Integrated Report 2014 - National Government...6 South African Post Office SOC Limited (Registration number 1991/005477/06) Integrated Report 2014 Globally, the postal services have

Sustainable Business Growth

Driving diversification and Innovation

Integrated Report

2014

1South African Post Office SOC Limited (Registration number 1991/005477/06)Integrated Report 2014

Group Management Report ................................................................................................................3

Administrator’s Statement.............................................................................................................4

Acting Group Chief Executive Officer’s Report ..............................................................................6

Strategy ..............................................................................................................................................9

Corporate Governance Report ..........................................................................................................27

Operational Overview .......................................................................................................................53

Postbank ......................................................................................................................................54

Mail Business ..............................................................................................................................56

Retail ...........................................................................................................................................57

Logistics ......................................................................................................................................60

Sustainability ....................................................................................................................................61

Environmental Sustainability .......................................................................................................62

Corporate Citizenship ..................................................................................................................67

Global Reporting Initiative Framework .........................................................................................69

Business Support .............................................................................................................................75

Human Capital Management .......................................................................................................76

Information Technology ................................................................................................................80

E-Business ...................................................................................................................................82

Security and Investigation ...........................................................................................................83

Consolidated Annual Financial Statements ......................................................................................85

Audit Committee Report ..............................................................................................................87

Directors’ Responsibilities and Approval......................................................................................90

Secretary’s Statement .................................................................................................................91

Independent Auditors’ Report .....................................................................................................92

Directors’ Report .........................................................................................................................96

Statement of Financial Position .................................................................................................103

Statement of Comprehensive Income ......................................................................................105

Statement of Changes in Equity................................................................................................106

Statement of Cash Flows ..........................................................................................................108

Notes to the Consolidated Annual Financial Statements ..........................................................109

Detailed Income Statement ......................................................................................................200

Three Year Period Review ..........................................................................................................202

Glossary.....................................................................................................................................203

Table of Contents

2 South African Post Office SOC Limited (Registration number 1991/005477/06)Integrated Report 2014

South African Post Office SOC Limited (Registration number 1991/005577/06)Integrated Report 2014 3

Group Management Report


Administrator’s Statement

On 7 November 2014, the non-executive directors resigned from the South African Post Office (SAPO) Board of Directors. The Honourable Minister of Telecommunications and Postal Services, Dr Siyabonga Cyprian Cwele, MP, as the shareholder representative appointed Dr Simo Lushaba in terms of section 25 of the Post Office Act, 22 of 2011 (as amended).

The Administrator is charged with the responsibility of bringing stability within SAPO, finalise the Strategic Turnaround Plan (STP) to improve financial performance and finalise the Audited Annual Financial Statements. The Administrator has appointed an intervention team made up of persons with requisite skills and knowledge in postal, financial and logistics business.

The Act provides for the Minister to appoint an Administrator as part of an intervention to stabilise the Post Office. The Minister will review the performance of SAPO whilst under administration and within six months table a report on his findings to the National Assembly.

Dr S Lushaba

Administrator



Globally, the postal services have been under pressure for a number of years owing to plummeting mail volumes and revenue. This is caused largely by a growing choice of electronic communication media available to customers. South Africa is no exception, and in the case of the South African Post Office, the drop in customer volumes has been exacerbated by repeated strikes and consequently, unreliable mail delivery.

The SA Post Office has been through another challenging year with slow economic recovery and increasing financial pressures on our already challenged customers. The rapid evolution within the digital space shrinks mail revenue as customers seek faster communication media. The result is a large fixed cost structure.

As part of the Universal Service Obligation (USO) the SA Post Office opened 50 (fifty) postal outlets during the year under review at the time that we are no longer receiving any subsidy. The 50 new points comprised 5 fully fledged post offices and 45 Retail Postal Agencies. This has increased the Post Office branch network to 2,486 access points.

The new addresses rolled out amounted to 1,197, 254 exceeding the addresses expansion target by 1,574. A total of 37.7% of these addresses were expanded in rural areas and 62.3% in urban areas.

In the year under review 50 million customers were served at the various post office outlets. Motor vehicle licenses can be renewed at Post Office outlets in all but two provinces, namely the Northern Cape and the Western Cape. A total of 3.4 million customers renewed their motor vehicle licenses through our post office branches.

On the logistics front, the Logistics Group continues to partner with government departments in fulfilling their mandates. In the Limpopo Province 6.3 million books were delivered to 3,975 schools for the Department of Education. In the Northern Cape Province 900,000 books were delivered to 575 schools.

Mail revenue continues to be the key generator by contributing 67% of the Group’s overall revenue. The impact of the four labour strikes over the past year played an major role in our missing the revenue budget and service delivery to customers.

The deployment of high-speed sorting machines ensures that letters are sorted and delivered in the shortest possible time. Key programmes like containerisation and mechanization at the major mail centres reduce the number of missorts and improve delivery standards.

SAPO E-Business experienced huge growth in hybrid mail and electronic bill presentment and payments (EBPP) sector. It is envisaged that the electronic migration and adoption by the market will offset the decline in mail volumes by a significant percentage.

Acting Group Chief Executive Officer’s Report


The 1,500 strong post office footprint extends into rural areas, giving Postbank customers access to financial and banking services, even in rural areas. Postbank cards are accepted at merchants that accept Visa cards in all countries.

During the 2010/2011 financial period the South African Postbank Limited Act no 9 of 2010 was signed into law providing for the establishment of a subsidiary company of the South Africa Post Office SOC Limited, namely the South African Postbank Limited, to which the designated assets and liabilities of the current Postbank division will be transferred in terms of the Postbank Act No 9 of 2010. It is envisaged that the new subsidiary will operate as a fully-fledged bank and will be regulated in terms of the Banks Act.

Postbank submitted its Section 12 Application to Establish a Bank to the South African Reserve Bank on 25 September 2013 and a decision thereon is awaited. Postbank has been designated as a clearing system participant by SARB from 01 November 2013. This positions Postbank to become an acquirer for ATM, online business and cards. The Postbank Corporatisation process has further been enabled through funding of R 481 million that has been allocated by the National Treasury over the Medium Term. The balance of the investment in corporatisation will be funded by Postbank.

Mail transportation is an essential operation for the Post Office, but it has an impact on the environment by contributing to air pollution. To minimise the impact on the environment we have implemented initiatives to reduce carbon emissions, recycle paper, reduce water usage and reduce energy consumption. This includes retrofitting power saving light sources and lighting sensors.

A total of 2,000 trees were purchased and planted across the country in support of Food and Trees for Africa during this year. These tree planting activities are incorporated into our employee volunteerism schedules to raise awareness of environment sustainability.

The SA Post Offices’ approach to corporate citizenship is not merely donating resources but actually getting involved in the implementation of the programmes to ensure that these programmes are successful. The Student to Government Programme has seen a partnership with Microsoft SA and the South African Local Government Association being rolled out in four provinces that allowed twenty four students to complete their internships in ten municipalities in these provinces.

Humana People to People is a poverty alleviation program in the Ribacross community in Limpopo that has completed its third year. This year has seen more than 600 people being trained in computer skills, business management, sewing and gardening. Many of the women who participated in these Programmes have employed other people within their communities.

Employee volunteerism is core to the corporate citizenship objectives of the SA Post Office. The central message around corporate citizenship is “Delivering Change” and employees follow this through when they are volunteering their time, skills and resources. This financial year has seen more than 25% of the staff volunteering in communities and schools around the country.

During the year ahead the SA Post Office plans to form new partnerships with Isibaya, a non-governmental organisation in the Eastern Cape, to assist farmers in 55 villages to become economically active and commercially viable as well as The Red Cap Foundation to bring ICT to rural schools in KwaZulu-Natal.

It is critical for Human Capital development to contribute to the organisation’s bottom line. Addressing the skills gaps, organisational transformation as well as supporting career development, form part of its output, ensuring that staff is constantly empowered, inspired and motivated.

During the year under review, the primary focus of IT was on stabilising and improving existing IT capabilities. Its activities focused specifically on IT governance, operational efficiency and IT security. A number of projects were initiated and continue from the prior year like the Infrastructure Refresh, Disaster Recovery and Network Upgrade, Flexcube upgrade to Universal Banking Solution (UBS) and Track and Trace.

Whilst the availability and stability of systems remains important, the focus within IT will gradually move towards becoming a true business partner, by providing flexible and scalable solutions that will be responsive to business needs and reduce time to market. This will be achieved through considering modern ways of provisioning IT services and transforming the IT environment to keep abreast with current trends and enable the corporatisation of the Postbank.


Financial performance

Tough trading conditions prevailed during the period under review with further losses in revenue and customers contributing to the net loss of R 358.88 million posted for the year ended 31 March 2014. This represented an increase of 6.5% from the restated net loss position of R 337,12 million for the prior year. The declining trend in net profits continued for the last few years with the past two posting net losses due to the lower than expected revendues, and the lack of government funding relating to USO obligations.

2010 2011 2012(Restated)

2013(Restated) 2014

293,130 117,756 87,771 (337,12) (358,88)

(400,000)

(300,000)

(200,000)

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200,000

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00

Net profit after tax

Net profit after tax

Group revenue increased by 2% to R5.78 billion from R5.69 billion posted in the prior year. The decline in mail and courier volumes and the loss of customers contributed to a marginal growth of 2% in revenues despite the approval of a general price increase of 5% for reserved products and services by the Postal Regulator, ICASA. Labour unrest during the year under review also contributed to the loss in revenues earned and negatively impacted our operations and customer service. Additional costs were also incurred to clear backlogs resulting from the strike action.

The lower revenues were to some extent offset by the implementation of cost optimisation programmes and containment measures across the group that resulted in operating expenses being limited to R 6.51 billion (2013: R 6.08 billion) - a growth of 7% from the prior year.

The balance sheet has strengthened with an increase of R 530 million in the value of the total assets to R 11.29 billion from R 10.76 billion in the prior year. The growth in total assets has resulted from the increase of R 308 million in short-term

assets to match the growth of R 245 million in the Postbank depositor’s funds.

Mr M Mathonsi

Acting Group Chief Executive Officer


Strategy


The Strategic Corporate Plan

The years ahead

The South African Post Office (SA Post Office) is mandated through its license agreement and Universal Service Obligation (USO) to provide postal, and communications services to all South Africans at affordable prices. This mandate charges the regulator, Independent Communication Association of South Africa (ICASA), with ensuring the provision of universal service and managing the performance of the SA Post Office through the license agreement. In order to fulfil on the mandate of the USO, a strategic priority for the SA Post Office includes rolling out new addresses and service points in rural and under-serviced areas. This requirement is aligned to enabling the Government’s national development programme for 2030.

The SA Post Office remains a monopoly entity in the reserved mail business, which constitutes the biggest component of its business. The postal industry has been going through a major transformation to adjust to structural changes in its core mail business, for a number of years which has seen declines in revenue and volumes. The global trend has seen a steady decline in mail volumes as other forms of communication pervade the market. In an effort to reduce its dependency on mail and exploit new revenue streams, the SA Post Office needs to focus on further diversifying its products and services.

The SA Post Office faces several challenges that impact the business’s ability to deliver against its mandate and license requirements. These include, negative customer perception, uncertain financial sustainability due to declining revenues, loss of USO subsidy and a large fixed cost base. These challenges present the organisation with opportunities to exploit new growth alternatives. The 2014/15 – 2016/17 Strategic Corporate Plan of the SA Post Office is aimed at addressing these business challenges facing the organisation and mapping out a new path that will see the organisation reposition itself, into a profitable, self-sustaining, efficient and customer centric organisation.

The Strategic Corporate Plan provides us with a good opportunity to chart a new path. This journey will see us creating a healthy, financially stable, and highly efficient and customer centric organisation that is a key contributor to the South African economy. Over the next three years, the main focus will be on ensuring that the business is self-sustaining, that we improve our financial position (i.e. increasing revenue base and managing costs more prudently) and that we improve overall efficiencies throughout our different business divisions.

The SA Post Office has been working on a detailed list of initiatives to address the current performance barriers and concerns in the Group. This has led to the development of the Strategic Turnaround Plan (STP) that is aimed at implementing strategic initiatives that will stabilise the business and steer it in a positive growth direction. The initiatives include amongst others, the implementation of alphanumerical postal codes, the roll-out of the Government’s Digital Terrestrial Television project, expansion of the E-Business products and channels, optimisation of our property portfolio to optimise value, providing more South African homes with addresses and the corporatisation of Postbank (which will see more people having access to financial services).


Key themes for SAPO’s Business Transformation

SAPO’S STRATEGIC THEMES

To be recognised amongst the leading providers of postal and related services in the world

• Align business operations to customer needs, shareholder priorities and government priorities

• Efficient and sustainable business that is well defined and well communicated to the public

• Invest in people, take them along and build capacity for the future

• Review internal policies and streamline processes to foster good governance and efficient decision-making

• Review and design a physical network for the future

• Attain innovation with new products and services.

• New products and services

• Post Bank transformation

• Rationalise product information

• Network optimisation

• Selected operational improvement

• Infrastructure and IT

• Subsidy reintroduction

• Service levels renegotiation

• Funding and balance sheet strategy

• Measurement, performance and reward

• Capability building: skills and disciplines

• Operating and support costs

• Asset upgrade and renewal

• Procurement and strategic sourcing

• Property portfolio management

Products & Services

Assets & Cost Base

Network & Operations

People Processes

Regulatory & Financial

The diagram below highlights strategic initiatives of the different business units.

POSTBANK

• Corporatise the Bank

• Focus on innovative channel strategy

• Focus on product innovations

LOGISTICS

• Review product and pricing strategies and consolidate assets

• Provide competitive logistics services and solutions

• Stimulate economic development and growth by connecting business with markets and customers

• Be supply chain solution partners of the Government

MAIL

• Modernise and rationalise mail and parcel operations

• Build internal capabilities

• Drive product and price simplification strategies


RETAIL

• Adapt new multi-channel strategy in order to meet customer expectations

• Expand and refine retail channel network

• Align property strategy and footprint

• Design innovative products and services

E-BuSINESS

• Grow Hybrid mail business

• Expand into the rest of Africa

• Grow PKI authentication services to Government as primary target market

• Migrate traditional postal products service into single E-Business platform

PROPERTIES

• Improve the effectiveness and efficiency of property management processes

• Increase lease and sales/disposition revenues

• Rationalise excess space and reduce lease costs

• Evaluate alternative sale/leaseback options

The removal of the USO subsidy and the capital investment required to successfully implement the initiatives listed above require the organisation to consider different funding options in order to raise the required capital. The SA Post Office will have to consider borrowing as one option to its funding requirements. The total funding requirement for the organisation is R3.5 billion over the three-year planning period. This includes R940 million required for the Corporatisation of the bank and a further R450 million for improving our current property portfolio.

Our focus in the new financial year includes the implementation of a new organisation structure and the SA Post Office Strategic Turnaround Plan. The new structure is intended to introduce a new commercial and business delivery focus within the Group, in addition to entrenching a new culture of responsibility and accountability. The Strategic Turnaround Plan will focus on different phases that will see the organisation addressing its fundamental building blocks (including addressing its capacity and capability shortcomings).

The phases will include focusing on revenue improvement, cost containment initiatives, implementing initiatives that will drive diversification, and innovation to enable the business to drive growth. Key to our plans will be the following:

1The roll-out of key projects such as the implementation of alpha-numerical postal codes

2The roll-out of the Government’s Digital Terrestrial Television (DTT) project

3 Expanding our e-Business products and channels 4 Optimisation of our property

portfolio to derive value

5 Providing more South African homes with addresses 6

Corporatisation of Postbank which will see more people having access to financial services.


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Att

ain

finan

cial

su

stai

nabi

lity

whi

le d

eliv

erin

g on

Gov

ernm

ent

soci

al m

anda

te

Impr

ove

cost

ef

ficie

ncy

man

agem

ent

Gro

up t

otal

cos

t as

% o

f to

tal

inco

me

Vario

us c

ost

and

proc

ess

optim

izat

ion

initi

ativ

es

101%

108.

7%N

ot a

chie

ved

The

poor

per

form

ance

in r

even

ue fo

r th

e ye

ar t

o da

te h

as c

ontr

ibut

ed t

o th

e no

n-ac

hiev

emen

t of

the

cos

t to

inco

me

ratio

of

101%

.

Red

uctio

n in

le

ave

liabi

lity

Impl

emen

t ne

w

leav

e po

licy

from

01

Apr

il 20

13 a

nd

enfo

rcem

ent

of le

ave

man

agem

ent

cont

rols

to

redu

ce le

ave

liabi

lity

Red

uctio

n of

20

%In

crea

sed

by

22%

Not

ach

ieve

dIn

crea

se d

ue t

o m

onth

ly le

ave

accr

uals

and

ne

w a

ppoi

ntm

ents

.

Sta

ff c

ompl

imen

t in

crea

sed

– co

nver

sion

of

casu

als

to P

PTE

s.

Red

uctio

n of

Lea

ve L

iabi

lity

Proj

ect”

laun

ched

du

ring

Oct

ober

201

3.

Bus

ines

s U

nits

(BU

) sch

edul

ed le

ave

for

all

empl

oyee

s w

ith m

ore

than

33

days

(lea

ve

allo

catio

n pr

ojec

ted

to 3

1 M

arch

201

4).

Impr

ove

cost

ef

ficie

ncy

man

agem

ent

Cos

t sa

ving

Vario

us c

ost

and

proc

ess

optim

isat

ion

initi

ativ

es o

n th

e to

tal c

ost

of

R6.

287b

R78

.8m

R39

mN

ot a

chie

ved

The

year

to

date

ben

efits

ant

icip

ated

did

no

t m

ater

ialis

e. T

he r

even

ue p

roje

ct o

f pr

epai

d en

velo

pes

to N

edba

nk o

f R

23m

and

th

e sa

ving

s of

R5

mill

ion

in t

he t

elep

hone

co

ntra

cts

did

not

mat

eria

lise.

Cap

ital

inve

stm

ent

in

prio

rity

area

s

Ret

urn

on C

AP

EX

sp

end

10%

ret

urn

on

capi

tal i

nves

ted

R25

mR

0mN

ot a

chie

ved

An

amou

nt o

f R

181

mill

ion

in C

apex

is

com

mitt

ed. T

he b

enefi

ts a

s pe

r th

e bu

sine

ss

case

s w

ill b

e re

alis

ed o

nce

thes

e pr

ojec

ts a

re

fully

impl

emen

ted.

Eg

Post

al a

ddre

ss s

yste

m

and

the

Trac

k &

Trac

e sy

stem

.

Valu

e cr

eatio

n th

roug

h al

tern

ativ

e re

venu

e m

odel

s

Boa

rd a

ppro

ved

Prop

erty

D

evel

opm

ent

stra

tegy

Exp

lore

and

qu

antif

y st

rate

gies

to

leve

rage

the

ex

istin

g pr

oper

ty

port

folio

for

valu

e cr

eatio

n

Del

iver

y of

a

boar

d ap

prov

ed

com

preh

ensi

ve

prop

erty

de

velo

pmen

t pl

an a

nd d

eliv

ery

stra

tegy

Bas

elin

e as

sess

men

ts

of a

ll SA

PO

pr

oper

ties

done

.

Not

ach

ieve

dB

asel

ine

asse

ssm

ents

will

allo

w fo

r th

e de

velo

pmen

t of

a h

olis

tic p

rope

rty

deve

lopm

ent

stra

tegy

.

The

prop

erty

val

uatio

n ex

erci

se w

ill

com

men

ce s

oon

as t

he a

ppoi

ntm

ent

of t

he

serv

ice

prov

ider

is im

min

ent.

Alte

rnat

ive

finan

cing

mod

els

Boa

rd a

ppro

ved

Fund

ing

stra

tegy

Est

ablis

hmen

t of

a s

uita

ble

fund

ing

stra

tegy

to

fina

nce

key

proj

ects

ou

tsid

e no

rmal

op

erat

ions

Est

ablis

hmen

t of

a f

undi

ng

stra

tegy

Non

eN

ot a

chie

ved

Fund

ing

stra

tegy

was

sub

mitt

ed t

o th

e B

oard

fo

r co

nsid

erat

ion.


Pre

det

erm

ined

Ob

ject

ives

: No

n-F

inan

cial

Per

form

ance

ST

RA

TE

GIC

TH

EM

EIN

VE

ST

IN P

EO

PLE

, TA

KE

TH

EM

ALO

NG

AN

D B

uIL

D C

APA

CIT

Y F

OR

TH

E F

uT

uR

E

Str

ateg

ic G

oal

Str

ateg

ic

ob

ject

ive

Mea

sure

Str

ateg

ic P

lan

s 20

14Ta

rget

201

3/14

Ach

ieve

men

t 20

13/1

4A

chie

ved

Sta

tus

Rem

arks

Inve

st in

ou

r pe

ople

by

bui

ldin

g ca

paci

ty a

nd

impl

emen

ting

tran

sfor

mat

ion

prog

ram

s

Prov

isio

n of

a

cond

uciv

e w

orki

ng

envi

ronm

ent

that

pro

mot

es

a pe

rfor

man

ce

focu

sed

wor

kfor

ce

Red

uctio

n of

w

orkp

lace

ac

cide

nts

and

inju

ry o

n du

ty

(IOD

s)

Red

uctio

n of

IO

Ds

5% r

educ

tion

by

28 in

cide

nts

from

a

base

of

563

to

535

Incr

ease

d by

21

% t

o 65

6 in

cide

nts

Not

Ach

ieve

dM

ain

cont

ribut

ors

wer

e B

icyc

le a

nd m

otor

ve

hicl

e ac

cide

nts,

dog

bite

s, a

nd m

ovin

g of

he

avy

obje

cts.

The

se w

ere

part

ly o

ff-s

et b

y a

redu

ctio

n in

arm

ed r

obbe

ry r

elat

ed in

cide

nts.

Sta

ff S

atis

fact

ion

inde

xIm

plem

ent

100%

in

terv

entio

n pl

an b

ased

on

out

com

es

from

pre

viou

s su

rvey

to

addr

ess

inte

rnal

co

mm

unic

atio

n sh

ortc

omin

gs

and

impl

emen

t a

mon

itorin

g to

ol

Impr

ovem

ent

of e

mpl

oyee

en

gage

men

t/

com

mun

icat

ion

satis

fact

ion

inde

x fr

om a

bas

e of

56

.3%

to

70%

Non

eN

ot a

chie

ved

A n

ew c

ultu

re s

urve

y ha

s be

en d

esig

ned

and

will

not

onl

y re

flect

cul

ture

ele

men

ts b

ut w

ill

also

hig

hlig

ht c

hang

e re

adin

ess

and

mor

ale

leve

ls w

ithin

the

com

pany

.

An

impl

emen

tatio

n pl

an t

o be

fina

lised

by

end

Apr

il 20

14 a

nd im

plem

enta

tion

to b

e co

mpl

eted

by

end

May

201

4. T

he r

esul

ts

ther

eof

will

form

par

t of

the

Cor

pora

te

Turn

arou

nd s

trat

egy

tran

sfor

mat

ion

plan

for

2014

/15.

A c

hang

e an

d tr

ansf

orm

atio

n pl

an h

as b

een

deve

lope

d.

Hum

an c

apita

l ca

paci

ty b

uild

ing

Suc

cess

rat

e of

indi

vidu

als

on le

ader

ship

de

velo

pmen

t pr

ogra

ms

Targ

eted

in

terv

entio

ns

via

Lead

ersh

ip

deve

lopm

ent

prog

ram

s an

d th

e ev

alua

tion

of t

he s

ucce

ss

ther

eof

(bas

e of

24)

To im

prov

e cu

rren

t ba

se b

y 5%

to

95%

No

enro

lmen

ts

wer

e do

ne fo

r th

e le

ader

ship

pr

ogra

m in

20

13/1

4

Not

ach

ieve

dC

halle

nges

with

the

app

oint

men

t of

ap

prop

riate

ser

vice

pro

vide

rs.

Vaca

ncy

rate

at

first

tw

o le

vels

(s

ubje

ct t

o ne

w

revi

sed

stru

ctur

e)

Filli

ng o

f id

entifi

ed c

ritic

al

lead

ersh

ip

posi

tions

. A

tota

l of

8 ou

t of

th

e cu

rren

t 18

va

canc

ies

by y

ear

end

Prog

ress

ive

redu

ctio

n of

va

canc

y ra

te

from

60%

to

33%

11 e

xecu

tive

posi

tions

vac

ant

Not

ach

ieve

dTh

e fo

llow

ing

are

in t

he r

ecru

itmen

t pr

oces

s:

CO

O, C

CO

, Hea

d of

Leg

al, G

E in

GC

EO

’s

offic

e, P

ostb

ank

CR

O, P

ostb

ank

CA

E,

SAP

O C

IO, M

D P

rope

rtie

s, G

E:H

CM

and

G

E: S

trat

egy

MD

Pos

tban

k (t

o be

fille

d in

al

ignm

ent

with

Cor

pora

tisat

ion

proc

ess)

.

No.

of

criti

cal

posi

tions

with

su

cces

sors

Con

firm

a T

alen

t pi

pelin

e ag

ains

t a

defin

ed t

alen

t m

atrix

for

the

iden

tified

crit

ical

po

sitio

ns (1

4 @

Po

st o

ffice

and

3

@ P

ostb

ank)

100%

17

Tale

nt

man

agem

ent

impl

emen

ted

in P

ostb

ank

on

Sen

ior

Man

ager

an

d M

anag

er

leve

ls

Not

ach

ieve

dTa

lent

foru

ms

wer

e im

plem

ente

d an

d ar

e be

ing

rolle

d ou

t in

Bus

ines

s U

nits

. Upo

n co

mpl

etio

n of

the

per

form

ance

man

agem

ent

enga

gem

ent

othe

r po

tent

ial s

ucce

ssor

s w

ill b

e id

entifi

ed t

hrou

gh t

alen

t fo

rum

.


ST

RA

TE

GIC

TH

EM

EIN

VE

ST

IN P

EO

PLE

, TA

KE

TH

EM

ALO

NG

AN

D B

uIL

D C

APA

CIT

Y F

OR

TH

E F

uT

uR

E

Str

ateg

ic G

oal

Str

ateg

ic

ob

ject

ive

Mea

sure

Str

ateg

ic P

lan

s 20

14Ta

rget

201

3/14

Ach

ieve

men

t 20

13/1

4A

chie

ved

Sta

tus

Rem

arks

Inve

st in

ou

r pe

ople

by

bui

ldin

g ca

paci

ty a

nd

impl

emen

ting

tran

sfor

mat

ion

prog

ram

s

Hum

an c

apita

l ca

paci

ty b

uild

ing

570

staf

f w

ith

com

plet

ed

and

cont

ract

ed

indi

vidu

al

scor

ecar

ds

Impl

emen

t an

aut

omat

ed

Inte

grat

ed

perf

orm

ance

m

anag

emen

t sy

stem

Perf

orm

ance

m

anag

emen

t im

plem

ente

d at

al

l man

agem

ent

leve

ls in

clud

ing

exec

utiv

e di

rect

ors

RFQ

pro

cess

for

a pe

rfor

man

ce

man

agem

ent

syst

em h

as

been

con

clud

ed

and

the

serv

ice

prov

ider

ap

poin

ted.

Im

plem

enta

tion

is e

xpec

ted

to t

ake

3 to

4

mon

ths.

Not

ach

ieve

dTh

e im

plem

enta

tion

of a

n au

tom

ated

pe

rfor

man

ce m

anag

emen

t sy

stem

will

be

done

in p

hase

s st

artin

g w

ith t

he t

op 2

00

empl

oyee

s up

to

Sen

ior

Man

ager

leve

l.

Num

ber

of s

taff

w

ith c

ompl

eted

&

eva

luat

ed

scor

ecar

ds

570

Not

ach

ieve

d10

0% o

f th

e (p

aper

bas

ed) p

erfo

rman

ce

cont

ract

s fo

r th

e fu

ll ye

ar e

xpec

ted

by e

nd

Apr

il 20

14.

Wel

lnes

sS

taff

par

ticip

atio

n in

HIV

/AID

S

test

ing

prog

ram

s

Enc

oura

ge

empl

oyee

pa

rtic

ipat

ion

in

volu

ntar

y H

IV/

AID

S t

estin

g

Targ

et o

f 78

%

(12

480)

of

tota

l sta

ff t

o be

pr

ogre

ssiv

ely

test

ed b

y en

d of

Q

4 fr

om a

bas

e of

75%

(12

000)

79%

Ach

ieve

d

Abs

ente

eism

ra

teR

educ

e cu

rren

t ab

sent

eeis

m r

ate

by 5

0% t

o 6%

fr

om a

bas

e of

11

.8%

To r

each

a t

arge

t of

6%

(tot

al

abse

nt d

ays)

by

Q4

8.71

%N

ot a

chie

ved

This

incl

udes

all

type

s of

aut

horis

ed le

ave

(exc

ludi

ng s

ick

leav

e). T

he e

ndea

vour

to

redu

ce

the

leav

e lia

bilit

y on

the

Bal

ance

She

et la

rgel

y co

ntrib

uted

to

the

incr

ease

.

Sic

k le

ave

rate

Mai

ntai

n si

ck

leav

e ra

te w

ithin

th

e in

dust

ry

benc

hmar

k an

d ul

timat

ely

reac

h ta

rget

of

2.3%

fr

om a

bas

e of

2.

6%

To r

each

a

prog

ress

ive

targ

et o

f 2.

3%

(tot

al s

ick

leav

e da

ys)

1.26

%A

chie

ved


ST

RA

TE

GIC

TH

EM

EIN

VE

ST

IN P

EO

PLE

, TA

KE

TH

EM

ALO

NG

AN

D B

uIL

D C

APA

CIT

Y F

OR

TH

E F

uT

uR

E

Str

ateg

ic G

oal

Str

ateg

ic

ob

ject

ive

Mea

sure

Str

ateg

ic P

lan

s 20

14Ta

rget

201

3/14

Ach

ieve

men

t 20

13/1

4A

chie

ved

Sta

tus

Rem

arks

Inve

st in

ou

r pe

ople

by

bui

ldin

g ca

paci

ty a

nd

impl

emen

ting

tran

sfor

mat

ion

prog

ram

s

Sup

port

ing

Gov

ernm

ent

Impe

rativ

es

Adv

ance

men

t of

H

DIs

and

wom

en

in t

he w

orkp

lace

Em

ploy

men

t eq

uity

tar

gets

Gen

der

equi

ty t

arge

ts

Tota

l fem

ales

(b

ase=

704

3-45

%)

Ach

ieve

ta

rget

(657

3)42

%45

%A

chie

ved

Tota

l bla

ck

fem

ales

(bas

e =

5548

-36%

)

Ach

ieve

ta

rget

(446

9)29

%36

%A

chie

ved

Bla

ck fe

mal

es

as %

of

tota

l G

radu

ates

&

lear

ners

(bas

e =

35 –

45%

)

Ach

ieve

ta

rget

(50)

60%

61%

Ach

ieve

d

Tota

l bla

cks

base

(1

3035

= 8

4%)

Ach

ieve

tar

get

79%

85%

Ach

ieve

d

Inte

grat

ion

of

peop

le w

ith

disa

bilit

ies

in t

he

wor

kpla

ce

Dis

abili

ty t

arge

ts (a

s pe

r D

WC

PD

gui

delin

es)

Dis

abili

ty (b

ase

69 =

0.4

4%)

Ach

ieve

tar

get

2%0.

44%

Not

ach

ieve

dA

s a

resu

lt of

the

dis

abili

ty a

war

enes

s ca

mpa

ign,

the

num

ber

of d

iscl

osur

es

as s

tead

ily in

crea

sed

to 6

0 em

ploy

ees.

