• + Accounting policies and critical accounting judgements and key sources of estimation uncertainty
         
    NOTES TO THE ANNUAL FINANCIAL STATEMENTS
     
         
    Accounting policies and critical accounting judgements and key sources of estimation uncertainty
         
    With the exception of the accounting policies relevant to the basis of consolidation, the accounting policies and standards and interpretations issued are in line with the Massmart Group accounting policies. Refer to note 1 and note 3 in the Group Financial Statements. The accounting policy of the Company is to hold investments in subsidiaries at cost less impairment.
         
    Details of critical accounting judgements and key sources of estimated uncertainty are disclosed in note 2 of the Group Financial Statements, where relevant.
         
         
  • + 1. Revenue
    1. Revenue
    December 2019 December 2018
    Rm 52 weeks 52 weeks
    Dividends received   1,317.0   1,160.2
    Management, sales and administration fees received   61.6   46.3
      1,378.6   1,206.5
  • + 2. Operating profit before interest
    2. Operating profit before interest
    December 2019 December 2018
    Rm 52 weeks 52 weeks
    Other income comprises:
    Sundry income   0.4   7.5
    Operating profit includes:
    Director fees   7.7   7.4
    Share-based payment expense   7.7   6.7
    Depreciation – Motor vehicles   0.7   0.7
    Contribution to pension scheme   0.9   0.7
    Professional fees   10.4   2.1
    Foreign exchange profit   0.1   0.8
    Imagegate loan impairment   0.1   7.4
  • + 3. Net finance income
    3. Net finance income
    December 2019 December 2018
    Rm 52 weeks 52 weeks
       
    Finance costs
    Interest on Group loans   (0.9)
    Finance income
    Interest on Group loans   22.0   9.7
    Interest from Banks
      22.0   9.7
    Net finance income   22.0   8.8
  • + 4. Taxation
    4. Taxation
    December 2019 December 2018
    Rm 52 weeks 52 weeks
    Current year
    South African normal taxation
     – Current taxation – Current year   6.0   4.1
     – Current taxation – Prior year1   (0.0)
     – Deferred taxation   3.1   2.0
    Total   9.1   6.1
    % December 2019 December 2018
    The rate of taxation is reconciled as follows:
    Standard corporate taxation rate   28.0   28.0
    Exempt income – dividends received   (27.8)   (29.0)
    Non-taxable income   (0.1)
    Disallowed expense2   0.5   1.6
    Effective rate   0.7   0.5
    1Value is less than R100,000.              
    2Disallowed expenses relates primarily to the decrease in the deferred tax asset raised on the equity settled share scheme and professional fees which are capital in nature.              
  • + 5. Interest in subsidiaries
               
    5. Interest in subsidiaries
             
    Rm   December 2019   December 2018
             
    Investment in subsidiaries        
    Capensis Investments 241 Proprietary Limited     698.0     698.0
    Game Discount World (Mauritius) Limited1    
    Massbuild Proprietary Limited     289.4     289.4
    Masscash Holdings Proprietary Limited     81.2     81.2
    Massmart International Holdings Limited     227.7     81.4
    Unison Risk Management Alliance Proprietary Limited     13.3     13.3
    Massmart Services Proprietary Limited2     4,077.2  
          5,386.8     1,163.3
             
    Rm   December 2019   December 2018
             
    Amounts owing by subsidiaries        
    Masscash Holdings Proprietary Limited     0.5     2,974.7
    Massmart Management and Finance Company Proprietary Limited     398.8  
    Masstores Proprietary Limited       203.7
    Game Discount World (Mozambique) Limitada     1.1     1.1
    Fresh Food Direct Proprietary Limited     0.2     54.8
    Wild Developments Proprietary Limited       197.8
          400.6     3,432.1
             
             
    Rm   December 2019   December 2018
             
    Amounts owing to subsidiaries        
    Massmart Management and Finance Company Proprietary Limited       (39.0)
    Unison Risk Management Alliance Proprietary Limited1    
    Massbuild Proprietary Limited1    
    Cambridge Food Gauteng Proprietary Limited1    
    Masstores Proprietary Limited     (19.5)  
    Massmart Services Proprietary Limited1    
          (19.5)     (39.0)
             
    The loan with Massmart Management and Finance Company Proprietary Limited is unsecured, bears interest at a variable rate linked to the South African prime overdraft rate, and is receivable on demand. The rest of the loans are unsecured, interest free and are receivable or payable on demand.
             
