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, which are predominantly defined contribution 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 R100 million were expensed during the year (2015: R98 million).   
         
  Zimbabwe Pension Funds       
  The post-retirement benefit provisions for the Zimbabwe operations at 31 March 2016 amount to R234 million (2015: 
R185 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):  2016
(Rmillion)		 2015
(Rmillion)		  
   
         
  Fair value of fund assets       
  Balance at beginning of year  793  751   
  Expected return on scheme assets  49  38   
  Settlements/conversion  3  4   
  Balance at end of year  845  793   
         
  Comprises:       
  Employer surplus account (note 3) 634  588   
  Provisions and reserves  211  205   
    845  793   

  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 these 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 
    2016  2015  2016  2015 
           
  Amounts recognised in the statement of financial position:         
           
  Net liability at beginning of year  542  487  427  396 
           
  Actuarial loss:  22  25  14  20 
  From changes in financial assumptions  3  11  3  15 
  From changes in demographic assumptions  3  8     
  From changes in experience items during the year  16  6  11  5 
  Net expense recognised in income statement  49  49  37  38 
  Employer contributions  (36) (33) (28) (27)
  Currency alignment  23  14     
  Net liability at end of year  600  542  450  427 
           
  Amounts recognised in profit or loss:         
  Current service costs  9  8  4  3 
  Interest costs  40  41  33  35 
    49  49  37  38 
           
  The principal actuarial assumptions applied are:         
  Discount rate:         
  South Africa  9,60%  8,10%  9,60%  8,10% 
  Mozambique  9,09%  7,34%     
  Zimbabwe  4,00%  5,00%     
           
  Healthcare cost inflation rate:         
  South Africa  8,75%  7,20%  8,75%  7,20% 
  Mozambique  8,24%  6,51%     
  Zimbabwe  2,50%  3,50%     
           
  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  (62) (56) (42) (41)
  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  76  69  50  49 
           
  On healthcare 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  76  69  50  49 
  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  (63) (57) (43) (42)
           
  Estimated contributions payable in the next financial year  38  34  30  28 
  Weighted average duration of the obligation:         
  South Africa  11,1 years  11,3 years  11,1 years  11,3 years 
  Mozambique  6,6 years  6,1 years     
  Zimbabwe  16,6 years  17,0 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 
    2016  2015  2016  2015 
           
  Amounts recognised in the statement of financial position:         
           
  Net liability at beginning of year  198  176  122  112 
           
           
  Actuarial loss/(gain):  2  (2) 2  5 
  From changes in financial assumptions  (2) 1  1  4 
  From changes in experience items during the year  4  (3) 1  1 
  Net expense recognised in income statement  27  25  17  16 
  Payments made by the employer  (18) (12) (11) (11)
  Currency alignment  17  11     
  Net liability at end of year  226  198  130  122 
           
  Amounts recognised in profit or loss:         
  Service costs  12  10  7  6 
  Interest costs  15  15  10  10 
    27  25  17  16 
           
  The principal actuarial assumptions applied are:         
  Discount rate:         
  South Africa  9,60%  8,10%  9,60%  8,10% 
  Zimbabwe  4,00%  5,00%     
           
  Salary inflation rate:         
  South Africa  8,50%  6,95%  8,50%  6,95% 
  Zimbabwe  1,50%  2,75%     
           
  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  (20) (18) (11) (10)
  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  23  21  13  12 
           
  On salary inflation rate:         
  1% increase in trend rate - increase in the aggregate of the service and interest costs  4  3  2  2 
  1% increase in trend rate - increase in the obligation  23  21  13  12 
  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  (20) (18) (11) (10)
           
  Estimated contributions payable in the next financial year  23  18  15  11 
           
  Weighted average duration of the obligation:         
  South Africa  9,8 years  9,9 years  9,8 years  9,9 years 
  Zimbabwe  10,5 years  11,0 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 of 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 to 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 2015 		 Released
including deaths
in service 		 Forfeited / adjustments  Balance time constrained 
 
 
           
  1 August 2010  12 647  (12 272) (375)  
  1 February 2011  12 124  (11 359) (765)  
  1 August 2011  11 468  (63) (126) 11 279 
  Unallocated  29 959    1 167  31 126 
    66 198  (23 694) (99) 42 405 
           

  Management Share Ownership Plan 
             
  Grant date  Balance at 31 March 2015  Released including deaths in service  Awarded
during 2015/16 		 Forfeited / adjustments  Balance time constrained 
 
 
             
  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 November 2012  250 638      (4 157) 246 481 
  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  47 605  (1 734)   (3 904) 41 967 
  1 September 2014  1 928        1 928 
  1 September 2015      52 213    52 213 
  Unallocated  198 999    (52 213) 6 698  153 484 
    862 457  (72 611)   (1 363) 788 483 
 

35.  SUBSEQUENT EVENTS     
       
  There were no material events between 31 March 2016 and the date of this report. 
 

 

top of page