2

empl

oyee

s ar

e in

clud

ed in

gra

duat

e pr

ogra

mm

e.%

of

tota

l nu

mbe

r G

radu

ates

&

lear

ners

(no

curr

ent

base

)

Ach

ieve

tar

get

2%2%

Ach

ieve

d


ST

RA

TE

GIC

TH

EM

EA

LIG

N B

uS

INE

SS

OP

ER

AT

ION

S T

O C

uS

TOM

ER

NE

ED

S, S

HA

RE

HO

LDE

R A

ND

GO

VE

RN

ME

NT

PR

IOR

ITIE

S

Str

ateg

ic G

oal

Str

ateg

ic

ob

ject

ive

Mea

sure

Str

ateg

ic P

lan

s 20

14Ta

rget

201

3/14

Ach

ieve

men

t 20

13/1

4A

chie

ved

Sta

tus

Rem

arks

Prov

ide

affo

rdab

le p

osta

l an

d re

late

d se

rvic

es t

hat

mee

t th

e ne

eds

of o

ur c

usto

mer

s

Mee

t Li

cens

e an

d m

anda

te

oblig

atio

ns b

y in

crea

sing

the

ac

cess

ibili

ty o

f pr

oduc

ts a

nd

serv

ices

Add

ition

al

phys

ical

ad

dres

ses

rolle

d ou

t

Rol

l out

ad

dres

ses

as d

efine

d in

sc

hedu

le 2

of

the

amen

ded

SAP

O li

cens

e ag

reem

ent

by IC

ASA

(G

over

nmen

t ga

zett

e no

. 35

080)

1 19

5 68

01

197

254

Ach

ieve

d

Add

ition

al r

etai

l ou

tlets

(poi

nts

of p

rese

nce)

es

tabl

ishe

d

Rol

l out

poi

nts

of p

rese

nce

as d

efine

d in

sc

hedu

le 1

of

the

amen

ded

SAP

O

licen

se b

y IC

ASA

(G

over

nmen

t ga

zett

e no

. 35

080)

50 5

0A

chie

ved

Pref

eren

tial

proc

urem

ent

Ent

erpr

ise

deve

lopm

ent

Tota

l BB

BE

E

spen

d as

a

% o

f to

tal

proc

urem

ent

spen

d (in

voic

ed

amou

nt)

Proc

urem

ent

plan

and

pr

actic

es a

ligne

d to

adv

ance

men

t of

BB

BE

E

60%

69.9

%A

chie

ved

BB

BE

E

cont

ribut

or le

vel

Mai

ntai

n th

e cu

rren

t le

vel 4

co

ntrib

utor

44

Ach

ieve

dTh

e SA

PO

BB

BE

E c

ertifi

cate

was

val

id u

ntil

28 N

ovem

ber

2013

. Rat

ing

Age

ncy

has

been

en

gage

d to

com

plet

e th

e ve

rifica

tion

proc

ess

for

a ne

w c

ertifi

cate

to

be is

sued

.

Boa

rd a

ppro

ved

supp

lier

deve

lopm

ent

stra

tegy

Dev

elop

men

t of

a

com

preh

ensi

ve

ente

rpris

e de

velo

pmen

t st

rate

gy

Del

iver

y of

a

boar

d ap

prov

ed

com

preh

ensi

ve

ente

rpris

e de

velo

pmen

t st

rate

gy

Sup

plie

r D

evel

opm

ent

stra

tegy

ex

pect

ed t

o be

tab

led

for

appr

oval

by

Ju

ne 2

014.

Not

ach

ieve

dTh

e B

BE

EE

and

Ent

erpr

ise

Dev

elop

men

t Fr

amew

ork

have

bee

n dr

afte

d an

d su

bmitt

ed

to P

rocu

rem

ent T

ask

Team

(PTT

) mee

ting.

Th

e P

TT r

eque

sted

the

BB

EE

E a

nd E

nter

pris

e D

evel

opm

ent

Fram

ewor

k to

be

alig

ned

with

th

e ch

ange

s in

legi

slat

ion

rela

ted

to t

he

revi

sed

Cod

es o

f G

ood

Prac

tice.

Post

bank

C

orpo

ratis

atio

nS

ubm

issi

on o

f ba

nkin

g lic

ense

ap

plic

atio

n

Post

bank

C

orpo

ratis

atio

n pr

oces

s

Ban

k lic

ense

ap

plic

atio

n su

bmitt

ed t

o re

gula

tor

by

31 M

arch

201

4

Ban

k lic

ense

ap

plic

atio

n su

bmitt

ed

25 S

epte

mbe

r 20

13

Ach

ieve

d


ST

RA

TE

GIC

TH

EM

EA

LIG

N B

uS

INE

SS

OP

ER

AT

ION

S T

O C

uS

TOM

ER

NE

ED

S, S

HA

RE

HO

LDE

R A

ND

GO

VE

RN

ME

NT

PR

IOR

ITIE

S

Str

ateg

ic G

oal

Str

ateg

ic

ob

ject

ive

Mea

sure

Str

ateg

ic P

lan

s 20

14Ta

rget

201

3/14

Ach

ieve

men

t 20

13/1

4A

chie

ved

Sta

tus

Rem

arks

Act

ive

part

icip

atio

n in

Afr

ica’

s de

velo

pmen

t ag

enda

Impl

emen

tatio

n st

atus

at

rem

aini

ng

coun

trie

s

Impl

emen

tatio

n of

the

SA

DC

cr

oss

bord

er

inte

rope

rabl

e m

oney

tra

nsfe

r se

rvic

e at

re

mai

ning

co

untr

ies

Impl

emen

tatio

n at

Moz

ambi

que

and

DR

C

Moz

ambi

que

-MO

U t

o be

si

gned

by

CE

O

of M

ozam

biqu

e Po

st

DR

C –

im

plem

ente

d

4 S

ept

2013

Swaz

iland

–

impl

emen

ted

9

Sep

tem

ber

2013

Ach

ieve

dM

ozam

biqu

e im

plem

enta

tion

targ

eted

for

Q4

– de

lays

due

to

the

polit

ical

situ

atio

n th

ere.

DR

C w

hich

was

tar

gete

d fo

r 4t

hQ h

as b

een

impl

emen

ted.

Swaz

iland

was

an

addi

tiona

l im

plem

enta

tion.

ST

RA

TE

GIC

TH

EM

EA

LIG

N B

uS

INE

SS

OP

ER

AT

ION

S T

O C

uS

TOM

ER

NE

ED

S, S

HA

RE

HO

LDE

R A

ND

GO

VE

RN

ME

NT

PR

IOR

ITIE

S

Str

ateg

ic G

oal

Str

ateg

ic

ob

ject

ive

Mea

sure

Str

ateg

ic P

lan

s 20

14Ta

rget

201

3/14

Ach

ieve

men

t 20

13/1

4A

chie

ved

Sta

tus

Rem

arks

Rem

ain

cust

omer

cen

tric

by

pro

vidi

ng

qual

ity s

ervi

ce

Cus

tom

er

cent

ricity

Del

iver

y pe

rfor

man

ce s

tand

ards

Mai

lA

chie

ve d

eliv

ery

perf

orm

ance

st

anda

rds

as

defin

ed in

sc

hedu

le 3

of

the

amen

ded

SAP

O li

cens

e ag

reem

ent

by IC

ASA

(G

over

nmen

t ga

zett

e no

. 35

080)

95%

88%

Not

ach

ieve

dM

ain

reas

ons

for

non

achi

evem

ent:

•O

ngoi

ng c

asua

l sta

ff s

trik

es •

Upg

rade

to

Nat

iona

l roa

d ne

twor

k (s

top/

go)

Pla

n:

Nat

iona

l and

Reg

iona

l com

mitt

ees

set

up t

o ad

dres

s se

rvic

e im

prov

emen

t

Dep

ende

ncy:

Usa

ge o

f co

rrec

t ad

dres

ses

and

post

al c

odes

by

cus

tom

ers

Logi

stic

s96

%95

%N

ot a

chie

ved

•La

bour

inst

abili

ty •

Ser

vice

failu

res

by S

AA

Car

go –

airc

raft

br

eakd

owns

res

ulte

d in

flig

ht d

elay

s an

d ca

ncel

latio

ns

Reg

iona

l lin

e ha

ul v

ehic

le b

reak

dow

ns


ST

RA

TE

GIC

TH

EM

EA

LIG

N B

uS

INE

SS

OP

ER

AT

ION

S T

O C

uS

TOM

ER

NE

ED

S, S

HA

RE

HO

LDE

R A

ND

GO

VE

RN

ME

NT

PR

IOR

ITIE

S

Str

ateg

ic G

oal

Str

ateg

ic

ob

ject

ive

Mea

sure

Str

ateg

ic P

lan

s 20

14Ta

rget

201

3/14

Ach

ieve

men

t 20

13/1

4A

chie

ved

Sta

tus

Rem

arks

Que

ue w

aitin

g tim

e of

7

min

utes

Ach

ieve

ef

ficie

ncy

stan

dard

as

defin

ed in

th

e cu

stom

er

care

sta

ndar

ds

by IC

ASA

(G

over

nmen

t ga

zett

e no

. 35

097)

At

leas

t 96

% o

f 15

79 b

ranc

hes

to

achi

eve

7 m

inut

es t

arge

t

97%

bra

nche

s co

nfor

med

Ach

ieve

d

Ens

urin

g th

at

criti

cal I

T sy

stem

s ar

e av

aila

ble

Upt

ime

and

avai

labi

lity

of c

ritic

al IT

sy

stem

s

Infr

astr

uctu

re

Ref

resh

in

itiat

ives

Ach

ieve

98%

up

time

95%

Not

ach

ieve

dIm

pact

ed b

y fr

eque

nt p

ower

out

ages

and

Te

lkom

tru

nk fa

ilure

s on

SA

PO

net

wor

k gr

id.

Pow

er s

pike

at

com

pute

r ce

ntre

res

ultin

g in

do

wnt

ime

from

18

to 2

0 Fe

brua

ry 2

014.

Pla

n:

Will

be

addr

esse

d by

net

wor

k up

grad

e pr

ogra

mm

e w

hich

will

ach

ieve

ful

l red

unda

ncy

to a

ll on

line

bran

ches

– e

xpec

ted

to

com

men

ce 1

st Q

14/

15.

Dep

ende

nt o

n B

oard

Ass

uran

ce p

roce

ss

Prov

isio

n of

a s

ecur

e tr

ansa

ctin

g en

viro

nmen

t fo

r ou

r cu

stom

ers

Red

uctio

n of

po

stal

, vio

lent

an

d fr

aud

crim

e in

cide

nts

Impl

emen

tatio

n of

phy

sica

l &

pro

cedu

ral

secu

ring

mea

sure

s to

pr

even

t, d

etec

t an

d/or

det

er

crim

e in

cide

nts

Ann

ual r

educ

tion

of 1

5% o

f in

cide

nts

from

a

base

of

2 63

2 in

cide

nts

20%

incr

ease

in

ove

rall

crim

e in

cide

nts

(fro

m

2424

to

2911

) an

d a

48%

de

crea

se in

re

port

ed lo

sses

(f

rom

R31

.1m

to

R16

.3m

)

Not

ach

ieve

d •

Vio

lent

crim

e de

crea

sed

by 1

9% •

Post

al c

rime

incr

ease

d by

37%

•Fr

aud

& T

heft

incr

ease

d by

35%

Pla

n:

Rev

iew

the

cur

rent

inci

dent

cap

turin

g m

odel

, sp

ecifi

cally

Pos

tban

k in

cide

nts.

Exp

edite

the

impl

emen

tatio

n of

the

onl

ine

ID

verifi

catio

n.

Sta

blis

e in

dust

rial r

elat

ions

, the

prim

ary

sour

ce

of p

osta

l crim

e.

Rol

lout

the

Crim

e A

war

enes

s C

ampa

ign


ST

RA

TE

GIC

TH

EM

ER

EN

EW

AN

D D

ES

IGN

A P

HY

SIC

AL

NE

TWO

RK

FO

R T

HE

Fu

Tu

RE

AN

D IN

NO

VA

TE

WIT

H N

EW

PR

OD

uC

TS

AN

D S

ER

VIC

ES

Str

ateg

ic G

oal

Str

ateg

ic

ob

ject

ive

Mea

sure

Str

ateg

ic P

lan

s 20

14Ta

rget

201

3/14

Ach

ieve

men

t 20

13/1

4A

chie

ved

Sta

tus

Rem

arks

Prov

ide

a se

cure

, effi

cien

t an

d in

tegr

ated

in

fras

truc

ture

fo

r be

tter

re

spon

sive

ness

to

our

st

akeh

olde

rs

Prov

ide

an

effic

ient

te

chno

logy

pl

atfo

rm

Net

wor

k U

pgra

de

Tech

nolo

gy

infr

astr

uctu

re

rene

wal

–

conv

ersa

tion

of

curr

ent

PO

S w

ith

WR

E P

OS

WR

E P

OS

R

epla

cem

ent

Tota

l of

1 37

0 br

anch

es t

o be

co

nver

ted

Con

vert

ed 3

55

bran

ches

Not

ach

ieve

dC

onve

rsio

n of

bra

nche

s to

WR

E P

OS

is

depe

ndan

t on

:

•Th

e im

plem

enta

tion

of t

he u

pgra

de a

nd

full

stab

iliza

tion

of M

Q In

tegr

atio

n la

yer

envi

ronm

ent

•Th

e im

plem

enta

tion

of n

ew c

hang

e re

ques

ts f

rom

Pos

tban

k an

d R

etai

l to

enha

nce

the

syst

em •

T he

esta

blis

hmen

t of

reg

iona

l tra

inin

g ce

ntre

s to

faci

litat

e th

e tr

aini

ng o

f st

aff

on

the

WR

E s

yste

m

Upg

rade

the

cu

rren

t ne

twor

k ca

pabi

lity

to a

fu

lly r

edun

dant

on

e

All

on-li

ne

bran

ches

co

nnec

ted

to a

fu

lly r

edun

dant

ne

twor

k

Des

ign

and

spec

ifica

tions

ap

prov

ed

by S

AP

O

proc

urem

ent

com

mitt

ee.

Aw

aitin

g B

oD

appr

oval

to

issu

e R

FP

Not

ach

ieve

dE

xpec

ted

to

com

men

ce in

1s

tQ 1

4/15

onc

e B

oard

ass

uran

ce

proc

ess

com

plet

e.

Phy

sica

l in

fras

truc

ture

re

new

al

Num

ber

of

iden

tified

/pl

anne

d pr

oper

ties

refu

rbis

hed

Proa

ctiv

e an

d re

activ

e m

aint

enan

ce o

f cr

itica

l bui

ldin

gs

as id

entifi

ed

20 id

entifi

ed

build

ings

62 p

rope

rtie

s w

ere

refu

rbis

hed

Ach

ieve

d

Prov

idin

g a

secu

re

envi

ronm

ent

for

our

clie

nts

% R

educ

tion

of

viol

ent

crim

e at

th

ese

bran

ches

No.

of

high

ris

k br

anch

es

rein

forc

ed

Rei

nfor

cem

ent

of B

ranc

h se

curit

y th

roug

h im

plem

enta

tion

of p

hysi

cal

secu

rity

mea

sure

s to

pr

even

t vi

olen

t cr

ime

10%

re

duct

ion

from

a

base

of

296

inci

dent

s

80 h

igh-

risk

post

al o

utle

tsN

one

Not

ach

ieve

dR

eprio

ritis

atio

n of

Bra

nch

secu

rity

upgr

ade

proj

ect

in n

ew F

Y

Proj

ect

requ

ires

R20

m C

apex

to

rein

forc

e ph

ysic

al s

ecur

ity in

ord

er t

o pr

even

t ar

med

ro

bber

y in

cide

nts,

enh

ance

em

ploy

ee/

cust

omer

saf

ety

27%

red

uctio

n ac

hiev

ed (f

rom

29

6 to

217

)

Ach

ieve

d


ST

RA

TE

GIC

TH

EM

ER

EV

IEW

INT

ER

NA

L P

OLI

CIE

S T

O F

OS

TE

R G

OO

D G

OV

ER

NA

NC

E, S

TR

EA

MLI

NE

PR

OC

ES

SE

S A

ND

EN

HA

NC

E E

FFIC

IEN

T D

EC

ISIO

N

MA

KIN

G

Str

ateg

ic G

oal

Str

ateg

ic

ob

ject

ive

Mea

sure

Str

ateg

ic P

lan

s 20

14Ta

rget

201

3/14

Ach

ieve

men

t 20

13/1

4A

chie

ved

Sta

tus

Rem

arks

Mai

ntai

n go

od

corp

orat

e go

vern

ance

pr

inci

ples

to

ensu

re t

hat

we

cont

inuo

usly

im

prov

e as

a

trus

ted

corp

orat

e ci

tizen

Impr

ove

the

cont

rol

envi

ronm

ent

Res

olut

ion

of

audi

t fin

ding

sR

esol

utio

n of

in

tern

al a

nd

exte

rnal

aud

it fin

ding

s

0 hi

gh r

isk

audi

t fin

ding

s ou

tsta

ndin

g >

90

DAY

S

191

item

s ou

tsta

ndin

gN

ot a

chie

ved

Man

agem

ent

is m

onito

ring

the

prog

ress

m

onth

ly. T

here

is s

till a

way

to

go b

efor

e th

e cu

rren

t vo

lum

e, o

f ou

tsta

ndin

g is

sues

is f

ully

re

solv

ed. T

he o

vera

ll nu

mbe

r is

red

ucin

g.

Con

trol

en

viro

nmen

t as

sess

men

t m

easu

re

Sta

tus

of c

ontr

ol

envi

ronm

ent

Hig

h =

10%

Med

ium

= 3

0%

Low

= 6

0%

Hig

h =

10%

Med

ium

= 3

0%

Low

= 6

0%

Hig

h =

12%

Med

ium

= 7

0%

Low

= 1

8%

Not

ach

ieve

d

Effe

ctiv

e ris

k m

anag

emen

tR

isk

mat

urity

as

sess

men

tE

ntre

nchm

ent

and

impr

ovem

ent

of t

he r

isk

man

agem

ent

mat

urity

leve

l

Con

duct

an

orga

nisa

tiona

l w

ide

risk

mat

urity

as

sess

men

t

Gro

up r

isk

mat

urity

as

sess

men

t co

nclu

ded

Ach

ieve

d

% im

prov

emen

t of

ris

k pr

ofile

Red

uctio

n of

re

sidu

al r

isk

by

10%

Bas

elin

e: 7

5%

(ver

y hi

gh r

isk)

R

educ

tion

of

resi

dual

ris

k pr

ofile

by

10%

Ong

oing

by

busi

ness

uni

tsN

ot a

chie

ved

Con

tinuo

us m

onito

ring

of r

isk

miti

gatio

n im

plem

enta

tion

by B

Us

Com

plia

nce

assu

ranc

e%

Impr

ovem

ent

of c

ompl

ianc

e ris

k pr

ofile

Red

uctio

n of

co

mpl

ianc

e re

sidu

al r

isk

profi

le b

y 20

% t

hrou

gh

com

plia

nce

asse

ssm

ents

Bas

elin

e =

70%

re

sidu

al r

isk

(hig

h ris

k) R

educ

tion

of c

ompl

ianc

e re

sidu

al r

isk

profi

le b

y 20

%

Focu

sed

on

FAIS

& F

ICA

co

mpl

ianc

e –

1710

com

plia

nce

audi

ts c

ompl

eted

Ach

ieve

dFo

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Corporate Governance Report


Corporate Governance Report

Mandate, regulation and license

The South African Post Office (SOC) Limited was established on 1 October 1991 as a public company in terms of the Companies Act, No. 61 of 1973. The state (Republic of South Africa), represented by the Minister of Communications, is the sole shareholder.

Following the repealing amendment of the Companies Act No. 61 of 1973 and the enactment of by the Companies Act No. 71 of 2008 (as amended), the SA Post Office was designated as a state-owned company (SOC) Limited SA as per the Post Office (SOC) Limited Act No. 22 of 2011, as amended.

The SA Post Office is also a major state entity in terms of Schedule 2 of the Public Finance Management Act (PFMA) No. 1 of 1999 (as amended) and is a SOC Limited in terms of the Companies Act No. 71 of 2008 (as amended).

Regulation

The SA Post Office is mandated to provide postal services according to the Postal Services Act of 1985 and the exclusive mandate of 1998. This Act provides for the regulation of postal services and the operational functions of the company, including its universal service obligations (USOs).

The license to operate as South Africa’s postal services provider was issued to the SA Post Office on behalf of the regulator in August 2001. This license is valid for 25 years and is reviewed every three years in terms of targets and performance.

The SA Post Office still enjoys a monopoly over reserved services, one that is currently being liberalised in many European countries. Until 2012/2013 this priviledge was accompanied by government subsidies, provided in return for a USO. The Postal Services Act of 1998 charges the regulator, Icasa, with ensuring the provision of universal service through the reserved postal services licensee, namely the SA Post Office.

Through the SA Post Office’s USO, a strategic priority for the Company is rolling out new addresses and branches in remote areas, in line with the government’s development programme for 2030. The Postal Services Act further appoints ICASA to monitor the incumbent against ‘anti-competitive’ behaviour.

Legislative and governance framework

The SA Post Office complies with the protocols and legislation governing SOCs and is guided by various postal, courier and financial regulations laid down by the regulatory bodies such as ICASA and the Financial Services Board (FSB).

The Group is required to comply with, inter alia, the following:

• SAPostOfficeActNo.1.220f2011;

• PostbankActNo.1.9of2010;

• PostalServicesActNo.1124of1998.

• PublicFinanceManagementActNo.11of1999(asamended);

• CompaniesActNo.171of2008(asamended);

• RelevantlegislationapplicabletothepostalsectorandtoSOCs;

• KingIIICodeonGoodCorporateGovernance.

Other relevant local and international codes for the postal sector.

The Group is committed to sound corporate governance principles and is guided primarily by generally accepted corporate governance practices, in particular the King III Report on Corporate Governance plus the Protocol on Corporate Governance in the Public Sector. These practices seek to ensure that the entity’s mandate is fulfilled with due consideration to


responsible decision-making, accountability, effective and ethical leadership, as well as fairness and transparency, whilst performance is monitored and statutory requirements are satisfied.

In support of the shareholder’s drive to impact positively on poverty alleviation and the social wellbeing of all citizens, the SA Post Office engages in a range of support activities, such as serving as a conduit for BBBEE share schemes and a vehicle for the payment of government services. Through Postbank, the company also provides accessible and affordable banking to the unbanked and lower income segment of the population.

SA Post Office Group shareholding structure

The State is the sole shareholder represented by the Minister of Communications.

The SA Post Office operates in terms of a Group holding structure, with the SA Post Office as the Group holding company, with two operating subsidiaries and several property companies. The subsidiary companies have their own boards comprising SA Post Office non-executive and executive directors and the holding company executives who are appointed in a non-executive capacity to the subsidiary boards. The managing director of the subsidiary company acts as the executive director of the subsidiary. In line with the founding documents and articles of association of the subsidiaries, the SA Post Office Board appoints the directors of the subsidiary boards.

The relationship between the subsidiary companies and the SA Post Office, as the shareholder, is governed by the individual shareholders’ compacts between the holding company and the subsidiary. The shareholder compact, as well as spelling out the roles and responsibilities of the parties, outlines the performance targets to be met by the subsidiary in terms of the overall annual corporate plan for the Group.

The SA Post Office Board has delegated some authority to the subsidiary Boards and has determined the relevant materiality and significance thresholds required by the PFMA for both subsidiaries in terms of approval of transactions.

The Postbank Act has allowed for the creation of the Postbank Company (SOC) Limited as part of the process of corporatising Postbank. The processes to register Postbank as a fully fledged commercial bank with a banking license and as a SOC are currently underway and will result in changes in the current Group structure. The SA Post Office will, in terms of the Postbank Act, become the 100% shareholder of the Postbank company, once it has been registered.

The mandate of the Board

The SA Post Office has, as its accounting authority, a Board appointed by the Minister of Communications, who is the shareholder representative.

The mandate of the SA Post Office Board is set out in the South African Post Office Act and has been encapsulated in the SA Post Office Board charter as well as in the shareholders’ compact signed by the Board and the Minister.

The SA Post Office license and social mandate are derived from the following:

• TheSAPostOffice’slegislativemandateintermsofitslicenseandUniversalServiceObligation(USO)

• ThemandateoftheSAPostOfficeasastate-ownedcompany(SOC)toensurealignmentofitsprogrammeswiththe overall programmes of the government

• Triplebottomlinereportingprinciples,ieprofit,people,planet.

The mandate of the SA Post Office Board, as set out in the Board charter, is aligned to the requirements stipulated by the Protocol on Governance in State-owned Institutions as well as in the shareholders’ compact.

To fulfil its mandate, the SA Post Office Board strives to increase shareholder value and maximising of socio-political benefits in terms of the broader principles and policies of the government.

Independence of the Board

Board members are appointed by the shareholder and the Minister of Communications. The Board considers submissions and recommendations made by management and makes independent decisions based on its fiduciary responsibilities and the strategic direction of the company. The Board has a formal charter that defines its mandate, roles and responsibilities.


The Board committees meet independently and report back to the Board through their chairpersons. Each committee has a formal charter that clearly defines its roles and responsibilities.

The Audit Committee regularly meets individually with the external and internal auditors. Furthermore, the Board, its committees and individual directors may engage independent counsel and advisers on request and at the discretion of the Board.

Similarly, the subsidiary companies have their own independent and unitary Boards that meet independently and make policy pronouncements for the subsidiary company or recommendations to the Group Holding Board in line with the shareholders’agreements;anddelegationofauthority/materialityframeworkandtheirrespectiveBoardcharters.

A comprehensive framework setting out the authorities and responsibilities of the various sub-committees and subsidiary companies is in place through an approved system of delegation of authority, which also sets out the applicable financial thresholds for transacting.

Composition of the SA Post Office Board

The SA Post Office Board is a Unitary Board comprising of a majority of non- executive directors. The non-executive directors of the Board are appointed by the Minister in accordance with section 11 of the SA Post Office Act. The SA Post Office Board has executive directors who are appointed by Cabinet on the recommendation of the Minister of Telecommunications and Postal Services. The executive directors are responsible for the day to day running of the company.

In terms of the SA Post Office Act No 22 of 2011, the Board should comprise of:

(a) Not more than 11 non-executive directors including the Managing Director of the Postbank appointed in terms of section 11 of the SA Post Office Act

(b) Three executive directors who must include the Chief Executive Officer (CEO), Chief Operations Officer (COO) and the Chief Financial Officer (CFO)

Board members

NAME DIRECTORSHIP APPOINTED RETIRED CHAIRMANSHIP/ POSITION IN COMPANY

Dr Hlamalani Manzini Non-executive Director and Acting Chairperson of the Board 1 March 2012 7 November 2014 Board

Mr Christopher Hlekane Executive Director 01 October 2012 Group Chief Executive Officer

Mr Shaheen Adam Executive Director 14 October 2011 15 October 2014 Acting Managing Director: Postbank

Ms Khumo Mzozoyana Executive Director 01 January 2013 Group Chief Financial Officer

Ms Nomathemba Kela Non-executive Director 1 March 2012 7 November 2014

Human Resources Remuneration and Performance Management Committee

Mr Templeton Mageza Non-executive Director 17 December 2013 7 November 2014 Risk Management Committee

Ms Nobuhle Mthethwa Non-executive Director 1 March 2012 23 October 2014 Courier and Freight Group

Mr Sathiaseelan Gounden Non-executive Director 17 December 2013 7 November 2014 Audit Committee

Mr Shu’ayb Patel Non-executive Director 1 August 2007 7 November 2014 Social, Ethics and Transformation Committee

Mr Sihle Ngubane Non-executive Director 17 December 2013 7 November 2014 IT Governance Committee

Ms Khangekile Simelane Non-executive Director 1 March 2012 22 October 2014 Stamp Advisory Committee

Mr Richard Sishuba Non-executive Director 1 March 2012 23 October 2014 Document Exchange

Ms Selebaleng Mothelesi Non-executive Director 17 December 2013 7 November 2014 Postbank Committee


Committees of the Board

The Group Board as the Accounting Authority oversees the overall decision making across the Group to ensure it retains proper direction and control of the Group.

The Board has a formal delegation of authority framework agreed to with the Minister. The Board has delegated certain powers to the CEO and to management but has reserved certain powers exclusively for the Board and these are set out in the Board Charter.

The Board has also appointed several committees to help it meet these responsibilities. Delegating various functions and authorities to committees and management however does not absolve the Board and its directors of their duties and responsibilities.

The Board has delegated certain functions without abdicating its own responsibilities to the following committees:

(a) Audit Committee

(b) Risk Management Committee

(c) Postbank Committee

(d) Human Resources, Remuneration and Performance Management Committee

(e) NominationsCommittee;(adhocCommittee)

(f) Social, Ethics and Transformation Committee

(g) IT Governance Committee

The various Committees of the Board each have formal terms of reference embodied into a charter which further defines the mandates, roles and responsibilities of each Committee. The charters are reviewed and updated on an annual basis where required.

The Committees of the Board are chaired by a non-executive director and members are drawn from the ranks of non-executive directors. The executive directors attend Committee meetings in their capacity as executives and other representatives from management are also invited to Committee meetings when required to report to the Committee.

The Committees meet at pre-arranged meeting dates at least four times in a year and at such other times as deemed necessary by the Chairperson.

The mandates of the various committees of the SA Post Office Board as tasked to assist the Board in fulfilling its oversight responsibilities, are detailed below:

Appointment of Administrator

On 7 November 2014, all the non-executive members of the Board resigned and duly the board and all of its committees dissolved. Dr Simo Lushaba was appointed as administrator in terms of Section 25 of the South African Post Office Act No 22 of 2011 (as amended). As at 31 March 2014, the Board (in compliance with King III) and all its committees were active and functioning.


Board of directors

The SAPO Memorandum of Incorporation (MOI) provides for a maximum of 14 directors, including the Chief Executive Officer, the Chief Operations Officer and the Chief Financial Officer. The Board meets at pre-arranged meeting dates at least four times in a year and at such other times as deemed necessary by the Chairperson. The Board holds annual workshops at least twice a year to review the Group’s business strategy and to conduct the Group annual risk assessment.

Board composition

Chairperson (Non-Executive):

Dr HN Manzini (Acting)4

Mr G Mothema 2

Members:

Non-executive Directors

Ms NE Kela

Ms NG Mthethwa

Mr MS Patel

Ms KP Simelane

Mr RV Sishuba

Mr S Gounden 1

Mr PT Mageza 1

Ms SP Mothelesi 1

Mr SJ Ngubane 1

Executive Directors

Mr CJ Hlekane (Chief Executive Officer)

Ms K Mzozoyana (Chief Financial Officer)

Mr S Adam (Acting MD: Postbank)

Mr B Yafele3 (Acting Chief Operating Officer)

Mr Mathonsi5 (Chief Operating Officer)

Legend ü = Present

X = Absent with apology

1 = Appointed 17 December 2013

2 = Retired 26 June 2013

3 = Retired 14 November 2013

4 = Appointed Acting Chairperson 27 June 2013

5 = Appointed COO 1 July 2014

- = Not a member of the Board


Attendance at SAPO Board Meetings and workshops for the year 1 April 2013 to 31 March 2014

NA

ME

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4/20

13

03/0

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13

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10/0

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13

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13

23/0

8/20

13

10/0

9/20

13

16/0

9/20

13

03/1

0/20

13

23/1

0/20

13

Dr HN Manzini ü ü ü ü ü ü ü ü ü ü ü X

Ms NE Kela ü ü ü ü ü ü ü X ü ü ü ü

Ms NG Mthethwa ü ü ü ü ü ü ü ü ü ü ü ü

Mr MS Patel ü ü ü ü ü ü ü ü ü ü ü ü

Ms KP Simelane ü ü ü ü X ü ü ü ü ü ü X

Mr RV Sishuba ü ü ü ü ü ü ü ü ü ü ü ü

Mr S Gounden 1 - - - - - - - - - - - -

Mr PT Mageza 1 - - - - - - - - - - - -

Ms SP Mothelesi 1 - - - - - - - - - - - -

Mr SJ Ngubane 1 - - - - - - - - - - - -

Mr G Mothema 2 X ü ü ü - - - - - - - -

Mr CJ Hlekane ü - ü ü ü ü ü ü ü ü ü X

Ms K Mzozoyana X - X ü ü ü ü ü ü ü ü ü

Mr S Adam X - ü ü ü ü ü ü ü ü ü ü

Mr B Yafele 3 - - - - ü ü ü ü ü ü X ü

NA

ME

28/1

0/20

13

27/1

1/20

13

09/1

2/20

13

18/1

2/20

13

13/0

1/20

14

29/0

1/20

14

19/0

2/20

14

12/0

3/20

14

25/0

3/20

14

26/0

3/20

14

TOTA

L

Dr HN Manzini ü ü ü ü ü ü ü ü ü ü 21

Ms NE Kela ü ü ü ü ü ü ü ü X ü 20

Ms NG Mthethwa ü ü ü ü ü ü ü X ü ü 21

Mr MS Patel ü ü ü ü ü ü ü ü ü ü 22

Ms KP Simelane ü X ü ü ü ü ü ü ü ü 19

Mr RV Sishuba ü ü ü ü ü ü ü ü ü ü 22

Mr S Gounden 1 - - - ü ü ü ü ü ü ü 7

Mr PT Mageza 1 - - - ü ü ü ü ü ü ü 7

Ms SP Mothelesi 1 - - - ü ü ü ü ü ü ü 7

Mr SJ Ngubane 1 - - - ü ü ü ü ü X ü 6

Mr G Mothema 2 - - - - - - - - - - 3

Mr CJ Hlekane ü X ü ü ü ü ü ü X ü 18

Ms K Mzozoyana ü ü ü ü X ü ü ü X ü 17

Mr S Adam ü ü ü ü ü ü ü ü X ü 19

Mr B Yafele 3 ü - - - - - - - - - 8


Committtees of the board

Audit Committee

The SAPO Audit committee was established in terms of Companies Act No. 71 of 2008 (as amended) and the Public Finance Management Act as amended and relevant Treasury Regulations and in accordance with section 19.1.1.3 of the SAPO MOI. As a major public entity in terms of Schedule 2 of the PFMA and the Company’s Act, SAPO is required to, establish an Audit Committee. The Audit Committee is responsible for, evaluating the Group’s financial statements which will be provided to Parliament and other stakeholders, the systems of internal control which management and the Board have established, the audit processes, the risk management framework and assesses the Group’s financial performance against its Corporate Plan. Representatives of external and internal audit have direct access to the Chairperson of the Committee.

