Annual Financial Statements


Financial Statements for the year ended 31 March 2014


Notes to the Annual Financial Statements (30 - 34)

31.  RETIREMENT BENEFITS 
    
   Pension and Provident Fund Schemes 
Tongaat Hulett contributes towards retirement benefits for substantially all permanent employees who, depending on preference or local legislation, are required to be a member of either a Tongaat Hulett implemented scheme or of various designated industry or state schemes. The Tongaat Hulett schemes are governed by the relevant retirement fund legislation. Their assets consist primarily of listed shares fixed income securities property investments and money market instruments and are held separately from those of Tongaat Hulett. The scheme assets are administered by boards of trustees each of which includes elected employee representatives. 

Defined Contribution Pension and Provident Schemes 
The latest audited financial statements of the defined contribution schemes including the scheme in Swaziland reflect a satisfactory state of affairs. Contributions of R94 million were expensed during the year (2013: R55 million).

Zimbabwe Pension Funds
The post-retirement benefit provisions for the Zimbabwe operations at 31 March 2014 amount to R186 million (2013: R269 million) including the post-retirement medical aid and the retirement gratuity provisions. 

Defined Benefit Pension Scheme
A defined benefit scheme in South Africa which previously covered the old Tongaat-Hulett Group was split between Tongaat Hulett and Hulamin in 2012 and then in 2013 was converted to a Defined Contribution arrangement with the existing pensioner liabilities being outsourced to an insurer.
               
   Details of the IAS 19 valuation of the DB Fund (South Africa):  2014  2013     
     Rmillion  Rmillion     
   Fair value of fund assets           
   Balance at beginning of year  737  5 076     
   Expected return on scheme assets  34  366     
   Contributions by plan members     18     
   Benefits paid     (192)    
   Actuarial loss     (72)    
   Settlements / conversion  (20) (4 459)    
   Balance at end of year  751  737     
               
   Present value of defined benefit obligation           
   Balance at beginning of year     3 794     
   Current service cost     56     
   Interest cost     261     
   Contributions by plan members     18     
   Benefits paid     (192)    
   Actuarial loss     111     
   Settlements / conversion     (4 048)    
   Balance at end of year     
               
   Fund assets less member liabilities  751  737     
   Employer surplus account (note 3) (552) (515)    
   Provisions and reserves  199  222     
               
  The following dislosure is in respect of the previous financial year and relates to the defined benefit scheme up to the time that it was converted to a Defined Contribution arrangement. 

Defined benefit accounting disclosure for the year ended 31 March 2013 
       2013      
      Rmillion     
   Amounts included in the statement of financial position:            
   Balance at 1 April 2012     469      
                
   Amounts recognised in profit or loss:     46      
   Net expense in respect of defined benefit accounting     (22)     
   Employer surplus account recognition     68      
                
   Balance at 31 March 2013     515      
                
   Asset information            
   Cash and other     737      
   Actual return on scheme assets     294      
                
   The principal actuarial assumptions were:            
   Discount rate     8,00%      
   Salary cost and pension increase     5,75%      
   Expected rate of return on assets     8,00%      
                
   Experience loss on:            
   Plan assets     72      
   Percentage of plan assets     9,80%      
                
   Basis used to determine the rate of return on assets
The expected rate of return on assets was calculated using the discount rate at the beginning of the year, which corresponds to that used in the previous valuation. This is a reasonably conservative approach, adopted on the basis that the additional returns anticipated on certain other asset classes in which the Fund is invested (e.g. equities) can only be achieved with increased risk.

Post-Retirement Medical Aid Benefits
In the South African operations, the obligation to pay medical aid contributions after retirement is no longer part of the conditions of employment for employees engaged after 30 June 1996. A number of pensioners and current employees, however, remain entitled to this benefit. The entitlement to this benefit for current employees is dependent upon the employee remaining in service until retirement and completing a minimum service period of ten years. The Zimbabwe operations provide post-retirement medical benefits for pensioners and current employees. In Mozambique, Acucareira de Xinavane subsidises the medical contributions in respect of its pensioners.

