total
2 389
3 906
52
10
205
1 121
7 683

Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 2019

Figures in Rand million
Reconciliation of property, plant and equipment - Company - 2019
Openingbalance
12
38
2
2
54

Plant and machinery
Furniture and fixtures
Motor vehicles
Asset Under Construction

Additions

Disposals Depreciation

165
2
3
170

(139)
(3)
(142)

(7)
(16)
(1)
(24)

Total
5
48
3
2
58

Reconciliation of property, plant and equipment - Company - 2018
Openingbalance
21
30
2
1
54

Additions

Depreciation

Total

19
1
1
21

(9)
(11)
(1)
(21)

12
38
2
2
54

2019
Movements

Fair value

2018
Movements

Fair value

(2)

34

Cost /
Valuation
27

9

36

343
24
403

(110)
(112)

232
24
290

316
23
366

27
1
37

343
24
403

Cost /
Valuation
32

2019
Fair value
adjustment
5

Carrying
value
37

Cost /
Valuation
15

2018
Fair value
adjustment
17

Carrying
value
32

Plant and machinery
Furniture and fixtures
Motor vehicles
Asset Under Construction

6. Investment property
Figures in Rand million
Group

Land and buildings leased
to industrialists
Land held for development
Farming land and buildings
Total

Cost /
Valuation
36

Company

Land and buildings leased
to industrialists

79Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 2019
6. Investment property (continued)
Reconciliation of investment property - Group - 2019
Opening balance

Additions

Disposals

36

-

343
24
403

2
2

Land and buildings leased
to industrialists
Land held for development
Farming land and buildings

Total

-

Fair value
adjustment
(2)

(105)
(105)

(7)
(9)

232
24
290

34

Reconciliation of investment property - Group - 2018Land and buildings leased to industrialists
Farming land and buildings
Land held for development

Opening balance
27
23
316
366

Fair value adjustment
9
1
27
37

Total
36
24
343
403

Opening balance
32

Fair value adjustment
5

Total
37

Opening balance
15

Fair value adjustment
17

Total
32

Reconciliation of investment property - Company - 2019Land and buildings leased to industrialists
Reconciliation of investment property - Company - 2018Land and buildings leased to industrialists

Details of valuation
Valuations take place annually, based on the aggregate of the net annual rental receivable from the properties, considering andanalysing rentals received on similar properties in the neighbourhood, less associated costs (insurance, maintenance, repairs andmanagement fees). A capitalisation rate which reflects the specific risk inherent in the net cash flows is applied to the net annual
rentals to arrive at the property valuations.
T he fair value of undeveloped land held as investment property is based on comparative market prices after intensive market
surveys. Gains and losses arising from a change in fair value are recognised in profit or loss.
E xternal, independent valuers having appropriate, recognised qualifications and recent experience in the location and categoryof the property being valued are used to value the portfolio.

7. Biological assets
Group

Planted pecan nut trees
Maize
Blueberry plants
Total

80

Cost /
Valuation
18
75
93

2019
Accumulated
depreciation-

Carrying
value
18
75
93

2018
Cost / Accumulated
Valuation depreciation
19
22
11
52
-

Carrying
value
19
22
11
52

Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 2019

Reconciliation of biological assets - Group - 2019
Figures in Rand million

Openingbalance

Additions

Disposals

Planted pecan nut trees
Maize
Blueberry plants

19
22
11
52

17
54
71

(4)
(22)
(11)
(37)

Openingbalance

Additions

Disposals

19
23
9
51

16
2
18

(15)
(15)

Gains (losses)
arising fromchanges in fair value
6
1
7

Total

Gains (losses)
arising fromchanges in fair value
(1)
(1)
(2)

Total

38
55
93

Reconciliation of biological assets - Group - 2018

Planted pecan nut trees
Maize
Blueberry plants

19
22
11
52

Nature of biological assets
T here are 129.03 hectares (2018: 129.03 hectares) of plants. The current plant density for the majority of plants at the Diepe Kloof farm is
4 000 and 5 000 plants per hectare and the plant densities at the Klyne Fontein farm is 3 333 and 4 167 plants per hectare. Fair value cannot be
determined for blueberry plants as reliable information about the projected yields for the above mentioned varieties are not available and any
predictions about yields cannot be verified in terms of historical yields.
 iological assets represent unharvested maize on land and pecan nuts on trees. Due to the fact that there is an active market at year end and theBfair value of the maize could be determined by using an external independent valuer the biological asset would be measured at fair value lessestimated point-of-sale costs of agricultural produce, which is determined at the point of sale harvest.

8. Intangible assets
Group
Figures in Rand million
GoodwillIntellectual Property
Computer software, other
Total

Cost /
Valuation
882
2
86
970

2019
Accumulated
depreciation
(882)
(1)
(78)
(961)

Carrying
value
1
8
9

Cost /
Valuation
881
78
959

2018
Accumulated
depreciation
(881)
(68)
(949)

Carrying
value
10
10

Openingbalance1910Additions

Amortisation

Total

2
2

(3)
(3)

1
8
9

Reconciliation of intangible assets - Group - 2019

Figures in Rand million
Intellectual Property
Water rights
Computer software, other81Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 2019
8. Intangible assets (continued)
Reconciliation of intangible assets - Group - 2018
Openingbalance

Additions

Transfers

Amortisation

Total

44

4

(18)

(20)

10

Figures in Rand million
Computer software, other

9. Investments in subsidiaries
Company
20192018
41 93041 393(2 678)6 858
8 548(1 356)(868)
47 43246 395Figures in Rand million
Fair value of investments
Impairment of shares
Loans receivable
Impairment of loans

IDC subsidaries

Arengo 316
ADC Cables
Dymson Nominee
Findevco
FoskorFoskorImpofin
Kindoc Investments
Konbel
KonoilPrillaKindoc Sandton Properties
Sefa
Grinding Media SA
Cast Products
Sustainable Fibre Solutions
Sheraton Textiles
Thelo Rolling Stock
Other subsidiaries
Fair value adjustment
Impairment adjustment
Fair value

Share
class

%
interest

Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Preference
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary

100 %
100 %
100 %
100 %
59 %
100 %
100 %
100 %
100 %
100 %
100 %
100%
59 %
100 %
100 %
80 %
50 %
-%

IDC net
IDC netindebtedness to the indebtedness by theholding company
holding company
2018
2019
2018
2019
2018
160
159
35
336
316
2
46
47
(374)
(373)
205
1 172
956
3 177
(88)
(88)
154
154
(10)
(10)
(13 455)(12 720)
14
308
324
174
177
150
1 957
1 304
4
136
134
56
57
976
981
644
(71)
5 243
(33)
4 081
6 858
8 548
(13 960)(13 191)
37 312(2 678)(1 356)(868)
38 7155 502
7 680(13 960)(13 191)

Shares at cost andfair value
2019
35
2
805
3 177
14
4
3
280
4 320
37 61041 930L egally the IDC owns 59% of Foskor, but for accounting purposes an effective 85% of Foskor is consolidated by virtue of IDC
holding shares on behalf of BBBEE participants until repayment of IDC funding is effected.

82Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 2019

Subsidiaries with 50% stake lthough the Company holds 50% of the voting powers in Thelo Rolling Stock Leasing (Proprietary) Limited, the investment isAconsidered a subsidiary because of additional voting powers granted to the IDC through its right to appoint three out of the five
directors to the Board of Directors of Thelo Rolling Stock Leasing (Proprietary) Limited.
Profit and losses
The aggregate net profits and losses after taxation of subsidiaries attributable to the IDC were as follows:Group
Figures in Rand million
Profits
LossesCompany
2019
32
(432)
(400)

2019
18
(5)
13

Included in financing are the following investments which have been made in terms of section 3 (a) of the Industrial
Development Act with the approval of the State President:
Group
2019
131
131

Figures in Rand million
Foskor Limited - At cost
Sasol Limited - At cost

2018
131
131

Company
2019
2018
805
205
805
205

A register of investments is available and is open for inspection at the IDC’s registered office.
Subsidiaries with material non-controlling interests
T he following information is provided for subsidiaries with non-controlling interests which are material to the reporting
company. The summarised financial information is provided prior to intercompany eliminations.
Subsidiary

Country ofincorporation

Foskor
SCAW

RSA
RSA

% Ownership interest heldby non-controlling interest
2019
2018
15%
15%
26%

T he percentage ownership interest and the percentage voting rights of the non controlling interests were the same in all cases
except for Foskor Limited where the voting rights were 41% (2018: 41%)83

Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 2019
9.