    1Value is less than R100,000.      
    2On 26 April 2019, the Company subscribed for a share in Massmart Services Proprietary Limited to the value of R3 227.2 million on loan account increasing the value of its investment. On the same day, the Company transferred and ceded all its rights to the loan receivables from Masscash Holdings Proprietary Limited (R2 974.6 million), Fresh Food Direct Proprietary Limited (R54.8 million) and Wild Developments Proprietary Limited (R197.8 million) to Massmart Services Proprietary Limited. The value of the ceded loans were off-set against the value of the amount owing in respect of the share subscription. Furthermore, on 1 October 2019 the Company subscribed for an additional share in Massmart Services Proprietary Limited to the value of R850 million. This subscription was settled in cash.
             
             
  • + 6. Property, plant and equipment
    6. Property, plant and equipment
    Rm Cost Accumulated depreciation and impairment Net book value
     
    December 2019  
    Owned assets
    Motor vehicles   3.3   (3.0)   0.2
     
    Total property, plant and equipment   3.3   (3.0)   0.2
    Rm Cost Accumulated depreciation and impairment Net book value
    December 2018
    Owned assets
    Motor vehicles   3.3   (2.4)   0.9
    Total property, plant and equipment   3.3   (2.4)   0.9
    Reconciliation of property, plant and equipment
    December 2019 Opening net book value Depreciation Closing net book value
    Rm
    Owned assets
    Motor vehicles   0.9   (0.7)   0.2
    Total property, plant and equipment   0.9   (0.7)   0.2
    December 2018 Opening net book value Depreciation Closing net book value
    Rm
    Owned assets
    Motor vehicles   1.5   (0.6)   0.9
    Total property, plant and equipment   1.5   (0.6)   0.9
    The Company has reviewed the residual values and useful lives at year end. No significant adjustment resulted from such review in the current financial year.
  • + 7. Other financial assets
             
    7. Other financial assets
             
    Rm   December 2019   December 2018
             
    Financial assets measured at amortised cost        
    Employee Share Trust Loans to the Executive Directors and other employees of Massmart Holdings Limited:1        
    Balance at the beginning of the year   7.4   11.9
    Advanced during the year   0.1   4.5
        7.5   7.4
             
    Financial assets measured at fair value through OCI        
    Investment in listed shares   0.8   1.1
        0.8   1.1
             
        8.3   8.5
             
    1The Employee Share Trust Loans to Executive Directors and other employees of the Company are non-interest bearing and are secured by the underlying ordinary shares in Massmart Holdings Limited. The loans are repayable 10 years after the grant date. Recourse is not limited to these shares and should shares sold to repay these loans be insufficient to recover the balance outstanding, the unrecovered portion remains a debt due and payable. 105,448 (December 2018: 105,448) shares with a market value of R7,539,643 (December 2018: R10,861,144) have been pledged. Employee share trust loan will be repayable on 31 May 2020.
    For more information on the recognition and measurement of the financial assets measured at amortised cost and the financial assets measured through OCI refer to note 14 and note 15 of the Group Annual Financial Statements.
             
