NOTES (31-35) TO THE FINANCIAL STATEMENTS



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 R98 million were expensed during the year (2014: R94 million).  
           
  Zimbabwe Pension Funds
  The post-retirement benefit provisions for the Zimbabwe operations at 31 March 2015 amount to R185 million (2014: R186 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):     2015
(Rmillion) 		 2014
(Rmillion) 
  Fair value of fund assets        
  Balance at beginning of year     751  737 
  Expected return on scheme assets     38  34 
  Settlements/conversion     4  (20)
  Balance at end of year     793  751 
           
  Comprises:        
  Employer surplus account (note 3)     588  552 
  Provisions and reserves     205  199 
        793  751 
           
  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
    2015  2014  2015  2014 
  Amounts recognised in the statement of financial position:        
  Net liability at beginning of year 487  448  396  383 
           
  Actuarial loss/(gain): 25  10  20  4 
  From changes in financial assumptions 11  1  15  1 
  From changes in demographic assumptions 8  6    (4)
  From changes in experience items during the year 6  3  5  7 
  Net expense recognised in income statement 49  48  38  33 
  Employer contributions (33) (29) (27) (24)
  Currency alignment 14  10     
  Net liability at end of year 542  487  427  396 
           
  Amounts recognised in profit or loss:        
  Current service costs 8  6  3  3 
  Past service costs   7   
  Interest costs 41  35  35  30 
    49  48  38  33 
           
  The principal actuarial assumptions applied are:        
  Discount rate        
  South Africa 8,10%  9,00%  8,10%  9,00% 
  Mozambique 7,34%  6,75%     
  Zimbabwe 5,00%  7,00%     
           
  Health care cost inflation rate        
  South Africa 7,20%  7,75%  7,20%  7,75% 
  Mozambique 6,51%  6,00%     
  Zimbabwe 3,50%  5,75%     
           
  Sensitivity analysis:        
  On discount rate        
  1% increase in trend rate - decrease in the aggregate of the service and interest costs (2) (2) (1) (1)
  1% increase in trend rate - decrease in the obligation (56) (53) (41) (38)
  1% decrease in trend rate - increase in the aggregate of the service and interest costs 2  2  1  1 
  1% decrease in trend rate - increase in the obligation 69  65  49  45 
           
  On health care cost inflation rate        
  1% increase in trend rate - increase in the aggregate of the service and interest costs 2  2  1  1 
  1% increase in trend rate - increase in the obligation 69  65  49  45 
  1% decrease in trend rate - decrease in the aggregate of the service and interest costs (2) (2) (1) (1)
  1% decrease in trend rate - decrease in the obligation (57) (54) (42) (38)
           
  Estimated contributions payable in the next financial year 34  30  28  26 
           
  Weighted average duration of the obligation        
  South Africa 11,3 years  11,3 years  11,3 years  11,3 years 
  Mozambique 6,1 years  4,9 years     
  Zimbabwe 17,0 years  17,8 years     
           
  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) turns out 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
    2015  2014  2015  2014 
  Amounts recognised in the statement of financial position:        
           
  Net liability at beginning of year 176  152  112  102 
           
  Actuarial (gain)/loss: (2) 7  5  8 
  From changes in financial assumptions 1    4   
  From changes in demographic assumptions   2    2 
  From changes in experience items during the year (3) 5  1  6 
  Net expense recognised in income statement 25  22  16  14 
  Payments made by the employer (12) (13) (11) (12)
  Currency alignment 11  8     
  Net liability at end of year 198  176  122  112 
           
  Amounts recognised in profit or loss:        
  Service costs 10  9  6  6 
  Interest costs 15  13  10  8 
    25  22  16  14 
           
  The principal actuarial assumptions applied are:        
  Discount rate        
  South Africa 8,10%  9,00%  8,10%  9,00% 
  Zimbabwe 5,00%  7,00%     
           
  Salary inflation rate        
  South Africa 6,95%  7,50%  6,95%  7,50% 
  Zimbabwe 2,75%  5,00%     
           
  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 (18) (16) (10) (9)
  1% decrease in trend rate - increase in the aggregate of the service and interest costs 1  1  1  1 
  1% decrease in trend rate - increase in the obligation 21  18  12  11 
           
  On salary inflation rate        
  1% increase in trend rate - increase in the aggregate of the service and interest costs 3  3  2  2 
  1% increase in trend rate - increase in the obligation 21  18  12  11 
  1% decrease in trend rate - decrease in the aggregate of the service and interest costs (3) (3) (2) (2)
  1% decrease in trend rate - decrease in the obligation (18) (16) (10) (9)
           
  Estimated contributions payable in the next financial year 18  15  11  11 
           
  Weighted average duration of the obligation        
  South Africa 9,9 years  9,8 years  9,9 years  9,8 years 
  Zimbabwe 11,0 years  11,4 years     
           
  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) turn out 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 Share Appreciation Right Scheme 2005, the Long Term Incentive Plans 2005 and the Deferred Bonus Plan 2005 are set out here 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 specific repurchase rights at maturity (five years from grant date), they were a separate class of restricted shares which, other than for the repurchase terms, rank 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 2014 		 Released 
including deaths 
in service 		 Forfeited / 
adjustments 		 Balance time 
constrained 		  
  1 August 2009  20 330  (19 734) (596)      
  1 February 2010  23 622  (22 836) (786)      
  1 August 2010  13 022  (125) (250) 12 647     
  1 February 2011  12 310  (93) (93) 12 124     
  1 August 2011  11 668    (200) 11 468     
  Unallocated 28 034    1 925  29 959     
    108 986  (42 788)   66 198     
               
  Management Share Ownership Plan
               
  Grant date Balance at 
31 March 2014 		 Released 
including deaths 
in service 		 Awarded 
during 
2014/15 		 Forfeited / 
adjustments 		 Balance time 
constrained 
  1 August 2009  36 876  (36 876)        
  1 February 2010  72 619  (72 619)        
  1 August 2010  49 749        49 749   
  1 February 2011  19 576        19 576   
  1 August 2011  77 998        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  250 638        250 638   
  7 January 2013  5 000        5 000   
  1 March 2013  4 855        4 855   
  15 April 2013 *       1 552  1 552   
  1 July 2013  25 000        25 000   
  1 August 2014      48 393  (788) 47 605   
  1 September 2014      1 928    1 928   
  Unallocated 247 302    (50 321) 2 018  198 999   
    971 952  (109 495)     862 457   
               
  * Adjustment made for award on 15 April 2013 that had previously been omitted.  
   
   
35. CHANGE IN ACCOUNTING POLICY IN THE PRIOR YEAR (Rmillion)
  During the year ended 31 March 2014, the company adopted the revised IAS 19 Employee Benefits. The adoption of this standard resulted in actuarial gains and losses being recognised immediately in other comprehensive income and no longer being amortised via profit or loss. The effect of the change in accounting policy on the 2012/13 financial statements is disclosed below.
               
            Consolidated  Company 
  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)
  Foreign currency translation 6   
  Increase in provision for retirement benefits (68) (104)
  Deferred tax 21  29 
               
  Equity at 31 March 2013 restated   9 705  2 847 
               

 

top of page