Investments in subsidiaries (continued)
Summarised statement of financial position
Figures in Rand million
AssetsNon-current assets
Current assets
Total assets
Liabilities
Non-current liabilities
Current liabilities
Total liabilities
Total net assets (liabilities)
Carrying amount of non-controlling interest

Foskor
2019

2018

SCAW
2018

5 686
2 503
8 189

5 757
2 584
8 341

915
915

1 842
1 421
3 263
4 926
739

2 109
1 839
3 948
4 393
658

609
609
306
(80)

Foskor
2019
2018
5 429
5 893
(5 805)(6 843)
(376)
(950)
287
188
(89)
(762)
3
(4)
(86)
(766)
(13)
(72)

SCAW
2018
224
(230)
(6)
(6)
(6)
-

Foskor
2019
(45)
(495)
590
50

SCAW
2018
(493)
3 146
(2 800)(147)

Summarised statement of profit or loss and other comprehensive income
Figures in Rand million
Revenue
Other income and expenses
Profit/(loss)before tax
Tax expense
Profit (loss)
Other comprehensive income/(loss)
Total comprehensive income
Profit (loss) allocated to non-controlling interest
Summarised statement of cash flows
Figures in Rand million
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Net increase(decrease) in cash and cash equivalents

84

2018
(395)
(761)
768
(388)

Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 2019
10. Investments in associates
Group
2019
2018
32 56523 7699 470
5 559
23 16821 843(12 446)(11 800)
16 936
10 290(4 563)(2 123)
187
203
222
212
(35)
(9)
32 75223 972

Figures in Rand million
Associated companies
Fair value of investments – listed shares in associates
Fair value of investments – unlisted shares in associates
Impairment of shares
Net asset value at acquisition
Accumulated equity-accounted income
Accumulated equity-accounted losses and impairments
Loans receivable
Impairment of loans
Partnerships and joint ventures
Partners’ capital
Accumulated profits/(losses)

Company
20192018
32 10723 6011 374
1 648
18 38915 321(1 505)16 907
10 260(4 563)(2 123)
22
22
41
41
(19)
(19)
32 12923 623

Material associates
Companies

BAIC Automobile SA(Pty) LtdBEECO 333
Broadband Infraco

Provides telecommunication
infrastructure
Columbus Stainless Steel Steel manufacturer
Duferco Steel Processing Processes steel coil
Eastern Produce Malawi Farms tea, coffee and macadamia
nuts
Hans Merensky
Holds investments in timber andagricultural industries
Hulamin Limited
Asset-leasing company
Incwala Resources
Platinum mining
Karsten Boerdery
Farms table grapes and dates
KaXu Solar One
Parabolic through solar energy farm
KHI Solar One (Pty) Ltd
Parabolic through solar energy farm
Merafe Ltd
Operates chrome and alloys plant
Mozal S.A.R.L.
Produces primary aluminium metal
Palabora Mining Co
Mining of various minerals
Umicore Catalyst
Manufactures automotive catalysts
Xina Solar One
Parabolic through solar energy farmYork Timber Ltd
Sawmilling
Other associates
VariousFinancialCountry of
%
Total
Total
year-ends* incorporation holding exposure exposure
2019
2018
31/12/2018
RSA 35.00%
406
446
31/12/2018
31/12/2018

RSA
RSA

23.00%
26.00%

3 075
229

2 376
478

31/12/2018
31/12/2018

RSA
RSA
Malawi24.00%
50.00%
27.00%

924
653
209

812
556
152

31/12/2018

RSA

30.00%

1 150

953

31/12/2018

RSA
RSA
RSA
RSA
RSA
RSA
Mozambique
RSA
RSA

30.00%
23.00%
42.00%
29.00%
29.00%
22.00%
24.00%
20.00%
35.00%
20.00%
29.00%
various

1 141
645
717
491
846
1 067
3 685
1 844
237
1 060
881
13 30532 565

1 376
650
431
1 526
933
1 010
3 089
1 945
207
1 067
885
4 877
23 76931/12/2018
31/12/2018
31/12/2018
31/12/2018
31/12/2018
31/12/2018

RSA
RSA

* The financial year-ends for which the financial statements of the associated entities have been prepared, where they are
different from that of the investor, are disclosed above.

85

Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 2019
10. Investments in associates (continued)
Summarised financial information of material associates
2019
Summarised statement of profit orloss and other comprehensive income
Broadband Infraco
Columbus Stainless
Duferco Steel Processing
Eastern Produce Malawi
Hans Merensky Holdings
Hulamin Limited
Karsten Group Holdings
KaXu Solar One
KHI Solar One
Merafe Ltd
Mozal S.A.R.L.
Umicore Catalyst
Xina Solar One
York Timber Ltd
Summarised statement of financial
position
Broadband Infraco
Columbus Stainless
Duferco Steel Processing
Eastern Produce Malawi
Hans Merensky Holdings
Hulamin Limited
Karsten Group Holdings
KaXu Solar One
KHI Solar One
Merafe Ltd
Mozal S.A.R.L.
Umicore Catalyst
Xina Solar One
York Timber Ltd

86

Revenue

372
2 731
1 838
622
15 654
11 534
1 031
1 256
435
5 606
11 314
2 776
1 354
800
Non current
assets
1 151
2 000
1 266
777
7 820
2 102
2 242
6 145
3 888
3 309
13 690
120
8 822
4 005

Profit (loss)
from continuing
operations
(94)
(111)
(56)
117
512
(773)
118
(113)
(210)
683
(374)
226
(41)
(65)

Other
comprehensive
incomeCurrent assets

Non current
liabilities

95
5 045
1 379
376
4 165
4 409
1 085
1 186
355
3 271
5 383
919
1 360
948

520
(23)
29
(1)
63
-

457
397
976
247
3 621
527
1 069
6 209
3 023
1 136
1 987
37
7 463
1 444

Total
comprehensive
income
(94)
(111)
(56)
117
932
(796)
118
(84)
(210)
683
(374)
225
22
(65)

Dividend
received fromassociate

Current liabilities

Total net assets

153
2 798
1 333
128
3 005
2 182
564
806
316
550
1 753
325
354
442

636
3 850
336
778
5 359
3 802
1 694
316
904
4 893
15 333
677
2 364
3 067

11
7
15
6
93
158
49
-

Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 2019

Summarised financial information of material associates
2018
Summarised statement of profit orloss and other comprehensive income

Revenue

Broadband Infraco
Columbus Stainless
Duferco Steel Processing
Eastern Produce Malawi
Hans Merensky
Hulamin Limited
Karsten Boerdery
KaXu Solar One
KHI Solar One
Merafe Ltd
Mozal S.A.R.L.
Palabora Copper
Umicore Catalyst
Xina Solar One
York Timber Ltd

Summarised statement offinancial position
Broadband Infraco
Columbus Stainless
Duferco Steel Processing
Eastern Produce Malawi
Hans Merensky
Hulamin Limited
Karsten Boerdery
KaXu Solar One
KHI Solar One
Merafe Ltd
Mozal S.A.R.L.
Palabora Copper
Umicore Catalyst
Xina Solar One
York Timber Ltd

379
13 65119 451458
9 806
10 160
900
832
312
5 889
10 671
9 912
2 296
617
1 838
Non current
assets
1 144
2 011
1 031
637
3 801
3 543
1 905
6 668
4 063
3 303
11 356
7 384
124
9 052
4 161

Profit (loss)
from continuing
operations
(122)
457
1 567
55
389
332
88
(187)
(209)
914
1 172
1 193
138
17
271

Other
comprehensive
incomeCurrent assets

Non current
liabilities
472
463
806
199
1 244
953
1 042
6 882
3 052
1 084
1 242
2 261
32
6 915
1 546

99
5 746
1 416
200
2 672
3 687
882
815
320
3 053
4 233
5 607
808
970
897

9
95
4
91
-

Total
comprehensive
income
(122)
466
1 567
55
389
332
88
(187)
(209)
914
1 172
1 290
142
108
271

Dividend
received fromassociate

Current liabilities

Total net assets

144
3 461
1 340
72
1 693
1 628
430
253
252
635
1 495
1 495
307
744
432

627
3 833
301
566
3 536
4 649
1 315
348
1 079
4 637
12 852
9 235
593
2 363
3 080

8
7
14
7
66
492
61
-

Aggregated individually immaterial associates accounted for using the equity method

Figures in Rand million
The aggregate amounts were as follows:
Non-current assets
Current assets

EquityNon-current liabilities
Current liabilities

Statement of Comprehensive Income
Revenue
Profits
Losses

Group
2019

2018

111 363
41 090152 453

85 09535 832120 92775 31254 28822 853
152 453

55 45647 71517 756120 927

73 8718 035(3 539)93 0949 360(1 896)87

Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 2019
10. Investments in associates (continued)
Partnerships and joint ventures
	The IDC equity accounts for its joint venture, the Vantage Capital Fund Trust. While the IDC owns 100% of the trust, the trust deed
does not grant the power to direct the investment.
Total% interest
Total
exposure
exposure
2018
2019
The Vantage Capital Fund Trust
100
40
168
Profits

Figures in Rand million
The aggregate amounts were as follows:
Non-current assets
Current assets

Equity

2

2

Group
2019

2018

133
228
361

133
228
361

25
25

25
25

361

361

25

25

6

6

-

(3)
-

Statement of Comprehensive Income
Profits
LossesCompany
20192018

11. Derivative financial instruments
Figures in Rand million
Derivative assets
Foreign exchange contract assets
Derivative liabilities
Foreign exchange contract liability

Group
2019

2018

Company
2019
2018

1

142

-

108

39

139

17

126

T hese derivative assets and liabilities are subject to master netting agreements, which allows the Company to off-set the assets
and liabilities, arriving at a net liability position of R17m (2018: net asset position of R18m)
All contractual maturities for the derivative assets and liabilities are within 12 months.