The unfunded liability for post-retirement medical aid benefits is determined actuarially each year and comprises:
      Consolidated  Company 
    2014  2013  2014  2013 
         Restated     Restated 
   Amounts recognised in the statement of financial position:             
                 
   Net liability at beginning of year as previously reported  448  357  383  274 
   Effect of adoption of IAS 19 (Revised):             
   Actuarial losses transferred to Other Comprehensive Income     34     61 
   Net liability at beginning of year restated  448  391  383  335 
                 
   Actuarial loss/(gain):  10  33  39 
   From changes in financial assumptions  23  24 
   From changes in demographic assumptions  (7) (4)   
   From changes in experience items during the year  17  15 
   Net expense recognised in profit or loss  48  40  33  32 
   Employer contributions  (29) (27) (24) (23)
   Currency alignment  10  11       
   Net liability at end of year  487  448  396  383 
                 
   Amounts recognised in profit or loss:             
   Current service costs 
   Past service costs          
   Interest costs  35  34  30  29 
      48  40  33  32 
                 
   The principal actuarial assumptions applied are:             
   Discount rate             
   South Africa  9,00% 8,00% 9,00% 8,00%
   Mozambique  6,75% 6,75%      
   Zimbabwe  7,00% 7,60%;      
                 
   Health care cost inflation rate             
   South Africa  7,75% 6,75% 7,75% 6,75%
   Mozambique  6,00% 6,00%      
   Zimbabwe  5,75% 6,35%      
                 
   Sensitivity analysis:             
   On discount rate             
   1% increase in trend rate - decrease in the aggregate of the service and interest costs  (2) (1) (1) (1)
   1% increase in trend rate - decrease in the obligation  (53) (49) (38) (37)
   1% decrease in trend rate - increase in the aggregate of the service and interest costs 
   1% decrease in trend rate - increase in the obligation  65  59  45  45 
                 
   On health care cost inflation rate             
   1% increase in trend rate - increase in the aggregate of the service and interest costs 
   1% increase in trend rate - increase in the obligation  65  59  45  45 
   1% decrease in trend rate - decrease in the aggregate of the service and interest costs  (2) (1) (1) (1)
   1% decrease in trend rate - decrease in the obligation  (54) (50) (38) (38)
                 
   Estimated contributions payable in the next financial year  30  29  26  25 
           
   Weighted average duration of the obligation (years):             
   South Africa  11,3  11,4  11,3  11,4 
   Mozambique  4,9  4,6       
   Zimbabwe  17,8  16,9       
           
  Key risks associated with the post-retirement medical aid obligation:
  Higher than expected inflation (to which medical cost/contribution increases are related). 
“Real” future medical aid cost/contribution inflation (i.e. above price inflation) is higher than allowed for.
Members / pensioners changing medical aid plans to more expensive plans subject to maximum in terms of policy. 
Longevity – pensioners (and their dependants) living longer than expected in retirement.
Changes in the prescribed basis (as a result of market conditions) which adversely impact the financial results of the company.
 
           
  Retirement Gratuities 
Tongaat Hulett has in the past made payments, on retirement, to eligible employees who have remained in service until retirement, and have completed a minimum service period of ten years. The benefit is applicable to employees in the South African and Zimbabwean operations. The unfunded liability for retirement gratuities which is determined actuarially each year comprises: 
           
      Consolidated  Company 
      2014  2013  2014  2013 
         Restated     Restated 
   Amounts recognised in the statement of financial position:             
   Net liability at beginning of year as previously reported  152  116  102  77 
   Effect of adoption of IAS 19 (Revised):             
   Actuarial losses transferred to Other Comprehensive Income        11 
   Net liability at beginning of year restated  152  124  102  88 
                 