The Audit Committee meets at least four times a year.


Mr H Daniels 1

Mr S Gounden 2 7

Members:

Ms KP Simelane3 6

Mr MS Patel 7

Mr RV Sishuba4 5

Mr PT Mageza 3 7

Attendance at Audit Committee meetings for the year 1 April 2013 to 31 March 2014

NAME 30/05/2013 * 19/07/2013 11/10/2013 19/11/2013 21/02/2014 05/03/2014 TOTAL

Mr H Daniels 1 ü ü ü ü - - 4

Mr S Gounden 2 7 - - - - ü ü 2

Mr PT Mageza 2 7 - - - - ü ü 2

Mr MS Patel 7 - ü ü ü ü ü 5

Ms KP Simelane*6 ü - - - ü ü 3

Mr RV Sishuba4 5 ü X ü ü - - 4

Legend ü = Present


1 = Retired 29 January 2014

2 = Appointed as Chairperson 29 January 2014

3 = Appointed 29 January 2014


5 = Retired from the Board 23 October 2014


7 = Retired from the Board 7 November 2014

- = Not a member of the Committee


Risk Management Committee

The SAPO Risk Management Committee was established in terms of section 51 (1) (a) (i) of the Public Finance Management Act No. 1 of 1999 as amended. The committee monitors, evaluates and advises the Board on the adequacy of risk management processes and strategies within the Group and recommends the approval of risk policies to the Board. It further reviews significant risks facing the company and reports these to the Board. The scope of the Risk Management Committee extends across the Company to include the subsidiary companies whose products and processes expose the Group to Credit Risk, Liquidity Risk, Market Risk, Balance Sheet Risk and Operational Risk within the legislative and regulatory framework that governs the SAPO Group. Representatives of Group Risk Management, Internal Audit, the Security and Investigations division and all core Business Units attend all meetings of the Committee. The committee meets four times a year.


Mr PT Mageza 2 8

Mr RV Sishuba 3 6

Members:

Mr S Gounden 2 8

Mr SJ Ngubane 2 8

Ms NG Mthethwa 2 6

Mr H Daniels 1

Mr MS Patel 4* 8

Attendance at risk Management Committee meetings for the year 1 April 2013 to 31 March 2014

NAME 12/04/2013 30/07/2013 01/11/2013 06/03/2014 TOTAL

Mr PT Mageza 2 8 - - - X 0

Mr RV Sishuba 6 ü ü ü - 3

Mr S Gounden 2 8 - - - ü 1

Mr SJ Ngubane 2 8 - - - ü 1

Ms NG Mthethwa 2 6 - - - ü 1

Mr H Daniels 1 ü ü ü - 3

Mr MS Patel 4* 8 - ü ü - 2

Ms KP Simelane 5 7 ü - - - 1

Legend ü = Present





4 = Appointed 30 July 2013

5 = Attendance by invitation




* = Retired 29 January 2014



Human Resources, Remuneration and Performance Management Committee

The Human Resources Remuneration and Performance Management Committee was established in accordance with the Company’s Memorandum of Incorporation. The committee reviews all aspects relating to human resources and remuneration within the Group. It also monitors compliance with relevant labour and employment legislative matters and recommends approval of significant human resources related policies to the Board. This committee’s mandate includes remuneration and performance management issues. The committee meets at least four times a year.


Ms NE Kela 5

Members:

Dr HN Manzini 1 5

Ms NG Mthethwa 3

Ms KP Simelane 4

Mr PT Mageza 2 5

Attendance at Human Resources, Remuneration and Performance Management Committee meetings for the year 1 April 2013 to 31 March 2014

NAME 14/05/ 2013*

04/06/ 2013

25/06/ 2013

04/09/ 2013

06/11/ 2013*

07/03/ 2014

10/03/ 2014 TOTAL

Ms NE Kela 5 ü ü ü ü ü ü ü 7

Mr PT Mageza 1 5 - - - - - ü ü 2

Ms NG Mthethwa 3 ü ü ü ü X ü ü 6

Ms KP Simelane 4 ü ü ü ü ü ü ü 7

Dr HN Manzini 5 X ü X ü X - - 2

Legend ü = Present









Postbank Committee

The Postbank Committee was established with an oversight role over the Postbank to ensure that the Postbank operates within all the applicable legislation, monitors the performance of the investment portfolio of depositors’ funds as well as ensuring that these funds are invested appropriately. It also recommends the approval of ledger fees and bank charges to the Board. The committee meets four times a year. The Postbank Act which came into operation in late 2010, now provides for the establishment of a Board of Directors for the Postbank when it starts operating as a licensed bank.


Ms SP Mothelesi 1 5

Ms NG Mthethwa 2 3

Members:

Dr HN Manzini 2 5

Mr SJ Ngubane 1 5

Mr RV Sishuba 3

Mr S Adam [Acting MD: Postbank] 4

Attendance at Postbank Committee meetings for the year 1 April 2013 To 31 March 2014

NAME 09/05/2013 15/09/2013 18/02/2014 TOTAL

Ms NG Mthethwa 3 ü ü - 2

Dr HN Manzini 5 ü X - 1

Ms SP Mothelesi 1 5 - - ü 1

Mr SJ Ngubane 1 5 - - ü 1

Mr RV Sishuba 3 - - ü 1

Mr S Adam 4 ü ü X 2

Legend ü = Present









IT Governance Committee

The committee is responsible for overseeing on behalf of the Board, the execution of IT governance across the Group. The committee reports to the Board and is responsible for the governance of IT across the Group, which includes monitoring and reviewing IT policies and practices to ensure that the required IT support is provided and that IT is positioned as a key enabler for business. The Group CEO, the CIO and relevant representatives from management attend meetings of the committee. The committee meets at least four times a year.


Mr SJ Ngubane 2 7

Mr N Ndhlela 1

Members:

Mr MS Patel 3 7

Mr RV Sishuba 5

Ms S Mothelesi 2 7

Ms KP Simelane 4 6

Attendance at IT Governance Committee meetings for the year 1 April 2013 to 31 March 2014

NAME 09/04/ 2013 15/05/ 2013 27/06/ 2013 05/09/ 2013 01/10/ 2013 18/03/ 2014 TOTAL

Mr N Ndhlela 1 ü ü ü ü ü - 5

Mr RV Sishuba 5 X ü ü ü ü ü 5

Mr MS Patel 3 7 ü ü ü - - - 3

Ms KP Simelane 4 6 - - - ü ü - 2

Mr SJ Ngubane 2 7 - - - - - ü 1

Ms S Mothelesi 2 7 - - - - - ü 1

Legend ü = Present


1 = Retired as Independent Chairperson 19 December 2013


3 = Retired 30 July 2013







Social, Ethics and Transformation Committee

The committee was established to monitor the Group’s socio-economic development and transformation activities, its adherence to generally accepted ethics standards, and to ensure it is seen as a good corporate citizen through its strategies to combat corruption, protect the environment, and labour and employment practices. The Group CEO and key representatives from management attend meetings of the committee. The committee meets at least four times a year.


Mr MS Patel 4

Members:

Mr S Gounden 1 4

Ms NE Kela 4

Ms KP Simelane 2 3

Attendance at Social, Ethics and Transformation Committee meetings for the year 1 April 2013 to 31 March 2014

NAME 31/05/ 2013 28/09/ 2013 18/10/ 2013 25/02/ 2014 TOTAL

Mr MS Patel 4 ü ü ü ü 4

Ms NE Kela 4 - X X ü 1

Ms KP Simelane 3 ü ü ü - 3

Mr S Gounden 1 4 - - - ü 1

Legend ü = Present


1 = Appointment 17 December 2013






Subsidiary Companies

The Courier and Freight Group

The Courier and Freight Group (CFG) is an operating subsidiary company of the South African Post Office. CFG has its own Board of Directors which is accountable to the SAPO Group which is the sole shareholder. The company provides courier services which range from overnight to seventy two hour delivery, as well as express freight for consignments ranging from twenty kilograms up to thirty tons. The Board of Directors of CFG comprises of non-executive directors appointed by the SAPO Group Board including independent non-executive directors with expertise in the courier and freight industry.

Board Composition


Ms NG Mthethwa 6 7

Members

Ms NE Kela 5 8

Dr HN Manzini 4 8

Mr MS Patel 8

Mr CJ Hlekane

Ms K Mzozoyana

Mr JM Mathibe 3

Mr H Daniels 1

Mr B Yafele 2

Attendance at the Courier and Freight Group Board Meetings for the year 1 April 2013 to 31 March 2014

NAME

10/0

4/20

13

23/0

5/20

13

05/0

6/20

13 *

13/0

6/20

13

18/0

7/20

13

11/0

9/20

13

16/0

9/20

13

25/1

1/20

13

26/0

2/20

14

20/0

3/20

14TOTAL

Ms NG Mthethwa 7 - - - - - - - ü ü ü 3

Ms NE Kela 5 8 - - - - ü ü ü ü - - 4

Dr HN Manzini 8 ü ü * ü - - - - - - 3

Mr MS Patel 8 ü ü ü ü ü ü ü ü ü ü 10

Mr CJ Hlekane ü X X ü X ü ü X X X 4

Ms K Mzozoyana X ü ü ü ü X ü ü ü ü 8

Mr JM Mathibe 3 ü ü * ü ü ü ü ü ü ü 9

Mr H Daniels 1 - ü * ü ü ü ü ü - - 6

Mr B Yafele 2 - ü ü ü ü ü ü X - - 6

Legend ü = Present


1 = By Invitation, Retired 22 April 2014

2 = Retired 14 November 2013

3 = Managing Director

4 = Retired as Chairperson 27 June 2013

5 = Appointed as Chairperson 27 June 2013 to 25 November 2013

6 = Appointed as Chairperson 29 January 2014



* = Telecon at NCC



Document Exchange Group (Docex) Board

The Document and Exchange Group (DOCEX) is an operating subsidiary company of the South African Post Office. DOCEX has its own Board of Directors which is accountable to the SAPO Group which is the sole shareholder. The company provides a secure and expeditious delivery of documents, letters and parcels or postal articles within the country. The Board of Directors of DOCEX comprises of non-executive directors appointed by the SAPO Group Board including independent non-executive directors with expertise in the courier and freight industry.

Board Composition


Mr RV Sishuba 3

Members

Ms KP Simelane 1 4

Ms NG Mthethwa 3

Mr JM Mathibe 2

Mr CJ Hlekane

Ms K Mzozoyana

Attendance at the Document Exchange Group Board meetings for the year 1 April 2013 to 31 March 2014

NAME 17/07/2013 12/09/2013 16/09/2013 03/12/2013 26/02/2014 TOTAL

Mr RV Sishuba 3 ü ü ü ü ü 5

Ms NE Kela 5 ü X ü ü ü 4

Ms NG Mthethwa 3 ü X ü ü ü 4

Ms KP Simelane 1 ü - - - - 1

Mr CJ Hlekane X ü ü ü X 3

Ms K Mzozoyana ü ü ü ü ü 5

Mr JM Mathibe 2 ü ü ü ü ü 5

Legend ü = Present


1 = Retired 30 July 2013

2 = Managing Director




- = Not a member of the Board


Chairperson’s Committee

The Chairperson’s Committee was initially established in accordance with Article 15.1.2 of the SAPO Articles of Association. The Chairperson’s Committee is tasked with giving detailed attention to areas of the Board’s duties and responsibilities by way of a more comprehensive evaluation of specific issues in relation to cross-cutting issues of the Group. The main responsibility of the Chairperson’s Committee is to enhance good corporate governance within the Group and to deal with any other matters in between Board meetings. It is made up of the appointed chairpersons of all the committees of the Board and is chaired by the Chairperson of the Board. The committee meets at least four times a year. The committee has subsequently been disbanded by the Board in January 2014.


Dr HN Manzini

Members:

Ms NE Kela 5

Dr HN Manzini 5

Ms NG Mthethwa 3

Mr MS Patel 5

Ms KP Simelane 4

Mr RV Sishuba 3

Mr H Daniels 1

Mr N Ndhlela 2

Mr CJ Hlekane

Attendance at Chairperson’s Committee meetings for the year 1 April 2013 to 31 March 2014

NAME 26/06/2013 25/09/2013 20/11/2013 TOTAL

Dr HN Manzini 5 ü ü ü 3

Ms NE Kela 5 ü ü ü 3

Ms NG Mthethwa 3 ü ü X 2

Mr MS Patel 5 ü ü ü 3

Ms KP Simelane 4 ü ü ü 3

Mr RV Sishuba 3 ü ü ü 3

Mr CJ Hlekane ü ü X 2

Mr H Daniels 1 ü ü ü 3

Mr N Ndhlela 2 ü ü ü 3

Legend ü = Present


1 = Retired 22 April 2014

2 = Retired 19 December 2013





Logistics Audit and Risk Sub-Committee

A Logistics Audit Committee was established as a sub-committee of the Group Audit Committee. The sub-committee acts in accordance with the Public Finance Management Act and reports to the Group Audit Committee. It evaluates the financial statements for the DOCEX and CFG Groups which are submitted to the Group Holding Board for approval and for inclusion in the Group’s annual report. The composition of the sub-committee comprises of representatives from the two subsidiary Boards as well as representatives from both internal and external audit. The committee meets at least four times a year. The committee has subsequently been disbanded by the Board on 22 April 2014.

Logistic Audit Committee


Mr H Daniels

Members:

Ms NG Mthethwa 2

Mr RV Sishuba 2

Ms K Mzozoyana

Attendance at the Logistics Audit Committee meetings for the year 1 April 2013 to 31 March 2014

NAME 09/07/2013 10/10/2013 19/11/2013 TOTAL

Mr H Daniels 1 ü ü ü 3

Ms NG Mthethwa 2 ü ü X 2Mr RV Sishuba 2 ü ü ü 3

Legend ü = Present


1 = Retirement 22 April 2014



Board Procurement Task Team

The Board Procurement Task Team was established in terms of the SA Post Office Association. The Procurement Task Team was appointed by the Board to oversee on behalf of the Chairperson’s Committee and the Board, the Company’s procurement policies and practices to ensure that the operation policies and procedures relating to procurement are recognised as “best practice” that all tenders are conducted in a fair and ethical manner. The Task Team has subsequently been disbanded by the Board on 29 January 2014.


Ms NG Mthethwa 2

Members:

Dr HN Manzini 3

Mr RV Sishuba 2

Mr N Ndhlela 1

Attendance at the Board Procurement Task Teams meetings for the year 1 April 2013 to 31 March 2014

NAME 24/05/2013 06/06/2013 06/09/2013 07/11/2013 TOTAL

Ms NG Mthethwa 2 ü ü ü ü 4

Dr HN Manzini 3 X ü ü X 2

Mr RV Sishuba 2 ü ü ü ü 4

Mr N Ndhlela 1 ü ü ü X 3

Legend ü = Present


1 = Retirement 19 December 2013




Audit and Assurance

Internal control is a framework designed to provide reasonable assurance on the achievement of organisational objectives. The system of internal control, which is embedded in all key operations, provides reasonable rather than absolute assurance that the Group’s strategic objectives will be achieved. The Board has overall responsibility for internal control.

Management prepares the Group’s financial statements and the auditors examine the underlying accounting assumptions, principles and procedures management has adopted, with Board approval. To make the comparisons required by an audit, the auditor must examine not only the financial statements, but the records on which they have been based and the company’s system of internal controls, including internal audit.

Executive management, as mandated by the Board, has established an organisation-wide system of internal control to manage significant risks. There is ongoing monitoring and reporting processes by Business Unit (BU) heads to provide feedback on the status of internal controls.

The Board also receives assurance from the Audit Committee, which derives some of the information from regular internal and external audit reports.

Internal Audit

The purpose, authority and responsibility of Group Internal Audit are defined in a Board-approved charter that is consistent with the Institute of Internal Auditors definition of internal auditing and the principles of King III. Although not reliant on external audit for any resource support, the internal audit function continues to liaise with the external auditors and other relevant assurance providers to maximise efficiencies in assurance coverage and risks.

The primary scope in providing assurance includes:

• Evaluatingthereliabilityandintegrityofinformationandthemeansusedtoidentify,measure,classifyandreportsuch information

• Evaluatingthesystemsestablishedtoensurecompliancewithpoliciesandprocedures,plansandlegislationthatcould be significant to the Group

• Evaluatingthemeansofsafeguardingassetsand,asappropriate,verifyingtheexistenceofsuchassets

• Evaluatingtheeffectivenessandefficiencywithwhichresourcesareemployed

• Evaluatingoperationsorprogrammestoensureresultsareconsistentwithestablishedobjectivesandgoalsandwhether the operations are being carried out as planned

• Monitoringandevaluatinggovernanceprocesses

• Monitoringandevaluatingtheriskmanagementprocess

• Theassurancemandateisinformedbytherisk-basedauditcoverageplan,whichisapprovedannuallybytheAuditCommittee


Risk and Compliance

Risk management

The Board acknowledges the legislative requirements that define and direct the risk management responsibilities of the Board, executive management, management and employees as in the PFMA (Act 1 of 1999 as amended by Act 29 of 1999 - PFMA) and King III.

The Group’s risk management methodology has been formalised and aligned to Paragraph 14 of National Treasure (NT) Practice Note 4 of 2009/10 issued in terms of section 52 of the PFMA and King III principles. The Board, through the risk management policy and framework, has accepted accountability for risk management across the Group and has additionally established risk governance structures, eg Board committees and other management structures, to monitor risk and compliance levels in the organisation.

The risk management policy and framework aims to ensure the deployment of a common and systematic risk management operating standard in accordance with international best practices across all operational activities within the Group. This will ensure appropriate management of risks, enhance sound corporate governance and effect regulatory compliance, strategic management, leadership efficiency and performance.

The Board requires management to reinforce effective control measures, continuous improvement strategies and compliance.

All Group executives, Business Units and Support Units’ heads and management at all levels have been mandated and are required to develop, implement and maintain risk management plans for their areas of responsibility and accountability to:

• Achieveanoptimalandcosteffectivebalancebetweenriskexposureandriskmitigation

• Monitorandmaintainsoundbusinessoperatingenvironmentstoensurethattheseremainwithintheoperationalrisk appetite

• Enhancemanagementdecisionsonnewlyidentifiedrisks

• Reinforceeffectivecontrolmeasures,continuousimprovementstrategiesandcompliance

As an SOC, the Group also has a risk management plan that is aligned to King III and the ISO 31000 requirements and is, inter alia, directed at:

• Thesystematicidentificationanddocumentingofkeyrisksthatmayimpactnegativelyontheabilitytoachievethestrategic objectives

• Theidentificationofrelevantcontrolfailures

• Theidentificationandimplementationofriskmitigationstrategies

• Providingtimelyinformationtoallstakeholderstoenhancethedecision-makingprocess

• Safeguarding the Group’s resources against loss due to fraud, misuse, damage, and fruitless and wastefulexpenditure

• Safeguardingtheavailability,confidentialityandintegrityofinformationsystems

• Ensuringconformancetoapplicablelegislation,regulations,policies,proceduresandoperatingstandards

• Enhancingpoliciesandproceduresforthemanagementofoperationalrisk,financialriskandtreasuryoperations

• EnsuringcompliancetotheGroup’scodeofethics


The Board is responsible for the total risk management process within the Group and for overseeing the implementation of internal controls to address significant risks. The Board:

• ThroughitsRiskManagementCommittee,overseestheGroup’sriskmanagementprogramme

• Conductedanannualriskassessmentandreviewworkshoptoidentifythecurrentandemergingrisksfacingthecompany and the relevant risk mitigation strategies to avert and manage the risks. Ad hoc assessments are also performed, informed by emerging risks or changes in the corporate plan

• Hasdelegatedtomanagementtheday-to-dayresponsibilitytodesign,implementandmonitortheriskmanagementplan

• HasassignedresponsibilityforoverseeingtheimplementationoftheGroupriskplanandtheidentifiedriskstotheGroup Chief Risk Officer, who is required to report to the Risk Management Committee on the steps being taken to manage or mitigate risks

• RequiresthevariousbusinessandsupportunitstosubmittheirquarterlyoperationalriskplansforreviewbytheRisk Management Committee

• EnsuresthatmanagementreportsontheimplementationoftheannualGroupriskmanagementplanareastandingagenda item for the Risk Management Committee

Risk mitigation strategies for the Group’s strategic risks are directed at improving the control environment and at mitigating aspects that impact negatively on the following:

• Theabilitytobuildandgrowanefficient,sustainablebusiness,whichiswelldefinedin itspurposeandwhosepurpose and services are well marketed and communicated

• Theabilitytoensureadequateinvestmentinemployeestobuildcapabilityforthefuture

• Theabilitytoalignbusinessoperationstocustomerneeds,shareholderprioritiesandgovernmentprogrammes;

• Improvedstakeholderrelations

• Appropriateprocurementgovernance-failuresandtheimpactonreputationacrosstheprocurementvaluechain(project initiation, specifications, sourcing, contract management and supplier performance management)

• Theabilitytoenhanceadequateinternalcontrolandgovernance,streamliningprocessesandenhancingefficientdecision making

• Theabilitytorenewanddesignthephysicalnetwork(workplaceinfrastructureandsystems)forthefuture,andinnovating new products and services

External insurance cover is a mechanism to mitigate operational risks and transfer some risks to third parties in the insurance market to the extent considered appropriate and that, inter alia, include:

• Coverfordamagestobuildingsandequipment

• Coverforbusinessinterruption

• Comprehensivecoverforcrime–includingelectroniccrime

• Directors’andofficers’liability

• Publicliabilitycover

• Coverforlegalliabilityarisingoutoftheuseofnon-ownedaircraft

• Cover for liabilities or damages arising out of any activities of consultants, contractors, suppliers, vendors,manufacturers or other advisers appointed by the company


Group 2013/2014 risk register

The 2013/2014 strategic risk register for the Group has been approved by the Board and the following are the top key strategic risks for the Group: contemporaneous

NO RISK INHERENT RISK CONTROL RATING RESIDuAL RISK

1 Revenue Growth Very High Weak Very High

2 IT Infrastructure Very High Weak Very High

3 Business Continuity Very High Satisfactory Very High

4 Employee Relations Very High Weak Very High

5 Cost Optimisation Very High Weak Very High

6 Property Infrastructure Very High Weak Very High

7 Regulator Expectations High Weak High

8 Leadership Continuity High Weak High

9 Employee Life Cycle High Weak High

10 Risk and Compliance High Satisfactory Moderate

11 Group Synergies High Satisfactory Moderate

12 Criminal Activities High Satisfactory Moderate


Compliance

As a SOC and a Schedule 2 public entity, the SA Post Office recognises compliance as an integral part of governance and has established appropriate structures and processes to ensure adequate and effective compliance with statutes, rules and codes.

The company has developed a legislative universe that incorporates crucial legislations that inherently impact the operations of the Group. These legislative aspects are then deployed at business area level and entrenched through the development and implementation of appropriate policies and procedures.

The legislative universe that holds the most significant risk for the Group is the SA Post Office license requirements of ICASA and, inter alia, the following key legislation:

• PFMA,No.1of1999-PublicEntitiesSchedule2

• PostalServicesAct,No.124of1998

• BanksAct,No.94of1990

• CompaniesAct71of2008

• ConsumerProtectionAct,No.68of2008

• FinancialAdvisoryandIntermediaryServices(FAIS)Act,No.37of2002

• FinancialIntelligenceCentreAct(FICA),No.38of2001

• PreventionandCombatingofCorruptActivitiesAct,No.12of2004

• PreventionofOrganisedCrimeAct,No.121of1998

• ProtectionofConstitutionalDemocracyAgainstTerroristandRelatedActivitiesAct,No.33of2004

Monitoring of compliance is accomplished through independent assessments, and reporting is done regularly to business/support unit management, the Group executive management, the Risk Management Committee and the Board.

The Risk Management Committee and the Group Compliance unit review the adequacy and effectiveness of the Group’s procedures to ensure compliance with legal and regulatory responsibilities. The directors are provided with a comprehensive overview of the Group’s compliance universe as part of their induction to enable them to understand the laws, rules and codes of standards required by the company and its business.


Social, Ethics and Transformation Committee Report

On 7 November 2014, all the non-executive members of the Board resigned and duly the board and all of its committees dissolved. Dr Simo Lushaba was appointed as administrator in terms of Section 25 of the South African Post Office Act No 22 of 2011 (as amended). As at 31 March 2014, the Board (in compliance with King III) and all its committees were active and functioning. The report below was compiled by the relevant committee members at 31 March 2014 (while still appropriate) and has been accepted as fair and accurate by the Administrator who has signed the report as such.

The purpose of this report is to outline how the social and ethics committee has discharged its responsibilities as set out in section 72 of the South African Companies Act No 71 of 2008, as amended and the recommendations of The King Report on Corporate Governance 2011 (King III).

Composition

The current membership of the Committee comprises of three (3) non-executive directors, Ms Nomathemba Kela, Mr. Sathie Gounden (from January 2014) and the Chairperson of the Committee, Mr. Shu’ayb Patel. Ms Getty Simelane was a member of the committee until January 2014.

The Chief Executive Officer, Chief Operations Officer and Chief Financial Officer attend most of the committee’s meetings and permanent invitees to the meetings include all business unit heads, the MD’s of the subsidiary companies and Post Bank, as well as the Heads of Internal Audit, Human Capital, Risk, Supply Chain, Corporate Affairs, Sustainability and Security and Investigations.

Mandate

During the year under review the Social and Ethics Committee’s mandate was expanded to include Transformation issues hence the changed name.

The SAPO Group Social, Ethics and Transformation Committee of the Board is constituted in accordance with the Companies Act requirement for the establishment of this Committee.

Terms of Reference

The Committee has conducted its affairs in accordance with its Terms of Reference, and discharged its responsibilities contained therein.

The key areas of responsibility for the committee are:

• Social and economic development

• Empowerment and transformation

• Corporate citizenship

• Labour and employment

• Environment, health and public safety

• Ethics and code of conduct compliance

• Stakeholder relations

• Regulatory, statutory and legislative compliance


Highlights of activities during the period under review

Ethics Survey

The SA Post Office Ethics Committee commissioned the Ethics Institute of South Africa (Ethics SA) to conduct an ethics risk assessment of the company, including developing an ethics management strategy. Performing an ethics risk assessment is a key component of the process of ethics management of a company as recommended in the King III Report on Governance for South Africa. Therefore, the ethics risk assessment complies with best practice recommendations, while also providing a benchmark against which the company can compare its ethics risk profile in future.

Overview of Ethics Assessment Results

The ethics risk assessment of the SA Post Office was undertaken between October and December 2013 with the company’s employees, and it was intended at gauging their perceptions and expectations of the ethics of the company. The findings of the ethics risk assessment established both positive ethics risks and negative ethics risks for the company. Positive ethics risks refer to the ethics achievements and opportunities that exist within the company. Negative ethic risks refer to areas of ethical concerns that can possibly alienate internal and external stakeholders of the company, and that can put the company at risk. The specific details of the findings are summarized as follows:

Positive ethics risks

The risk assessment established that the participants are convinced that an ethical organisational culture will enhance the reputation of the SA Post Office. In addition, the assessment found that the SA Post Office employees desire and support a strong ethical culture in the organisation. Further, the assessment established that the SA Post Office has made progress in promoting its adopted ethical standards.

Negative Ethical Risks

The risk assessment also established areas of negative ethics risks for the SA Post Office. Ethics SA clustered the negative ethics risk areas for the company into several categories that include staff relations, human resources and human resources practices, leadership examples, management approach, ethics management, customer relations, supplier relations, safety and procurement practices.

Response and Mitigation Plans

In view of the aforementioned findings, an Ethics Implementation Plan was developed and approved by the Board with the sole objective of addressing the ethical deficiencies emanating from the survey, as well as the enhancement of existing ethics standards and practices. Further, the Plan was integrated with other initiatives currently underway within the SAPO Group as part of comprehensive communication plans being rolled out during the 2014/15 financial year. It is the intention to re-assess the impact of these plans on Ethics in the company by doing a follow up assessment in about 18 months’ time.

Additional Ethics Measures

Through the counsel of the Social, Ethics and Transformation Committee, some of the supplementary initiatives deployed within the SAPO Group during the period under review included the promotion of the integration of ethics in all business decision-making processes, as well as in the formulation and large scale review of especially HR, but also other policies and procedures.


Conclusion

The committee is of the view that the SA Post Office group takes its environmental, social and governance responsibilities seriously. Appropriate policies, plans and programmes are in place to contribute to social and economic development, good corporate citizenship, environmental responsibility, fair labour practices and good relations with our customers.

No substantive non-compliance with legislation and regulation, or non-adherence with codes of best practice, relevant to the areas within the committee’s mandate has been brought to its attention.

The other matters which are ancillary to the Committee’s Terms of Reference and scope of work are highlighted in the rest of the Integrated Annual Report and more specifically under Sustainability, Corporate Citizenship and the Group Key Performance Indicators.

Dr S Lushaba

(Administrator)

15 December 2014


Operational Overview


Operational Overview

Postbank

Postbank’s financial performance for the year ended 31 March 2014 reflected the impact of the low interest rate environment, with net interest income increasing to R318 million from R306 million in the previous financial year. Net fee and commission income was R255 million as opposed to R273 million in 2013.

Postbank deposits increased by 5% from R4.492 billion in 2013 to R4.738 billion in this financial year, driven by an increase in the savings account balances and investments by the public. Cash and cash equivalents Investments increased 6% to R6.589 billion (2013:R6.225 billion). The number of customer accounts increased to 7.5 million (2012: 7.2 million).

The Postbank Amendment Act 44 of 2013 was gazetted on 27 January 2014 conflicts between the amended Postbank Act and the Banks Act.

Postbank submitted its section 12 banking license application to the South African Reserve Bank (SARB) on 25th September 2013. The Postbank management continues to engage with SARB to assess the progress with regard to the application. Three significant areas that received attention in the corporatisation programme, included the finalisation of the cooperation agreement, the finalisation of the Memorandum of Incorporation for the new Postbank entity and the revitalised Postbank strategy. Postbank has commenced with the fourth and final phase of the corporatisation programme, namely the implementation phase. Postbank will continue to implement several significant initiatives in order to meet the requirements of the Banks Act, including implementing risk management systems and processes, enabling regulatory reporting and hiring additional skilled banking staff.

Postbank is upgrading its core banking system which aims to replace a number of customisations by standard features and will also provide a suitable platform to deliver varied products to customers across multiple channels. This new version will also provide better security features with improved flexibility and responsiveness to customer needs. Implementation is scheduled for 2014.

There is an on-going productive relationship with South African Banking Risk Information Centre (SABRIC), BankservAfrica, FIC, VISA and PASA as non-bank members to share knowledge on industry trends and ensure alignment with the industry. From a regulatory perspective, the engagement and positive relationship with these institutions ensures that Postbank remains relevant and manages operational risks appropriately.

The notice that designates Postbank as a clearing system participant was amended by SARB and gazetted with effect from 1 November 2013. The Postbank division of the South African Post Office can now become an acquirer for ATM, Online Business and Cards (which will be new sources of revenue). Postbank may apply to be a member of any card

scheme for it is no longer limited to VISA and it may terminate participation in payments streams that are not profitable.

Postbank launched a new youth focused product called Aspire which has shown positive growth since its launch in December 2013. This is in line with the revitalised Postbank strategy and refreshed customer value propositions.

Regrettably, the growth in the depositors book has not been achieved for this financial year, this is largely due to the unfavourable economic conditions and because of this, household income remains under pressure. The targets for non-interest revenue was not achieved and this is largely due to the low volumes and internal capabilities. Postbank launched its Aspire Card, aimed at the youth

market, during the year under review.