88

Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 2019
12. Loans and advances
Figures in Rand million
Loans and advances to clients
Specific impairment of loans and advances
Collective impairment of loans and advances

Group
2019
35 583(9 703)25 8802018
35 830(4 168)(1 002)30 660Company20192018
36 86633 060(8 934)(3 504)(992)
27 93228 564

4 168
4 467
2 587
(58)
(1 461)
9 703

3 037
1 900
(55)
(13)
(701)
4 168

3 504
4 467
2 347
(58)
(1 326)
8 934

2 434
2 157
(55)
(13)
(1 019)
3 504

-

964
38
1 002

-

954
38
992

9 703
9 703

4 168
1 002
5 170

8 934
8 934

3 504
992
4 496

1 952
4 993
5 687
5 066
5 238
4 063
8 584
(9 703)25 880

1 664
4 865
5 300
4 779
3 800
4 423
10 999(5 170)30 660

1 952
4 187
5 532
4 980
5 138
4 053
11 024(8 934)27 932

1 664
4 117
5 075
4 628
3 746
4 368
9 462
(4 496)28 564* Interest rates range between 0.4% and 26%
Reconciliation of provision for impairment of loans and receivablesSpecific impairment of loans and advances
Opening balance
IFRS 9 transition– Charge for the year
– Recoveries– Effect of foreign currency movements
Write-offs

Portfolio impairment of loans and advances
Opening balance
Impairment charge for the year

Total allowances for impairment
Specific allowances for impairment
Collective allowance for impairment

Maturity of loans and advances– due within three months– due after three months but within one year
– due after one year but within two years– due after two years but within three years– due after three years but within four years– due after four years but within five years– due after five years– impairment of loans and advances89Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 2019
13. Investments
Figures in Rand million
Listed equities
Unlisted equities
Preference shares
Impairment of listed shares
Impairment of unlisted shares
Impairment of preference shares
Shares at fair value

Group
2019
54 860
4 114
1 346
60 32060 3202018
45 6295 244
9 150
60 023(8)(239)(2 260)57 516Company
20192018
30 89024 150
4 060
5 148
1 346
9 150
36 29638 448(8)(239)(2 260)36 29635 941

-

236
(228)
8

-

236
(228)
8

-

239
239

-

239
239

-

2 192
68
2 260

-

2 192
68
2 260

-

8
239
2 260
2 507

-

8
239
2 260
2 507

Specific allowance for impairment
Listed equities
Balance at 1 April
Impairment charge/(reversal) for the year

Unlisted equities
Balance at 1 April
Impairment charge/(reversal) for the year

Preference shares
Balance at 1 April
Impairment charge/(reversal) for the year

Comprises
Impairment of listed shares
Impairment of unlisted shares
Impairment of preference shares
Shares at fair value

14. Inventories
Figures in Rand million
Raw materials, components
Work in progress
Finished goods
Consumable storesPhosphate rock

Group
2019
268
90
631
820
242
2 051

2018
270
99
614
570
195
1 748

Company
2019
2018
1
4
1
4

Group inventory to the value of R4.14m was written down as a net realisable value adustment at 31 March 2019 (2018:3.45m).

90Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 201915. Trade and other receivables
Figures in Rand million
Financial instruments:
Trade receivables
Other receivable
Expected credit losses
Trade receivables at amortised cost

Group
2019
3 336
549
(61)
3 824

2018
1 800
1 505
3 305

Company
2019
2018
1 912
1 254
165
3
(3)
2 074
1 257

Non-financial instruments:
Prepayments (if immaterial)
Total trade and other receivables

41
3 865

46
3 351

10
2 084

1 257

Categorisation of trade and other receivables
Trade and other receivables are categorised as follows in accordance with IFRS 9: Financial Instruments:

At amortised cost

Group
2019
3 824

2018
3 305

Company
2019
2018
2 074
1 257

Trade and other receivables pledged as security
 rilla, a subsidiary, entered into an invoice discounting agreement with Nedbank Limited whereby it has discounted all of its
P
debtors and has given first cession of all receivables as security for a R130 million (2018: R115 million) finance facility advanced toit.
Fair value of trade and other receivables
Fair value of trade and other receivables approximates their carrying amount.

16. Cash and cash equivalents
Cash and cash equivalents consist of:

Figures in Rand million
Cash and balances with bank
Negotiable securities
Bank overdraft

Current assets
Current liabilities

Group
2019
2 762
7 047
(49)
9 760

2018
3 265
2 891
(19)
6 137

Company
2019
2018
1 466
2 682
7 767
3 044
9 233
5 726

9 809
(49)
9 760

6 156
(19)
6 137

9 233
9 233

5 726
5 726

91

Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 201917. Nature and Purpose of reserves
Foreign currency translation reserveT he translation reserve comprises all foreign currency differences arising from the translation of the financial statements offoreign operations, as well as the effective portion of any foreign currency differences arising from hedges of a net investment in
a foreign operation.
Revaluation reserveT he revaluation reserve comprises the cumulative net change in the fair value of available-for-sale financial assets until the assets
are derecognised or impaired. The revaluation reserve also relates to the revaluation of property, plant and equipment.
Associated entities reserveT he associated entities reserve comprises the cumulative net changes of equity accounted investment, directly to othercomprehensive income.
Common control reserveT he common control reserve relates the the transfer of Small Enterprise Finance Agency from the Economic Development
Department to the IDC.
Share-based payment reserveT he share-based payment reserve relates to the equity-settled portion share-based portion of the Foskor BEE transaction,entered into on 7 July 2009. Please refer to Note 30 for further detail.
Other Reserves
Other reserves relate to the group’s net defined benefit plan.

18. Share capital
Figures in Rand million
IssuedAuthorised
A shares of R1 each - 1 000 000
B shares of R1 each - 1 499 000 000

IssuedOrdinary Type A
Ordinary Type B

Group
2019

2018

Company
2019
2018

1
1 499
1 500

1
1 499
1 500

1
1 499
1 500

1
1 499
1 500

1
1 392
1 393

1
1 392
1 393

1
1 392
1 393

1
1 392
1 393

 shares are not transferable otherwise than by an Act of Parliament, however the B shares may be sold with the authorisation ofA
the President of the Republic of South Africa.
The A shares held by the State shall entitle it to a majority vote.

92Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 201919. Borrowings
Cash and cash equivalents consist of:

Figures in Rand million
Foreign loans
Domestic loans

Group
2019
2018
9 840
8 570
29 64624 64739 48633 217Company
2019
2018
9 841
8 570
44 28438 15354 12546 72331 8657 621
39 48624 1939 024
33 21728 50725 61854 12523 49623 22746 723

8 195
1 145
500
9 840

7 078
1 492
8 570

8 195
1 145
500
9 840

7 078
1 492
8 570

2 673
6 134
1 033
9 840

2 295
5 181
1 094
8 570

2 673
6 134
1 033
9 840

2 295
5 181
1 094
8 570

4 948
10 84713 85129 646

6 729
9 753
8 165
24 64718 131
4 814
10 43810 90144 28416 541
4 391
9 051
8 170
38 153

-

665

-

-

6 400
4 624
13 0322 097
3 493
29 646

10 198
7 112
4 555
1 286
831
24 6476 400
4 624
13 0322 097
3 669
13 927535
44 28411 386
4 767
5 822
1 514
1 620
12 509535
38 153

Split between non-current and current portions
Non-current liabilities
Current liabilities

Foreign loans
US dollarEuro
SA Rand
Total
Maturity of foreign loans- Due within one year
- Due after one year but within five years- Due after five years

Maturity of domestic loans- No date for repayments- Due within one year
- Due after one year but within five years- Due after five years
Total
Domestic loans Secured loans*
Nedbank Limited
Unsecured loans
Rand-denominated loans
Public Investment Corporation GreenBond
Public Bond
Unemployment Insurance Fund Bond
Loans with no fixed terms of repayment
Loans from subsidiaries with no fixed terms of repayment: interest free
Loans with no fixed terms of repayment: Money market related interest
Total* Secured by assets of subsidiaries.