   Actuarial loss:  11  10 
   From changes in financial assumptions       
   From changes in demographic assumptions       
   From changes in experience items during the year 
   Net expense recognised in income statement  22  19  14  13 
   Payments made by the employer  (13) (9) (12) (9)
   Currency alignment       
   Net liability at end of year  176  152  112  102 
                 
   Amounts recognised in profit or loss:             
   Service costs 
   Interest costs  13  11 
      22  19  14  13 
                 
   The principal actuarial assumptions applied are:             
   Discount rate             
   South Africa  9,00% 8,00% 9,00% 8,00%
   Zimbabwe  7,00% 7,60%      
                 
   Salary inflation rate             
   South Africa  7,50% 6,50% 7,50% 6,50%
   Zimbabwe  5,00% 5,60%      
                 
   Sensitivity analysis:             
   On discount rate             
   1% increase in trend rate - decrease in the aggregate of the service and interest costs  (1) (1) (1) (1)
   1% increase in trend rate - decrease in the obligation  (16) (14) (9) (9)
   1% decrease in trend rate - increase in the aggregate of the service and interest costs 
   1% decrease in trend rate - increase in the obligation  18  17  11  11 
                 
   On salary inflation rate             
   1% increase in trend rate - increase in the aggregate of the service and interest costs 
   1% increase in trend rate - increase in the obligation  18  17  11  11 
   1% decrease in trend rate - decrease in the aggregate of the service and interest costs  (3) (2) (2) (2)
   1% decrease in trend rate - decrease in the obligation  (16) (15) (9) (9)
                 
   Estimated contributions payable in the next financial year  15  16  11  12 
                 
   Weighted average duration of the obligation (years):             
   South Africa  9,8  10,6  9,8  10,6 
   Zimbabwe  11,4  12,3       
                 
   Key risks associated with the retirement gratuity obligation:             
   Higher than expected inflation (to which salary increases are related). 
"Real" salary increases (i.e. above price inflation) are higher than allowed for. 
Large number of early retirements (normal or ill health) bringing forward gratuity payments. 
Fewer exits prior to retirement than expected (i.e. more people reach retirement than allowed for in terms of current demographic assumptions).
Changes in the prescribed basis (as a result of market conditions) which adversely impact the financial results of the company.
 
                
32.  DIRECTORS' AND PRESCRIBED OFFICERS' EMOLUMENTS AND INTERESTS 
  The information in respect of directors' and prescribed officers' emoluments and interests is included in the Remuneration Report as follows:
           
              
   Executive directors' and prescribed officers' remuneration          
   Non-executive directors' remuneration         
   Declaration of full disclosure            
   Interest of directors of the company in share capital            
           
           
33. EMPLOYEE SHARE INCENTIVE SCHEMES 
  Details of awards made in terms of the company's share incentive schemes comprising The Tongaat-Hulett Group Limited 2001 Share Option Scheme, the Share Appreciation Right Scheme 2005, the Long Term Incentive Plans 2005 and the Deferred Bonus Plan 2005 are set out in the Remuneration Report and details of the interest of directors in share-based instruments are set out here.
 
           
34. BEE EMPLOYEE SHARE OWNERSHIP PLANS
  The BEE employee transaction, which comprises the Employee Share Ownership Plan (ESOP) and the Management Share Ownership Plan (MSOP), vested during the year ended 31 March 2013.

The ESOP scheme consisted of a share appreciation right scheme and participants shared in 50% of the dividend payable to ordinary shareholders. The MSOP scheme consisted of two components, namely a share appreciation right scheme and a share grant scheme.

The ESOP Trust and MSOP Trust were established to acquire and hold Tongaat Hulett Limited shares for the benefit of designated employees. Tongaat Hulett Limited and its subsidiaries made contributions to the MSOP Trust and the ESOP Trust (refer note 3). Due to these shares having had specific repurchase rights at maturity (five years from grant), they were a separate class of restricted shares which, other than for the repurchase terms, ranked pari passu with ordinary shares and became ordinary shares at maturity of the scheme on 1 August 2012. 