The synergy between Postbank and the Post Office continues to favourably enhance the corporatisation proposition of Postbank as a stand-alone subsidiary of the Post Office. This is also in line with the Post Office’s diversification strategy, in the face of the global phenomena of falling mail volumes and increasing competition in the financial services industry from non-traditional financial services operators, such as, retail chains.

Postbank’s relationship with SEF develops entrepreneurship amongst rural women

With more than 1500 post office outlets countrywide, Postbank has the most extensive network of all banks. In small towns such as Oranjeville (pictured) Postbank is the only provider of financial services

The Small Enterprise Foundation (SEF) is one of Postbank’s major customers. It offers small loans to groups of rural women for enterprise development. Currently it prides itself on having 21 000 groups on its books. These groups associated with the SEF, hold group savings (Bakgotsi) accounts with Postbank. The SEF is funded and guided by a Government agency for small enterprises.

Alinah Rampedi is one of the successful members from her group of women and is a member of the Itsoseng Group in Mehlakong Centre near Mankweng, a rural area in the Limpopo Province. It is situated between Polokwane and Tzaneen and a distance from major roads.

Alinah joined SEF in 1998 and received her first loan of R800 which she used to buy clothes for resale and other goods. From the income generated she bought a refrigerator which she used to store perishable goods. She was granted a second loan of R1400 and bought clothes and blankets for resale.

In 2003, she was granted her sixth loan for R5000. Currently, she is in her ninth cycle with a loan amount of R10,000. This loan was used to expand her spaza shop and she has bought a pick-up truck for business purposes.

Alinah is a mother of eight whose husband is unemployed. Her entire family now works with her in the business. As a result of the success that she has enjoyed, she has built an eight-roomed house for her family and is determined to continue her success in business.

Postbank cards are accepted at merchants that accept Visa cards in all countries


Mail Business

The core functions of Mail Business are the collection, processing and delivering of all mail items and parcels, within timeframes, in good quality and cost effectively, as stipulated by the Regulator in the License Agreement.

High-speed sorting machines, such as this one in the Tshwane Mail Centre, ensure that letters are sorted and delivered in the shortest possible time

Mail Business continues to be the key revenue generator for the SA Post office contributing 67%. The SA post office experienced the decline of around 4.3% in mail volumes, with revenue below budget by 0.3% down to prior year. The effect of the strikes during the year was felt on most products with Bulkmail heavily affected.The impact of the four strikes in 12 months played a very big role in missing the revenue budget and service delivery to customers.

A total of 1,197,254 addresses were rolled out, exceeding the annual address expansion target of 1,195,680 as one of the key deliverables within the business unit. A total of 37,7% addresses were expanded in rural areas and 62,3% in urban areas.

Containerisation and mechanisation at major mail centres reduce missorts and improve delivery standards

The competitive environment is becoming increasingly sophisticated with constant changes in the manner in which customers communicate as well as the legal and regulatory environment. In transforming the business unit, strategic changes are necessary to address key challenges such as integration of operational units and elimination of redundancies in processing facilities.

The strategic planning for Mail Business resolved to embark on a systematic approach that will immediately seek to grow the business, improve on innovation and embark on an exercise to deliver value to our clients.


Retail

The Retail division is the primary channel of the South African Post Office through which customers can access the products and services offered by the Company. The South African Post Office branch network consists of 2,486 access points, which makes it the largest footprint in the country.

Retail outlets – better known as the corner post office – are seen internally as hubs of postal and commercial activity. In many cities they are also examples of exemplary architecture. This is the Bloemfontein Post Office.

In the year under review, a total number of 50 million customers were served at various Post Office outlets. The service offering varies from Company owned products and services to other services that the Company is rendering on behalf of other entities, including government and private companies. In some provinces such as the Eastern Cape, Gauteng, Limpopo and KwaZulu-Natal. motor vehicle licenses can be renewed at most of the Post Office outlets. A total of 3.4 million motor vehicle licenses were renewed at Post Office branches in the financial year under review.

Residents are also able to pay their water and electricity bills at many of the branches where agreements were reached with the local municipalities to accept payments on their behalf. The Post Office also facilitates the payment of monthly short term insurance premiums for a number of insurance companies at its branches.

Improving access

The Mobile Post Office concept has been developed as part of the Multi-Channel Strategy to render products and services in remote rural areas where communities are vastly dispersed and it is not viable to establish fully fledged branches. These Mobile Post Office units will follow a route and service different communities on for a specific period each day. The Mobile Post Offices are also used for emergencies where branches are closed due to fire, floods, etc. and also during upgrading of branches. Each Mobile Post Office is fitted with two counters, an electrical power connection, a generator for back-up power, is fully air conditioned with a wash basin, fridge and microwave oven. The mobile will render the full basket of products and services on an on-line basis by means of 3G connectivity. A total of nine mobile post offices have been obtained and is scheduled to be deployed during August 2014.

As part of the operating license condition, the South African Post Office is required to establish 50 new access points annually. Due to the high cost of erecting conventional bricks and mortar structures, the South African Post Office is looking at other cost effective means of providing access to commodities. The utilisation of mobile post office units will not

only be cost effective but will enable the Post Office to reach out to communities in the remote rural areas.

In the year under review, the Post Office established 50 additional points of access and re-established 11 Retail Post Office Agencies. The additional points of access were made up of five fully fledged branches and 45 Retail Post Office Agencies. A total of 43 Post Office buildings were renovated to improve the trading environment.


Customer service excellence

The Retail Division embarked on a number of projects to improve customer service. A Customer Satisfaction Survey Mystery Shopper and Mystery Caller Reviews commenced in November 2013 and was conducted at 165 branches of all classification, with the sample size of 11,297. The following issues were identified as the most important aspects to receive attention:

1. Staff Issues focusing on

• Staff shortages

• Staff attitude (friendly and courteous)

• Staff knowledge on products and services

2. Process Issues

• Queue length

• Parcel arrival notification

3. Infrastructure Issues

• Inadequate signage

• System related issues

The Retail business unit continued with the reward and recognition programme to acknowledge individual employees and branches that excelled in customer service. In the financial year in review, 4,073 compliments were received for excellent service from tellers and branches. The business unit also embarked on customer services excellence road shows. All 33 area offices in the seven Regions were visited, the focus was on Branch Managers and tellers regarding the impact of Consumer Protection Act and ICASA compliance. All the concerns raised at the roadshows were summated and is receiving the necessary attention. The customer service excellence road show will continue annually until the service standards are met.

Customer complaints 2012/13 and 2013/14

All complaints that were received by the Post Office were resolved within the stipulated timeframes. Some of the challenges faced included IT systems down time (Postbank, motor vehicle license and the Webriposte point of sale system), lack of availability of fax machines and photocopiers, disparate and obsolete pin pads and terminals (pin pads not working, debit and credit card system), lack of chairs for the elderly and the lack of access ramps for the disabled. There are projects underway to address sourcing equipment to capacitate the branches i.e the Multi-Function Devices Business Case is still being completed to address the lack of functional fax and copies, Pin Pads specifications were completed and is still to be presented to Procurement Committee on 10 July 2014 to resolve the card payments transactional issues.

Customer Complaints and Compliments Comparisons - March 2013 and March 2014

COMPLAINTS COMPLIMENTS

DescriptionYTD

March 2013

YTD March 2014

(Nr) Increase/Decrease

(%) Increase/Decrease

DescriptionYTD

March 2013

YTD March 2014


(%) Increase/ Decrease

Complaints Received

2 487 3 043 556 22% Compliments Received

949 4 073 3 124 329%


Regional Performance

COMPLAINTS COMPLIMENTS

RegionYTD

March 2013

YTD March 2014


(%) Increase/Decrease

RegionYTD

March 2013

YTD March 2014


(%) Increase/ Decrease

Central 580 200 -380 -66% Central 353 86 -267 -76%

Eastern Cape 530 269 -261 -49% Eastern Cape 201 295 91 45%

KwaZulu-Natal 453 644 191 42% KwaZulu-Natal 139 2 090 1 951 1 404%

North Central 294 417 123 42% North Central 92 96 4 4%

North East 242 211 -31 -13% North East 74 309 235 318%

Western Cape 220 319 99 45% Western Cape 59 409 350 593%

Wits 168 983 815 485% Wits 28 788 760 2 714%

Total 2 487 3 043 556 22% Total 949 4 073 3 124 329%

0

500

1000

1500

2000

2500

3000

3500

0

1000

2000

3000

4000

4 500

1 500

2 500

3 500

500

March 2013

Complaints Received Compliments Received

March 2013

YTD March 2013 YTD March 2014949 4 073

YTD March 2013 YTD March 20142 487

Complaints Received

3 043

Compliments Received

Business Partnership Initiatives

Employees in outlets who perform well receive recognition at an annual event in each region. This event is highly regarded by employees. This is the staff of the Phokeng Post Office, a tiny village in the Northwest Province.

In order to provide a wider range of services through the branch network, Retail has in the year under review, entered into service agreements with the following service providers and companies:

• AvroyShlain

• StateLifeCompany

• SetsotoMunicipality

• Assupol(NewProduct)

• DrakensteinMunicipality

• 35NewClients (for bulkmotor vehicle license renewals)

The partnership will enable the clients of these companies to pay their accounts or premiums at their nearest post office.


Logistics

The current economic climate and the competitive landscape remain a challenge for the overall business. The key business interventions that were formulated are continuing and becoming more focused, in an effort to find stability for our business, given the persistent unstable environment we find ourselves. This effort will place us in an enabling position for future growth and will be instrumental in the delivery of our services and therefore the attainment of our goals.

The following are some of the key and relevant areas:

• Thelogisticsbusinessoperationscontinuetorunonanintegratedplatformtoensuretheextractionofsynergiesand the maximisation of the cost structures

• Thetransportationmodelwasconsolidatedtooptimisetripsandthereforeimproveefficiencies,notonlyforthelogistics unit but also the Group

• Theimplementationofthetrackandtracesystemisnearingcompletion.Thiswillimproveourservicedeliveryandremains a priority for ensuring we meet our customer needs

The creation of the e-platform is aimed at introducing e-products to the existing customers within the legal fraternity. The Sales Executives continue to issue Digital Certificates to existing members. The Law Society of South Africa (LSSA) pilot project has commenced and 11 Advanced Electronic signatures and signature applications have been installed thus far. Products have already been piloted and ready for roll out.

The ageing infrastructure is a challenges but the proposal to recapitalise is already on the table. The roll out of this plan will be prioritised in creating value for the business.

We have continued our partnership with various Government Departments in fulfilling the mandates during the financial year. The following are some of the projects and engagements that have been accomplished:

• CFGhassuccessfullypartneredwith:

The Department of Education in Limpopo and delivered 6,3 million books to 3,975 schools between October 2013 and January 2014

The Department of Education in Northern Cape and delivered in excess of 900,000 books to 575 schools between September 2013 and November 2013

KwaZulu-Natal (KZN) Department of Health (condoms distribution).

Government Communication and Information System (GCIS) SA Yearbook deliveries and booklets to schools.

The logistics business will continue to leverage on the existing relationships with Government and work towards enhancing future work opportunities that may exist.

PX offers a highly secure containerisation service

During the year under review, the Logistics business unit delivered the Limpopo province’s textbooks to schools throughout the province. The project created temporary employment for 250 local people and delivered 6 million textbooks to 3,928 schools.


Sustainability


Sustainability

Environmental sustainability

Material

The South African Post Office utilises paper diversely for its services. Hybrid mail plays a major role in the consumption of paper to print mail items for its clients and the utilisation of paper for documentation in the office. The printers are set for a default print of double sided pages which encourages the minimisation of paper usage.

Recycling Usage

537.89

230.44 172.17

617.39 618.08

249.45

2011/2012 2012/2013 2013/2014

Paper usage and recyling in tons

The paper recycling target for 2013/2014 was set at 95% of all used paper. A total of 139% was recycled.

The total revenue from the paper recycling amounted to R124,338.05 for the financial year under review, compared to R267,714.55 for the previous year. The recycled cartridges generated a total revenue of R23,460.00.

IMPROVEMENT PRIORITY

TARGET 2012/2013 ACHIEVEMENT ACHIEVED/NOT ACHIEVED

REMARKS

Improve sustainability through recycling

Reduce the total amount of paper used by 2.5%

Paper usage was reduced by 25.3%

Achieved Implementing duplex printing reduced paper consumption by half the usual consumption

Recycle 95% of used paper

139% of paper was recycled*

Achieved Paper recycling is ongoing in all regions

Recycle all cartridges 3273.78 kg No target set Cartridge recycling is ongoing in all regions

* The amount of paper recycled is higher than 100% because other forms of paper such as magazines, newspaper and cardboard were also recycled. These items are not listed as printing paper. when it is purchased.


Air pollution

The Post Office reports on emissions generated from our direct (scope 1) and indirect sources (scope 2). Scope 1 emissions are emitted by the fleet controlled by the company and scope 2 emissions are caused by electricity that the company purchased. These figures exclude the Courier and Freight Group (CFG) and Speed Services because these are subsidiaries and would fall under scope 3 (other indirect emissions)

SCOPE 1 2011/2012 2012/2013 2013/2014

CO2e (Ktons) 14,04 13,14 13,68

The total emissions generated by both scopes for 2013/2014 fiscal year is 57 KtCO2 (kilotons of carbon dioxide). The carbon-management target is set at reducing 2,5% of scope 1 emissions for the year under review. The Group’s carbon emissions reduction target was not met.

Forscope2emissions(indirectemissions),wereportedonmailcentres,datacentres,depotsandwarehouses;thetotalnumber of buildings reported on is 156. We emitted 43.3 KtCO2e as compared to a target of 67.4 KtCO2e that was emitted in 2012/2013.

2011/2012 2012/2013 2013/2014

Energy (KWh) 53,620,406 75,695,227 47,432,965

CO2eq (tons) 48,985 69,152 43,333

Carbon offsetting compensates for the emissions generated by direct and indirect activities in the company. The target for 2013/2014 was set at offsetting 10% of emissions from the prior year’s emissions. A total of 2,000 trees were planted nationwide, offsetting a total of 5,4 KtCO2 emissions. This has offset 7% against the set target of 10%.

Transport

The transportation of mail is an essential operation for the Post Office that unfortunately impacts on the environment by contributing to air pollution. In an effort to minimise the impact on the environment, the following initiatives have been implemented by the Post Office:

• AnimprovedmodelofanelectricscooterthatiscompletingitstrialphasewithintheWitsregion

• Agasfuelledcaddywasprocuredin2013/2014andiscurrentlybeingused

• Continuingwithleasingfuel-efficientvehiclesbyreplacingpetroldrivenvehicleswithdieselvehicles

SAPO fleet indicators

INDICATOR uNIT 2011/2012 2012/2013 2013/2014

Total Vehicles No. 1,410 1,471 1,354

Petrol vehicles driven No. 989 839 637

Diesel Vehicles driven No. 469 648 717

Electric scooters No. 5 5 5

Gas Caddy No. 0 0 1

Total Road Distance Covered KM 44,752,141 45,345,971 43,996,238


2,764,153.7

1,688,590 1,085,677

3,051,687

3,799,133.6 4,194,089

5,815,840.7 5,487,723.6 5,279,766

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

2011/2012 2012/2013 2013/2014

Total Petrol consumption L Total Diesel consumption L Total Fuel comsumption L

FuEL EFFICIENCY uNIT 2011/2012 2012/2013 2013/2014

Average Fuel consumption - Scooters L/100Km 4.42 4.08 4.02

Average Fuel consumption - Passenger Petrol L/100Km 7.74 7.38 7.23

Average Fuel consumption - Passenger Diesel L/100Km 11.09 10.46 13.1

Average Fuel consumption - Commercial Diesel L/100Km 11.16 10.58 10.39

Average Fuel consumption - Commercial Petrol L/100Km 12.77 12.15 11.68

Energy usage

The total energy consumption of the South African Post Office Group for the financial year 2013/2014 was tracked for 156 buildings (28 Mail centres, 2 Data centres, 81 depots, 3 Area offices and 3 Warehouses and 39 Retail outlets). The target was to reduce the annual energy usage by 3%.

The results for the year under review were:

• Thethresholdsetfor2013/2014was73,424,370 KWh;theactualenergyconsumedfortheyearunderreviewis47,432,965 KWh. This is captured from the actual bills.

Initiatives to reduce indirect energy consumption

The SA Post Office has entered into Eskom’s light retrofit performance contracting and conducted a study on energy usage of lights at the head office building to decide on the feasibility of installing motion sensors.

Light Retrofitting

RETROFITTING PROjECT PROjECT STATuS

Northern Region (4x Mail centres) Complete

Wits (6 Mail Centres) & Johannesburg International Mail centre Complete

Kwa-Zulu Natal (3x Mail Centres) Complete

Central (3X Mail centres) Complete

Head Office (Eco Point) Complete

• Thelightretrofittingprojecthadamonthlysavingof900,416KWhandatotalof10,804,997KWhfortheyearunderreview.


• Theprojectedmonetarysavingsasaresultoflightretrofittingfor2013/14isR921,045andatotalofR11,052,535since 2011.

Lighting sensors

• Fortheyearunderreview,apilotstudyhasbeenconcludedatSilverLakesretailoutlet

• ThefeasibilitystudyofinstallingsensorsatEcoPointwasfinalized.

Water usage

SA Post Office aimed to reduce water usage by 3% from the previous year. In the year under review, a total of 112 buildings were reported on and a decrease of 111,642 Kl was achieved.

2011/2012 2012/2013 2013/2014

Water usage (KL) 227,861 371,884 260,242

Implementation status of the company’s plans

GOAL ACTION IMPLEMENTATION STATuS

Measure the company’s carbon emissions

Monthly tracking of the company’s emissions generated from fleet and electricity purchased

A dashboard with all the relevant information is compiled monthly together with an environmental sustainability report

Identify methods to reduce the company’s carbon emissions

Testing of alternative fuels vehicles Testing and inclusion of electric vehicles in the company’s fleet.

Install renewable energy technologies and Solar Photo-voltaic cells. (Solar PVs).

Teleconferencing will be used to reduce emissions from travelling

Develop a carbon offset programme 2,000 trees were procured to be planted nationwide

All 2,000 trees were planted

Fossil fuel consumption Fossil fuel consumption tracked on a monthly basis

A dashboard with all the relevant Green House Gas (GHG) is compiled monthly together with an environmental sustainability report

Participate in the carbon disclosure project (CDP)

Annual participation in the CDP Co-sponsored the CDP and participated fully in the CDP

Member of the International Post Corporation (IPC)

Participate in the environmental measuring and monitoring system (EMMS) of the IPC

Disclosed on the EMMS and ranked 16th out of 23 postal services that participated internationally

Baseline the company’s electricity consumption

The electricity consumption baseline for buildings (mail centres, data centres, area offices and depots) is 2009/2010

The data for 156 buildings are being reported on for their monthly usage and the other buildings data is still being collected to cover the entire organisation

Buildings electricity consumption Mail centres, Depots, Retail, Data Centres, Offices and Warehouses

A monthly dashboard and report are compiled to show the performance of the buildings in energy consumption

Smart metering Smart meters that measure electricity and water usage to be installed at the six mail centres and Eco Point

The audit to determine the number of meters required in each building is completed

Identify initiatives to reduce electricity consumption

Eskom Performance Contracting Project for Lighting

The retrofitting commenced in April 2012 and was completed in the year under review


GOAL ACTION IMPLEMENTATION STATuS

Lighting sensors for office blocks A study was conducted in March 2013 at Eco-Point to identify the opportunity of saving electricity by using sensors

The business case for piloting the light sensors is under review and will be finalised in 2014/2015

Building water consumption Baseline water consumption from 2009/2010

The collection of data is being finalised in order to conclude 2009/2010 as a baseline for water usage in buildings

Introduce cartridge recycling Still finalising the national service provider for recycling cartridges

Currently data on waste is collected and reporting should be effective from this financial year

Introduce an effective programme for electronic waste

A service level agreement has been concluded with service providers

Two out of six regions have started to report on electronic waste

Introduce recycling programmes for other recyclable items (plastic, cans, glass)

There is a national service agreement to recycle other recyclable waste with Nampak

The pilot phase for recycling other waste is concluded. A business case for roll out nationally is currently under review


Corporate Citizenship

SA Post Office in Communities

As a caring corporate citizen, the SA post office believes that good citizenship is key to the SA Post Office’s vision. With more than 2 000 outlets, the SA Post Office has one of the largest footprints in the country, therefore the company is perfectly placed to make a meaningful difference in the lives of hundreds of people, especially in the rural areas. Since 2011, the SA Post Office has through partnerships with both the private and public sector been able to implement programmes that have not only made a meaningful but also a sustainable difference to the lives of hundreds of people. The SA Post Office’s approach to corporate citizenship is not merely donating resources but actually getting involved in the implementation of the programme and going the extra mile to ensure that these programmes are successful.

The investment areas

The SA Post Office continues to focus its investment in women, young people, the disabled and people living with HIV and AIDS with a bias towards people living in rural and peri- urban areas. The areas of investment are: digital inclusion, poverty alleviation, environmental sustainability and HIV and AIDS.

Corporate Social Investment

In the year under review, the SA Post Office continued the work it started in 2011 with its various partners and the achievements have been significant.

Student to Government Programme:

The purpose of this programme is to give unemployed graduates technology skills that will make them more employable as well as enable them to assist local municipalities in rendering their services to the communities. By providing young people with the appropriate skills and competencies and placing them in local municipalities, we are addressing the challenges of training and unemployment among young people as well as the challenge of service delivery in the local municipalities.

The year under review saw the beginning of phase two of this partnership with Microsoft SA and the South African Local Government Association (SALGA) being rolled out in four provinces. Twenty four students participated in the programme, completing their internships at 10 local municipalities in these provinces.

Over the two years, forty-eight students have participated in the programme. Twenty-eight of those students have now secured employment, some permanent and others on contract. Twenty have been absorbed by municipalities, while others got employment from government departments, parastatals and private companies.

In an effort to combat poor service delivery and an attempt to develop the youth, 22 local municipalities opened their doors to allow these students to gain the appropriate experience. This resulted in better and more efficient service delivery to 112 towns, affecting the lives of approximately 3,127,040 citizens

Humana People to People:

The poverty alleviation programme in the community of Ribacross in Limpopo completed its third year and so far, more than 8,000 community members have been reached. This financial year has seen more than 600 people being trained in computer skills, business management and sewing and gardening. These skills assist people to start their own small businesses. Many of the women who participated in these programmes have gone on to employ other people in their communities.

E-Rural Access Programme:

The E-Rural Access programme has been firmly established in the three villages in the Northern Cape and Limpopo. Although the SA Post Office’s financial investment stopped in 2011, the company has been involved in providing training for the community forum members. Unfortunately, these training sessions were unable to continue during the year under review because the internet connectivity was stopped by the Department of Rural Development and Land Reform


(DRDLR). The DRDLR has subsequently revamped these centres and re-established connectivity in March 2014, therefore the training of these members can commence in the new financial year.

Tree Planting:

The SA Post Office has committed to offsetting 5% of its carbon emissions by planting 857 trees per year until 2012. This project has continued into the 2013/2014 financial period with the SA Post Office planting 2,000 trees across the country. Many of the regional offices have incorporated these tree planting activities into their employee volunteerism schedules. The SA Post Office continues to use these tree planting events to raise awareness about the importance of the environment.

Employee Volunteerism:

Employee volunteerism is core to the corporate citizenship objectives of the SA Post Office. The central message around SA Post Office’s corporate citizenship is “Delivering Change” and the staff follows this through by volunteering their time, skills and resources in the communities. This financial year has seen more than 25% of the staff volunteering in communities and schools around the country.

The year ahead:

The year ahead will see the SA Post Office forming new partnerships to grow our corporate social investment activities. The SA Post Office has partnered with Isibaya, a non-governmental organisation in the Eastern Cape to assist farmers in 55 villages to become economically active and commercially viable. Another exciting partnership has been established with The Red Cap Foundation to bring ICTs to rural schools in Kwa Zulu Natal.

Student 2 Government Graduates


SAPO Compliance Status against the Global Reporting Initiative (GRI) Framework

ECONOMIC

The economic dimension of sustainability concerns the organisation’s impact on the economic conditions of its stakeholders and on economic systems at local, national and global levels.

Compliance Status

Aspect: Economic PerformanceFully

ComplyPartially Comply

Do not Comply

EC1Direct economic value generated and distributed, including revenues, operating costs, employee compensation, donations and other community investments, retained earnings and payments to capital providers and governments.

x

EC2Financial implications and other risks and opportunities for the organisation’s activities due to climate change. x

EC3 Coverage of the organisation’s plan obligations. x

EC4 Significant financial assistance received from government. x

Aspect: Market Presence

EC5Range of ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation. x

EC6Policy, practices and proportion of spending on locally-based suppliers at significant locations of operation. x

EC7Procedures for local hiring and proportion of senior management hired from the local community at locations of significant operation. x

Aspect: Indirect Economic Impacts

EC8Development and impact of infrastructure investments and services provided primarily for public benefit through commercial, in-kind, or pro bono engagement. x

EC9Understanding and describing significant indirect economic impacts, including the extent of impacts. x

Environmental

The environmental dimension of sustainability concerns an organisation’s impacts on living and non-living natural systems, including ecosystems, land, air and water. Environmental Indicators cover performance related to inputs (e.g. material, energy, water) and outputs (e.g. emissions, effluents, waste). In addition, they cover performance related to biodiversity, environmental compliance and other relevant information such as environmental expenditure and the impacts of products and services.

Compliance Status

Aspect: MaterialsFully


Do not Comply

EN1 Materials used by weight or volume. x

EN2 Percentage of materials used that are recycled input materials. x

Aspect: Energy

EN3 Direct energy consumption by primary energy source. x

EN4 Indirect energy consumption by primary source. x

EN5 Energy saved due to conservation and efficiency improvements. x

EN6Initiatives to provide energy-efficient or renewable energy based products and services and reductions in energy requirements as a result of these initiatives. x

EN7 Initiatives to reduce indirect energy consumption and reductions achieved. x


Aspect: Water

EN8 Total water withdrawal by source. x

EN9 Water sources significantly affected by withdrawal of water. x

EN10 Percentage and total volume of water recycled and reused. x

Environmental

The environmental dimension of sustainability concerns an organisation’s impacts on living and non-living natural systems, including ecosystems, land, air and water. Environmental Indicators cover performance related to inputs (e.g. material, energy, water) and outputs (e.g. emissions, effluents, waste). In addition, they cover performance related to biodiversity, environmental compliance and other relevant information such as environmental expenditure and the impacts of products and services.

Compliance Status

Aspect: BiodiversityFully


Do not Comply

EN11Location and size of land owned, leased, managed in, or adjacent to protected areas and areas of high biodiversity value outside protected areas. N/A

EN12Description of significant impacts of activities, products and services on biodiversity in protected areas and areas of high biodiversity value outside protected areas. N/A

EN13 Habitats protected or restored. N/A

EN14 Strategies, current actions and future plans for managing impacts on biodiversity. N/A

EN15Number of IUCN Red List species and national conservation list species with habitats in areas affected by operations, by level of extinction risk. N/A

Aspect: Emissions, Effluents and Waste

EN16 Total direct and indirect greenhouse gas emissions by weight. x

EN17 Other relevant indirect greenhouse gas emissions by weight. x

EN18 Initiatives to reduce greenhouse gas emissions and reductions achieved. x

EN19 Emissions of ozone-depleting substances by weight. x

EN20 NO, SO and other significant air emissions by type and weight. x

EN21 Total water discharge by quality and destination. N/A

EN22 Total weight of waste by type and disposal method. x

EN23 Total number and volume of significant spills. x

EN24Weight of transported, imported, exported, or treated waste deemed hazardous under the terms of the Basel Convention Annex I, II, III and VIII and percentage of transported waste shipped internationally.

x

EN25Identity, size, protected status and biodiversity value of water bodies and related habitats significantly affected by the reporting organisation’s discharges of water and runoff.

N/A

EN26Initiatives to mitigate environmental impacts of products and services and extent of impact mitigation. x

EN27Percentage of products sold and their packaging materials that are reclaimed by category. x

Aspect : Compliance

EN28Monetary value of significant fines and total number of non-monetary sanctions for noncompliance with environmental laws and regulations. N/A


Aspect : Transport

EN29Significant environmental impacts of transporting products and other goods and materials used for the organisation’s operations and transporting members of the workforce.

N/A

Aspect : Overall

EN30 Total environmental protection expenditures and investments by type. N/A

Labour Practices and Decent Work

• The specific Aspects under the category of Labour Practices are based on internationally recognises universal standards, including:

• United Nations Universal Declaration of Human Rights. • United Nations Convention: International Covenant on Civil and Political Rights. • United Nations Convention: International Covenant on Economic, Social and Cultural Rights. • Convention on the Elimination of all Forms of Discrimination against Women (CEDAW). • ILO Declaration on Fundamental Principles and Rights at Work (in particular the eight core Conventions of the ILO consisting of

Conventions 100, 111, 87, 98, 138, 182, 29, 105). • The Vienna Declaration and Programme of Action.

Compliance Status

Aspect: EmploymentFully


Do not Comply

LA1Total workforce by employment type, employment contract and region, broken down by gender. x

LA2Total number and rate of new employee hired and employee turnover by age group, gender and region. x

LA3Benefits provided to full-time employees that are not provided to temporary or part-time employees, by significant locations of operation. x

LA15 Return to work and retention rates after parental leave, by gender. x

Aspect: Labour/Management Relations

LA4 Percentage of employees covered by collective bargaining agreements. x

LA5Minimum notice period(s) regarding operational changes, including whether it is specified in collective agreements. x

Aspect: Occupational Health and Safety

LA6Percentage of total workforce represented in formal joint management–worker health and safety committees that help monitor and advise on occupational health and safety programmes.

x

LA7Rates of injury, occupational diseases, lost days and absenteeism and total number of work-related fatalities, by region and by gender x

LA8Education, training, counselling, prevention and risk-control programmes in place to assist workforce members, their families, or community members regarding serious diseases.

x

LA9 Health and safety topics covered in formal agreements with trade unions. None

Aspect: Training and Education

LA10Average hours of training per year per employee by gender and by employee category. x

LA11Programmes for skills management and lifelong learning that support the continued employability of employees and assist them in managing career endings. x

LA12Percentage of employees receiving regular performance and career development reviews, by gender. x


Aspect: Diversity and Equal Opportunity

LA13Composition of governance bodies and breakdown of employees per employee category according to gender, age group, minority group membership and other indicators of diversity.

x

Aspect: Equal Remuneration For Women And Men

LA14Ratio of basic salary and remuneration of women to men by employee category, by significant locations of operation. x

Human Rights

The International Legal Framework for Human Rights is comprised of a body of law made up of treaties, conventions, declarations and other instruments. The corner stone of human rights is the International Bill of Rights which is informed by three instruments: i) The Universal Declaration of Human Rights (1948) ii) The International Covenant on Civil and Political Rights (1966) iii) The International Covenant on Economic, Social and Cultural Rights (1966)

Organisations can affect a wide range of human rights. In assessing which human rights are relevant for reporting, an organisation should consider all human rights. Some additional instruments which may be useful for a reporting organisation to reflect upon are:

• ILO Declaration on Fundamental Principles and Rights at Work (1998) (which builds upon the eight core Conventions of the ILO consisting of Conventions 100, 111, 87, 98, 138, 182, 29, 105)9

• The regional conventions, adhering to the principle of universality in the International Bill of Rights, for areas where the org anization operates, including: the African Charter on Human and Peoples Rights (1981), the Arab Charter on Human Rights (1994), the American Convention on Human Rights (1969), the European Convention on Human Rights (ECHR) (1950)

• Conventions protecting the rights of individuals who may be impacted by the organisation’s work, including but not limited to the Convention on the Elimination of Discrimination Against Women (CEDAW) (1979), the Convention on the Rights of the Child (1989), the International Convention on the Elimination of All Forms of Racial Discrimination (1966), ILO Convention 107 Indigenous and Tribal Populations Convention (1957), ILO Convention 169 Concerning Indigenous and Tribal Peoples in Independent Countries (1991), UN Declaration on the Rights of Indigenous Peoples (2007) and Convention on the Rights of Persons with Disabilities (2007)

Compliance Status

Aspect: Investment and Procurement PracticesFully


Do not Comply

HR1Percentage and total number of significant investment agreements and contracts that include clauses incorporating human rights concerns, or that have undergone human rights screening.