             
  • + 8. Deferred taxation
    8. Deferred taxation
    Rm December 2019 December 2018
    The major movements during the year are analysed as follows:
    Asset at the beginning of the year   8.5   10.4
    Charge to the Income Statement for the year   (3.1)   (2.0)
    Charge directly to equity   0.0   (0.1)
    Charge to other comprehensive income for the year1
    Asset at the end of the year   5.4   8.5
    The major components of deferred taxation are analysed as follows:
    Other temporary differences2   5.4   8.5
      5.4   8.5
    1Value is less than R100,000.
    2Other temporary differences include share-based payments and other insignificant timing differences relating to the Company’s property, plant and equipment.
  • + 9. Issued capital
                       
               
    9. Issued capital
           
          Share capital   Share premium
    Rm     December 2019   December 2018   December 2019   December 2018
                       
    Authorised                  
    500,000,000 (December 2018: 500,000,000) ordinary shares of 1 cent each   5.0   5.0    
    20,000,000 (December 2018: 20,000,000) non-redeemable cumulative non-participating preference shares of 1 cent each   0.2   0.2    
    18,000,000 (December 2018: 18,000,000) ‘A’ convertible redeemable non-cumulative participating preference shares of 1 cent each   0.2   0.2    
    4,000,000 (December 2018: 4,000,000) ‘B’ convertible redeemable non-cumulative participating preference shares of 1 cent each        
                       
    Issued                  
    219,138,809 (December 2018: 217,179,142 ) ordinary shares of 1 cent each   2.2   2.2   1,700.7   1,520.9
    2,797,675 (December 2018:2,797,675) ‘B’ convertible redeemable non-cumulative participating preference shares of 1 cent each        
                       
              Number of   Share capital   Share premium
              shares   Rm   Rm
    Ordinary shares                  
                       
    Balance at December 2017         217,145,489   2.2   1,580.0
    Shares issued in terms of the Massmart Black Scarce Skills Trust       33,653    
    Ordinary shares issued – December 2018         217,179,142   2.2   1,580.0
    Treasury shares         (1,177,645)     (59.1)
    Ordinary shares issued excluding treasury shares – December 2018       216,001,497   2.2   1,520.9
                       
    Balance at December 2018         217,179,142   2.2   1,520.9
    Shares issued in terms of the scrip dividend declared1       1,959,667     174.3
    Ordinary shares issued – December 2019         219,138,809   2.2   1,695.2
    Treasury shares         (1,466,504)     5.5
    Ordinary shares issued excluding treasury shares – December 2019       217,672,305   2.2   1,700.7
                       
    Ordinary shares, which have a par value of 1 cent, carry one vote per share and carry the right to dividends.
                       
    Non-redeemable cumulative non-participating preference shares            
                       
    The non-redeemable cumulative non-participating preference shares are unissued in the current year. It remains within the ambit of the Board of Directors to issue these shares as the need arises.    
                       
    ‘A’ convertible redeemable non-cumulative participating preference shares            
                       
    There are no ‘A’ convertible redeemable non-cumulative participating preference shares in issue as the residual shares were automatically redeemed on the vesting of the Massmart Thuthukani Empowerment Trust scheme, in terms of the Trust Deed in the 2013 financial year.    
               
                       
    ‘B’ convertible redeemable non-cumulative participating preference shares            
                       
    Balance at December 2017         2,831,328    
    Shares converted to ordinary shares       (33,653)    
    Balance at December 2018         2,797,675    
    Shares converted to ordinary shares          
    Balance at December 2019         2,797,675    
                       
    B’ convertible redeemable non-cumulative participating preference shares, which have a par value of 1 cent, are held in the Massmart Black Scarce Skills Trust. These shares carry one vote per share, which are cast by the trustees, and do not carry the right to dividends. On election of the beneficiary, the shares will convert to ordinary shares on a one-for-one basis and will rank pari passu with all ordinary shares then in issue.
                       