Employee Share Ownership Plan 
           
  Grant date Balance at 
31 March 2013 
Released 
including deaths 
in service 
Scrip 
distribution 
Forfeited / 
adjustments 
Balance time 
constrained 
 
   1 August 2008  49 154  (48 694)    (460)      
   1 February 2009  28 564  (26 971)    (1 593)      
   1 August 2009  23 524        (3 194) 20 330    
   1 February 2010  24 330        (708) 23 622    
   1 August 2010  13 436        (414) 13 022    
   1 February 2011  12 688        (378) 12 310    
   1 August 2011  11 883        (215) 11 668    
   Unallocated  18 769     378  8 887  28 034    
      182 348  (75 665) 378  1 925  108 986    
                       
  Management Share Ownership Plan 
               
  Grant date  Balance at 
31 March 2013 
Released 
including deaths 
in service 
Awarded 
during 
2013/14 
Scrip 
distribution 
Forfeited / 
adjustments 
Balance time 
constrained 
   1 August 2008  116 851  (116 851)            
   1 February 2009  45 420  (45 420)            
   1 August 2009  47 167           (10 291) 36 876 
   1 February 2010  76 390           (3 771) 72 619 
   1 August 2010  49 749              49 749 
   1 February 2011  23 430           (3 854) 19 576 
   1 August 2011  82 638           (4 640) 77 998 
   1 February 2012  93 737              93 737 
   1 June 2012  43 885              43 885 
   1 July 2012  41 935              41 935 
   1 August 2012  2 782              2 782 
   1 November 2012  267 587           (16 949) 250 638 
   7 January 2013  5 000              5 000 
   1 March 2013  4 855              4 855 
   1 July 2013        25 000        25 000 
   Unallocated  229 619     (25 000) 3 178  39 505  247 302 
      1 131 045  (162 271)   3 178     971 952 
               
               
35. CHANGE IN ACCOUNTING POLICY (Rmillion)
  The adoption of the revised IAS 19 Employee Benefits has resulted in actuarial gains and losses being recognised immediately in other comprehensive income and no longer amortised via profit or loss. The effect of the change in accounting policy is disclosed below. 
       
      Consolidated  Company 
   Effect on the statements of financial position at 31 March 2012       
           
   Equity at 31 March 2012 as previously reported  7 796  3 162 
           
   Effect of change in accounting policy  (30) (51)
   Increase in provision for retirement benefits: actuarial losses recognised  (42) (72)
  Deferred tax thereon 12 21
           
  Equity at 31 March 2012 restated  7 766 3 111
           
   Effect on profit or loss for the year ended 31 March 2013       
           
  Reversal of actuarial losses amortised  12  17 
   Deferred tax  (3) (5)
   Increase in profit for the year  12 
       
   Attributable to:       
  Shareholders of Tongaat Hulett  8 12
  Minority (non-controlling) interest   
      12 
           
   Effect on other comprehensive income for the year ended 31 March 2013       
           
   Actuarial losses recognised  (44) (49)
   Deferred tax  12  13 
   Currency alignment    
  Decrease in other comprehensive income (26) (36)
           
   Net decrease in total comprehensive income  (17) (24)
           
   Attributable to:       
   Shareholders of Tongaat Hulett  (19) (24)
  Minority (non-controlling) interest  2  
      (17) (24)
           
   Effect on the statements of financial position at 31 March 2013 
           
   Equity at 31 March 2013 as previously reported  9 752  2 922 
           
   Effect of change in accounting policy  (47) (75)
   Actuarial losses recognised  (74) (104)
   Currency alignment    
   Increase in provision for retirement benefits  (68) (104)
   Deferred tax thereon  21  29 
           
   Equity at 31 March 2013 restated  9 705  2 847 
           
   The change in accounting policy did not affect cash flow from operations.