N/A

HR2Percentage of significant suppliers, contractors and other business partners that have undergone human rights screening and actions taken. N/A

HR3Total hours of employee training on policies and procedures concerning aspects of human rights that are relevant to operations, including the percentage of employees trained.

N/A

Aspect: Non-discrimination

HR4 Total number of incidents of discrimination and corrective actions taken. x

Aspect: Freedom of Association and Collective Bargaining

HR5Operations and significant suppliers identified in which the right to exercise freedom of association and collective bargaining may be violated or at significant risk and actions taken to support these rights.

x

Aspect: Child Labour

HR6Operations and significant suppliers identified as having significant risk for incidents of child labour and measures taken to contribute to the effective abolition of child labour.

N/A

Aspect: Forced and Compulsory Labour

HR7Operations and significant suppliers identified as having significant risk for incidents of forced or compulsory labour and measures to contribute to the elimination of all forms of forced or compulsory labour.

N/A


Aspect: Security Practices

HR8Percentage of security personnel trained in the organisation’s policies or procedures concerning aspects of human rights that are relevant to operations. N/A

Aspect: Indigenous Rights

HR9Total number of incidents of violations involving rights of indigenous people and actions taken. N/A

Aspect: Assessment

HR10

Percentage and total number of operations that have been subject to human rights reviews and/or impact assessments.- Ramps for alternatively abled persons- Lowered counters for the alternatively abled persons

x

HR11Number of grievances related to human rights filed, addressed and resolved through formal grievance mechanisms. x

Society

Society Performance Indicators focus attention on the impacts organisations have on the local communities in which they operate and disclosing how the risks that may arise from interactions with other social institutions are managed and mediated. In particular, information is sought on the risks associated with bribery and corruption, undue influence in public policy-making and monopoly practices.Community members have individual rights based on:

• Universal Declaration of Human Rights • International Covenant on Civil and Political Rights • International Covenant on Economic, Social and Cultural Rights • Declaration on the Right to Development

Compliance Status

Aspect: Local CommunitiesFully


Do not Comply

SO1Percentage of operations with implemented local community engagement, impact assessments and development Programmes. x

SO9Operations with significant potential or actual negative impacts on local communities. N/A

SO10Prevention and mitigation measures implemented in operations with significant potential or actual negative impacts on local communities. N/A

Aspect: Corruption

SO2Percentage and total number of business units analysed for risks related to corruption. x

SO3Percentage of employees trained in organisation’s anti-corruption policies and procedures. x

SO4 Actions taken in response to incidents of corruption. x

Aspect : Public Policy

SO5 Public policy positions and participation in public policy development and lobbying. x

SO6Total value of financial and in-kind contributions to political parties, politicians and related institutions by country. x

Aspect: Anti-Competitive Behaviour

SO7Total number of legal actions for anti-competitive behaviour, anti-trust and monopoly practices and their outcomes. x


Aspect: Compliance

SO8Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with laws and regulations. x

Product Responsibility

Product Responsibility Performance Indicators address the aspects of a reporting organisation’s products and services that directly affect customers, namely, health and safety, information and labelling, marketing and privacy. These aspects are chiefly covered through disclosure on internal procedures and the extent to which these procedures are not complied with.

Compliance Status

Fully Comply

Partially Comply

Do not Comply

Aspect: Customer Health and Safety

PR1Life cycle stages in which health and safety impacts of products and services are assessed for improvement and percentage of significant products and services categories subject to such procedures.

N/A

PR2Total number of incidents of non-compliance with regulations and voluntary codes concerning health and safety impacts of products and services during their life cycle, by type of outcomes.

N/A

Aspect: Product and Service Labelling

PR3Type of product and service information required by procedures and percentage of significant products and services subject to such information requirements. N/A

PR4Total number of incidents of non-compliance with regulations and voluntary codes concerning product and service information and labelling, by type of outcomes. N/A

Product Responsibility

Product Responsibility Performance Indicators address the aspects of a reporting organisation’s products and services that directly affect customers, namely, health and safety, information and labelling, marketing and privacy. These aspects are chiefly covered through disclosure on internal procedures and the extent to which these procedures are not complied with.

Compliance Status

Fully Comply

Partially Comply

Do not Comply

Aspect: Customer Health and Safety

PR5Practices related to customer satisfaction, including results of surveys measuring customer satisfaction. x

Aspect : Marketing Communications

PR6Programmes for adherence to laws, standards and voluntary codes related to marketing communications, including advertising, promotion and sponsorship. x

PR7Total number of incidents of non-compliance with regulations and voluntary codes concerning marketing communications, including advertising, promotion and sponsorship by type of outcomes.

x

Aspect: Customer Privacy

PR8Total number of substantiated complaints regarding breaches of customer privacy and losses of customer data. x

Aspect: Compliance

PR9Monetary value of significant fines for noncompliance with laws and regulations concerning the provision and use of products and services. x


Business Support


Business Support

Human Capital Management

1. Introduction

Business is not as usual… With the rapid changes in a shrinking economy, regulatory and legislative compliance promulgated in parliament, the constant and changing needs of customers and a shortened product life cycle, constantly place stresses on the organisation, therefore, Human Capital Management constantly reviews and re-aligns its strategy towards people enablement in order to ensure optimal efficiency of its workforce.

2. Management of talent

Recruitment and selection processes have been refined to address all vacancies with the timeous appointments across all levels, rolling out from executive level downwards.

A collective agreement was signed with relevant stakeholders regarding the employment of casual workers. A new entry level category was created to include them into the organisation workforce with the understanding that they will become full-time permanent employees over a three-year period.

A process has been initiated to address the identification of successors for critical positions. The process was launched and the pilot phase concluded in Postbank.

Performance management (individual scorecards) was done for approximately 2,000 employees on the total cost to company package. This paper based process will be automated and implemented in phases starting mid-2014.

3. Human Capital Development

To remain competitive in today’s uncertain economic times, it is critical for Human Capital Development to contribute positively to the organisation’s bottom-line. The challenges associated with the changing nature of work and the workplace environment is reality for all organisations. Rapid change requires a skilled and knowledgeable workforce with employees who are adaptive, flexible and motivated. The drive toward transformation and striving toward a culture of high performance, is synonymous to the characteristics of the typical work environment and businesses of the 21st century.

Addressing skills gaps, organisational transformation as well as supporting career development, forms part of its output, ensuring that the staff is constantly empowered, inspired and motivated.

Table 1. Status of the Workplace Skills Plan for the financial year April 2013 to March 2014

FINANCIAL YEAR

2013-2014

PLANNED

INTERVENTIONS

IMPLEMENTED

INTERVENTIONSVARIANCE

% IMPLEMENTED

April - June 4,008 4,194 (186) 104,6%

July- Sept 4,581 3,879 702 84,7%

Oct-Dec 4,581 6,673 (2,092) 145,7%

Jan - Mar 4,581 3,049 1,532 66,6%

Total 17,751 17,795 (44) 100,2%For the 2013/2014 financial year, 100,2% of the consolidated plan was implemented.


Vocational and Functional Training

3.1. Bachelor in Business Administration

The Bachelor in Business Administration intervention is part of a multi-pronged approach in ensuring that employees in critical positions are equipped with the minimum requirements, which will ensure compliance as per the Financial Services Board’s (FSB) requirements. The South African Post Office obtained funding from the Services SETA for learners – for Bachelor in Business Administration (BBA).

A total of 583 employees (nationally) from different business units were registered onto this relevant programme.

A total of 511 employees (88%) successfully progressed to the second year after their examinations in November 2013.

Behavioural Training

3.2. Personal Mastery (Behavioural)

Personal Mastery is a programme developed for employees in order for them to re-discover themselves, identify where they fit into the workplace as a group, and also ultimately find their place in an interrelated world that connects with others. The training was conducted in all the regions by the contracted provider. A total of 1410 employees attended this intervention.

In Cape Town, a special session was scheduled to enable the facilitators of the programme to focus on Learners with Special Needs (LSN). A facilitator with sign language skills was employed to facilitate the session for the hearing impaired which hugely contributed to the success of this programme. The feedback received from the individual attendees, proved that they were impressed that the organisation cared about them and they thoroughly enjoyed themselves during the intervention.

Hearing impaired learners attending the Personal Mastery Programme (Cape Town July 2013)

4. Corporate Social Investment – Digital Literacy

Digital Literacy is a Microsoft product that is designed to facilitate learning for new users, on Personal Computers. This programme is used to train new computer users and fulfilling the South African Post Office Groups’ mandate in terms of social responsibility whereby unemployed learners are invited to attend the training. The duration of the program runs five days and the unemployed people are assessed upon completion and certificated accordingly.

For this financial year a total of 404 people received digital literacy training of which 332 were unemployed (external). From the 332 external unemployed learners, 203 were African females and 29 were African males. They were all assessed and 298 learners were deemed competent and awarded certificates. A total of 34 learners who were deemed not yet competent were given opportunities to re-write the assessment. For this period, a total of 203 females, and 29 males were trained in Digital Literacy.


5. Workforce Status

5.1. Workforce movements

The number of staff at the end of the 2013/2014 financial year is 23,820. This depicts an increase of 2.5% of staff since April 2013. This increase in the staff compliment was due to casuals that were appointed permanently.

However, the staff compliment decreased by 1.2% (280 employees) since the 3rd quarter. This insignificant decline is experienced within the active casual group that was appointed based on operational requirements.

The graph below portrays the workforce movements for all quarters across all job categories for 2013/2014.

Exec Snr Mgr Mgr C B A

Short Term Staff

Casuals

Learner Totals

1st Quarter 2014 [Apr - Jun] 38 140 396 4,181 9,012 974 304 8,106 63 23,214

2nd Quarter 2014 [Jul - Sep] 42 135 409 4,208 9,319 971 262 8,054 75 23,475

3rd Quarter 2014 [Oct - Dec] 37 134 396 4,199 10,031 967 261 7,993 82 24,100

4th Quarter 2014 [Jan - Mar] 35 139 399 4,196 10,246 998 135 7,596 76 23,820

0

5000

10000

15000

20000

25000

30000

*Includes all internal movements (transfers/promotions/exits/appointments)

5.2. Workforce Transformation (Employment Equity)

The graph below displays the representation of Females, Black Females, Blacks and People with Disabilities within the organisation for the FY 2013/2014 against the set target.

0.00%

50.00%

100.00%

Representation

of females

Representation

of Black

females

Representation

of Blacks

Disability

Target April 2013 March 2014

TherepresentationofBlackshasincreasedby1%sinceApril2013andiscurrentlysittingat85%.Inthesameperiod;overall Whites declined by 1%, from 16 % to 15%. However, the overall White females remain an area of concern as they are currently at 8.80% against a target of 5.34%

Overall, African females are under-represented with 5% and coloured females by 0.14%. The focus should, therefore, should be on the implementation of affirmative action through recruitment and talent and succession management initiatives that seek to empower suitably qualified females, according to the employment equity targets in order to address racial disparity at specialist and management levels.


5.3. Current Identified People with Disabilities

The percentage of people with disabilities (PwD) identified in the organisation at the end of Oct 2013, was 68 employees (there was one termination). This figure of PwD identified increased to 85 employees during the period 1 Nov to 10 Dec 2013;whichisanincreaseof21%.AdesktopinvestigationofmedicalfilesandapplicationforTTDandIHRwasdoneandthere was an increase from 85 to 158 of employees with disabilities (an increase of 85%).

6. Management of Workforce liabilities

Systems and processes are in place to manage leave effectively. The employee composite increased during the year with the appointment of the casuals which increased the leave liability, this also affected the increase in absenteeism for this period.

The sick leave rate has been significantly reduced from 2.6% to 1.26%, even below the industry benchmark of 2.3%.

7. Workforce Health and Wellness

SA Post Office continues providing a number of health and wellness services to the employees.

7.1. Health Management

Staff participation in HIV/AIDS testing programmes

The HIV and Aids programme is aimed at assisting employees to deal with issues of HIV and Aids, whether who are infected or affected by it. We continue to providing voluntary confidential counselling and testing of employees, 79% of our employees know their status. Ngatana, our HIV support groups, continue to be a source of support to employees who are HIV positive.

Monthly health promotion themes are followed in all the regions in the form of events, power talks, workshops and print.

7.2. Workforce Wellness

7.2.1 Employee Assistance Programme (EAP)

The Employee Assistance programme is designed to assist employee who experience work, life and psychosocial problems. In addition, there are sensitisation programmes designed to assist the employees to cope, manage or avoid psychosocial and work related problems.

7.2.2 Sports activities within SA Post Office

Employees within the Group are engaged in individual and team sports throughout the year. Registered sporting codes currently active include soccer, netball, volleyball, golf, angling, aAthletics, gymnastics and cycling


Information Technology

The role of the South African Post Office Information Technology (SAPO IT) division is to provide support to all the business units within the organisation by providing the information technology services that enable them to achieve their strategic goals. This is achieved by ensuring that the IT systems are available in accordance with the required Service Level Agreements, for use by the business. It further aims to ensure that the information assets of the organisation are accessible to the right people in a secure manner. These services are provisioned through structured and associated IT processes that are aligned to industry standards and guidelines such as King III codes, Information Technology Information Library (ITIL), Control Objectives for Information and Related Technology (COBiT) and Project Management Body of Knowledge (PMBOK).

During the year under review, the primary focus of IT was on stabilising and improving existing IT capabilities. IT activities focussed specifically on the following areas:

• IT Governance: Addressing audit and risk issues and ensuring that proper governance structures are in place. A governance framework aligned to the King III guidelines was presented in the fourth quarter and approved by the Board for implementation. Most of the governance structures and policies were established. A number of projects were initiated to address the weaknesses in the environment that were identified through the audit and risk assessments. The progress on the major IT projects that were implemented, are dealt with later in the report.

• Operational Efficiency: Improving system availability as well as achieving optimal return on IT investments. Systems were relatively stable during the year, achieving an average availability of 96%. The focus was on efficient utilisation of IT resources (people and IT infrastructure) and cost effective use of IT for growth. The IT architecture was reviewed and a number of applications were identified for rationalisation and simplification in alignment with the approved IT strategy and Shared Services Model. The Infrastructure Refresh and other projects are underway to replace legacy systems in order to achieve this objective.

• IT Security: Strengthening the operational IT Security to protect the information assets of the organisation. In 2011 and 2012, several significant security incidents were experienced by SAPO, some of which could be attributed directly to inadequate IT Security in the organisation’s IT systems and infrastructure. The IT Security Remediation Project was set up with the objective of managing and performing a number of initiatives required to stabilise the current IT environment and to deliver the current IT Security services effectively. This will also create a platform from which future IT Security initiatives will be established to drive SAPO towards its stated objective of ISO 27001 compliance. Vulnerability and threat monitoring of the environment was carried out through the use of Managed Security Services. The security strategy is being revised to capacitate and address some of the gaps identified. A number of security policies were presented to the Board for approval and implementation.

Apart from these activities, a number of projects were initiated or continued from the previous year. Some of the major projects worth noting are the following.

• Infrastructure Refresh: The project aims to replace all legacy systems by upgraded technology systems and at the same time, achieving the objective of rationalising and simplifying the IT environment. The project will also help to address a significant number of audit findings and risks identified in the current environment. The platform commissioning was completed and the application migration phase is underway. The project is expected to be completed in March 2015.

• Disaster Recovery and Network upgrade: The project aims to ensure that SAPO has a full disaster recovery plan to allow for business continuity in the event of a disaster. It is a regulatory requirement to ensure that Postbank is compliant with Payments Association of South Africa (PASA), South African Reserve Bank (SARB) and other financial services industry requirements. The review of the technical specifications for these projects has commenced and the procurement process will commence in the new financial year. In the meantime, an Interim Disaster Recovery Plan is in place for Postbank.


• Flexcube upgrade to universal Banking Solution (uBS): The purpose of the project is to upgrade the Flexcube core banking solution to the UBS version and provide better stability and functionality to Postbank. The project will also improve the security and address some of the audit and risk findings identified within the banking environment. The upgrade will form a solid foundation on which the Postbank Corporatisation can depend on. The project has progressed well and is expected to be completed in June 2014.

• TrackandTrace:This project aims to replace all the instances of Track and Trace solutions in the environment with a single, upgraded solution that will meet the requirements of the different business units. This projects seeks to achieve a significant amount of rationalisation of the current IT environment. The project is expected to be completed in August 2014.

Going forward

While the emphasis will continue to be on availability and stability of systems, the focus within IT will gradually move towards becoming a true business partner, by providing flexible and scalable solutions that will be responsive to business needs and reduce time to market. This will be achieved through considering modern ways of provisioning IT services and transforming the IT environment to keep abreast with current trends. IT will need to build sufficient competence and investment to become a true partner and support business in realising its strategies. The corporatisation of Postbank and the implementation of the Shared Service Model will pose new challenges and require a well-defined technology architecture and strategy.

The IT organisation will enhance its project execution capability, improve the speed of execution and ensure that projects are delivered within acceptable timelines. The investment in stabilisation activities will continue and focus will be given to reducing operational costs. IT will also build capacity to manage contracts and licensing arrangements more efficiently. Other areas that will be enhanced are:

• Overallbusinesscontinuity(includingDisasterRecovery(DR)

• Networkperformanceandflexibility

• InformationandDatasecurity

• Providingusablemanagementinformationtoimprovestrategicdecisionmaking


E-Business

The E-Business Unit operates as a Business Communication and Transaction platform focusing on the electronic fulfilment of communications and transactions through multiple delivery channels and includes Hybrid Mail, Mobile, Internet, The Trust Centre and Self Service kiosks etc. Our strategic intent is to develop an online Post Office channel for our customers so that they can transact with the Post Office in the comfort of their offices or from anywhere, using the available mobile technologies.

During year under review, the unit grew its revenue from R112 million in 2012/2013 to R223 million in 2013/2014, representing a revue growth of 99,1%. The huge growth areas were primarily in the Hybrid Mail and Electronic Bill Presentment and Payments sector. The market is warming up to the Post Office Electronic offering. There was, however, very little marketing efforts in this space, and this poses a huge risk if not curbed. It is envisaged that the electronic migration and adoption by the market will offset the decline in mail volumes by a significant percentage. Efforts are afoot to roll out various electronic services.

A number of new initiatives were also launched during 2013/2014 which should see additional growth from other revenue sources in the Authentication Services and the Electronic Bill Presentment and Payment (EBPP). The South African Trust Centre is slowly taking shape and is gaining traction in the market.

A number of Programmes that

are in progress and which will help with the diversification of

revenue are:

Secure electronic communications

The expansion of the Hybrid Mail

platform Online services such as electronic

forms, efiling and other government

related services

Secure electronic

transactions online [ The Post office online channel}

Extension of the EBPP services to more channels

It is projected that with proper intervention and investment,

the E-Business unit revenue will GROW by at least 42% in 2014/15.


Security and Investigation

During the 2013/2014 financial, the South African Post Office experienced three waves of industrial actions that resulted in the loss of 59 days of business operations. In addition to losing revenue that is estimated at R236 million, property was damaged and vandalised and non-striking employees were intimidated and/or assaulted. The strike action primarily affected the Mail Business in the Wits Region, and it is here that a significant increase in postal crime was recorded.

During the period under review, a total of 2,911 incidents were recorded compared to 2,424 in the same period of 2012/2013, representing a 20% increase. The increased number of reported incidents are the result of labour disputes and protest actions which has resulted in an increase of 37% in postal crime related incidents.

Postal crime incidents comprise of 54% (1,570 incidents) of all crime categories. The increase in postal crime amounts to 87% of the total number of increased incidents reported during 2013/2014.

Incidents of fraud and theft increased from 392 incidents during 2012/2013 to 532 incidents – an increase of 140 incidents (35%). There has been a 98% increase in reported loss – R5.4 million loss in 2012/2013 to R10.9 million loss during 2013/2014.

The Graph below indicates the monthly patterns over a three-year period.

0 100 200 300 400 500

April

May

June

July

August

Septe

mber

October

Novem

ber

Decem

ber

Januar

y

Febru

ary

Mar

ch

YTD Incidents (Three-year comparison per month)

2011 / 2012 2012 / 2013 2013 / 2014

Crime categories

• Armed Robbery – In total, 59 armed robberies were recorded during the financial year compared to 127 in the previous year, therefore a decrease of 68 incidents. Notably, the most incidents (21) had occurred in the Eastern Cape Region. In the Wits Region armed robberies decreased by 41 incidents (from 51 to 10). Reported financial loss has decreased significantly from R5.3 million in 2012/2013 to R1.7 million during 2013/2014.

The national decrease in the number of incidents and financial loss is attributed to improved employee awareness, improved cash management as well as the deployment of 100 cash-upload receptacles at high-cash volume branches.

The Reprioritisation of Branch Security Upgrade Project was directed to further reinforce physical security at Postal Outlets in order to prevent armed robbery incidents, enhance employee/customer safety which will require R20 million CAPEX funding.

• CashinTransit(CIT)andHijacking – At the end of March 2014 and six incidents of vehicle hi-jacking was recorded (three incidents in 2012/2013), and for the second year in a row no incidents of CIT robberies had occurred.

• Housebreaking– In comparison to the previous financial year (169), 158 housebreaking incidents occurred in the 2013/2014 financial year – a decrease of 11 incidents.

• PostalCrime – Incidents of all types of postal articles i.e. standard, non-standard and parcel-related crime increased by 426 incidents (37%), from 1,144 to 1,570 reported incidents.


• Fraud – In total, 372 fraud incidents were recorded during the financial year compared to 260 in the previous year, therefore a decrease of 112 incidents. Of the 372 fraud incidents, 252 (68%) relate to fraud committed on Postbank savings products at Retail Outlets – an increase of 84 incidents compared to the 168 incidents reported in 2012/2013.

Fraud losses reported during 2013/2014 amounted to R10 million and reflects an increase of R7.4 million in comparison to the R2.5 million reported during 2012/2013. Postbank related fraud amounts to R2 million of the total fraud related loss. A total reported loss of R5 million was committed at a Retail Outlet in the Northern Region over a period of a few years – banking fraud.

Investigations

Of the 2911 cases investigated during the 2013/2014 financial year, 2,667 investigations were completed, representing 92%. 296 (10%) cases investigated were unfounded/false and 662 (23%) cases concluded were followed by the investigations

that were referred to the line management to institute disciplinary action.

Anonymous Crime Reporting

During the 2013/2014 financial year, 163 incidents were reported through the Hotline, an increase of 26 (19%) in comparison to the 137 incidents reported during 2012/2013.

Of all the incidents reported to Security and Investigation Services, 98 (60%) were not crime and dishonesty related, but related to general procedural and operational irregularities.

Crime Awareness

Crime awareness initiatives are continuously undertaken by the Security and Investigation Services Team during their normal functions.

A need has been identified to deploy a structured national crime awareness campaign across all Business Units in SAPO. This campaign will require dedicated funding of R3 million to implement.

Conclusion

Ongoing labour unrest will have an impact on the ability to reduce the levels of postal related crime and will negatively impact on the image of the South African Post Office.

Improved physical security of postal outlets will continuously receive priority attention. It is also intended to extend the cash-upload receptacles to 500 more outlets if funding is available.


Consolidated Annual Financial Statements for the year ended 31 March 2014

South African Post Office (SOC) Limited

(Registration number 1991/005477/06)

These consolidated annual financial statements were prepared by: Bianca Branford CA (SA) Senior Manager: Financial Reporting

These consolidated annual financial statements have been audited in compliance with the applicable requirements of the Companies Act No 71 of 2008 by Deloitte & Touche and Nkonki Incorporated Chartered Accountants (S.A.) Registered Auditors

Published 15 December 2014

86

South AfricAn PoSt office (Soc) Limited (Registration number 1991/005477/06) Consolidated annual FinanCial statements for the year ended 31 march 2014

South African Post office Soc Limited (Registration number 1991/005577/06)integrated Report 2014

Index

The reports and statements set out below comprise the consolidated annual financial statements presented to the shareholder:

Index Page

Audit Committee Report 87

Directors’ Responsibilities and Approval 90

Group Company Secretary’s Certification 91

Independent Auditors’ Report 92

Directors’ Report 96

Statement of Financial Position 103

Statement of Comprehensive Income 105

Statement of Changes in Equity 106

Statement of Cash Flows 108

Notes to the Consolidated Annual Financial Statements 109

The following supplementary information does not form part of the consolidated annual financial statements:

Detailed Income Statement 200

Three Year Period Review 202

87



Audit Committee Report

On 7 November 2014, all the non-executive members of the Board resigned and duly the board and all of its committees dissolved. Dr Simo Lushaba was appointed as administrator in terms of Section 25 of the South African Post Office Act No 22 of 2011 (as amended). As at 31 March 2014, the Board (in compliance with King III) and all its committees were active and functioning. The report below was compiled by the relevant committee members at 31 March 2014 (while still appropriate) and has been accepted as fair and accurate by the Administrator who has signed the report as such.

The audit committee (the committee) hereby presents its report in respect of the financial year ended 31 March 2014 in terms of its obligations according to Treasury Regulations issued in terms of the Public Finance Management Act (PFMA) and in terms of the Companies Act No 71 of 2008, as amended (the Companies Act).

1. Members of the Audit Committee

The committee was established in accordance with the provisions of PFMA and the Companies Act. The Audit Committee Charter requires that the committee be comprised of a minimum of three members.

The members of the committee are all independent non-executive directors of the group and include:

Name Changes

Mr S Gounden (Chairperson) Appointed29January2014;retired07November2014

Mr PT Mageza Appointed29January2014;retired07November2014

Mr MS Patel Re-appointed30July2013;retired07November2014

Ms G Simelane Appointed29January2014;retired22October2014

Mr H Daniels (Interim Chairperson) Retired 29 January 2014

Mr R Sishuba Retired 29 January 2014

The committee is satisfied that the members thereof have the required knowledge and experience as set out in Section 94(5) of the Companies Act No 71 of 2008 and Regulation 42 of the Companies Regulation, 2011.

2. Meetings held by the Audit Committee

The audit committee performs the duties laid upon it by Section 94(7) of the Companies Act by holding meetings with the key role players on a regular basis and by the unrestricted access granted to the external auditors.

In terms of the Audit Committee Charter, the committee must meet at least four times a year. Details of the committee meetings during the financial year under review are disclosed in the Corporate Governance Report.

The committee held meetings with the Group Chief Executive Officer, senior management, external auditors and internal auditors, collectively and individually, on matters related to governance, internal control and risk, throughout the reporting period.

3. Responsibility

The committee has complied with its responsibilities arising from the PFMA, Treasury Regulation, Companies Act and also reports that it operated in terms of the Audit Committee Charter as its terms of reference in discharging all its responsibilities as regulated therein.

4. Effectiveness of internal controls

The committee acknowledges management’s efforts to strengthen internal controls. However, when seen in the context of the reports issued by external audit and internal audit, it is clear that management’s efforts have not yielded the required benefits to date.

The committee is concerned that in certain instances the matters reported in prior years have not been fully and satisfactorily addressed. Management has given assurance that effective corrective action will be implemented in respect of all internal control weaknesses and the committee will monitor these.

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The committee is especially concerned with the high rate of non-adherence to established policies and procedures and the lack of subsequent punitive measures against the responsible officials, when required. The committee believes that there needs to be tighter controls around work ethic, responsibility and accountability and that non-adherence to such, should be addressed through a fair and rigorous application of the performance management system.

Vacancies undermine the effective functioning of the system of internal control and it is imperative that management reviews its recruitment procedures and processes to ensure that vacancies are filled expeditiously with properly qualified, skilled and experienced personnel.

The committee is not satisfied that fraud and corruption has been reduced to an acceptable level and these concerns have been raised with management. The South African Post Office (SOC) Limited has adopted aggressive anti-corruption measures to curb the frequency and magnitude of fraud and corruption.

Owing to the strategic importance of and huge dependence on Information and Communication Technology (ICT), the committee is concerned that the ICT environment is not operating at an optimal level. Management has undertaken to present an ICT risk register and progress report on the respective action plans to the committee for monitoring purposes.

5. Specific focus areas

Going forward, the committee has identified the following specific focus areas to monitor, support and advise management on:

• Enhancementofreportingonperformanceinformation;

• Modernisationoftheinformationtechnology;

• Effectivenessoftheinternalauditfunction;

• Improvingthecontrolenvironment;

• Cohesiveriskmanagementframework;and

• Embedding a combined assurance model.

6. Quality of monthly and quarterly management reports submitted in terms of the PFMA

The committee was satisfied with the content and quality of quarterly financial reports prepared and issued by management during the year under review, in compliance with the statutory reporting framework. The committee has requested and received the monthly management accounts and interim (quarterly) financial statements for deliberations at the committee meetings.

The committee has however suggested improvements to reports especially relating to performance information. The committee has recommended that the South African Post Office move towards preparing interim financial statements, which would assist it in attending to reconciliations timeously as well as eliminate year-end adjustments.

7. Internal audit function

The committee is satisfied that internal audit has properly discharged its functions and responsibilities during the year under review.

The capacity of internal audit has been enhanced through the redesign of the internal audit process, employment of additional personnel and investments in an intensive training programme. The committee expects these initiatives to contribute to internal audit becoming more efficient, more responsive to the challenges and providing audit reports of a high quality to management and the committee on a timely basis. The committee supports the direction that internal audit is adopting in providing the necessary skills and agility required for internal audit to respond quickly and effectively to the demands for internal audit across The South African Post Office’s multipal locations.

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The recent appointment of specialist ICT auditors is a welcome development in light of the need for expertise in the auditing of automated systems and the development and maintenance of a system of continuous auditing.

The committee is satisfied that the internal audit function is operating effectively and that it has addressed the risks pertinent to The South African Post Office (SOC) Limited.

8. Evaluation of the consolidated annual financial statements

The committee has:

• reviewed and discussed the audited consolidated annual financial statements with the external auditors and management;

• reviewedtheexternalauditors’managementletterandmanagement’sresponsethereto;

• reviewedanddiscussedtheperformanceinformationwithmanagement;

• reviewedchangesinaccountingpoliciesandpractices;and

• reviewed the group’s compliance with legal and regulatory provisions.

9. External auditors’ report

The committee concurs with and accepts the conclusions and the audit opinion of the external auditors on the consolidated annual financial statements and is of the view that the audited consolidated annual financial statements be accepted and read together with the report of the external auditors.

The committee confirms that it has been actively involved throughout the audit process and is thoroughly appraised of the issues giving rise to the audit opinion.

The committee appreciates the enormity of the challenge associated with managing a large, geographically dispersed and complex audit. However, the external audit issues raised should have been avoided given the effort put in by certain officials and the ongoing assurances given by management to the committee that these matters were under control.

On behalf of the committee:

Dr S Lushaba

Administrator

22 December 2014


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The directors are required in terms of the Companies Act No 71 of 2008 (Companies Act) to maintain adequate accounting records and are responsible for the content and integrity of the consolidated annual financial statements and related financial information included in this report. It is their responsibility to ensure that the consolidated annual financial statements fairly present the state of affairs of the group as at the end of the financial year and the results of its operations and cash flows for the year then ended, in conformity with International Financial Reporting Standards (IFRS). The external auditors are engaged to express an independent opinion on the consolidated annual financial statements.

The consolidated annual financial statements are prepared in accordance with IFRS and the Companies Act and are based upon appropriate accounting policies consistently applied and supported by reasonable and prudent judgements and estimates.

The directors acknowledge that they are ultimately responsible for the system of internal financial control established by the group and place considerable importance on maintaining a strong control environment. To enable the directors to meet these responsibilities, the board of directors sets standards for internal control aimed at reducing the risk of error or loss in a cost effective manner. The standards include the proper delegation of responsibilities within a clearly defined framework, effective accounting procedures and adequate segregation of duties to ensure an acceptable level of risk. These controls are monitored throughout the group and all employees are required to maintain the highest ethical standards in ensuring the group’s business is conducted in a manner that in all reasonable circumstances is above reproach. The focus of risk management in the group is on identifying, assessing, managing and monitoring all known forms of risk across the group. While operating risk cannot be fully eliminated, the group endeavours to minimise it by ensuring that appropriate infrastructure, controls, systems and ethical behaviour are applied and managed within predetermined procedures and constraints.

The directors are of the opinion, based on the information and explanations given by management, that the system of internal control provides reasonable assurance that the financial records may be relied on for the preparation of the consolidated annual financial statements. However, any system of internal financial control can provide only reasonable, and not absolute, assurance against material misstatement or loss.

The directors have reviewed the group’s cash flow forecast for the twelve months after signature date and, in the light of this review and the current financial position, they are satisfied that the group has or has access to adequate resources to continue in operational existence for the foreseeable future.

The external auditors are responsible for independently auditing and reporting on the group’s consolidated annual financial statements. The consolidated annual financial statements have been audited by the group’s external auditors and their report is presented on pages 92 to 95.