                       
    Share options granted under the Massmart Holdings Limited Employee Share Trust    
                       
    At December 2019, executives and senior employees have options of 3,583,071 (December 2018: 4,234,937) ordinary shares of which nil (December 2018: 134,782) are unvested.
    Share options granted under the Employee Share Incentive Schemes carry no rights to dividends and no voting rights. Additional information of the Employee Share Incentive Schemes can be found in note 27 of the Group Financial Statements.
    During the current financial year, 1.1 million shares (0.5% of average shares in issue) were bought in the market by the Massmart Holdings Limited Executive Share Trust at an average price of R43.98 totalling R48.4 million.
    During the prior financial year, 1.9 million shares (0.9% of average shares in issue) were bought in the market by the Massmart Holdings Limited Executive Share Trust at an average price of R127.85 totalling R246.1 million.
    The Directors have the authority, until the next annual general meeting, to issue the ordinary shares of the Company up to a maximum of 5% of the shares already issued.
                       
                       
    1The share capital value is less than R100,000.          
  • + 10. Other reserves
               
    10. Other reserves
               
    Rm     December 2019   December 2018
               
    Balance at the beginning of the year   56.5   51.2
    Treasury shares     (1.3)
    Share-based payment expense reserve   (3.8)   6.7
    Revaluation of listed investments   (0.3)   (0.1)
          52.4   56.5
               
    Reconciliation of the treasury share reserve        
    Balance at the beginning of the year     1.3
    Movement on treasury shares     (1.3)
           
               
    Reconciliation of the share-based payment reserve        
    Balance at the beginning of the year   55.4   48.7
    Share-based payment expense related to Massmart Holdings Limited Employee Share Trust   7.7   6.7
    Share-based payment reserve adjustment upon vesting     (11.5)  
          51.6   55.4
               
    Reconciliation of the OCI financial asset.        
    Balance at the beginning of the year   1.1   1.2
    Revaluation of listed investments to market value   (0.3)   (0.1)
          0.8   1.1
               
    The Group introduced an Employee Share Incentive Scheme in the 2013 financial year. The share-based payment reserve arises on the granting of share options, referred to as the Employee Share Option Scheme, and retention share grants and performance share awards, referred to as the Employee Share Incentive Plan, to employees under the Employee Share Incentive Schemes of the Group. Details of the Employee Share Incentive Schemes can be found in note 27 in the Group Financial Statements. The share-based payment valuation of the Employee Share Option Scheme was performed by Alexander Forbes. The share-based payment valuation of the Employee Share Incentive Plan was performed using a valuation system acquired by the Group with the necessary model inputs having been determined by management. Management derived these inputs through consultation with various financial institutions, and they are representative of the market data available for Massmart Holdings Limited’s shares at the reporting date.
               
               
  • + 11. Trade and other payables
    11. Trade and other payables
    Rm December 2019 December 2018
    Payroll accruals
    Value Added Taxation   6.5   4.0
    Sundry payables and other accruals   0.7   1.4
      7.2   5.4
         
     ‘Sundry payables and other accruals’ comprises other sundry creditor accruals and shareholders for dividends.
  • + 12. Cross-suretyships and promissory notes
             
    12. Cross-suretyships and promissory notes
             
    Rm   December 2019   December 2018
             
    Cross-suretyships under banking and other financial facilities     12,314.5     10,206.1
          12,314.5     10,206.1
             
             
    Banking facilities incorporate, amongst others, letters of credit, forward exchange contracts and electronic fund transfers. These facilities have been secured by cross-suretyships between Group companies.
    ABSA Bank has provided shared facilities and term loans amounting to R4.1 billion (December 2018: R3.5 billion) to the Company and fellow Group companies. Cross-suretyships have been lodged as security by and between the Company and fellow Group companies in this regard.
    Standard Bank has provided shared facilities and term loans amounting to R2.3 billion (December 2018: R2.8 billion) to the Company and fellow Group companies. Cross-suretyships have been lodged as security by and between the Company and fellow Group companies in this regard.
    First National Bank has provided shared facilities amounting to R2.2 billion (December 2018: R0.7 billion) to the Company and fellow Group companies. Cross-suretyships have been lodged as security by and between the Company and fellow Group companies in this regard.
    Nedbank has provided shared facilities amounting to R2.0 billion (December 2018: R2.0 billion) to the Company and fellow Group companies. Cross-suretyships have been lodged as security by and between the Company and fellow Group companies in this regard.
    BNP Paribas has provided shared facilities amounting to R1.0 billion (December 2018: R0.5 billion) to the Company and fellow Group companies. Cross-suretyships have been lodged as security by and between the Company and fellow Group companies in this regard.
    Investec Bank has provided shared facilities amounting to R0.5 billion (December 2018: R0.5 billion) to the Company and fellow Group companies. Cross-suretyships have been lodged as security by and between the Company and fellow Group companies in this regard.
    Standard Chartered has provided shared facilities and term loans amounting to R0.3 billion (December 2018: Rnil billion) to the Company and fellow Group companies. Cross-suretyships have been lodged as security by and between the Company and fellow Group companies in this regard.
  • + 13. Notes to the statement of cash flows
               