93

Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 201919. Borrowings (continued)
Interest bearing loans- Non-current interest bearing loans- Current interest bearing loans

Interest-free loans- Non-current interest free loans- Current interest free loans

28 840
10 57239 41224 1259 025
33 15028 506
11 15839 66423 4979 501
32 998

74
74

67
67

14 46114 46113 72513 725

20. Revenue
Figures in Rand million
Revenue from contracts with customers
Sale of goods
Fee income

Revenue other than from contracts with customers
Interest received (trading)
Dividends received (trading)

Group
2019

2018

Company
2019
2018

9 630
432
10 062

7 540
454
7 994

387
387

361
361

4 465
3 383
7 848
17 910

3 374
2 855
6 229
14 223

4 486
3 306
7 792
8 179

3 445
2 832
6 277
6 638

Group
2019
585
3 880
4 465

2018
482
2 723
169
3 374

Company
2019
2018
526
308
3 960
2 984
153
4 486
3 445

2018
115
2
2 263
53
2 433

Company
2019
2018
(205)
243
2 627
2 228
151
21
2 573
2 492

21. Interest income
Figures in Rand million
Interest received 1 - Cash and cash equivalents
Interest received 2 - Loans and advancesInterest received 3 - Other

22. Finance costs
Figures in Rand million
Net foreign exchange (gains) losses on foreign
Trade and other payables
Current borrowings
Other interest paid
Total finance costs

94

Group
2019
(78)
1
2 930
(28)
2 825

Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 201923. Profit (loss) on sale of financial assets

Profit (loss) on disposal of financial assets

Group
2019
68

2018
2 383

Company
2019
2018
(7)
2 383

Group
2019
146

2018
3 381

Company
2019
2018
(824)
1 892

623
9
(644)
(3 383)(4 465)
2 825
3 041
1
(9)
607
3
16
(68)
303

517
232
1
(419)
(2 651)(3 374)
2 433
2 653
(204)
(204)
20
2 832
(249)
(2 383)(1 707)-24
7(3 306)(4 486)
2 573
3 613
(5)
1 168
7
(160)

21
(17)
(2 628)(3 445)
2 492
4 930
(204)
(27)
8
67
13
(2 383)
-

(303)
(514)
141
(100)
(335)
(2 106)

1 023(1 127)
(66)
(672)
36

3
(827)
107
(109)
(18)
(2 233)

(648)
(38)
(392)
(359)

24. Cash used in operations
Figures in Rand million
Profit (loss) before taxation
Adjustments for:
Depreciation of property, plant and equipment
Project Feasibility and Research & Development costs
Impairment of property, plant and equipment
Surplus of revaluation of investment property
Loss/(profit) on sale of asset
Income from equity accounted investments
Dividend income
Interest income
Finance costs
ECL Impairments and write offs
Specific and collective impairments
Dividend received - preference share options
Fair value adjustment on share based payment
Movements in retirement benefit assets and liabilities
Losses on FVTPL financial assets
Amortisation of Intangible assets(Increase)/Decrease in Non-current asset held for sale
Income statement effect of provisions
Net capital gains
Goodwill Impairment
Other non-cash items
Changes in working capital:
Inventories
Trade and other receivables
Derivatives assets
Derivative liabilities
Trade and other payables

95

Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 201925. Financial guarantees
Figures in Rand million
Guarantees issued in favour of third parties in respect of financeprovided to industrialists
Sundry guarantees issued by subsidiaries
Guarantees issued by equity-accounted investments
Guarantees
Financial guarantees
Expected credit losses

Group
2019
1 547

2018
3 624

Company
2019
2018
1 177
3 449

568
25
2 140

333
467
4 424

1 177

3 449

194

-

194

-

Foskor (Pty) LimitedT he Group had mine rehabilitation guarantees amounting to R499 million (2018: 499 million) at year-end. In line with therequirements set out by the Department of Mineral Resources (DMR), this guarantee amount was in place at 31 March 2019.
T hese guarantees and the agreement reached with the Department of Mineral and Resources were based on the environmental
rehabilitation and closure costs assessment that was performed during the 2019 financial year. The assessments are performed on athree-year rolling basis, with the next assessment due in 2020. Estimated scheduled closure costs for the mine are R546 million.
F or unscheduled or premature closure, the DMR, in accordance with the Minerals and Petroleum Resources Development Act,requires Foskor (Pty) Ltd to provide for the liability of R693 million in the form of guarantees and cash. The premature closure costof R693 million is covered by guarantees totalling R445 million and investment assets totalling R242 million. Foskor has, therefore,
over provided for early closure costs by R6 million.

26. Directors’ emoluments
Non-executive: Fees for services as directors:
Figures in Rand thousand
Director
Ms BA Mabuza
Ms LJ Bethlehem1
Mr BA Dames
Mr RM Godsell
Dr SM Magwentshu-Rensburg
Ms MP Mthethwa
Ms N Mnxasana
Ms NDB Orleyn
Ms M More
Mr A Kriel
Mr NE Zalk2

Chairperson

2019

2018

1 895
523
613
547
791
460
807
634
396
470
7 136

930
262
427
384
498
378
541
421
282
422
4 545

1. M
 s L Bethlehem does not derive any financial benefit for services rendered to the IDC. Her fees are paid directly to HCI Limited
2. Mr NE Zalk is employed by the DTI and does not earn director’s fees for services rendered to the IDC
3. Ms M More is employed by the PIC and her directors fees are paid directly to the PIC.

96

Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 2019

Executive
2019

Emoluments

Short-term
incentive*

37 316
1 149
5 191
4 786
2 955
1 723
2 786
1 966
2 328
2 862
2 509
3 101
2 344
2 189
1 427
37 316

3 024
323
134
134
42
558
21
406
388
209
167
180
462
3 024

Figures in Rand thousand
IDC
TP Nchocho **MG Qhena ***GS Gouws ****SAU Meer
AP Malinga *****PB Makwane
RJ Gaveni
DA Jarvis
PM Mainganya
Z Luthuli
NS Dlamini
VL Matshekga
WH Smith
TL Khumalo ******

Contributions
to medical aid,
retirement
benefits and other
9 639
151
2 973
743
431
707
464
645
414
424
366
415
533
567
806
9 639

Total
R’000

49 979
1 300
8 487
5 663
3 520
2 472
3 808
2 632
3 148
3 674
3 084
3 683
3 057
3 218
2 233
49 979*The short term incentives approved in the financial year under review relate to prior financial years.
Changes to the executive**Mr Nchocho the CEO, assumed the role on 1 January 2019.
***Mr Qhena, the former CEO, resigned on 31 December 2018.
****Mr Gouws resigned on 31 March 2019.
*****Mr AP Malinga resigned on 31 December 2018.
******Ms. TL Khumalo was appointed on 1 September 2018.

97

Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 201926. Directors’ emoluments (continued)
2018

Figures in Rand thousand
IDC
MG Qhena
GS Gouws
SAU Meer
AP Malinga
PB Makwane
RJ Gaveni
DA Jarvis
PM Mainganya
PZ Luthuli
NS Dlamini
VL Matshekga
WH Smith

Emoluments

Long-term
incentive
bonus*

Nonpensionable
allowance

34 824
6 410
4 554
2 855
2 191
2 635
1 874
2 171
2 664
2 404
2 886
2 186
1 994
34 824

3 933
1 191
724
450
372
383
233
83
38
0
0
191
268
3 933

4 479
974
540
338
253
322
257
274
327
294
350
275
275
4 479

Short-term Contributions
incentive*
to medicalaid,
retirement
benefits and
other
1 807
7 090
863
403
790
84
538
126
1 081
160
445
64
517
204
460
245
392
73
400
174
528
68
502
206
574
1 807
7 090

Total
R’000

52 133
9 438
7 011
4 265
4 023
3 945
2 945
3 192
3 666
3 171
3 938
3 222
3 317
52 133* Represents amounts payable to executive members for achieving certain objectives that are aligned to the corporate
objectives (targets). These objectives are approved by the board at the beginning of each period. The amount paid is basedon the corporate, team and individuals’ performance.

98Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 2019
27. Related parties
Shareholder: The Government of South Africa through the Economic Development Department
Directors’ interests
R’m

Company

Ms LJ
Bethlehem

Cape Town Film
Studio (Pty) Ltd

Ilangalethu (Pty)Ltd

Mr AndreKriel

Ms Patience
Nomavuso
Mnxasana
Ms Thandi
OrleynFinancingbalanceFinancing 2019 2018
approved

84

Interest/fundingrate

22

34 Prime +1%

1 504 1 473

60 R186 +(3.2% to
3.4%)

Type offinancing/
repayment
terms
Normal loan

Senior Debt
Loan

Kai Garib Solar
SPV

778

800

609 RATIRR of Normal loan
10%

Trade Call
Investments
Apparel(Pty) Ltd

18

-

-

Grant funding

Cape Town Film
Studios (Pty) Ltd

84

24

34 Prime +1%

Normal loan

Noma Namhuhla
Trading andProjects(Pty) Ltd
Le Sel Research(Pty) Ltd

4.6

-

-

Quasi-Equity
Loan

282

269

165 Prime +1%

Normal Loan

Director’s interest

Year ofapproval

The controlling shareholders ofCape Town Studio is Sabido
Investments (Pty)
Ltd(Sabido).Sabido is a part of
HCI. Ms Bethlehem is a senior
manager at HCI
Hosken Consolidated
Investments Limited (HCI) has a
10% stake in Ilangalethu (Pty) Ltd.
Ms Bethlehem is a senior manager
at HCIHCI holds 12.5% stake in Kai Garib
Solar SPV. Ms Bethlehem is a senior
manager at HCIMr Andre Kriel is a director ofSouthern African Clothing and
Textile Workers’ Union (SACTWU),
which has a 32.8% Shareholdingin HCI.
The controlling shareholders ofCape Town Studio are Sabido
Investments (Pty) Ltd (Sabido) andVideovision Dreamworld. Sabido ispart of the JSE-listed group Hosken
Consolidated investments Limited(HCI). Mr Andre Kriel is a directorof SACTWU which has a 32.8%
shareholding in HCI.
Ms Patience Nomavuso Mnxasanaowns 100% in Noma Namuhla
Trading and Projects (Pty) Ltd
Ms Orleyn is a shareholder in
Peotona Group Holdings via theMamaswa Family Trust. Peotona
Private Equity is a subsidiary of
Peotona Group Holdings. Indirect
shareholder in Le-Sel via Trinitas
Fund General Partner (Trinitas).
Trinitas has a 37.5% equity interestin Le-Sel.

2010

2013

2015

2010

2017

2017

2015

99

Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 2019
27. Related parties (continued)
Directors’ interests
R’m

Company

FinancingbalanceFinancing 2019 2018
approved

Interest/fundingrate

Type offinancing/
repayment
terms

Director’s interest

Year ofapproval

National
sphere ofgovernment

The Land &Agricultural
Developmentbank of SA Ltd
The Land &Agricultural
Developmentbank of SA Ltd

250

65

86 0%

400

254

317 0%

Figures in Rand million
Related party transactions
Non-financing transactions - Rendering of services
Eskom Limited
Transnet Limited
South African Airways (Pty) Limited
Telkom Limited
National Ports Authority

100

Loan
repayable
on 31 March
2022
Loan
repayable
on 31 March
2025
Group
2019

2018

9 40
2 005
12
2
28
2 987

798
1 065
11
6
63
1 943

Company
2019
2018

11
11

4
2
6

Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 201928. Non-current assets held for sale and assets of disposal groupsSEFA n 20 November 2013, the Board of Directors approved the sale of certain properties in the property portfolio. Investment
O
properties held-for-sale are current assets.
 dditionally in a board meeting on 25 May 2015 it was resolved that all property should be transferred to Khula BusinessA
Premises, and thus all the properties at sefa company level will need to be reclassified from investment property to investment
property held for sale. The resolution has no impact on sefa group level due to Khula Business Premises being a wholly owned
subsidiary of sefa.
SCAW SOUTH AFRICAS caw became a 74% owned subsidiary of IDC. The IDC shareholding was increased to a 100% after the winding up of the
ESOP Trust and the corporatisation of Scaw’s Grinding Media and Cast Divisions into two separate entities which had been
implemented on the 1st of March 2018. The former BEE shareholder in Scaw swopped its previous 22% shareholding in Scaw foran additional 4% shareholding in Grinding Media SA.
 rinding Media and Cast Products divisions were carved-out of Scaw and began operating independently from the 1st of MarchG2018.
The remaining Scaw will constitute Rolled, Wire Rod Products and the main property assets of Scaw.
S caw was sold after the financial year-end on the 1st of May and the IDC shareholding decreased from 100% to 26%. Scaw has
been classified as a Non-current Asset held-for-sale.
 ssets and liabilities of disposal groups held for sale: On 30 November 2016 the Scaw net assets were classified as held for saleAand comprised the following assets and liabilities:
Profit and loss
Figures in Rand million
Revenue
Expenses
Net loss before tax
Tax

Group
2019
2018
3 330
(3 868)
(538)
(538)

Company
2019
2018
-

Assets and liabilities
Non-current assets held for sale
- IDC (aircraft)
Property, plant and equipment
Inventories
Trade and other receivables
Cash and cash equivalents- SEFA (Investment property)
Other assets

36
36

2 436
844
1 056
128
14
30
4 508

-

-

101

Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 201929. Provisions
Provisions - Group - 2019
Change indiscount
factor
16
16

Total

28
28

Utilisedduring the
year
(524)
(42)
(566)

Utilisedduring the
year
(15)
(15)
(30)

Reversedduring the
year
(64)
(125)
(189)

Change indiscount
factor
29
29

Total

Openingbalance

Additions

1 088
(200)
888

Openingbalance

Additions

1 197
(185)
1 012

(59)
(59)

Figures in Rand million
Environmental rehabilitation
Trust fund

608
(242)
366

Reconciliation of provisions - Group - 2018

Environmental rehabilitation
Trust fund
Other provisions

1 088
(200)
888

Reconciliation of provisions - Company - 2019
Openingbalance41

Total

Additions Utilised during
the year
21
(8)

Total

Figures in Rand million
Environmental rehabilitation

41

Reconciliation of provisions - Company - 2018

Figures in Rand million
Provision 1

Openingbalance28

41

T he warranty provision represents management’s best estimate of the group’s liability under one period warranties granted on(electrical) (products), based on (prior experience) (and) (industry averages for defective products).
There is no expected reimbursement (from the manufacturer) in respect of this provision.
T he restructuring provision relates to redundancy costs incurred on the disposal of. At , approximately -% of the staff had been
retrenched. The remainder departed in.
T he group moved from its previous leased premises. The lease is non-cancellable and the lease continue for the next - years. The
company cannot find a lessee to occupy the premises.
FOSKOR (PTY) LTD
T he company continually contributes to the Environmental Rehabilitation Trust to ensure that adequate funds are available topay for mine closure and reclamation costs. The Environmental Rehabilitation Trust is an irrevocable trust under the control of thecompany.

102

Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 2019T he financial assets held by the Trust are intended to fund the environmental rehabilitation liability of Foskor (Pty) Ltd and are notavailable for general purposes of the Group. The objective of the Trust is to act as the financial provider for expenditure that its
member, Foskor (Pty) Ltd, is likely to incur in order to comply with the statutory obligation for the environmental rehabilitation.
The Trust is exempt from tax in accordance with Section 10(1)cP of the Income Tax Act (No. 58 of 1962).
F oskor, the Department of Water and Environmental Affairs (DWEA) and the Local Authority are in discussions on the
rehabilitation of the Gypsum Dam area. The liability of the rehabilitation and/or closure is the responsibility of Foskor once all the
Gypsum is removed. Foskor management have made a high level estimate of anticipated costs for the closure of the Gypsum
waste facility in Richards Bay. Management estimated, in consultation with external experts, who have done similar projects, thatthe closure costs for the conventional capping will vary from R350/m2 to R750/m2 excluding all the approvals and design related
costs. At 31 March 2019 a provision for rehabilitation of R304 million for the closure costs has been made.
T he Group had mine rehabilitation guarantees amounting to R499 million at year-end. In line with the requirements set out
by the Department of Mineral Resources, the guarantee amount was in place at 31 March 2019. These guarantees and theagreement reached with the Department of Mineral Resources were based on the environmental rehabilitation and closure costs
assessment that was performed during the 2019 financial year. The assessments are performed on a three-year rolling basis, with
the next assessment due in 2020. Estimated scheduled closure costs for the mine are R546 million. For unscheduled or premature
closure, the Department of Mineral Resources, in accordance with the Minerals and Petroleum Resources Development Act,requires Foskor (Pty) Ltd to provide for the liability of R693 million in the form of guarantees and cash. The premature closure
cost of R693 million is covered by guarantees totalling R445 million and investment assets totalling R242 million. The Group has,
therefore, underprovided for early closure costs by R6 million.
T he premature closure costs of R642 million is covered by guarantees totalling R496 million and investment assets totalling R201
million. The Group has, therefore, over provided for early closure costs of R11 million.
AFRICAN CHROME (PTY) LTD s a result of the processes used in the manufacture of the chemical products of the company, the ground water has becomeA
contaminated with a by-product Chrome 6. In terms of the minimum requirements of the National Water Act ,37 of 1998, Part 5,
Section 20 and the Environment Conservation Act, 73 of 1989, Part V, Sub-sections 21 and 22, the company is required to remove
the contaminated water and dispose of the waste material.
T he Industrial Development Corporation, as primary shareholder, stands as security for the entire environmental provision until
the land is fully rehabilitated.
T he rehabilitation process initially comprised of two phases namely Phase 1 and Phase 2. The entire process was expected to takea period of 3 years; with Phase 1 having commenced on the 1st of March 2012 and was completed during the 2013/14 financial
year. Phase 2 activities commenced during 2013/14 financial year after Phase 1 was completed. An amount of R18,5 million was
expected to be incurred for Phase 2 activities, this provisional amount was based on previous historical costs and it was adjusted
for inflation. It was assumed that the amount incurred each year for Phase 2 activities will be settled at each respective year end.
T ests were conducted to ascertain the success of Phase 1 in rehabilitating the surface of the soil. It was found that remediation
works completed to date had effectively removed soil contamination from the surface of the site to concentration levels well
below the recently gazetted South African Soil Screening Values (SSV2) for industrial land use. The site is therefore considered
suitable for industrial re-development. However, the groundwater contamination has not been resolved giving rise to an
environmental liability for the IDC.