The consolidated annual financial statements set out on pages 85 to 202, which have been prepared on the going concern basis, were approved by the Board of Directors on 22 December 2014 and signed on its behalf by:

Mr M Mathonsi

Acting Group CEO

Khumo Mzozoyana

CFO

Directors’ Responsibilities and Approval

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Group Company Secretary’s Certification

Declaration by the group company secretary in respect of Section 88(2)(e) of the Companies Act

In terms of Section 88(2)(e) of the Companies Act No 71 of 2008, as amended, I certify that the group has lodged with the Companies and Intellectual Property Commission (CIPC) all such returns as are required of a public company in terms of the Companies Act and that all such returns are true, correct and up to date.

Adv MM Mphelo

Acting Company Secretary

22 December 2014

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Independent Auditors’ Report to Parliament on the South African Post Office SOC Limited

REPORT ON THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS

Introduction

We have audited the consolidated and separate financial statements of the South African Post Office SOC Limited and its subsidiaries as set out on pages 103 to 199, which comprise the consolidated and separate statement of financial position as at 31 March 2014, the consolidated and separate statement of comprehensive income, statement of changes in equity and the statement of cash flows for the year then ended, as well as the notes, comprising a summary of significant accounting policies and other explanatory information.

Accounting Authority’s responsibility for the consolidated and separate financial statements

The board of directors which constitutes the accounting authority is responsible for the preparation and fair presentation of these consolidated and separate financial statements in accordance with International Financial Reporting Standards and the requirements of the Public Finance Management Act of South Africa and the Companies Act of South Africa, and for such 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.

Auditors’ responsibility

Our responsibility is to express an opinion on these consolidated and separate financial statements based on our audit. We conducted our audit in accordance with the Public Audit Act of South Africa, the general notice issued in terms thereof and International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated and separate financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated and separate financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the consolidated and separate financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated and separate financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated and separate financial statements.

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

Opinion

In our opinion, the group and company financial statements present fairly, in all material respects, the financial position of South African Post Office SOC Limited as at 31 March 2014, and its financial performance and statement of cash flows for the year then ended in accordance with International Financial Reporting Standards, and the requirements of the Public Management Finance Act of South Africa and the Companies Act of South Africa.

Emphasis of Matter

Without qualifying our opinion, we draw attention to note 47 to the financial statements which indicates that the group incurred a net loss of R361 million for the year ended 31 March 2014 and, as at the date of this report, the group is projecting a loss of R1.3 billion for the year ending 31 March 2015. These conditions, along with other matters as set forth in note 47 indicate the existence of a material uncertainty which may cast significant doubt about the company’s ability to continue as a going concern.

unaudited supplementary information

Without qualifying our opinion we draw attention to the fact that the detailed income statement as set out on pages 200 - 201 and the supplementary information as set out on page 202 do not form part of the financial statements and are presented as additional information. We have not audited these schedules and accordingly do not express an opinion on them.

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Independent Auditors’ Report to Parliament on the South African Post Office SOC LimitedOther matter

We draw attention to the matter below. Our opinion is not modified in respect of this matter.

Other reports required by the Companies Act

As part of our audit of the consolidated and separate financial statements for the year ended 31 March 2014, we have read the Directors’ Report, the Audit Committee’s Report and the Statement by the Company Secretary for the purpose of identifying whether there are material inconsistencies between these reports and the audited consolidated and separate financial statements. These reports are the responsibility of the respective preparers. Based on reading these reports we have not identified material inconsistencies between the reports and the audited consolidated and separate financial statements. We have not audited the reports and accordingly do not express an opinion on them.

REPORT ON OTHER LEGAL AND REGuLATORY REQuIREMENTS

Reportable irregularities

In accordance with our responsibilities in terms of sections 44(2) and 44(3) of the Auditing Profession Act, we reported that we had identified certain unlawful acts or omissions committed by persons responsible for the management of the South African Post Office SOC Limited which constitute reportable irregularities in terms of the Auditing Profession Act, and have reported such matters to the Independent Regulatory Board for Auditors.

The entity has breached the requirements of section 45 of the Companies Act No.71 of 2008 (the Companies Act). The entity provided financial assistance to its related entities without obtaining a special resolution by the shareholder for these transactions, and did not assess the liquidity and solvency requirements prior to advancing the financial assistance, as required by the Companies Act.

The entity did not comply with the requirements of section 129 of the Companies Act to consider a resolution to commence voluntary business rescue proceedings when it had reasonable grounds to believe that the entity was financially distressed. The Board of Directors (the Board) did not deliver a written notice to each affected person to inform them of the reasons for not adopting a resolution to commence voluntary business rescue proceedings.

The entity has not complied with the requirements of Section 55 (1) of Public Finance Management Act 1 of 1999 and Section 30 (1) of the Companies Act 71, 2008. Consolidated and separate annual financial statements for the financial year ended 31 March 2014 were not finalised within five months after the financial year end as required by the Public Finance Management Act and six months after the year end as required by the Companies Act.

Predetermined objectives

In accordance with the PAA and the general notice issued in terms thereof, we report the following findings on the reported performance information against predetermined objectives for the selected objectives presented in the annual report, non-compliance with legislation as well as internal control. We performed tests to identify reportable findings as described under each subheading but not to gather evidence to express assurance on these matters. Accordingly, we do not express an opinion or conclusion on these matters.

We performed procedures to obtain evidence about the usefulness and reliability of the reported performance information for the following selected objectives presented in the annual performance report of the public entity for the year ended 31 March 2014:

• Objective 1: Alternative financing model pages 13 to 15 of the Performance Information Report.

• Objective 2: Human capital capacity building on pages 16 to 18 of the Performance Information report.

• Objective 3: Meet License and mandate obligations by increasing the accessibility of products and services on pages 19 to 20 of the Performance Information report.

• Objective 4: Customer centricity 20 to 21 of the Performance Information report.

• Objective 5: Postbank Corporatization on page 19 of the Performance Information report.

• Objective 6: Active participation in Africa’s development agenda on page 20 of the Performance Information report.

• Objective 7: Ensuring that critical IT systems are available on page 21 of the Performance Information report.

• Objective 8: Provide of an efficient technology platform on pages 21 to 22 of the Performance Information report.

• Objective 9: Providing a secure environment for our customers on page 22 of the Performance Information report.

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Independent Auditors’ Report to Parliament on the South African Post Office SOC Limited • Objective 10: Maintenance of ethical business practices on pages 23 to 26 of the Performance Information report.

• Objective 11: Contract management on page 24 of the Performance Information report.

• Objective 12: Crime awareness on page 21 of the Performance Information report.

• Objective 13: Preferential procurement Enterprise development on page 19 of the Performance Information report.

We evaluated the reported performance information against the overall criteria of usefulness and reliability.

We evaluated the usefulness of the reported performance information to determine whether it was presented in accordance with the National Treasury’s annual reporting principles and whether the reported performance was consistent with the planned objectives. We further performed tests to determine whether indicators and targets were well defined, verifiable, specific, measurable, time bound and relevant, as required by the National Treasury’s Framework for managing programme performance information (FMPPI).

We assessed the reliability of the reported performance information to determine whether it was valid, accurate and complete.

We did not raise any material findings on the usefulness and reliability of the reported performance information for the selected objectives.

Additional matter

Although we raised no material findings on the usefulness and reliability of the reported performance information for the selected objectives, we draw attention to the following matter:

Achievement of planned targets

Refer to the annual performance report on pages 13 to 26 for information on the achievement of the planned targets for the year.

Compliance with legislation

We performed procedures to obtain evidence that the entity has complied with applicable laws and regulations regarding financial matters, financial management and other related matters. Our findings on material non-compliance with specific matters in key applicable laws and regulations as set out in the General Notice issued in terms of the PAA are as follows:

Expenditure Management

Although the accounting authority has embarked on a process to identify irregular expenditure, the entity continued to incur irregular expenditure during the current financial year. The accounting authority has therefore not taken effective steps to prevent irregular expenditure, as required by section 51(1) (b) (ii) of the Public Finance Management Act.

During the current year management completed a full review of all procurement contracts which resulted in the identification of irregular expenditure amounting to R 71 million as disclosed in note 50 in the Annual Financial Statements. A further R 10 million potential irregular expenditure was identified which is currently being investigated as disclosed in the aforementioned note.

Internal control

We considered internal controls relevant to the audit of the financial statements, group key performance indicators and compliance with laws and regulations. We also draw your attention to the comments included in the directors’ report regarding the internal control environment. The matters reported above and below under the fundamentals of internal control are limited to the significant deficiencies that were identified during the audit, the findings on the group key performance indicators and the findings on compliance with laws and regulations included in this report.

Leadership and Governance

During the current financial year we identified potential and actual reportable irregularities which we have reported to the Independent Regulatory Board for Auditors. All potential and actual irregularities reported related to various actual and potential non-compliance with the Companies Act of South Africa. The accounting authority did not have sufficient processes in place to prevent non-compliance with the Companies Act of South Africa.

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Independent Auditors’ Report to Parliament on the South African Post Office SOC LimitedThere was an improvement in the process to identify irregular expenditure, the entity did however continue to incur irregular expenditure during the current financial year. The accounting authority has therefore not taken effective steps to prevent irregular expenditure, as required by section 51(1) (b) (ii) of the Public Finance Management Act.

Leadership did not ensure that processes and systems that are in place could identify and prevent non-compliance with various legislation

OTHER REPORTS

Investigations

• Investigation instituted by the Minister of Communications for matters including governance, financial management and other various matters, this investigation is on-going.

• InvestigationbythePublicProtectorregardingpotentialirregularitiesrelatingtoprocurement;and

• Investigation by Special Investigation Unit (SIU). This investigation was proclaimed by the president of the Republic of South Africa, Mr JG Zuma on 04 February 2014 (Government Gazette no 37303) for matters relating property procurement, loans advanced to subsidiaries, Human resource process and other various matters. This investigation has not been completed by the SIU and is ongoing.

Audit-related services and special audits

The following agreed-upon procedures engagements have been performed and reports issued by us at the request of the South African Post Office SOC Limited:

• Agreed-upon procedures on the license fee payable by the South African Post Office SOC Limited to Independent Communications Authority of South Africa (“ICASA”) for the year ended 31 March 2014

• Agreed-upon Procedures on Government Grants received by the South African Post Office SOC Limited for the year ended31March2014;

• Agreed-upon procedures for Marine Living Resource Fund on the reasonableness of revenue recorded with regards to the sale of licenses and permits by South African Post Office SOC Limited on their behalf for the year ended 31 March 2014.

• Agreed-upon procedures on the return in terms of regulation 4.4 (i) and (ii) of the Short-Term Insurance Act. (no. 53 of 1998) to the Intermediaries Guarantee Facility Limited (“IGF”) for South African Post Office SOC Limited for the yearended31March2014;

• Agreed-upon procedures on the return in terms of regulation 4.4 (i) and (ii) of the Short-Term Insurance Act. (no. 53 of 1998) to the Intermediaries Guarantee Facility Limited (“IGF”) for South African Post Office SOC Limited (specificallyfortheamountscollectedonbehalfofthirdpartiesbyretail)fortheyearended31March2014;and

• Agreed-upon procedures on the return in terms of regulation 4.4 (i) and (ii) of the Short-Term Insurance Act. (no. 53 of 1998) to the Intermediaries Guarantee Facility Limited (“IGF”) for South African Post Office SOC Limited (specifically for the amounts collected on behalf of third parties by retail) for the year ended 31 March 2014.

Yours faithfully, Yours faithfully,

Deloitte & ToucheRegistered AuditorPer: Trushar KalanPartner22 December 2014

Nkonki Inc.Registered AuditorPer: Zakhele NkosiPartner22 December 2014

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Directors’ Report

The directors have pleasure in submitting their report on the consolidated annual financial statements of the South African Post Office (SOC) Limited and the group for the year ended 31 March 2014.

1. Incorporation

The company was incorporated on 01 October 1991 and obtained its certificate to commence business on the same day.

2. Holding company

The group’s holding company is a State Owned Company (SOC), namely the South African Post Office (SOC) Limited incorporated in RSA.

3. ultimate holding company

The group’s ultimate holding company is the South African Government which is incorporated in RSA.

4. Nature of business

The South African Post Office (SOC) Limited is incorporated in South Africa with interests in the services industry. The activities of the group are undertaken through the company and its principal subsidiaries. The group operates in South Africa.

The business of the group is:

• The provision of universal, accessible, reliable and affordable postal services to the people of the Republic of South AfricaintermsoftheSAPostOfficeActNo22of2011andthePostalServicesActNo124of1998;

• To conduct the business of a bank that will encourage and attract savings amongst the people of the Republic of South Africa in accordance with the Postbank Act No 9 of 2010, as amended and the relevant sections of the Postal ServicesActNo124of1998,andalsotoprovideagencyservices;

• To provide an infrastructure for the movement of paper and electronic documents between members in various industries and become the preferred partner in the judicial system through its subsidiary the Document Exchange Group;and

• To provide courier, freight and related logistical services to business within and beyond the South African boundaries.

The business of the group is conducted through its operating divisions: Mail, Consumer Services, Postbank as well as its operating subsidiaries within logistics – The Courier and Freight Group (Pty) Ltd (CFG) and The Document Exchange (Pty) Ltd (Docex).

These divisions and subsidiaries are responsible for all the trading activities of the group, which are conducted through the mail distribution network as well as the infrastructure of service points available throughout the country. The main support divisions in the group are: Human Resources, Information Technology, Property Management, Finance, Risk and Compliance, Security and Investigation Services, Sales and Customer Services, Corporate Services, Marketing, Supply Chain Management, Internal Audit and Strategic Planning.

There have been no material changes to the nature of the group’s business from the prior year.

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Directors’ Report

5. Directorate

The directors in office at the date of this report are as follows:

DIRECTORS OFFICE DESIGNATION CHANGES

Dr HN Manzini Acting Chairperson of the Board: Group Non-executive Retired 07 November 2014

Mr CJ Hlekane CEO: Group /Director: The Courier and Freight Group /Director: The Document Exchange /Director: Sapos Properties

Executive

Ms K Mzozoyana CFO: Group /Director: The Courier and Freight Group / Director: The Document Exchange /Director: Sapos Properties

Executive

Mr M Mathonsi Acting Group CEO /COO: Group /Acting MD: The Courier and Freight Group /Acting MD: The Document Exchange

Executive Appointed 01 July 2014Acting Group CEO from 03 October 2014

Mr S Adam Acting MD: Postbank Executive Retired 15 October 2014

Mr MJ Mathibe MD: The Courier and Freight Group /Acting MD: The Document Exchange

Executive Retired 25 July 2014

Mr B Yafele Acting COO: Group Executive Appointed 09 May 2013, Retired 14 November 2013

Mr G Mothema Director: Group Executive Retired 26 June 2013

Ms G Simelane Director: Group Non-executive Retired 22 October 2014

Mr H Daniels Director: Group Non-executive Retired 22 April 2014

Mr JS Ngubane Director: Group Non-executive Appointed 17 December 2013, Retired 07 November 2014

Mr JS Kotsi Director: Sapos Properties Non-executive

Mr MS Patel Director: Group /Director: The Courier and Freight Group

Non-executive Retired 07 November 2014

Ms N Kela Director: Group /Director: The Courier and Freight Group /Director: The Document Exchange

Non-executive Retired 07 November 2014

Mr N Mnisi Director: Sapos Properties Non-executive

Mr NC Dube Director: The Document Exchange Non-executive Retired 14 July 2014

Ms NG Mthethwa Director: Group /Chairperson of the Board: The Courier and Freight Group /Director: The Document Exchange

Non-executive Retired 23 October 2014

Mr R Sishuba Director: Group /Chairperson of the Board: The Document Exchange

Non-executive Retired 23 October 2014

Mr S Gounden Director: Group Non-executive Appointed 17 December 2013, Retired 07 November 2014

Ms SP Mothelesi Director: Group Non-executive Appointed 17 December 2013, Retired 07 November 2014

Mr T Mageza Director: Group Non-executive Appointed 17 December 2013, Retired 07 November 2014

6. Directors’ interests in contracts

During the financial year, no contracts were entered into in which directors or officers of the group had an interest.

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7. Secretary

The acting company secretary for the group is Adv MM Mphelo.

Postal address

PO Box 10000

Pretoria

0001

Business address

350 Witch Hazel Avenue

Highveld Extension 70

Centurion

0157

8. Auditors

Deloitte & Touche and Nkonki Incorporated (the firms) were appointed in office as the joint auditors for the company and its subsidiaries for 2014.

The board of directors, on recommendation of the audit committee, appointed the firms as the external auditors for the group for the next five years.

At the next AGM, the shareholder will be requested to re-appoint Deloitte & Touche and Nkonki Incorporated as the independent external auditors of the group and to confirm Mr T Kalan & Mr Z Nkosi as the designated lead audit partners for the 2015 financial year.

9. Review of financial results and activities

The consolidated annual financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), the Public Finance Management Act No 1 of 1999 as amended, and the requirements of the Companies Act No 71 of 2008. The accounting policies have been applied consistently compared to the prior year, except for the adoption of new or revised accounting standards as set out in note 54.

The group recorded a net loss after tax for the year ended 31 March 2014 of R 361,210 million. This represented an increase of 59% from the net loss after tax of the prior year of R 226,881 million.

Group revenue increased by 2% from R 5,690 billion in the prior year to R 5,778 billion for the year ended 31 March 2014.

The decline in mail and courier volumes and the loss of customers contributed to the marginal growth of 2% in revenues despite the approval of a general price increase of 5% for reserved products and services by the Regulator, ICASA. Labour unrest during the year under review also contributed to the loss in revenues earned and negatively impacted our operations and customer service. Additional costs were also incurred to clear backlogs resulting from the strike action.

The lower revenues were to some extent offset by the implementation of cost optimisation Programmes and containment measures across the group that resulted in operating expenses declining to R 6,506 billion from the prior year of R 6,076 billion.

No subsidy funding has been received from the shareholder for the 2014 financial year. The group will therefore need to review the future extent of its universal service costs. The universal service obligation priorities that are being carried out by the group will have to be reviewed in line with the business sustainability model, funding model and the execution of the mandate in light of the removal of the subsidy from Government. In the meantime the South African Post Office (SOC) Limited has held discussions with the Department of Telecommunications and Postal Services, ICASA and the National Treasury to review the license requirements over the medium term.

Directors’ Report

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The Postbank Corporatisation process has commenced and funding of R 481 million has been allocated by the National Treasury over the Medium Term Expenditure Framework (MTEF) period for investment in systems and people necessary for Postbank to meet the requirements of a registered bank.

Capital expenditure for the year amounted to R 222,265 million (2013: R 140,239 million).

Group cash flows used in operating activities increased by 29% from R 429,652 in the prior year to R 333,969 for the year ended 31 March 2014.

10. Dividends

The company’s dividend policy is to consider an interim and a final dividend in respect of each financial year. At its discretion, the board of directors may consider a special dividend, where appropriate. Depending on the perceived need to retain funds for expansion or operating purposes, the board of directors may pass on the payment of dividends.

Given the current state of the global economic environment, the board of directors believes that it would be more appropriate for the group to conserve cash and maintain adequate debt headroom to ensure that the group is best placed to withstand any prolonged adverse economic conditions. Therefore the board of directors has resolved not to declare a dividend for the financial year ended 31 March 2014 (2013: R 0).

11. Property, plant and equipment

There was no change in the nature of the property, plant and equipment of the group or in the policy regarding their use.

The useful lives of certain property, plant and equipment have been revised during the current year. Refer to note 53 for more detail.

The correction of prior period errors resulted in adjustments. Refer to note 55 for more detail.

In terms of the ICASA license agreement the South African Post Office (SOC) Limited is required to own a museum which contains assets of a historical nature, including stamps, paintings, artifacts and machinery. These assets have been recognised for the first time in the current financial year after management catalogued and valued the assets. Refer to note 3 for more detail.

12. Share capital

2014 2013 2012

‘000 ‘000 ‘000

NuMBER OF SHARESAuthorised

Ordinary par value shares of R1 each 1,000,000 1,000,000 1,000,000

2014 2013 2014 2013

‘000 ‘000 NuMBER OF SHARESIssued

Ordinary par value shares 200,940 200,940 200,939,821 200,939,821

There have been no changes to the authorised or issued share capital during the year under review.

13. Interests in subsidiaries

Details of material interests in subsidiary companies are presented in the consolidated annual financial statements in note 7.

Directors’ Report

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The interest of the group in the profits and losses after tax of its subsidiaries for the year ended 31 March 2014 are as follows:

COMPANY2014 2013 2012

R ‘000 R ‘000 R ‘000Centriq Insurance Innovation Limited - - -Sapos Properties (Bloemfontein) (Pty) Ltd (25) (28) (25)Sapos Properties (Cape Town) (Pty) Ltd (102) (29) (36)Sapos Properties (East Rand) (Pty) Ltd (309) (165) (135)Sapos Properties (Port Elizabeth) (Pty) Ltd 188 (124) (189)Sapos Properties (Rossburgh) (Pty) Ltd 34 48 49The Courier and Freight Group (Pty) Ltd (75,345) (60,884) (47,134)The Document Exchange (Pty) Ltd 1,735 (826) 724Total interest in profits and losses after tax (73,824) (62,008) (46,746)

As detailed in note 54, the group adopted “IFRS 10 Consolidated Financial Statements” in the current year, which resulted in Centriq Insurance Innovation (Pty) Ltd, an investee which was previously consolidated under IAS 27 or SIC-12, to no longer be consolidated into the group.

The South African Post Office (SOC) Limited has undertaken to provide the Courier and Freight Group (Pty) Ltd with financial support as per the approved corporate plan and budgets as approved by the shareholder. Subordination agreements are in place for each of the following subsidiaries:

• Sapos Properties (Bloemfontein) (Pty) Ltd

• Sapos Properties (Cape Town) (Pty) Ltd

• Sapos Properties (Rossburgh) (Pty) Ltd

• Sapos Properties (Port Elizabeth) (Pty) Ltd

• The Courier and Freight Group (Pty) Ltd

14. Fruitless and wasteful and irregular expenditure

As per the requirement of the board, the South African Post Office (SOC) Limited has formulated a Financial Misconduct Framework which creates a framework to enable the management of financial misconduct activities such as fruitless & wasteful and irregular expenditure.

A Financial Misconduct Committee has been established and mandated through the financial misconduct policy to regulate, monitor and report on all proven fruitless, wasteful and irregular expenditure and institute management consequences that need to be carried out.

The Financial Misconduct Committee is reviewing certain instances of potential non-compliance with laws, policies and procedures and will report on them, if there are any, in the next reporting period.

The total fruitless and wasteful expenditure for the group for the year amounted to R 41,197 million (2013: R 39,132 million). Refer to note 48 for more detail.

The total irregular expenditure for the group for the year amounted to R 71,012 million (2013: R 45,653 million). Refer to note 50 for more detail.

15. Postbank corporatisation

During the 2010/2011 financial period the South African Postbank Limited Act no 9 of 2010 was signed into law providing for the establishment of a subsidiary company of the South Africa Post Office SOC Limited, namely the South African Postbank Limited, to which the designated assets and liabilities of the current Postbank division will be transferred in terms of the Postbank Act No 9 of 2010. It is envisaged that the new subsidiary will operate as a fully fledged bank and will be regulated in terms of the Banks Act. The Application to Establish a Bank was submitted to the South African Reserve Bank on 25 September 2013.

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101



16. Liquidity and solvency

The directors have performed the required liquidity and solvency tests required by the Companies Act No 71 of 2008 (refer to note 47 - Going concern).

17. Going concern

For the year ended 31 March 2014 the group generated net losses of R 361,210 million (2013: R 226,881 million), while the total assets exceeded the total liabilities by R 2,438 billion (2013: R 2,305 billion), which implies that the entity is technically solvent.

The organisation has been experiencing cash constraints, and as such has not had sufficient working capital. The cause of the deterioration of the group’s liquidity position is both due to internal and external factors, such as the migration of customers towards digital communication, a general decline in the mail business revenue as well as an inappropriate and inefficient business model. This has resulted in the group not generating sufficient revenue to finance its high cost-base and thus a material uncertainty of the entity’s ability to continue as a going concern for the foreseeable future.

To assist the entity with working capital, realising its assets and discharging its liabilities in the normal course of business, an overdraft of R 320 million has been secured with Standard Bank, which is guaranteed by the Shareholder. In addition, the directors have received a letter of guarantee of R 1,67 billion from the shareholder to act as a letter of comfort to the creditors, which also supports the going concern assumption on which the financial statements have been prepared. The terms of the guarantee are as follows:

• The guarantee will be reduced by any appropriation or transfer made by either the Department of Telecommunications andPostalServices(DTPS)oftheTreasurythroughthebudgetprocess;

• The South African Post Office (SOC) Limited will require Government approval of the terms of the financing raised againsttheguaranteebeforeconcludinganyagreements;

• Consideration is to be given to establishing a separate Postbank holding company independent of South African PostOffice(SOC)Limited,tobeestablishedanddesignatedasabankcontrollingcompanyforthePostbank;

• In addition, the net profit target will be reset in line with the latest net loss projections of R 676 million for the 2014/15financialyear;

• All salary increases must be approved by the Minister of Finance and the Minister of Telecommunications and PostalServices;

• Should labour increases exceed the assumptions included in the turnaround plan, measures will have to be taken toensurethatoverallsalarybillremainswiththebudgetsidentifiedintheturnaroundplan;

• The R 1,67 billion guarantee specifically excludes the guaranteeing of the overdraft facility as this was not included intheheadroomcalculations;

• All conditions attached to the R 320 million also applies to this guarantee.

The directors have had to critically examine the financial health of the organisation and as a result a new operation model has been designed. This seeks to address the high fixed cost structure and will see the organisation freeing up cash of R1,5 billion over the next 3 years, which in turn will lead to better working capital management with less dependency on the overdraft facility. Accordingly the consolidated annual financial statements have been prepared on a going concern basis.

18. Borrowing limitations

The company is a Schedule 2 entity as per the Public Finance Management Act. In terms of Section 66 (3) (a), the accounting authority may not borrow money or issue a guarantee, indemnity or security, or enter into any other transaction that binds or may bind that public entity to any financial commitment.

19. Special resolutions

No special resolutions, the nature of which might be significant to the shareholder in their appreciation of the state of affairs of the group were made by the group or any of its subsidiaries during the period covered by this report.

Directors’ Report

102



20. Events after the reporting period

Appointment of Administrator

On 7 November 2014, all the non-executive members of the Board resigned and duly the board and all of its committees dissolved. Dr Simo Lushaba was appointed as administrator in terms of Section 25 of the South African Post Office Act No 22 of 2011 (as amended). As at 31 March 2014, the Board (in compliance with King III) and all its committees were active and functioning.

Industrial Strike Action

From July 2014 to November 2014, the company was subject to industrial strike action. This action has resulted in loss of income and future income due to services not being rendered, delays in receipt of debtors payments, damage to and loss of fixed assets, increased security costs and injuries on duty (IODs). The estimated reported insurance claims, IODs and Criminal cases value amounts to approximately R 6,2 million. This is however a non-adjusting balance sheet event and the assets at 31 March 2014 are fairly stated.

Reportable Irregularities

The company has been issued with the following Reportable Irregularities as defined in the Auditing Profession Act 2005:

• Contravention of the Companies Act No 71 of 2008: Section 129(7) - Company resolution to begin business rescue proceedings, which states that if the board of a company has reasonable grounds to believe that the company is financially distressed, but the board has not adopted a resolution contemplated in this section, the board must deliver a written notice to each affected person, setting out the criteria referred to in section 128(1)(f) that are applicable to the company, and its reasons for not adopting a resolution contemplated in this section.

• Contravention of the Companies Act No 71 of 2008: Section 45 - Financial assistance to directors, which places a limitation on a company’s board of directors’ powers, namely that despite any provision of a company’s Memorandum of Incorporation to the contrary, the board of directors may not authorise any financial assistance to a related or inter-related company unless pursuant to a special resolution of the shareholders.

• Contravention of the Companies Act No 71 of 2008: Section 30(1) - Annual financial statements, as well as contravention of the Public Finance Management Act No 1 of 1999: Section 55(1) - Annual report and financial statements, which requires the consolidated and separate annual financial statements to be approved and audited within five months (six months per the Companies Act) after year end.

The company is in constant contact with the joint auditors and CIPC in order to resolve these Reportable Irregularities.

21. Litigation statement

The group becomes involved from time to time in various claims and lawsuits incidental to the ordinary course of business.

The group is not currently involved in any such claims or lawsuits, which individually or in the aggregate, are expected to have a material adverse effect on the business or its assets.

22. Insurance and risk management

The group follows a policy of reviewing the risks relating to assets and possible liabilities arising from business transactions with its insurers on an annual basis. Wherever possible assets are automatically included. There is also a continuous asset risk control programme, which is carried out in conjunction with the group’s insurance brokers. All risks are considered to be adequately covered, except for political risks, in the case of which as much cover as is reasonably available has been arranged.

23. Date of authorisation for issue of financial statements

The consolidated annual financial statements have been authorised for issue by the directors on 15 December 2014. No authority was given to anyone to amend the consolidated annual financial statements after the date of issue.

24. Acknowledgements

Thanks and appreciation are extended to all of our shareholders, staff, suppliers and consumers for their continued support of the group.