    13. Notes to the statement of cash flows
               
          December 2019   December 2018
    Rm     52 weeks   52 weeks
               
    13.1 Cash (outflow)/inflow from trading activities        
    Profit before taxation   1,327.5   1,180.6
    Adjustment for:        
    Depreciation   0.7   0.6
    Reversal of loan impairment    
    Investment impairment   0.1   7.4
    Finance costs     0.9
    Finance income   (22.0)   (9.7)
    Dividends received   (1,317.0)   (1,160.2)
    Share-based payment expense   7.7   6.7
    Treasury share acquisitions     (53.7)
    Other non-cash movements   0.1   2.4
        (2.9)   (25.0)
    13.2 Working capital movements        
    Decrease in trade and other receivables   8.2   15.7
    Increase/(decrease) in trade and other payables   1.8   (31.7)
    Decrease in amounts owing by subsidiaries   122.2  
        132.2   (16.0)
    13.3 Dividends paid        
    Shareholder for dividends     (0.8)
    Dividends declared to shareholders   (128.4)   (735.6)
          (128.4)   (736.4)
    13.4 Taxation paid        
    Amounts receivable/ (owing) at the beginning of the year   2.1   (16.9)
    Current tax   (6.0)   (4.1)
    Amounts owing/ (receivable) at the end of the year   0.1   (2.1)
        (3.8)   (23.1)
             
    Other non-cash movements includes foreign exchange movements and other reserve movements.
  • + 14. Related parties
                           
               
    14. Related parties
                           
                           
    Rm   Dividends received   Management, sales and administration fees   Interest received   Dividends paid   Interest paid
                           
    December 2019                      
    Income Statement transactions between related parties are as follows                    
    – Masscash Holdings Proprietary Limited          
    – Masstores Proprietary Limited   880.0   61.5      
    – Massmart Management & Finance Company Proprietary Limited   250.0     22.0    
    – Massbuild South Africa Proprietary Limited   180.0                
    – Unison Risk Management Alliance Proprietary Limited   7.0        
    – Main Street 830 Proprietary Limited         159.4  
          1,317.0   61.5   22.0   159.4  
                           
    December 2018                      
    Income Statement transactions between related parties are as follows                    
    – Masscash Holdings Proprietary Limited   253.0        
    – Masstores Proprietary Limited     46.3      
    – Massmart Management & Finance Company Proprietary Limited       9.7     0.9
    – Massbuild South Africa Proprietary Limited   897.2                
    – Unison Risk Management Alliance Proprietary Limited   10.0        
    – Main Street 830 Proprietary Limited         375.2  
          1,160.2   46.3   9.7   375.2   0.9
                           
    Additional information can be found in note 1 for dividends and management fees received in the Company Financial Statements.
    Additional information can be found in note 3 for interest received and paid in the Company Financial Statements.
    Additional information can be found in note 5 for loans to and from related parties in the Company Financial Statements.
    Additional information can be found in note 33 and note 34 in the Group Financial Statements with regards to Directors’ emoluments and interest of directors in the Company’s Share Incentive Schemes respectively.
                           