103

Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 201929. Provisions (continued)
In-situ Chromium Reduction TechnologyIn the prior year, a new remediation technology (In-situ chromium reduction) for Chromium(Cr) VI groundwater contamination
was explored. It was decided that Phase 2 would be substituted by this remediation method. In-situ chromium reduction is wellproven remediation technology for CrVI contaminated groundwater which involves the injection or infiltration of a reductive
reagent to precipitate and stabilise chromium in the less toxic form, CrIII.
The approach is as follows: onduct laboratory and field trials to determine the most suitable reagent. Review all existing boreholes and site infrastructuresC
to determine the suitability use for the remediation trials. Design an upgraded system and refine according to the results ofremediation field trials. Undertake full scale field trials to test the performance of the selected reagent. Install a combination of
injection wells and/or infiltration galleries in the hot spot areas associated with the South and North-West plumes. Sample andtest existing monitoring wells at regular intervals for p H, ORP and CrVI to monitor the reaction rate and spread of the reagent. It
may be necessary to drill additional wells to ensure aquifer coverage.
In addition the following supporting management measures have been proposed:S emi-annual groundwater sampling between the site and residential receptors for five years. Obtain Waste License for
Remediation Activities and undertake the Basic Assessment for authorisation.
T he Interest rate relating to the ZAR186 government bond rate was used as the discount rate for calculating the present valueof future cashflows for the current monthly groundwater site monitoring payments to Interwaste Environmental Solutions andGolder Associates over the next five years.
T he government bond was selected based on the approximate maturity date as at 29 March 2019. The rate was not adjusted forrisks as there is no risk relating to the technology used to rehabilitate the land.
All cash flows were adjusted for inflation rates forecasted for the relevant years by the IDC Research and Information Department.
 er the latest assessment report, it is not possible to provide a reliable estimate of the rehabilitation completion time as only twoPof the six parameters required for the ascertainment have been quantified to a reasonable extent.
COLUMBUS
 olumbus Joint Venture was a partnership between IDC, Samancor Limited and Highveld Steel. The provision is for theCrehabilitation of dumps of different waste streams estimated at 4.3 million tonnes, which were not included in the sale ofMiddleburg Stainless Steel in January 2002, and accordingly each partner was liable for its share of the rehabilitation. Information
still relates to the last report in December 2017 by the service provider as assessments are performed every 2 years. Therefore, by
early 2020, will be able to determine by when the rehabilitation is expected to be completed.

104Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 201930. Share based payments
Figures in Rand million
Equity-settled share-based payment reserve
At beginning of the year
Cash-settled share-based payment liability
At the beginning of the year
Fair value adjustment through profit or loss

Group
2019

2018

Company
2019
2018

304

304

-

-

2
(1)
1

26
(24)
2

-

27
(27)
-

	In the 2011 financial year, Foskor and the Industrial Development Corporation Limited (IDC) entered into a Black Economic
Empowerment Transaction (BEE Transaction). In terms of the transaction the IDC sold 15% interest in Foskor to Strategic
Business Partners (SBPs) and Special Black Groups (SBGs) (collectively, the Manyoro Consortium), 5% to the communities
where Foskor operates and a 6% interest in Foskor to the Foskor Employee Share Ownership Plan Trust (ESOP).The transaction
with the Manyoro Consortium and communities constitutes an equity-settled share-based plan and the transaction withthe employees constitutes a cash-settled share-based plan (refer to not 17.2). Under the equity-settled share-based plan, theshares vest immediately at grant date. In determining the fair value of services received as consideration for equity instruments
granted,measurement is referenced to the fair value of the equity instruments granted.
Equity-settled reserve: Weighted average fair value assumptions
	The fair value of services received in return for equity instruments granted is measured by reference to the fair value of the equity
instruments granted. The estimate of the fair value of the equity instruments granted is measured based on the Black Scholes
Option pricing model.
The following weighted average assumptions were used in the share pricing models at the valuation date:•
Grant date
31 December 2009•
Initial company value (exercise price) (R’m)
3 500•
Average share price at grant date382.19•Annualised expected volatility (%)
15.48•
Risk-free interest rate (%)
7.28•
Dividend yield (%)
0.00•
Strike price (R)394.07	The holders of the equity instruments were required to hold the instruments to maintain the BEE status until 31 March 2019,
however, due to the underperformance of the scheme, the participants have not exercised their options. The schemes
funder has not called an event of default but neither has it made a commitment to extend the scheme, in the absence of theaforementioned, Foskor continues to recognise the Share-Based Payment Reserve. The volatility indicator used in the calculation
was based on the market prices of globally listed proxy companies that are in the same industry as Foskor.
§Cash-settled share-based payment liability: Weighted average fair value assumptions
	The Company entered into a cash-settled share-based payment plan with its employees. A total liability of R1.3 million (2018:
R2.1 million) is carried. The share-based payment adjustment for the current year of R0.791 million was recognised in profit or loss
(refer to note 17.3).

105

Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 201930. Share based payments (continued)
	The fair values were determined by reference to the fair value of the equity instruments granted using the Black Scholes Option
Pricing model. This model has been modified to take into account early exercise opportunities and expected employee exercise
behaviour.
	The Employees Share Option Trust was due to end on 30 March 2019. However, due to the under performance of the scheme no
exercising of options have taken place. The scheme’s funder has not called an event of default, which results in the scheme being
extended. Changes to the scheme are being considered for the future. The volatility indicator used in the calculation was basedon market prices of globally listed proxy companies that are in the same industry as Foskor.The following weighted averageassumptions were inputs into the model:

Exercise price (R)Average share price at grant date (R)Annualised expected volatility (%)
1 year expected option lifetime%
2 year expected option lifetime%
Dividend yield (%)
Strike price (R) - 1 year expected option lifetime
Strike price (R) - 2 year expected option lifetime

Group
2019
3 500
382
14
7
8
717
818

2018
3 500
382
41
8
7
629
717

Company
2019
2018
3 500
3 500
382
382
33
33
7
8
8
7
2
2
717
629
818
717

Group
2019
-

2018
(378)
(378)

Company
2019
2018
(378)
(378)

31. Non-administrative expenses/(income)Current liabilities

Capital Gains Tax Provision for the exit from Main Street 333 (MS333)
In 2006 the IDC acquired 15.3% of the ordinary shares of MS333, which in turn invested in the ordinary shares of Exxaro, giving
the latter its majority BEE shareholding status. The investment was done in terms of the Pangolin agreement, which was in effectfor the 10-year period up to the 26th November 2016.
T he expiry of the Pangolin agreement on 26 November 2016 (expiry date) removed standing restrictions on MS333 and its
shareholders. Effectively, as on this date, Exxaro shares held by Main Street became free for trade. The MS333 shareholders’agreement provides that after expiry date, MS333 will distribute its shareholding in Exxaro to its shareholders in exchange foreach such shareholder’s shares in and claims against the unwinding of MS333.
The shareholders’ agreement further provides that:
1.

Exxaro will repurchase sufficient shares from MS333 to enable the latter to settle its obligations.

2.

Any remaining Exxaro shares in MS333 will be distributed to the shareholders in proportion to their shareholdings

 n 26 November 2016, the IDC derecognised its investment in MS333 in line with the requirements of International Financial
O
Reporting Standards (IFRS) as, on that date, the risks and rewards of ownership of Exxaro shares transferred from MS333 to theshareholders. Upon de-recognition, a profit of R1.7 billion was recognised in profit and loss.