Directors’ Report

103



GROuP COMPANY

Note(s)2014

R ‘000

2013(Restated)

R ‘000

2012 (Restated)

R ‘000

2014

R ‘000

2013(Restated)

R ‘000

2012 (Restated)

R ‘000

Assets

Non-Current Assets

Heritage assets 3 21,964 - - 21,964 - -

Investment property 4 20,686 21,161 20,379 20,686 21,161 20,379

Property, plant and equipment 5 1,367,609 1,325,223 1,324,322 1,347,422 1,303,355 1,298,815

Intangible assets 6 89,913 85,604 64,439 89,299 84,443 62,729

Investments in subsidiaries 7 - - - 17,744 17,589 17,694

Loans and long term receivables to group companies 8 - - - 3,488 2,905 2,851

Investments and other financial assets 9 653,485 645,367 606,319 653,485 645,367 606,319

Deferred tax 10 800,568 654,537 537,104 798,017 651,308 534,245

2,954,225 2,731,892 2,552,563 2,952,105 2,726,128 2,543,032

Current Assets

Inventories 11 77,389 50,854 61,293 77,125 50,812 61,102

Loans and long term receivables to group companies 8 - - - - 38,921 -

Investments and other financial assets 9 3,647,981 4,073,966 4,301,742 3,632,369 4,058,966 4,286,742

Current tax receivable 12 114 34,292 503 - 34,163 -

Operating lease asset 13 26 6 - - - -

Trade and other receivables 14 600,592 593,701 521,481 558,076 544,124 458,778

Cash and cash equivalents 15 4,011,114 3,276,755 3,277,136 3,974,896 3,237,394 3,237,102

8,337,216 8,029,574 8,162,155 8,242,466 7,964,380 8,043,724

Non-current assets held for sale 16 - - 201 - - -

Total Assets 11,291,441 10,761,466 10,714,919 11,194,571 10,690,508 10,586,756

Statement of Financial Position as at 31 March 2014

104



GROuP COMPANY

Note(s)2014

R ‘000

2013(Restated)

R ‘000

2012 (Restated)

R ‘000

2014

R ‘000

2013(Restated)

R ‘000

2012 (Restated)

R ‘000

Equity and Liabilities

Equity

Share capital 17 200,940 200,940 200,940 200,940 200,940 200,940

Non-distributable reserves 18 & 19 & 20

1,313,470 796,709 794,879 1,313,470 796,709 794,879

Retained income 923,886 1,307,341 1,646,294 927,426 1,333,321 1,649,955

2,438,296 2,304,990 2,642,113 2,441,836 2,330,970 2,645,774

Liabilities

Non-Current Liabilities

Operating lease accrual 13 76,491 48,720 44,047 76,134 48,498 43,507

Retirement benefit obligation 21 1,308,066 1,310,187 1,177,399 1,307,524 1,309,615 1,176,861

Deferred tax 10 244,287 251,127 207,998 243,422 250,594 207,441

Provisions 22 399,348 372,788 282,877 393,594 366,981 270,067

2,028,192 1,982,822 1,712,321 2,020,674 1,975,688 1,697,876

Current Liabilities

Amount owing to shareholder 23 - 270,674 248,327 - 270,674 248,327

Government grants 24 85,305 94,401 108,670 85,305 94,401 108,670

Current tax payable 12 - - 7,947 - - 7,947

Operating lease accrual 13 3,637 20,421 16,255 3,123 19,044 15,159

Trade and other payables 25 809,000 702,563 738,284 737,900 648,136 662,226

Retirement benefit obligation 21 131,243 126,648 121,808 131,202 126,607 121,767

Unearned revenue 26 324,631 330,862 365,075 312,923 317,452 335,606

Provisions 22 330,109 313,629 251,589 320,580 293,080 240,874

Deposits from the public 27 4,737,610 4,492,211 4,257,864 4,737,610 4,492,211 4,257,864

Funds collected on behalf of third parties

28 92,040 122,245 244,666 92,040 122,245 244,666

Bank overdraft 15 311,378 - - 311,378 - -

6,824,953 6,473,654 6,360,485 6,732,061 6,383,850 6,243,106

Total Equity and Liabilities 11,291,441 10,761,466 10,714,919 11,194,571 10,690,508 10,586,756

Statement of Financial Position as at 31 March 2014

105



GROuP COMPANY

Note(s) 2014

R ‘000

2013(Restated)

R ‘000

2014

R ‘000

2013(Restated)

R ‘000

Revenue 31 5,778,440 5,689,545 5,397,961 5,314,240

Other income 32 202,286 227,043 297,453 248,187

Operating expenses (2,093,595) (2,058,326) (2,190,829) (2,032,893)

Employee costs (3,665,103) (3,369,687) (3,494,745) (3,215,404)

Transport costs (747,353) (648,068) (559,766) (453,047)

Operating loss 33 (525,325) (159,493) (549,926) (138,917)

Finance income 34 141,579 119,582 142,591 120,755

Fair value adjustments 35 65,019 98,855 65,019 98,855

Interest paid 36 (192,545) (317,534) (192,419) (316,642)

Loss before tax (511,272) (258,590) (534,735) (235,949)

Taxation 37 150,062 31,709 151,120 31,356

Loss for the year (361,210) (226,881) (383,615) (204,593)

Other comprehensive income (loss):

Items that will not be reclassified to profit or loss:

Remeasurements on net defined benefit asset (30,918) (155,639) (30,950) (155,611)

First time recognition of heritage assets 21,965 - 21,965 -

Income tax relating to items that will not be reclassified 4,565 43,571 4,565 43,571

Total items that will not be reclassified to profit or loss (4,388) (112,068) (4,420) (112,040)

Items that may be reclassified to profit or loss:

Available-for-sale financial assets adjustments 8,264 2,250 8,264 2,250

Income tax relating to items that may be reclassified (1,543) (420) (1,543) (420)

Total items that may be reclassified to profit or loss 6,721 1,830 6,721 1,830

Other comprehensive income (loss) for the year net of taxation

38 2,333 (110,238) 2,301 (110,210)

Total comprehensive loss for the year (358,877) (337,119) (381,314) (314,803)

Statement of Comprehensive Income

106



Share capital

Revaluation reserve

Fair value adjustment

assets- available-for-sale reserve

Convertibleloans fromshareholder

Total reserves

Retained income

Total equity

R ‘000 R ‘000 R ‘000 R ‘000 R ‘000 R ‘000 R ‘000

Group

Opening balance as previously reported 200,940 - 10 750,000 750,010 1,761,247 2,712,197

Adjustments

Prior period error - - - - - (16,396) (16,396)

Change in accounting policy - - 44,869 - 44,869 (98,554) (53,685)

Balance at 01 April 2012 as restated 200,940 - 44,879 750,000 794,879 1,646,297 2,642,116

Loss for the year - - - - - (226,881) (226,881)

Other comprehensive income (loss) - - 1,830 - (1,830) (112,068) (110,238)

Total comprehensive income (loss) for the year - - 1,830 - (1,830) (338,949) (337,119)

Balance at 01 April 2013 200,940 - 46,709 750,000 796,709 1,307,348 2,304,997

Loss for the year - - - - - (361,210) (361,210)

Other comprehensive income (loss) - 17,864 6,721 - 24,585 (22,252) 2,333

Total comprehensive income (loss) for the year - 17,864 6,721 - 24,585 (383,462) (358,877)

Convertible loans from shareholder - - - 492,176 492,176 - 492,176

Total contributions by owners of company recognised directly in equity

- - - 492,176 492,176 - 492,176

Balance at 31 March 2014 200,940 17,864 53,430 1,242,176 1,313,470 923,886 2,438,296

Note(s) 17 18 & 38 19 & 38 20 38

Statement of Changes in Equity

107



Share capital

Revaluation reserve

Fair value adjustment

assets- available-for-sale reserve

Convertibleloans fromshareholder

Total reserves

Retained income

Total equity

R ‘000 R ‘000 R ‘000 R ‘000 R ‘000 R ‘000 R ‘000

Company

Opening balance as previously reported 200,940 - 10 750,000 750,010 1,709,935 2,660,885

Adjustments

Prior year error - - - - - (16,399) (16,399)

Change in accounting policy - - 44,869 - 44,869 (43,578) 1,291

Balance at 01 April 2012 as restated 200,940 - 44,879 750,000 794,879 1,649,958 2,645,777

Loss for the year - - - - - (204,593) (204,593)

Other comprehensive income (loss) - - 1,830 - 1,830 (112,040) (110,210)

Total comprehensive income (loss) for the year - - 1,830 - 1,830 (316,633) (314,803)

Balance at 01 April 2013 200,940 - 46,709 750,000 796,709 1,333,325 2,330,974

Loss for the year - - - - - (383,615) (383,615)

Other comprehensive income (loss) - 17,864 6,721 - 24,585 (22,284) 2,301

Total comprehensive income (loss) for the year - 17,864 6,721 - 24,585 (405,899) (381,314)

Convertible loans from shareholder - - - 492,176 492,176 - 492,176

Total contributions by owners of company recognised directly in equity

- - - 492,176 492,176 - 492,176

Balance at 31 March 2014 200,940 17,864 53,430 1,242,176 1,313,470 927,426 2,441,836

Note(s) 17 18 & 38 19 & 38 20 38

Statement of Changes in Equity

108



GROuP COMPANY

Note(s)2014

R ‘000

2013Restated

R ‘000

2014

R ‘000

2013Restated

R ‘000

Cash flows used in operating activities

Cash used in operations 40 (317,136) (191,930) (355,418) (147,892)

Interest received 141,579 117,665 142,591 118,838

Dividends received - 1,917 - 1,917

Interest paid (192,545) (315,962) (192,419) (316,642)

Tax received (paid) 41 34,133 (41,342) 34,163 (41,675)

Net cash used in operating activities (333,969) (429,652) (371,083) (385,454)

Cash flows used in investing activities

Purchase of property, plant and equipment

5 (166,478) (110,161) (165,693) (108,075)

Sale of property, plant and equipment 5 - 11,267 - 4,513

Purchase of investment property 4 (39) (352) (39) (352)

Purchase of other intangible assets 6 (18,082) (47,628) (18,080) (47,627)

Loans to group companies repaid - - 38,858 -

Loans advanced to group companies - - - (38,858)

Net movement in financial assets 491,150 289,833 491,762 289,833

Net cash from investing activities 306,551 142,959 346,808 99,434

Cash flows from financing activities

Proceeds from government grant - 51,965 - 51,965

Movement in deposits from the public 245,399 234,347 245,399 234,347

Proceeds from shareholders loan 205,000 - 205,000 -

Net cash from financing activities 450,399 286,312 450,399 286,312

Total cash movement for the year 422,981 (381) 426,124 292

Cash at the beginning of the year 3,276,755 3,277,136 3,237,394 3,237,102

Total cash at the end of the year 15 3,699,736 3,276,755 3,663,518 3,237,394

Statement of Cash Flows

109

Notes to the Consolidated Annual Financial Statements

South African Post Office (SOC) Limited (Registration number 1991/005477/06) Consolidated Annual Financial Statements for the year ended 31 March 2014

South African Post Office SOC Limited (Registration number 1991/005577/06)Integrated Report 2014

1. Accounting Policies

1.1 Presentation of Consolidated Annual Financial Statements

The consolidated annual financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), and the Companies Act 71 of 2008. The annual financial statements have been prepared on the historical cost basis, except for available-for-sale financial assets that are carried at fair value and all other financial assets and financial liabilities that are measured at fair value through profit and loss. These annual financial statements incorporate the principal accounting policies set out below. They are presented in South African Rands.

These accounting policies are consistent with the previous year, except for the changes set out in note 54 - Changes in accounting policy.

1.2 Consolidation

Basis of consolidation

The consolidated annual financial statements incorporate the consolidated annual financial statements of the group and all investees which are controlled by the group.

Thegrouphascontrolofaninvesteewhenithaspowerovertheinvestee;itisexposedtoorhasrightstovariablereturnsfrominvolvementwiththeinvestee;andithastheabilitytouseitspowerovertheinvesteetoaffecttheamountoftheinvestor’s returns.

The results of subsidiaries are included in the consolidated annual financial statements from the effective date of acquisition to the effective date of disposal.

Adjustments are made when necessary to the consolidated annual financial statements of subsidiaries to bring their accounting policies in line with those of the group.

All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.

Subsidiaries

Subsidiaries are all entities (including structured entities) over which the group has control. The group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases.

The group accounts for business combinations using the acquisition method of accounting. The cost of the business combination is measured as the aggregate of the fair values of assets given, liabilities incurred or assumed and equity instruments issued. Costs directly attributable to the business combination are expensed as incurred, except the costs to issue debt which are amortised as part of the effective interest and costs to issue equity which are included in equity.

Contingent consideration is included in the cost of the combination at fair value as at the date of acquisition. Subsequent changes to the assets, liability or equity which arise as a result of the contingent consideration are not affected against goodwill, unless they are valid measurement period adjustments. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IAS 39 either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not re-measured, and its subsequent settlement is accounted for within equity.

The acquiree’s identifiable assets, liabilities and contingent liabilities which meet the recognition conditions of IFRS 3 Business combinations are recognised at their fair values at acquisition date, except for non-current assets (or disposal group) that are classified as held-for-sale in accordance with IFRS 5 Non-current assets held-for-sale and discontinued operations, which are recognised at fair value less costs to sell.

110




1. Accounting Policies (continued)

1.2 Consolidation (continued)

Contingent liabilities are only included in the identifiable assets and liabilities of the acquiree where there is a present obligation at acquisition date.

On acquisition, the group assesses the classification of the acquiree’s assets and liabilities and reclassifies them where the classification is inappropriate for group purposes. This excludes lease agreements and insurance contracts, whose classification remains as per their inception date.

Non-controlling interests arising from a business combination, which are present ownership interests, and entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation, are measured either at the present ownership interests’ proportionate share in the recognised amounts of the acquiree’s identifiable net assets or at fair value. The treatment is not an accounting policy choice but is selected for each individual business combination, and disclosed in the note for business combinations. All other components of non-controlling interests are measured at their acquisition date fair values, unless another measurement basis is required by IFRS’s.

In cases where the group held a non-controlling shareholding in the acquiree prior to obtaining control, that interest is

measured to fair value as at acquisition date. The measurement to fair value is included in profit or loss for the year. Where the existing shareholding was classified as an available-for-sale financial asset, the cumulative fair value adjustments recognised previously to other comprehensive income and accumulated in equity are recognised in profit or loss as a reclassification adjustment.

Goodwill is determined as the consideration paid, plus the fair value of any shareholding held prior to obtaining control, plus non-controlling interest and less the fair value of the identifiable assets and liabilities of the acquiree. If the total of consideration transferred, non-controlling interest recognised and eviously held interest measured is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in the income statement.

Goodwill is not amortised but is tested on an annual basis for impairment. If goodwill is assessed to be impaired, that impairment is not subsequently reversed.

Goodwill arising on acquisition of foreign entities is considered an asset of the foreign entity. In such cases the goodwill is translated to the functional currency of the group at the end of each reporting period with the adjustment recognised in equity through to other comprehensive income.

Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. unrealised losses are also eliminated. When necessary amounts reported by subsidiaries have been adjusted to conform with the group’s accounting policies.

1.3 Significant judgements and sources of estimation uncertainty

In preparing the consolidated annual financial statements, management is required to make estimates and assumptions that affect the amounts represented in the consolidated annual financial statements and related disclosures. Use of available information and the application of judgement is inherent in the formation of estimates. Actual results in the future could differ from these estimates which may be material to the consolidated annual financial statements. Significant judgements include:

111





1.3 Significant judgements and sources of estimation uncertainty (continued)

Trade receivables, Held to maturity investments and Loans and receivables

The group assesses its trade receivables, held to maturity investments and loans and receivables for impairment at the end of each reporting period. In determining whether an impairment loss should be recorded in profit or loss, the group makes judgements as to whether there is observable data indicating a measurable decrease in the estimated future cash flows from a financial asset.

The impairment for trade receivables, held to maturity investments and loans and receivables is calculated on a portfolio basis, based on historical loss ratios, adjusted for national and industry-specific economic conditions and other indicators present at the reporting date that correlate with defaults on the portfolio. These annual loss ratios are applied to loan balances in the portfolio and scaled to the estimated loss emergence period.

Available-for-sale financial assets

The group follows the guidance of IAS 39 to determine when an available-for-sale financial asset is impaired. This determination requires significant judgment. In making this judgment, the group evaluates, among other factors, the durationandextenttowhichthefairvalueofaninvestmentislessthanitscost;andthefinancialhealthofandnear-termbusiness outlook for the investee, including factors such as industry and sector performance, changes in technology and operational and financing cash flow.

Allowance for slow moving, damaged and obsolete stock

An allowance was made for stock to be written down to the lower of cost or net realisable value. Management has made estimates of the selling price and direct cost to sell on certain inventory items.

Fair value estimation

The fair value of financial instruments traded in active markets (such as trading and available-for-sale securities) is based on quoted market prices at the end of the reporting period. The quoted market price used for financial assets held by the group is the current bid price.

The fair value of financial instruments that are not traded in an active market (for example, over the counter derivatives) is determined by using valuation techniques. The group uses a variety of methods and makes assumptions that are based on market conditions existing at the end of each reporting period. Quoted market prices or dealer quotes for similar instruments are used for long-term debt. Other techniques, such as estimated discounted cash flows, are used to determine fair value for the remaining financial instruments.

The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values.

The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the group for similar financial statements.

Impairment testing of non - financial assets

The recoverable amounts of cash-generating units and individual assets have been determined based on the higher of value in use calculations and fair values less costs to sell. These calculations require the use of estimates and assumptions. It is reasonably possible that assumptions may change which may then impact estimations and may then require a material adjustment to the carrying value of tangible assets.

112





1.3 Significant judgements and sources of estimation uncertainty (continued)

The group reviews and tests the carrying value of assets when events or changes in circumstances suggest that the carrying amount may not be recoverable.

Provisions

Provisions were raised and management determined an estimate based on the information available.

Expected manner of realisation for deferred tax

Deferred tax is provided for on the fair value adjustments of investment properties based on the expected manner of recovery, i.e. sale or use. This manner of recovery affects the rate used to determine the deferred tax liability.

Taxation

Judgement is required in determining the provision for income taxes due to the complexity of legislation. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. 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.

The group recognises the net future tax benefit related to deferred income tax assets to the extent that it is probable that the deductible temporary differences will reverse in the foreseeable future. Assessing the recoverability of deferred income tax assets requires the group to make significant estimates related to expectations of future taxable income. Estimates of future taxable income are based on forecast cash flows from operations and the application of existing tax laws in each jurisdiction. To the extent that future cash flows and taxable income differ significantly from estimates, the ability of the group to realise the net deferred tax assets recorded at the end of the reporting period could be impacted.

Site restoration and dismantling cost

Decommissioning costs that are expected to be incurred upon the termination or conclusion of lease agreements have been capitalised in terms of the relevant lease agreements. It is uncertain whether these leases will be extended or terminated earlier and this creates uncertainties regarding the amount and timing of the cash flows. There are no expected reimbursements for the costs that will be incurred.

The main assumptions used in the calculation of this capitalisation are as follows:

The Universal Service Obligations (USO) obliges the South African Post Office (SOC) Limited to expand its presence in South Africa (SA), especially in rural SA. This means that the South African Post Office (SOC) Limited would most probably not reduce the number of leasehold premises, but instead expand its presence to more buildings. The type of leasehold premises has been taken into account in arriving at a conclusion regarding possible restoration. A vacant stand with a Mail Collection Point (MCP) would probably not require restoration should they ever wish to relocate. The South African Post Office (SOC) Limited may not wish to relocate from shopping centres and malls. In the event that it does relocate the terms of the lease and the nature of its business are such that restoration of the premises would not be required. The date that the South African Post Office (SOC) Limited originally occupied the leasehold premises is also an indication of the chances of ever moving out of the premises, thus negating the liability to restore such leasehold premises. During the 2014 financial period, the South African Post Office (SOC) Limited relocated from 16 (2013: 16) leasehold premises of which six (2013: six) of the lessors required restoration, thus further supporting the expectation that relocation and thus restoration would not occur in most instances.

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1.4 Heritage assets

An entity shall recognise a heritage asset when, and only when:

• theentitycontrolstheassetasaresultofpastevents;

• itisprobablethatfutureeconomicbenefitsassociatedwiththeassetwillflowtotheentity;and

• the fair value or cost of the asset can be measured reliably.

Heritage assets are measured at their fair value less costs to sell.

The fair value of heritage assets is determined based on market prices in the local area.

A gain or loss arising on initial recognition of heritage assets at fair value less costs to sell is included in other comprehensive income for the period in which it arises.

Revaluations are made with sufficient regularity such that the carrying amount does not differ materially from that which would be determined using fair value at the end of the reporting period.

Any increase in an asset’s carrying amount, as a result of a revaluation, is credited to other comprehensive income and accumulated in the revaluation surplus in equity. The increase is recognised in profit or loss to the extent that it reverses a revaluation decrease of the same asset previously recognised in profit or loss.

Any decrease in an asset’s carrying amount, as a result of a revaluation, is recognised in profit or loss in the current period.The decrease is debited in other comprehensive income to the extent of any credit balance existing in the revaluation surplus in respect of that asset.

1.5 Investment property

Investment property is recognised as an asset when, and only when, it is probable that the future economic benefits that are associated with the investment property will flow to the enterprise, and the cost of the investment property can be measured reliably.

Investment property is initially recognised at cost. Transaction costs are included in the initial measurement.

Investment property is carried at cost less depreciation and any accumulated impairment losses.

Depreciation is provided to write down the cost, less estimated residual value on straight line basis over the useful life of the property, which is as follows:

Item useful life

Buildings 30 - 100 years

Land Indefinite

The residual value, useful life and depreciation method of each asset are reviewed at the end of each reporting period. If the expectations differ from previous estimates, the change is accounted for as a change in accounting estimate.

The depreciation charge for each period is recognised in profit or loss.

1.6 Property, plant and equipment

The cost of an item of property, plant and equipment is recognised as an asset when:

• itisprobablethatfutureeconomicbenefitsassociatedwiththeitemwillflowtothegroup;and

• the cost of the item can be measured reliably.

Property, plant and equipment is initially measured at cost.

Costs include costs incurred initially to acquire or construct an item of property, plant and equipment and costs incurred subsequently to add to, replace part of, or service it. If a replacement cost is recognised in the carrying amount of an item of property, plant and equipment, the carrying amount of the replaced part is derecognised.

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1.6 Property, plant and equipment (continued)

The initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located is also included in the cost of property, plant and equipment, where the entity is obligated to incur such expenditure, and where the obligation arises as a result of acquiring the asset or using it for purposes other than the production of inventories.

Property, plant and equipment is carried at cost less accumulated depreciation and any impairment losses.

Property, plant and equipment is depreciated on the straight line basis over their expected useful lives to their estimated residual value.

The useful lives of items of property, plant and equipment have been assessed as follows:

Item Average useful life

Assets under construction Not depreciated until asset is complete and in use

Buildings 30 - 100 years

Data processing equipment 3 - 8 years

Furniture and fixtures 3 - 12 years

Land Indefinite

Leasehold improvements Term of the lease

Motor vehicles 3 - 20 years

Plant and machinery 3 - 20 years

Site restoraion Expected term of the lease

The residual value, useful life and depreciation method of each asset are reviewed at the end of each reporting period. If the expectations differ from previous estimates, the change is accounted for as a change in accounting estimate.

The depreciation charge for each period is recognised in profit or loss.

The gain or loss arising from the derecognition of an item of property, plant and equipment is included in profit or loss when the item is derecognised. The gain or loss arising from the derecognition of an item of property, plant and equipment is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item.

1.7 Site restoration and dismantling cost

The company has an obligation to dismantle, remove and restore items of property, plant and equipment. Such obligations are referred to as ‘decommissioning, restoration and similar liabilities’. The cost of an item of property, plant and equipment includes the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, the obligation for which an entity incurs either when the item is acquired or as a consequence of having used the item during a particular period for purposes other than to produce inventories during that period. These assets are individually considered and depreciated over the expected lease term rather than the actual lease contract.

If the related asset is measured using the revaluation model:

a. Changes in the liability alter the revaluation surplus or deficit previously recognised on that asset, so that:

– a decrease in the liability (subject to (b)) is credited to other comprehensive income and accumulated in the revaluation surplus in equity, except that it is recognised in profit or loss to the extent that it reverses a revaluationdeficitontheassetthatwaspreviouslyrecognisedinprofitorloss;and

– an increase in the liability is recognised in profit or loss, except that it is debited to other comprehensive income as a decrease to the revaluation surplus to the extent of any credit balance existing in the revaluation surplus in respect of that asset.

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1.7 Site restoration and dismantling cost (continued)

b. In the event that a decrease in the liability exceeds the carrying amount that would have been recognised had the asset been carried under the cost model, the excess is recognised immediately in profit or loss.

c. A change in the liability is an indication that the asset may have to be revalued in order to ensure that the carrying amount does not differ materially from that which would be determined using fair value at the end of the reporting period. Any such revaluation is taken into account in determining the amounts to be taken to profit or loss and to other comprehensive income under (a). If a revaluation is necessary, all assets of that class are revalued.

1.8 Intangible assets

An intangible asset is recognised when:

• itisprobablethattheexpectedfutureeconomicbenefitsthatareattributabletotheassetwillflowtotheentity;and

• the cost of the asset can be measured reliably.

Intangible assets are initially recognised at cost.

An intangible asset arising from development (or from the development phase of an internal project) is recognised when:

• it is technically feasible to complete the asset so that it will be available for use or sale.

• there is an intention to complete and use or sell it.

• there is an ability to use or sell it.

• it will generate probable future economic benefits.

• there are available technical, financial and other resources to complete the development and to use or sell the asset.

• the expenditure attributable to the asset during its development can be measured reliably.

Intangible assets are carried at cost less any accumulated amortisation and any impairment losses.

The amortisation period and the amortisation method for intangible assets are reviewed regularly.

Internally generated brands, mastheads, publishing titles, customer lists and items similar in substance are not recognised as intangible assets.

Amortisation is provided to write down the intangible assets, on a straight line basis, to their residual values as follows:

Item Average useful life

Intangible assets under development Not amortised until asset is complete and in use

Licenses 1-3

Software 2-8

Software - personal computers 1-3

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1.9 Interests in subsidiaries

Company consolidated annual financial statements

In the company’s separate consolidated annual financial statements, investments in subsidiaries are carried at cost less any accumulated impairment.

The cost of an investment in a subsidiary is the aggregate of:

• the fair value, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issuedbythecompany;plus

• any costs directly attributable to the purchase of the subsidiary.

1.10 Financial instruments

Classification

The group classifies financial assets and financial liabilities into the following categories:

• Financial assets at fair value through profit or loss - held for trading

• Financial assets at fair value through profit or loss - designated

• Held-to-maturity investment

• Loans and receivables

• Available-for-sale financial assets

• Financial liabilities at fair value through profit or loss - designated

• Financial liabilities measured at amortised cost

Classification depends on the purpose for which the financial instruments were obtained/incurred and takes place at initial recognition. Classification is re-assessed on an annual basis, except for derivatives and financial assets designated as at fair value through profit or loss, which shall not be classified out of the fair value through profit or loss category.

A financial asset classified as available-for-sale that would have met the definition of loans and receivables may be reclassified to loans and receivables if the entity has the intention and ability to hold the asset for the foreseeable future or until maturity.

Initial recognition and measurement

Financial instruments are recognised initially when the group becomes a party to the contractual provisions of the instruments.

The group classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the contractual arrangement.

Financial instruments are measured initially at fair value, except for equity investments for which a fair value is not determinable, which are measured at cost and are classified as available-for-sale financial assets.

For financial instruments which are not at fair value through profit or loss, transaction costs are included in the initial measurement of the instrument.

Transaction costs on financial instruments at fair value through profit or loss are recognised in profit or loss.

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1.10 Financial instruments (continued)

Regular way purchases of financial assets are accounted for at trade date. Investments are recognised and derecognised on trade date. Trade day is defined as the day where all risks and rewards associated with the investment are transferred and where the purchase or sale of an investment is under a contract whose terms require delivery of the instrument within the timeframe established by the market concerned. The initial measurement is at fair value plus transaction costs, except fort hose financial assets classified at FVTPL which are initially measured at fair value.

Subsequent measurement

Financial instruments at fair value through profit or loss are subsequently measured at fair value, with gains and losses arising from changes in fair value being included in profit or loss for the period.

Net gains or losses on the financial instruments at fair value through profit or loss exclude dividends and interest.

Dividend income is recognised in profit or loss as part of other income when the group’s right to receive payment is established.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables are subsequently measured at amortised cost, using the effective interest method, less accumulated impairment losses. Interest income is recognised by applying the effective interest rate except for short-term receivables where the recognition of interest would be immaterial.

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity that the group has the intent and ability to hold to maturity. Held-to-maturity investments are subsequently measured at amortised cost, using the effective interest method, less accumulated impairment losses, with revenue recognised on an effective yield basis. The group’s cash on hand and cash in the bank equivalents and short-term deposits (i.e fixed and cancelable deposits) are included in the held-to-maturity category.

Financial assets are classified as available-for-sale where the intention with regard to the instrument and its origination does not fall within the ambit of other financial asset classification. Available-for-sale financial assets are measured at fair value, with fair value gains and losses recognised directly in other comprehensive income as the available-for-sale equity revaluation reserve. Interest is calculated using the effective interest method. Where the financial asset is disposed of or is determined to be impaired, the cumulative gain or loss previously recognised in the available for sale reserve is included in profit or loss for the period. Negotiable Certificates of Deposits (NCDs) and equity investments held by the group are classified under available-for-sale financial assets. Available-for-sale financial assets are subsequently measured at fair value. This excludes equity investments for which a fair value is not determinable, which are measured at cost less accumulated impairment losses.

Gains and losses arising from changes in fair value are recognised in other comprehensive income and accumulated in equity until the asset is disposed of or determined to be impaired. Interest on available-for-sale financial assets calculated using the effective interest method is recognised in profit or loss as part of other income. Dividends received on available-for-sale equity instruments are recognised in profit or loss as part of other income when the group’s right to receive payment is established.

Dividends on available-for-sale equity instruments are recognised in profit or loss when the group’s right to receive dividends is established. Financial assets may be designated as available-for-sale in accordance with the group Asset and Liability Management (ALM) investment strategy.

Financial liabilities at amortised cost are subsequently measured at amortised cost, using the effective interest method.

Financial liabilities at FVTPL are subsequently measured at fair value excluding transaction cost on disposal. Change in fair value is directly recognised in profit and loss.

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Derecognition

Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the group has transferred substantially all risks and rewards of ownership. If the group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the group retains substantially all the risks and rewards of ownership of the transferred financial asset, the group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.

Regular way sales of financial assets are accounted for at trade date.

A financial liability (or part of a financial liability) is derecognised and removed from the Statement of Financial Position when it is extinguished, that is, when the obligation is discharged, cancelled or expires.

An exchange between an existing borrower and lender of debt instruments with substantially different terms, or the modification of the terms of the existing financial liability, shall be recognised as an extinguishments of the original financial liability and the recognition of a new financial liability.

Fair value determination

The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities), the group establishes fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, and option pricing models making maximum use of market inputs and relying as little as possible on entity-specific inputs.

Impairment of financial assets

Financial assets, other than those at FVTPL, are assessed for indications of impairment during the reporting period and at each reporting date in line with the group’s treasury policy. Financial assets are impaired where there is objective evidence that, as result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the financial asset have been impacted.

For amounts due to the group, significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy and default of payments are all considered indicators of impairment.

In the case of equity securities classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is considered an indicator of impairment. If any such evidence exists for available-for-sale financial assets, the cumulative loss - measured as the difference between the acquisition cost and current fair value, less any impairment loss on that financial asset previously recognised in profit or loss - is removed from equity as a reclassification adjustment to other comprehensive income and recognised in profit or loss.

Impairment losses are recognised in profit or loss.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectable, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in the profit or loss. The group’s policy on the impairment of trade and other receivables is outlined in the below paragraphs of this note.

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Impairment losses are reversed when an increase in the financial asset’s recoverable amount can be related objectively to an event occurring after the impairment was recognised, subject to the restriction that the carrying amount of the financial asset at the date that the impairment is reversed shall not exceed what the carrying amount would have been had the impairment not been recognised.

Reversals of impairment losses are recognised in profit or loss except for equity investments classified as available-for-sale.

Impairment losses are also not subsequently reversed for available-for-sale equity investments which are held at cost because fair value was not determinable.

Where financial assets are impaired through the use of an allowance account, the amount of the loss is recognised in profit or loss within operating expenses. When such assets are written off, the write off is made against the relevant allowance account. Subsequent recoveries of amounts previously written off are credited against operating expenses.

Financial instruments designated as at FVTPL

Financial assets may be designated at initial recognition as at FVTPL if any of the following criteria are met:

• the designation eliminates or significantly reduces the inconsistent treatment that would otherwise arise from measuringtheassetsandliabilitiesorrecognisinggainsorlossesonthemonadifferentbasis;

• the assets and liabilities are part of a group of financial assets which are managed and their performance evaluated onafairvaluebasis,inaccordancewithadocumentedriskmanagementstrategy;or

• the financial assets and liabilities contain an embedded derivative that would need to be separately recorded.

Loans to (from) group companies

These include loans to and from holding companies, fellow subsidiaries and subsidiaries are recognised initially at fair value plus direct transaction costs.

Loans to group companies are classified as loans and receivables.

Loans from group companies are classified as financial liabilities measured at amortised cost.

Loans from the shareholder

These financial liabilities are classified as financial liabilities measured at amortised cost.

Trade and other receivables

Trade receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost using the effective interest method. Appropriate allowances for estimated irrecoverable amounts are recognised in profit or loss when there is objective evidence that the asset is impaired. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30 days overdue) are considered indicators that the trade receivable is impaired. The allowance recognised is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition.

The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in profit or loss within operating expenses. When a trade receivable is uncollectable, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against operating expenses in profit or loss.

Trade and other receivables are classified as loans and receivables.

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Trade and other payables

Trade payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest method.

Other payables are initially measured at fair value and are subsequently measured at FVTPL with any resulting gains and losses recognised in profit and loss.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These are initially and subsequently recorded at fair value.

Bank overdraft and borrowings

Bank overdrafts and borrowings are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest method.

Held-to-maturity

These financial assets are initially measured at fair value plus direct transaction costs.

At subsequent reporting dates these are measured at amortised cost using the effective interest method, less any impairment loss recognised to reflect irrecoverable amounts. An impairment loss is recognised in profit or loss when there is objective evidence that the asset is impaired, and is measured as the difference between the investment’s carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition. Impairment losses are reversed in subsequent periods when an increase in the investment’s recoverable amount can be related objectively to an event occurring after the impairment was recognised, subject to the restriction that the carrying amount of the investment at the date the impairment is reversed shall not exceed what the amortised cost would have been had the impairment not been recognised.

Financial assets that the group has the positive intention and ability to hold to maturity are classified as held to maturity.

Offsetting

Where a legally enforceable right of offsetting exists for recognised financial assets and financial liabilities, and there is an intention to settle the liability and realise the asset simultaneously, or to settle on a net basis, all related financial effects are offset. Otherwise it is not allowed.

1.11 Taxation

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 paid in respect of current and prior periods exceeds the amount due for those periods, the excess is recognised as an asset.

Current tax liabilities (assets) for the current and prior periods are measured at the amount expected to be paid to (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.

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1.11 Taxation (continued)

Deferred tax assets and liabilities

A deferred tax liability is recognised for all taxable temporary differences, except to the extent that the deferred tax liability arises from:

• the initial recognition of an asset or liability in a transaction which:

– isnotabusinesscombination;and

– at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss).