                           
  • + 15. Fair Value
                               
           
    15. Fair Value
                               
    Fair value hierarchy
                               
    The table below reflects ‘Financial instruments’ carried at fair value and those ‘Financial instruments’ that have carrying amounts that differ from their fair values, in the Statement of Financial Position:
    Financial instruments in the Statement of Financial Position        
                               
    Rm     Total Carrying Amount   Total Fair Value   Level 1   Level 2   Level 3    
                               
    December 2019                        
    Financial Assets                        
    Financial assets measured at amortised cost     7.5     7.3       7.3      
    – Employee share trust loans     7.5     7.3       7.3      
    Financial assets measured at fair value through OCI     0.8     0.8     0.8        
    – Investment in listed shares     0.8     0.8     0.8        
                               
            8.3     8.1     0.8     7.3      
                               
    There were no transfers between the fair value categories during the December 2019 financial year.    
    The financial assets and financial liabilities have been presented based on an analysis of their respective natures, characteristics and risks.
    The carrying value of the financial instruments disclosed as current assets and current liabilities approximate their fair value due to their short term nature.
                               
    Financial instruments in the Statement of Financial Position        
                               
    Rm     Total Carrying Amount   Total Fair Value   Level 1   Level 2   Level 3    
                               
    December 2018                        
    Financial Assets                        
    Financial assets measured at amortised cost     7.4     5.9       5.9      
    – Employee share trust loans     7.4     5.9       5.9      
    Financial assets measured at fair value through OCI     1.1     1.1     1.1        
    – Investment in listed shares     1.1     1.1     1.1        
                               
            8.5     7.0     1.1     5.9      
                               
    There were no transfers between the fair value categories during the December 2018 financial year.  
    The financial assets and financial liabilities have been presented based on an analysis of their respective natures, characteristics and risks.  
    The carrying value of the financial instruments disclosed as current assets and current liabilities approximate their fair value due to their short term nature.  
                               
    Fair value measurement and valuation techniques for level 2 financial instruments
                               
    Type of financial instrument     Fair value at December 2019 (Rm)   Valuation technique   Significant inputs        
                         
                             
    Financial Assets                      
                               
    Financial assets measured at amortised cost     7.3                
    Employee share trust loans     7.3   DCF   Market interest rate        
                               
                7.3                
                               
    Type of financial instrument     Fair value at December 2018 (Rm)   Valuation technique   Significant inputs        
                         
                               
    Financial Assets                      
                               
    Financial assets measured at amortised cost     5.9                
    Employee share trust loans     5.9   DCF   Market interest rate        
                               
                5.9                
                               
    Valuation technique       Description of valuation technique            
                               
    Discounted cash flow (DCF)     The DCF method involves the projection of a series of cash flows. To this projected cash flow series, an appropriate, market-derived discount rate is applied to establish the present value of the cash flow stream associated with the item. With regards to assets, the fair value is estimated using explicit assumptions regarding the benefits and liabilities of ownership over the asset’s life including an exit or terminal value. To this end, the Company applies Method 2 of the expected present value technique in terms of IFRS 13 Fair Value Measurement.    
                               
                               
  • + 16. Financial Instruments
                               
           
    16. Financial Instruments
                               
    Capital risk management
                               
    The Company manages its capital to ensure that it will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balances.
                               
    The capital structure of the Company consists of equity attributable to equity holders of the parent, comprising share capital, share premium, other reserves and retained profit. Additional information can be found in note 9 and note 10 respectively.
                               
    The targeted level of gearing is determined after consideration of the following key factors:
    – the needs of the Company to fund current and future capital expenditure to achieve its stated production growth target; and
    – the desire of the Company to maintain its gearing within levels considered to be acceptable taking into account potential business opportunities and the position of the Company in the business cycle.
    The targeted level of gearing was adequately managed in the current financial year.
                               