106

Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 2019F or tax purposes, a CGT trigger has not been achieved at 2017 year end, as the shares have not been transferred from MS333
to the proposed replacement structure. A provision for tax of R378 million was been made in the financial statements inaccordance with the requirements of IAS 37, as it was highly probable that the IDC would pay Capital Gains Tax on the disposalof its MS333 shares upon implementation of the replacement structure.
In 2018 financial year it was determined that because the underlying asset remains the investment in Exxaro, no CGT will bepayable on the transaction, thus leading to a reversal of the R378m provision.

32. Operating profit (loss)
Operating profit (loss) for the year is stated after charging (crediting) the following, amongst others:

Auditor’s remuneration - external
Audit fees

Group
2019
16

2018
18

Company
2019
2018
9
8

Employee costs
Salaries, wages, bonuses and other benefits

2 325

2 377

1 022

1 032

Depreciation and amortisation
Depreciation of property, plant and equipment
Amortisation of intangible assets
Total depreciation and amortisation

623
4
627

517
20
537

24
24

21
21

Impairment losses
Property, plant and equipment

93

232

-

-

10
147
16
24
552
607
611
2 430
274
26

13
129
45
79
37
601
2 653
1
-

10
147
4
17
7
1 168
1 313
2 300
-

17
129
1
(17)
4
4 930
-

Other
Research and development costs
Project feasibility expenses
Operating lease rentals
Expected credit losses on trade and other receivables
Revaluation on investment property
Repairs and maintananceImpairments and write-offs on other financial assets
Loss on financial assets classified as FVTPL
Expected credit losses
Financial assets written off
Profit on sale of property, plant and equipment
Profit on sale of investment property

107Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 2019
33. Taxation
Major components of the tax income

Current
Local income tax - current period

DeferredDeferred tax - Current year

Group
2019
25

2018
(242)

Company
2019
2018
(61)

Group
2019
(599)
(574)

2018
(139)
(381)

Company
2019
2018
(354)
(140)
(354)
(201)

Group
2019
2018
28.00 %
28.00 %
(648.80)%(25.00)%(2.60)%(26.00)%-%12.00 %-%
(1.00)%-%-%-%-%
440.50 %-%(210.30)%-%(393.20)%(12.00)%Company
20192018(28.00)%28.00 %
(112.30)%(20.00)%(0.10)%(21.00)%78.10 %
25.00 %
13.30 %
(24.00)%6.10 %
-%
-%
-%
-%
-%
-%
-%
(42.90)%(12.00)%Reconciliation of the tax expense
Reconciliation between applicable tax rate and average effective tax rate.

Applicable tax rate
Dividend Income
Capital gains and losses
Capital losses and write offs
Donations and grants
Non deductible project and insurance expenses
Disallowable charges
Net movements in impairments
Other

34. Financial and operating leases
Finance leases – Group as lessee
The Group has leases classified as financial leases principally for property. Future minimum lease payments payable underfinance leases, together with the present value of minimum lease payments, are as follows:

Land and buildings– due within one year
– due after one year but within five years– due after five years
Total minimum lease payments
Amount representing finance charges
Present value of minimum lease payments
Current portionLong-term portion

108

Group
2019
3
6
1
10
(3)
7

2018
5
11
1
17
(5)
12

2
5
7

3
9
12

Company
2019
2018
-

-

Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 2019

Foskor			
The finance lease is between Foskor (Pty) Limited and uMhlathuze Water Board for an effluent pipeline.
T he lease liability is effectively secured, as the rights to the leased asset revert to the lessor in the event of default. The lease isover a 20-year period with 7 years remaining as at 31 March 2019. Foskor has sole use of the effluent pipeline and pays for the
maintenance. The lease is at a fixed rate of 14.4% per annum.
IDC Company
T he IDC leases land and buildings from Dymson Nominess (Pty) Ltd and Kindoc Sandton (Pty) Ltd, its 100% owned subsidiaries.
There are no lease agreements that govern this arrangement and hence, there is no lease smoothing asset or liability.
Operating leases – Group as lessee				Certain items of computer and office equipment are leased by the Group.

Commitments for future minimum rentals payable under noncancellable leases are as follows:– due within one year
– due after one year but within five years– due after five years
Present value of minimum lease payments

Group
2019

2018

41
140
371
552

16
12
28

Group
2019
262
(25)
(268)
(31)

2018
473
242
(262)
453

Company
2019
2018
4
4

4
4
8

35. Tax (paid) refunded

Balance at beginning of the year
Current tax for the year recognised in profit or loss
Balance at end of the year

Company
2019
2018
268
471
61
(252)
(268)
16
264

109

Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 201936. Trade and other payables
Amounts in Rands
Financial instruments:
Trade payables
Accrued leave pay
Accrued bonus

Group
2019

2018

Company
2019
2018

2 661
196
185
3 042

2 875
141
363
3 379

797
116
165
1 078

714
83
300
1 097

37. Retirement benefits
Pension and provident schemes				T he Group has pension and provident schemes covering substantially all employees. All eligible employees are membersof either defined contribution or defined benefit schemes. These schemes are governed by the Pension Funds Act, 1956, as
amended. The assets of the schemes under the control of trustees are held separately from those of the Group.
T he costs charged to profit or loss represent contributions payable to the scheme by the Group at rates specified in the rules ofthe scheme.
Defined contribution schemesE mployees and Group companies contribute to the provident funds on a fixed-contribution basis. No actuarial valuation of thesefunds are required. Contributions, including past-service costs, are charged to profit or loss when incurred.
Defined benefit scheme Group company and its employees contribute to a defined benefit pension fund. The pension fund is final salary fully funded.
A
The assets of the fund are held in an independent trustee-administered fund, administered in terms of the Pension Funds Act,
1956, as amended.
T he fund is valued every three years using the projected unit credit method. The actuarial valuation for purposes of IAS 19 was
performed on 31 March 2019.
E mployees and Group companies contribute to the provident funds on a fixed-contribution basis. No actuarial valuation of thesefunds are required. Contributions, including past-service costs, are charged to profit or loss when incurred.
Defined benefit scheme Group company and its employees contribute to a defined benefit pension fund. The pension fund is final salary fully funded.
A
The assets of the fund are held in an independent trustee-administered fund, administered in terms of the Pension Funds Act,
1956, as amended.
T he fund is valued every three years using the projected unit credit method. The actuarial valuation for purposes of IAS 19 was
performed on 31 March 2019.
T he deficit in the current year does not require a cash contribution to be made to increase the plan assets as the fund is not in
deficit for the statutory valuation. The IAS 19 actuarial valuation makes use of difference basis than the statutory valuation.

110Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 2019

The amounts recognised in the statement of financial position are as follows:

Amounts in Rands

Group
2019

2018

Present value of funded obligations
Fair value of plan assets
Other
Liability recognised

310
(357)
47
-

332
(384)
52
-

332
1
36
(23)
(36)
310

354
1
33
(20)
(36)
332

384
37
(28)
(36)
357

383
36
3
(38)
384

1
36
(37)
5
5

1
33
(36)
(16)
(18)

37
(28)
9

36
3
39

The movement in the defined benefit obligation:
Opening balance
Current-service cost
Interest-cost
Actuarial (gains)/losses
Benefit paid
Closing balance
Movement in asset plan
Fair value of plan assets at beginning of the year
Expected return on asset
Actuarial (loss)/gain recognised during the year
Benefits paid
Fair value of plan assets at the end of the year
The amounts recognised in profit or loss are as follows:
Current-service cost
Interest cost
Expected return on assets
Net actuarial loss recognised during the year
Total included in operating expenses

The amounts recognised in other comprehensive income in 2019 is a loss of R5m.
The actual return on plan assets was:Expected return on plan assets
Actuarial gains/(losses) on plan assets
Actual return on plan assets

111Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 201937. Retirement benefits (continued)
Plan assets are comprised as follows

Equity instruments
Cash
Debt instruments
Other

Group
2019

2018

55%
8%
28%
9%
100%

49%
22%
20%
9%
100%

9.95
9.95
7.40
6.94
60

9.87
9.87
8.10
8.70
60

The principal actuarial assumptions for accounting purposes were:Discount rate %Expected return on plan assets %Future salary increases %Future pension increases %Normal retirement age
The sensitivity of the overall pension liability to changes in the weighted principal assumptions is:Inflation rate (increase of 1%)
Inflation rate (decrease of 1%)

Impact on overallliability
2019
2018
9.3
9.5
8.1
8.4

The expected contributions to the post-employment pension scheme for the year ending 31 March 2019 are R0.53 million.
Post-retirement medical benefits
Some Group companies have obligations to provide post-retirement medical benefits to their pensioners.
T he accumulated post-retirement medical aid obligation and the annual cost of those benefits were determined by independentactuaries. Any surplus or shortfall between the actuarially determined liability and the aggregate amounts provided is charged to
profit or loss.