    Classification of financial instruments
    Rm         Financial instrument   Financial liability measured at amortised cost   Financial assets measured at amortised cost   Financial assets measured at fair value through OCI   Non-financial instruments
                               
    December 2019                  
    Non-current assets 0.8       0.8   5,392.4
    – Investment in subsidiaries           5,386.8
    – Property, plant and equipment         0.2
    – Other financial assets 0.8         0.8  
    – Deferred taxation         5.4
    Current assets 408.1     408.1    
    – Trade and other receivables   0.0     0.0    
    – Other financial assets 7.5     7.5    
    – Amounts owing by subsidiaries   400.6     400.6    
    – Taxation          
                               
    Total assets     408.9     408.1   0.8   5,392.4
                               
    Current liabilities 20.3   20.3       6.6
    – Trade and other payables   0.7   0.7       6.5
    – Taxation         0.1
    – Amounts owing to subsidiary     19.5   19.5      
                               
    Total liabilities     20.3   20.3       6.6
                               
    Rm         Financial instrument   Financial liability measured at amortised cost   Financial assets measured at amortised cost   Financial assets measured at fair value through OCI   Non-financial instruments
                               
                               
    December 2018                    
    Non-current assets   8.5     7.4   1.1   1,172.7
    – Investment in subsidiaries           1,163.3
    – Property, plant and equipment           0.9
    – Other financial assets   8.5     7.4   1.1  
    – Deferred taxation           8.5
    Current assets   3,440.3     3,440.3     2.1
    – Trade and other receivables   8.2     8.2    
    – Amounts owing by subsidiaries   3,432.1     3,432.1    
    – Taxation           2.1
                               
    Total assets   3,448.8     3,447.7   1.1   1,174.8
                               
    Current liabilities   39.8   39.8       4.6
    – Trade and other payables   0.8   0.8       4.6
    – Amounts owing to subsidiary   39.0   39.0      
                               
    Total liabilities   39.8   39.8       4.6
                               
                               
    Financial risk management
                               
    The Company does not trade in financial instruments, but in the ordinary course of business operations, the Company is exposed to a variety of financial risks arising from the use of financial instruments. These risks include:
    – market risk (comprising interest rate risk and currency risk);
    – liquidity risk; and
    – credit risk.
    The Company has developed a comprehensive risk management process to facilitate, control and monitor these risks. This process includes formal documentation of policies, including limits, controls and reporting structures. The Executive Committee is responsible for risk management activities within the Company.
                               
    Market risk management
                               
    Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. The market risks that the Company is primarily exposed to include interest rate risk and currency risk. Market risk is managed by identifying and quantifying risks on the basis of current and future expectations and ensuring that all trading occurs within defined parameters. This involves the review and implementation of methodologies to reduce risk exposure. The reporting on the state of the risk and risk practices to executive management is part of this process. The processes set up to measure, monitor and mitigate these market risks are described below. There has been no change to the Company’s exposure to market risk or the manner in which it manages and measures the risk since the prior period.
                               
    Interest rate risk management    
                               
    The Company is exposed to interest rate risk because of its floating rate loan receivable from Massmart Management and Finance Proprietary Limited.
                               
    The carrying amount of the Group’s financial assets and liabilities at reporting date that are subject to interest rate risk is as follows :
                               
    December 2019   Subject to interest rate movement   Non-interest bearing   Total
    Rm             Fixed   Floating        
                               
    Non-current assets       0.8   0.8
    – Other financial assets       0.8   0.8
    Current assets     398.8   9.3   408.1
    – Trade and other receivables        
    – Other financial assets       7.5   7.5
    – Amounts owing by subsidiaries     398.8   1.8   400.6
                               
    Total assets     398.8   10.1   408.9
                               
    Current liabilities       20.2   20.2
    – Trade and other payables       0.7   0.7
    – Amount owing to subsidiary company       19.5   19.5
                               
    Total liabilities       20.2   20.2
                               
    December 2018   Subject to interest rate movement   Non-interest bearing   Total
    Rm             Fixed   Floating        
                               
    Non-current assets       8.5   8.5
    – Other financial assets       8.5   8.5
    Current assets       3,440.3   3,440.3
    – Trade and other receivables       8.2   8.2
    – Amounts owing by subsidiaries       3,432.1   3,432.1
                               
    Total assets       3,448.8   3,448.8
                               
    Current liabilities     39.0   1.4   40.4
    – Trade and other payables       1.4   1.4
    – Amount owing to subsidiary company     39.0     39.0
                               
    Total liabilities     39.0   0.8   39.8
                               
                               
    Interest rate sensitivity    
    The Company is sensitive to the movements in the SA Prime interest rate. The rates of sensitivity represents management’s assessment of the possible change in interest rates. The average interest rate for the Company for the year was 8.8% (December 2018: 8.3%). If the SA Prime interest rate increased or decreased by 100 basis points (December 2018: increased or decreased by 100 basis points) at year end, the profit for the year would have increased or decreased by R2.5 million respectively (December 2018: increased or decreased by R0.1 million respectively).
                               
                               
    Currency risk management
                               
    All liabilities are South African Rand (ZAR) denominated. Foreign-denominated assets are not covered by forward exchange contracts.
    The carrying amount of the Company’s foreign currency denominated monetary assets at reporting date is as follows :
                               
    Rm             ZAR   MZN   GBP   Total
                               
    December 2019                      
    Financial assets measured at amortised cost                
    Other financial assets   8.3       8.3
    Trade receivables   0.0       0.0
    Amounts owing by subsidiaries   399.5   1.1     400.6
                  407.8   1.1     408.9
    December 2018                    
    Financial assets measured at amortised cost                
    Other financial assets   8.5       8.5
    Trade receivables   8.2       8.2
    Amounts owing by subsidiaries   3,432.1       3,432.1
                  3,448.8       3,448.8
                               
    Foreign currency sensitivity
    The Company is primarily exposed to the movements in the Mozambique Metical (MZN). The rates of sensitivity represents management’s assessment of the possible change in currency rates. If the MZN increased or decreased by 10% (December 2018: increased or decreased by 10%) at year end, the profit for the year would have increased or decreased by less than R100,000 respectively (December 2018: increased or decreased by R0.1 respectively).
                               
    Liquidity risk management
                               
    Liquidity risk is the risk that the Company will be unable to meet a financial commitment in any location or currency. This risk is minimised through the holding of cash balances and sufficient available borrowing facilities. In addition, detailed cash flow forecasts are regularly prepared and reviewed so that the cash needs of the Company are managed according to its requirements.
                               
    The following table details the Company’s contractual maturity for its non-derivative financial liabilities. The table has been compiled based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Company will be required to repay the liability. The cash flows include both the principal and interest payments.
                               
    Rm                     Repayable within 1 year   Total
    December 2019            
    Financial liability measured at amortised cost            
    Trade and other payables       0.7   0.7
    Amounts owing to subsidiaries       19.5   19.5
    Total undiscounted cash flows of the Company’s financial liabilities       20.2   20.2
    Less: Future finance charges          
    Total financial liabilities           20.2
                               
                               
                          Repayable   Total
    Rm                     within 1 year    
    December 2018            
    Financial liability measured at amortised cost          
    Trade and other payables     0.8   0.8
    Amounts owing to subsidiaries     39.0   39.0
    Total undiscounted cash flows of the Company’s financial liabilities       39.8   39.8
    Less: Future finance charges          
    Total financial liabilities           39.8
                               
    The effect of discounting on the current financial liabilities are deemed immaterial due to their short-term nature.
                               
    Credit risk management
                               
    The carrying amount of the financial assets represents the Company’s maximum exposure to credit risk without taking into consideration any collateral provided. All financial assets measured at amortised cost are considered to be of low credit risk at the end of the current and prior financial year.
    The ECL requirements for the intercompany receivables have not had a material impact on the Company financial statements as a significant portion of the receivables are with companies that have no history of impairment losses and are profit making.
                               
                                     
  • + 17. Events after the reporting date
    17. Events after the reporting date
    The Directors are not aware of any material event which occurred after the reporting date and up to the date of this report that would impact the financial information disclosed in the Company Financial Statements in the current year.