112

Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 2019
The amounts recognised in the statement of financial position are as follows:

Present value of unfunded obligation:
Discovery Health members

Movement in the liability recognised in the statement of financial
position:
At the beginning of the year
Acquired in business combination
Contributions paid
Current-service costs
Interest cost
Non current medical obligation classified as held for sale
Deficit/surplus
Balance at the end of the year

The principal actuarial assumptions used for accounting purposes
were:– Discount rate (%)– General inflation rate (%)– Medical inflation rate (%)– Normal retirement age

Group
2019

2018

Company
2019
2018

375

384

183

Group
2019

2018

Company
2019
2018

384
(19)
7
31
(28)
375

588
57
(18)
3
29
(236)
(39)
384

188
(10)
3
16
(15)
183

Group
2019

2018

Company
2019
2018

9.70
6.00
8.00
59/63

9.00
5.80
8.10
59/63

Change in pastservice liability
Present value of unfunded obligation history
Inflation rate (increase of 1%)
Inflation rate (decrease of 1%)

12.4%
increase
10.3%
decrease

13.5%
increase
11.2%
decrease

188

180
(9)
2
17
(2)
188

-

Change in service costplus asset
13.4%
increase
11.2%
decrease

14.8%
increase
12.1%
decrease

The expected contributions to post-employment medical plans for the year ending 31 March 2019 are R0.2 million.

113

Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 201938. Commitments
Figures in Rand million
In respect of:
Undrawn financing facilities approved
Undrawn guarantee facilities approved
Capital expenditure approved by subsidiaries– Contracted
Capital expenditure approved by equity-accounted investments– Contracted– Not contracted
Total commitments
Less: counter-guarantees obtained from partners in respect of financing
and guarantees to be provided to major projects
Commitments net of counter-guarantees
Commitments will be financed by loans and internally generated funds.

114

Group
2019

2018

Company
20192018

12 639
65
473
473
361
154
207
13 53828 002
2 527
16
16
177
145
32
30 72212 26912 26927 7072 527
30 23413 538(182)
30 54012 269(182)
30 052

Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 201939. Other comprehensive income
Components of other comprehensive income - Group - 2019
Gross

Tax

Share of othercomprehensive
incomeof equity
accounted
investments

Net

10 581

1 556

-

9 025

21
10 602

1 556

-

21
9046

(728)

-

-

(728)

728
11 330

1 556

-

728
9 774

Gross

Tax

Share of othercomprehensive
incomeof equity
accounted
investments

Net

2

1

5

8

Exchange differences on translating foreign
operations
Exchange differences arising during the year

(149)

-

(399)

(548)

Available-for-sale financial assets adjustments
Gains (losses) arising during the year
Total items that may be reclassified to profit (loss)
Total

937
788
790

145
145
145

(6)
(405)
(400)

1 076
528
536

Figures in Rand million
Items that will not be reclassified to profit or loss
Movements on valuation of equity investments
Remeasurements on net defined benefit liability/asset
Remeasurements on net defined benefit liability/asset
Items that may be reclassified to profit (loss)
Exchange differences on translating foreign
operations
Exchange differences arising during the year
Available-for-sale financial assets adjustments
Gains (losses) arising during the year
Total items that may be reclassified to profit (loss)
Total

Components of other comprehensive income - Group - 2018

Figures in Rand million
Items that will not be reclassified to profit (loss)
Remeasurements on net defined benefit liability/asset
Remeasurements on net defined benefit liability/asset
Items that may be reclassified to profit (loss)

115

Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 201939. Other comprehensive income (continued)
Components of other comprehensive income - Company - 2019

Gross

Tax

Share of othercomprehensive
incomeof equity
accounted
investments

Net

Remeasurements on net defined benefit liability/asset
Remeasurements on net defined benefit liability/asset

24

-

-

24

Movements on valuations of equity investments
Gains (losses) on valuation
Effect on tax rate changes
Total items that will not be reclassified to profit (loss)

15 46315 487

2 169
2 169

-

13 29413 318Gross

Tax

Share of othercomprehensive
incomeof equity
accounted
investments

Net

12

-

-

12

2 187
2 199

(331)
(331)

(60)
(60)

1 916
1 928

Figures in Rand million
Items that will not be reclassified to profit or loss

Components of other comprehensive income - Company - 2018

Figures in Rand million
Items that will not be reclassified to profit (loss)
Remeasurements on net defined benefit liability/asset
Remeasurements on net defined benefit liability/asset
Items that may be reclassified to profit (loss)
Available-for-sale financial assets adjustments
Gains (losses) arising during the year
Total

116

40. Irregular, fruitless and wasteful expenditure
Amounts in Rands
Fruitless and wasteful expenditure
Write-offIrregular expenditure
Condonements

Details of fruitless and wasteful expenditure
Top Ten Security
Travel - cancellations and rechedulings
Travel - penalties on booking
Training - cancellations
Interest payment to SARSInterest on late rental payment
Payment erroneously paid to ex employee
Late registration penalty to trainee accountants
Fictitious payments
Duplicate payments
ADM's

Details of irregular expenditure
Business support
Sponsorship

Group
2019
2018
443 768
2 585 551
(438 194) (2 585 551)
5 574-

Company
20192018
443 768
2 585 551
(438 194) (2 585 551)
5 574-

5 691 237
1 193 392
(200 000) (1 193 392)
5 491 237-

5 691 237 1 193 392(200 000) (1 193 392)
5 491 237-

196 000
160 284
29 754775
52 1554 800
443 768

33 3699 177
1 923 727
448 000
54 532116 746
2 585 551

196 000
160 284
29 754775
52 1554 800
443 768

33 3699 177
1 923 727
448 000
54 532116 746
2 585 551

5 491 237
200 000
5 691 237

1 193 392
1 193 392

5 491 237
200 000
5 691 237

1 193 392
1 193 392

117

Notes to the Financial Statements
Annual Financial Statements for the Year Ended 31 March 201941. Events after the reporting period	In April 2019, after year end but before the approval of the IDC Group financial statements, the IDC disposed of a 15% stake in
CAST Products (Pty) Ltd, a fully controlled subsidiary that was carved out of the SCAW Group, as part of the IDC’s plan to introduce
strategic equity partners (SEP) into the business who possess the technical and commercial expertise necessary to grow thebusiness and provide access to growth markets. The IDC shareholding decreased from 100% to 85%

42. Deferred tax
Deferred tax
Deferred tax movements for the year
Group
2019

Amounts in Rand million
Movements of deferred tax
Opening balance
Charge for the current year (I/S)
Charge for the current year (OCI)
Closing balance

2018

Company20192018(4 220)574(216)(3 862)(4 705)381
104(4 220)(6 012)354(1 061)(6 719)(5 820)201(393)(6 012)(4 220)
(103)
(151)
748
(233)
97
(3 862)(4 705)29456(4 220)

6 012
22
3
748
(233)
167
6 719

5 820
(7)
(28)
399
(173)
1
6 012

Reconciliation of deferred tax asset / (liability)
At beginning of year
Increases (decrease) in tax loss
Temporary differences
Provisions
Property, Plant and Equipment
Financial instruments
Tax loss utilised
Other

43. Reportable irregularity
 matter of conflict of interest in relation to an executive was identified during the financial year ending 31 March 2019 throughA
the Corporation’s post investment reviews. The Board has taken steps to address the matter in line with the Corporation’s internal
policies. The external auditors then raised a reportable irregularity, in terms of section 45 of the Auditing Profession Act, 2005 (Act26 of 2005) (Auditing Profession Act), for the annual financial period ending 31 March 2019. The Board is in the process of closing
out the reportable irregularity. The finalisation of the irregularity depends on the recommended sanctions from the chairpersonof the disciplinary enquiry. Below is the summary of the reportable irregularity raised by the external auditors.
Description
There were allegations that an
executive of the IDC had a potential
conflict of interest due to the
executive’s failure to declare a conflictof interest with regards to close family
relationships in one of the IDC fundedbusiness partners.

118

Action•	Disciplinary enquiry has been instituted against the
implicated executive;•	The implicated executive has been found guilty on all
the allegations; and•	Appropriate action will be taken against the implicatedexecutive once the recommended sanctions have been
received from the chairperson of the disciplinary enquiry.

StatusOpen, pending
the recommended
sanctions from theoutcome of thedisciplinary enquiry.

NOTES119

NOTES

120

www.idc.co.za

RP244/2019
ISBN: 978-0-621-47571-5