A deferred tax liability is recognised for all taxable temporary differences associated with investments in subsidiaries and branches except to the extent that both of the following conditions are satisfied:

• theparentorinvestorisabletocontrolthetimingofthereversalofthetemporarydifference;and

• it is probable that the temporary difference will not reverse in the foreseeable future.

A deferred tax asset is recognised for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilised, unless the deferred tax asset arises from the initial recognition of an asset or liability in a transaction that:

• isnotabusinesscombination;and

• at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss).

A deferred tax asset is recognised for all deductible temporary differences arising from investments in subsidiaries and branches to the extent that it is probable that:

• thetemporarydifferencewillreverseintheforeseeablefuture;and

• taxable profit will be available against which the temporary difference can be utilised.

A deferred tax asset is recognised for the carry forward of unused tax losses and unused STC credits to the extent that it is probable that future taxable profit will be available against which the unused tax losses and unused STC credits can be utilised.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

Tax expenses

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 same or a different period, to other comprehensive income.

Current tax and deferred taxes are charged or credited to other comprehensive income if the tax relates to items that are credited or charged, in the same or a different period, to other comprehensive income.

Current tax and deferred taxes are charged or credited directly to equity if the tax relates to items that are credited or charged, in the same or a different period, directly in equity.

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1.12 Leases

A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership.

Operating leases - lessor

Operating lease income is recognised as an income on a straight-line basis over the lease term.

Income from leases is disclosed under revenue in profit or loss.

Operating leases – lessee

Operating lease payments are recognised as an expense on a straight-line basis over the lease term. The difference between the amounts recognised as an expense and the contractual payments are recognised as an operating lease asset. This liability is not discounted.

1.13 Inventories

Inventories are measured at the lower of cost and net realisable value.

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

The cost of inventories comprises of all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

The cost of inventories is assigned using the weighted average cost formula. The same cost formula is used for all inventories having a similar nature and use to the entity.

When inventories are sold, the carrying amount of those inventories are recognised as an expense in the period in which the related revenue is recognised. The amount of any write-down of inventories to net realisable value and all losses of inventories are recognised as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of inventories, arising from an increase in net realisable value, are recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs.

1.14 Non-current assets held for sale

Non-current assets are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.

Non-current assets held for sale are measured at the lower of its carrying amount and fair value less costs to sell.

A non-current asset is not depreciated (or amortised) while it is classified as held for sale.

1.15 Impairment of non-financial assets

The group assesses at each end of the reporting period whether there is any indication that an asset may be impaired. If any such indication exists, the group estimates the recoverable amount of the asset.

The recoverable amount of an asset is the higher of its fair value less costs to sell and its value in use.

If the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. That reduction is an impairment loss.

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1.15 Impairment of non-financial assets (continued)

An impairment loss of assets carried at cost less any accumulated depreciation or amortisation is recognised immediately in profit or loss. Any impairment loss of a revalued asset is treated as a revaluation decrease.

An entity assesses at each reporting date whether there is any indication that an impairment loss recognised in prior periods for assets may no longer exist or may have decreased. If any such indication exists, the recoverable amounts of those assets are estimated.

The increased carrying amount of an asset attributable to a reversal of an impairment loss does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior periods.

A reversal of an impairment loss of assets carried at cost less accumulated depreciation or amortisation is recognised immediately in profit or loss. Any reversal of an impairment loss of a revalued asset is treated as a revaluation increase.

1.16 Share capital and equity

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.

1.17 Employee benefits

Short-term employee benefits

The cost of short-term employee benefits, (those payable within 12 months after the service is rendered, such as paid vacation leave and sick leave, bonuses, and non-monetary benefits such as medical care), are recognised in the period in which the service is rendered and are not discounted.

The expected cost of compensated absences is recognised as an expense as the employees render services that increase their entitlement or, in the case of non-accumulating absences, when the absence occurs.

The expected cost of profit sharing and bonus payments is recognised as an expense when there is a legal or constructive obligation to make such payments as a result of past performance.

Defined contribution plans

Payments to defined contribution retirement benefit plans are charged as an expense as they fall due.

A defined contribution plan is a pension plan under which the group pays fixed contributions. The group has no legal orconstructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. Contributions are recognised as an expense as incurred.

Defined benefit plans

A defined benefit plans the cost of providing the benefits is determined using the projected unit credit method.

Actuarial valuations are conducted on an annual basis by independent actuaries separately for each plan.

Past service costs are recognised immediately.

Actuarial gains and losses are recognised in the year in which they arise, in other comprehensive income.

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1.18 Provisions and contingencies

Provisions are recognised when:

• thegrouphasapresentobligationasaresultofapastevent;

• itisprobablethatanoutflowofresourcesembodyingeconomicbenefitswillberequiredtosettletheobligation;and

• a reliable estimate can be made of the obligation.

The amount of a provision is the present value of the expenditure expected to be required to settle the obligation.

Provisions are not recognised for future operating losses.

If an entity has a contract that is onerous, the present obligation under the contract shall be recognised and measured as a provision. A provision for onerous contracts is recognised when the expected benefits to be derived by the group from a contract are lower than the unavoidable cost of meeting its obligations under the contract.

Management applies its judgment to the fact of patterns and advice it receives from its attorneys, advocates and other advisors in assessing if an obligation is probable, more likely than not, or remote. This judgment application is used to determine if the obligation is recognised as a liability or disclosed as a contingent liability.

Contingent assets and contingent liabilities are not recognised.

1.19 Government grants

Government grants are recognised when there is reasonable assurance that:

• thegroupwillcomplywiththeconditionsattachingtothem;and

• the grants will be received.

These are included in subsidy received in advance until they are utilised.

Government grants are recognised as income over the periods necessary to match them with the related costs that they are intended to compensate.

A Government grant that becomes receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the entity with no future related costs is recognised as income of the period in which it becomes receivable.

Government grants related to assets, including non-monetary grants at fair value, are presented in the statement of financial position by deducting the grant in arriving at the carrying amount of the asset.

Grants related to income are deducted from the related expense.

1.20 Revenue

Revenue from the sale of goods is recognised when all the following conditions have been satisfied:

• thegrouphastransferredtothebuyerthesignificantrisksandrewardsofownershipofthegoods;

• the group retains neither continuing managerial involvement to the degree usually associated with ownership nor effectivecontroloverthegoodssold;

• theamountofrevenuecanbemeasuredreliably;

• itisprobablethattheeconomicbenefitsassociatedwiththetransactionwillflowtothegroup;and

• the costs incurred or to be incurred in respect of the transaction can be measured reliably.

125





1.20 Revenue (continued)

When the outcome of a transaction involving the rendering of services can be estimated reliably, revenue associated with the transaction is recognised by reference to the stage of completion of the transaction at the end of the reporting period. The outcome of a transaction can be estimated reliably when all the following conditions are satisfied:

• theamountofrevenuecanbemeasuredreliably;

• itisprobablethattheeconomicbenefitsassociatedwiththetransactionwillflowtothegroup;

• thestageofcompletionofthetransactionattheendofthereportingperiodcanbemeasuredreliably;and

• the costs incurred for the transaction and the costs to complete the transaction can be measured reliably.

When the outcome of the transaction involving the rendering of services cannot be estimated reliably, revenue shall be recognised only to the extent of the expenses recognised that are recoverable.

Service revenue is recognised by reference to the stage of completion of the transaction at the end of the reporting period. Stage of completion is determined by services performed to date as a percentage of total services to be performed.

Revenue earned from the provision of services over a fixed period, such as post box rental is recognised on a straight line basis over the period of the service.

Where the company’s role in a transaction is that of a principal, revenue is recognised on a gross basis. This requires revenue to comprise the gross value of the transactions billed to customers after trade discounts. Where the company’s role in a transaction is that of an agent, revenue is recognised on a net basis, with revenue representing the margin earned.

Revenue comprises income from services provided and the sale of retail products, excluding value added tax, rebates and discounts. These services include work performed as an agent of certain Government Departments, other authorities and businesses.

Revenue is measured at the fair value of the consideration received or receivable and represents the amounts receivable for goods and services provided in the normal course of business, net of trade discounts and volume rebates, and value added tax.

Interest is recognised, in profit or loss, using the effective interest method.

Dividends are recognised, in profit or loss, when the company’s right to receive payment has been established.

Service fees included in the price of the product are recognised as revenue over the period during which the service is performed.

1.21 Translation of foreign currencies

Foreign currency transactions

A foreign currency transaction is recorded, on initial recognition in Rands, by applying to the foreign currency amount the spot exchange rate between the functional currency and the foreign currency at the date of the transaction.

At the end of the reporting period:

• foreigncurrencymonetaryitemsaretranslatedusingtheclosingrate;

• non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchangerateatthedateofthetransaction;and

• non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

126





1.21 Translation of foreign currencies

Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition during the period or in previous consolidated annual financial statements are recognised in profit or loss in the period in which they arise.

When a gain or loss on a non-monetary item is recognised to other comprehensive income and accumulated in equity, any exchange component of that gain or loss is recognised to other comprehensive income and accumulated in equity. When a gain or loss on a non-monetary item is recognised in profit or loss, any exchange component of that gain or loss is recognised in profit or loss.

Cash flows arising from transactions in a foreign currency are recorded in Rands by applying to the foreign currency amount the exchange rate between the Rand and the foreign currency at the date of the cash flow.

1.22 Insurance contracts

The group issues short-term insurance contracts that protect the group’s customers against the risk of loss or damage. These contracts transfer significant insurance risk. As a general guideline, the group defines significant insurance risk as the possibility of having to pay benefits, on the occurrence of an insured event, that is at least 10% more than the benefits payable if the insured event did not occur.

For all these contracts, premiums are recognised as revenue (earned premiums) proportionally over the period of coverage.The portion of premium received on in-force contracts that relates to unexpired risks at the reporting date is reported as the unearned premium liability which is included under other payables.

Claims and loss adjustment expenses are charged to profit and loss as incurred based on the estimated liability for compensation owed to contract holders. They include direct and indirect claims settlement costs and arise from events that have occurred up to the reporting date even if they have not been reported to the group. The group does not discount its liabilities for unpaid claims other than for disability claims. Liabilities for unpaid claims are estimated based on past experience.

1.23 Fruitless and wasteful expenditure

Fruitless expenditure means expenditure which was made in vain and would have been avoided had reasonable care been exercised.

All expenditure relating to fruitless and wasteful expenditure is recognised in profit and loss in the period that the expenditure was incurred. The expenditure is classified in accordance with the nature of the expense, and where recovered, is subsequently accounted for as income in profit and loss in the relating period.

127




2. New standards and interpretations

2.1 Standards and interpretations effective and adopted in the current year

In the current year, the group has adopted the following standards and interpretations that are effective for the current financial year and that are relevant to its operations:

IFRS 10 Consolidated Financial Statements

This standard replaces the consolidation sections of IAS 27 Consolidated and Separate Financial Statements and SIC 12 Consolidation – Special Purpose Entities. The standard sets out a new definition of control, which exists only when an entity is exposed to, or has rights to, variable returns from its involvement with the entity, and has the ability to effect those returns through power over the investee.

The effective date of the standard is for years beginning on or after 01 January 2013.

The group has adopted the standard for the first time in the 2014 consolidated annual financial statements.

The impact of the standard is set out in note 54 Changes in Accounting Policy.

IAS 27 Separate Financial Statements

Consequential amendment as a result of IFRS 10. The amended standard now only deals with separate financial statements.

The effective date of the amendment is for years beginning on or after 01 January 2013.

The group has adopted the amendment for the first time in the 2014 consolidated annual financial statements.

The impact of the amendment is not material.

IFRS 12 Disclosure of Interests in Other Entities

The standard sets out disclosure requirements for investments in subsidiaries, associates, joint ventures and unconsolidated structured entities. The disclosures are aimed to provide information about the significance and exposure to risks of such interests. The most significant impact is the disclosure requirement for unconsolidated structured entities or off balance sheet vehicles.



The impact of the standard is set out in note 54 Changes in Accounting Policy.

IFRS 13 Fair Value Measurement

This is a new standard setting out guidance on the measurement and disclosure of items measured at fair value or required to be disclosed at fair value in terms of other IFRS’s.



The impact of the standard is not material.

128




2. New standards and interpretations (continued)

2.1 Standards and interpretations effective and adopted in the current year (continued)

IAS 1 Presentation of Financial Statements

The amendment now requires items of other comprehensive income to be presented as:

• Those which will be reclassified to profit or loss

• Those which will not be reclassified to profit or loss.

The related tax disclosures are also required to follow the presentation allocation.

In addition, the amendment changed the name of the statement of comprehensive income to the statement of profit or loss and other comprehensive income.

The effective date of the amendment is for years beginning on or after 01 July 2012.


The adoption of this amendment has not had a material impact on the results of the company, but has resulted in more disclosure than would have previously been provided in the consolidated annual financial statements.

IAS 19 Employee Benefits Revised

• Require recognition of changes in the net defined benefit liability (asset) including immediate recognition of defined benefit cost, disaggregation of defined benefit cost into components, recognition of remeasurements in other comprehensiveincome,planamendments,curtailmentsandsettlements;

• Introduceenhanceddisclosuresaboutdefinedbenefitplans;

• Modify accounting for termination benefits, including distinguishing benefits provided in exchange for service and benefits provided in exchange for the termination of employment and affect the recognition and measurement of terminationbenefits;and

• Clarification of miscellaneous issues, including the classification of employee benefits, current estimates of mortality rates, tax and administration costs and risk-sharing and conditional indexation features.



The impact of the amendment is set out in note 54 Changes in Accounting Policy.

Disclosures – Offsetting Financial Assets and Financial Liabilities (Amendments to IFRS 7)

Amendment requires additional disclosures for financial assets and liabilities which are offset and for financial instruments subject to master netting arrangements.



The adoption of this amendment has not had a material impact on the results of the company, but has resulted in more disclosure that would have previously been provided in the consolidated annual financial statements.

129





2.1 Standards and interpretations effective and adopted in the current year (continued)

Government Loans (Amendment to IFRS 1)

The amendment allows first time adopters the option to measure loans from government at below market interest rates, which existed at transition date, at the amounts measured in accordance with their previous GAAP. The provisions of par 10A of IAS 20 will only apply to subsequent loans.




IAS 1 – Annual Improvements for 2009 – 2011 cycle

Clarification is provided on the requirements for comparative information. Specifically, if a retrospective restatement is made, a retrospective change in accounting policy or a reclassification, the statement of financial position at the beginning of the previous period is only required if the impact on the beginning of the previous period is material. Related

notes are not required, other than disclosure of specified information.




Consolidated Financial Statements, joint Arrangements and Disclosures of Interests in Other Entities: Transition Guidance.

Transitional guidance for the application of IFRS 10, IFRS 11 and IFRS 12. The amendment limits the requirement to provide adjusted comparative information to only the preceding comparative period.



The impact of the amendment is set out in note 54 Changes in Accounting Policy.

2.2 Standards and interpretations not yet effective

The group has chosen not to early adopt the following standards and interpretations, which have been published and are mandatory for the group’s accounting periods beginning on or after 01 April 2014 or later periods:

IFRS 9 Financial Instruments

This new standard is the first phase of a three phase project to replace IAS 39 Financial Instruments: Recognition and Measurement. To date, the standard includes chapters for classification, measurement and derecognition of financial assets and liabilities. The following are main changes from IAS 39:

• Financial assets will be categorised as those subsequently measured at fair value or at amortised cost.

• Financial assets at amortised cost are those financial assets where the business model for managing the assets is to hold the assets to collect contractual cash flows (where the contractual cash flows represent payments of principal and interest only). All investments and other financial assets are to be subsequently measured at fair value.

• Under certain circumstances, financial assets may be designated as at fair value.

130





2.2 Standards and interpretations not yet effective (continued)

• For hybrid contracts, where the host contract is an asset within the scope of IFRS 9, then the whole instrument is classified in accordance with IFRS 9, without separation of the embedded derivative. In other circumstances, the provisions of IAS 39 still apply.

• Voluntary reclassification of financial assets is prohibited. Financial assets shall be reclassified if the entity changes its business model for the management of financial assets. In such circumstances, reclassification takes place prospectively from the beginning of the first reporting period after the date of change of the business model.

• Financial liabilities shall not be reclassified.

• Investments in equity instruments may be measured at fair value through other comprehensive income. When such an election is made, it may not subsequently be revoked, and gains or losses accumulated in equity are not recycled to profit or loss on derecognition of the investment. The election may be made per individual investment.

• IFRS 9 does not allow for investments in equity instruments to be measured at cost.

• The classification categories for financial liabilities remains unchanged. However, where a financial liability is designated as at fair value through profit or loss, the change in fair value attributable to changes in the liabilities credit risk shall be presented in other comprehensive income. This excludes situations where such presentation will create or enlarge an accounting mismatch, in which case, the full fair value adjustment shall be recognised in profit or loss.

The effective date of the standard is for years beginning on or after January 01, 2018.

The group expects to adopt the standard for the first time in the 2016 consolidated annual financial statements.

The impact of this standard is currently being assessed.

Offsetting Financial Assets and Financial Liabilities (Amendments to IAS 32)

Clarification of certain aspects concerning the requirements for offsetting financial assets and financial liabilities.


The group expects to adopt the amendment for the first time in the 2015 consolidated annual financial statements.

It is unlikely that the amendment will have a material impact on the company’s consolidated annual financial statements.

IAS 36 – Recoverable Amount Disclosures for Non-Financial Assets

The amendment brings the disclosures for impaired assets whose recoverable amount is fair value less costs to sell in line with the disclosure requirements of IFRS 13 Fair Value Measurements.


The group expects to adopt the amendment for the first time in the 2015 consolidated annual financial statements.

The adoption of this amendment is not expected to impact on the results of the company, but may result in more disclosure than is currently provided in the consolidated annual financial statements.

IFRS 10, IFRS 12 and IAS 27 – Investment Entities

The amendments define an investment entity and introduce an exception to consolidating particular subsidiaries for investment entities. These amendments require an investment entity to measure those subsidiaries at fair value through profit or loss in accordance with IFRS 9 Financial Instruments in its consolidated and separate annual financial statements. The amendments also introduce new disclosure requirements for investment entities in IFRS 12 and IAS 27.

The effective date of the amendments is for years beginning on or after 01 January 2014.

The group expects to adopt the amendments for the first time in the 2015 consolidated annual financial statements.

The impact of this amendment is currently being assessed.


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3. Heritage assets (continued)

Reconciliation of heritage assets - Group - 2014

Opening balance

Additions Closing balance

R’000 R’000 R’000

Documents - 10 10

Other assets - 126 126

Philatelic stationary - 206 206

Photographs - 24 24

Stamps - 18,318 18,318

Works of art - 3,280 3,280

Total heritage assets - 21,964 21,964

Reconciliation of heritage assets - Company - 2014

Opening balance

Additions Closing balance

R’000 R’000 R’000

Documents - 10 10

Other assets - 126 126

Philatelic stationary - 206 206

Photographs - 24 24

Stamps - 18,318 18,318

Works of art - 3,280 3,280

Total heritage assets - 21,964 21,964

Valuations

The effective date of the revaluations was 31 March 2014. Revaluations were performed by independent valuers, Phakamisani Consulting and Projects CC. Phakamisani Consulting and Projects CC is not connected to the group.

The valuation was based on current market values and no discount rates were used.

Other information

In terms of the ICASA license agreement, the South African Post Office (SOC) Limited is required to own a museum which contains assets of a historical nature, including stamps, paintings, artifacts and machinery.

The assets were recognised for the first time in the current year after management compiled a catalogue of and valued the assets.

A register containing the information required by Regulation 25(3) of the Companies Regulations, 2011 is available for inspection at the registered office of the company.


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Figures in Rand thousand

4. Investment property

Reconciliation of investment property - Company - 2014

Opening balance

Additions Depreciation Closing balance

Investment property 21,161 39 (514) 20,686

Reconciliation of investment property - Company - 2013 (Restated)

Opening balance

Additions Transfers Depreciation Closing balance

Investment property 20,379 352 976 (546) 21,161

Reconciliation of investment property - Company - 2012 (Restated)

Opening balance

Additions Transfers Depreciation Closing balance

Investment property 18,596 3 2,296 (516) 20,379

Investment properties and significant componants thereof are stated at the cost less accumulated depreciation and impairment thereof.


Investment property obtained by means of Government grants

The following assets that are financed through project specific funding are recorded in the asset register and included therein at R1 in accordance with the accounting policy for Government grants. If these had been recorded at cost and depreciated over their useful lives, their book value would be as follows:

Group and company reconciliation 2014

Cost

R ‘000

Accumulated depreciation

R ‘000

Carrying value

R ‘000

Investment property 217 (39) 178

Group and company reconciliation 2013 (Restated)

Cost

R ‘000


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Carrying value

R ‘000


Group and company reconciliation 2012 (Restated)

Cost

R ‘000


R ‘000

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R ‘000



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136





5. Property, plant and equipment (continued)

Reconciliation of property, plant and equipment - Group - 2014

Opening balance

Additions Retirements Transfers DepreciationClosing balance

Assets under construction - 76,148 - (21,209) - 54,939Buildings 589,141 1,953 (2,604) - (29,731) 558,759Data processing equipment 107,589 55,848 (1,897) - (44,959) 116,581Furniture and fixtures 27,765 3,733 (557) - (3,109) 27,832Land 219,976 - - - - 219,976Leasehold improvements 64,182 11,425 (446) - (14,049) 61,112Machinery and equipment 115,349 24,445 (5,541) - (24,645) 109,608Motor vehicles 22,620 14,135 (22) - (2,527) 34,206Site restoration 178,601 19,865 - - (13,870) 184,596Total property, plant and equipment 1,325,223 207,552 (11,067) (21,209) (132,890) 1,367,609

Reconciliation of property, plant and equipment - Group - 2013 (Restated)

Opening balance


Buildings 600,153 20,272 (19) (1,067) (30,198) 589,141Data processing equipment 100,841 53,864 (694) - (46,422) 107,589Furniture and fixtures 30,599 1,628 (93) (274) (4,095) 27,765Land 219,976 - - - - 219,976Leasehold improvements 75,755 12,471 (226) 302 (24,120) 64,182Machinery and equipment 144,646 3,341 (4,812) 42 (27,868) 115,349Motor vehicles 6,167 18,585 (35) - (2,097) 22,620Site restoration 146,185 43,511 - - (11,095) 178,601Total property, plant and equipment 1,324,322 153,672 (5,879) (997) (145,895) 1,325,223

Reconciliation of property, plant and equipment - Group - 2012 (Restated)

Opening balance

Additions Retirements Transfers Depreciation Closing balance

Buildings 609,569 22,870 (9) (2,181) (30,096) 600,153Data processing equipment 125,006 24,740 (386) (841) (47,678) 100,841Furniture and fixtures 33,403 2,999 (299) (822) (4,682) 30,599Land 219,976 - - - - 219,976Leasehold improvements 101,191 20,236 (194) 2,066 (47,544) 75,755Machinery and equipment 161,218 17,610 (1,858) (213) (32,111) 144,646Motor vehicles 9,051 13 (194) (202) (2,501) 6,167Site restoration 6,312 148,042 - - (8,169) 146,185Total property, plant and equipment 1,265,726 236,510 (2,940) (2,193) (172,781) 1,324,322

Reconciliation of property, plant and equipment - Company - 2014

Opening balance


Assets under construction - 76,148 - (21,209) - 54,939Buildings 584,695 1,954 (2,606) - (29,527) 554,516Data processing equipment 102,532 55,080 (1,618) - (43,812) 112,182Furniture and fixtures 27,587 3,728 (556) - (3,250) 27,509Land 216,075 - - - - 216,075Leasehold improvements 64,036 11,412 (446) - (13,994) 61,008Machinery and equipment 111,814 24,445 (6,405) - (23,669) 106,185Motor vehicles 18,015 14,135 (13) - (1,725) 30,412Site restoration 178,601 19,865 - - (13,870) 184,596Total property, plant and equipment 1,303,355 206,767 (11,644) (21,209) (129,847) 1,347,422

137






Reconciliation of property, plant and equipment - Company - 2013 (Restated)

Opening balance


Buildings 595,504 20,273 (19) (1,046) (30,017) 584,695

Data processing equipment 96,235 51,777 (658) - (44,822) 102,532

Furniture and fixtures 30,350 1,629 (91) (274) (4,027) 27,587

Land 216,075 - - - - 216,075

Leasehold improvements 75,492 12,471 (226) 302 (24,003) 64,036

Machinery and equipment 138,577 3,341 (3,519) 42 (26,627) 111,814

Motor vehicles 397 18,584 - - (966) 18,015

Site restoration 146,185 43,511 - - (11,095) 178,601

Total property, plant and equipment 1,298,815 151,586 (4,513) (976) (141,557) 1,303,355

Reconciliation of property, plant and equipment - Company - 2012 (Restated)

Opening balance


Buildings 604,716 22,870 (9) (2,181) (29,892) 595,504

Data processing equipment 118,275 24,549 (347) (508) (45,734) 96,235

Furniture and fixtures 33,071 2,999 (298) (822) (4,600) 30,350

Land 216,075 - - - - 216,075

Leasehold improvements 101,191 19,885 (194) 2,066 (47,456) 75,492

Machinery and equipment 152,987 17,579 (1,728) (213) (30,048) 138,577

Motor vehicles 682 13 (8) - (290) 397

Site restoration 6,312 148,042 - - (8,169) 146,185

Total property, plant and equipment 1,233,309 235,937 (2,584) (1,658) (166,189) 1,298,815

Pledged as security

No property, plant and equipment has been pledged as security for liabilities.

Borrowing costs capitalised

There were no borrowing costs that required capitalisation during the year.

Fair value

Property, plant and equipment and signifcant components thereof are stated at their cost less accumulated depreciation and impairment thereof. According to company policy, valuations are done to assess the relevance of the cost model on a regular basis. Mail centers and hubs have been valued at depreciated replacement costs and all other fixed properties are reflected at municipal values.

The fair value of the assets are not significantly different from the carrying value thereof and would have been as follows:

GROuP COMPANY

2014 R ‘000

2013 R ‘000

2012 R ‘000

2014 R ‘000

2013 R ‘000

2012 R ‘000

Freehold land and buildings 717,684 819,937 819,937 717,684 819,937 819,937

Other information


138





Property, plant and equipment obtained by means of Government grants

The following assets that are financed through project specific funding are recorded in the asset register and included therein at R1 in accordance with the accounting policy for Government grants. If these had been recorded at cost and depreciated over their useful lives, their book value would be as follows:

Group and company reconciliation 2014 Cost

R ‘000


R ‘000

Carry value

R ‘000

Buildings 87,693 (18,506) 69,187

Data processing equipment 382,026 (380,151) 1,875

Furniture and fittings 593 (593) -

Land 4,028 - 4,028

Leasehold improvements 303,504 (291,549) 11,955

Machinery and equipment 104,013 (54,491) 49,522

Motor vehicles 490 (490) -

Total property, plant and equipment by means of Government grants 882,347 (745,780) 136,567

Group and company reconciliation 2013 (Restated) Cost

R ‘000


R ‘000

Carry value

R ‘000

Buildings 85,855 (15,368) 70,487



Land 4,028 - 4,028






R ‘000


R ‘000

Carry value

R ‘000

Buildings 83,455 (12,144) 71,311



Land 4,028 - 4,028






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140





6. Intangible assets (continued)

Reconciliation of intangible assets - Company - 2014

Openingbalance

Additions Retirements Transfers Amortisation Closingbalance

Computer software 84,443 18,080 (1,250) (12,053) (33,183) 56,037

Intangible assets under development

- - - 33,262 - 33,262

84,443 18,080 (1,250) 21,209 (33,183) 89,299

Reconciliation of intangible assets - Company - 2013 (Restated)

Openingbalance

Additions Amortisation Closingbalance

Computer software 62,729 47,627 (25,913) 84,443

Reconciliation of intangible assets - Company - 2012 (Restated)

Openingbalance

Additions Retirements Transfers Amortisation Closingbalance

Computer software 81,060 19,228 (316) (640) (36,603) 62,729

Other information

Included in intangible assets is computer software that is not considered integral to computer equipment.

There were no impairments of intangible assets during the year.

Intangible assets obtained by means of Government grants

Intangible assets that are financed through project specific funding are recorded in the asset register and included therein at R1 in accordance with the accounting policy for Government grants. If these assets had been recorded at cost and depreciated over their expected useful lives, their carrying value would be as follows:

Group and company reconciliation 2014 Cost

R ‘000

Accumulated amortisation

R ‘000

Carry value

R ‘000

Computer software 249,026 (247,685) 1,341


R ‘000


R ‘000

Carry value

R ‘000


Group and company reconciliation 2012 (Restated)Cost

R ‘000


R ‘000

Carry value

R ‘000


141




7. Investments in subsidiaries

The following table lists the entities which are controlled by the group, either directly or indirectly through subsidiaries.

Group

Name of company Held by%

holding 2014

%holding

2013

%holding

2012

CFG Zimbabwe (Pty) Ltd The Courier and Freight Group (Pty) Ltd -% 100.00 % 100.00 %

The Courier and Freight Botswana (Pty) Ltd The Courier and Freight Group (Pty) Ltd 100.00 % 100.00 % 100.00 %

The Courier and Freight Namibia (Pty) Ltd The Courier and Freight Group (Pty) Ltd 100.00 % 100.00 % 100.00 %

The Courier and Freight Swaziland (Pty) Ltd The Courier and Freight Group (Pty) Ltd -% 100.00 % 100.00 %

The following table lists the entities which are controlled directly by the company, and the carrying amounts of the investments in the company’s separate financial statements.

Name of company%

holding 2014

%holding

2013

%holding

2012

Cost amount

2014

Cost amount

2013

Cost amount

2012

R’000 R’000 R’000

Centriq Insurance Innovation (Pty) Ltd 100.00 % 100.00 % 100.00 % - - -

Sapos Properties (Bloemfontein) Pty Ltd 100.00 % 100.00 % 100.00 % 750 750 750

Sapos Properties (Cape Town) (Pty) Ltd 100.00 % 100.00 % 100.00 % 4,085 4,085 4,085

Sapos Properties (East Rand) (Pty) 100.00 % 100.00 % 100.00 % 11,195 11,195 11,195

Sapos Properties (Port Elizabeth) (Pty) Ltd 100.00 % 100.00 % 100.00 % 1,670 1,670 1,670

Sapos Properties (Rossburgh) (Pty) Ltd 100.00 % 100.00 % 100.00 % 3,800 3,800 3,800

The Courier and Freight Group (Pty) Ltd 100.00 % 100.00 % 100.00 % 1,053 1,053 1,053

The Document Exchange (Pty) Ltd 100.00 % 100.00 % 100.00 % - - -

Total cost of investment in subsidiaries 22,553 22,553 22,553

Impairment of investment in subsidiaries (4,809) (4,964) (4,859)

Total investment in subsidiaries net of impairment 17,744 17,589 17,694

The investments in subsidiary companies listed above are unlisted.

Refer to note 51 for deregistered companies.

142




GROuP COMPANY

2014

R ‘000

2013(Restated)

R ‘000

2012 (Restated)

R ‘000

2014

R ‘000

2013(Restated)

R ‘000

2012 (Restated)

R ‘000

8. Loans and long term receivables to group companies

Loans

Pensecure (Pty) Ltd

This loan is interest free and has no fixed terms of repayment. This loan has been subordinated in favour of creditors. The full amount has been impaired.

- - - - - 1,356

Sapos Properties (Bloemfontein) (Pty) Ltd


- - - 397 351 259

Sapos Properties (Cape Town) (Pty) Ltd


- - - 1,394 1,238 1,138

Sapos Properties (East Rand) (Pty) Ltd

This loan is interest free and has no fixed terms of repayment. Due to the fact that this company is making profits, this loan is not impaired.

- - - 2,962 2,905 2,851

Sapos Properties (Port Elizabeth) (Pty) Ltd


- - - 709 1,152 1,112

Sapos Properties (Rossburgh) (Pty) Ltd


- - - 3,322 3,066 2,732

143




GROuP COMPANY

2014

R ‘000

2013(Restated)

R ‘000

2012 (Restated)

R ‘000

2014

R ‘000

2013(Restated)

R ‘000

2012 (Restated)

R ‘000

8. Loans and long term receivables to group companies (continued)

The Courier and Freight Group (Pty) Ltd


- - - 219,322 219,322 219,322



- - - 40,918 40,918 40,918


This loan is repayable over 12 months and accrues interest at the prime interest rate. This loan was not impaired.

- - - - 38,921 -

The Courier and Freight Botswana (Pty) Ltd

This loan is interest free and has no fixed terms of repayment. The full amount has been impaired. The company seized trading in 2005, is dormant and in the process of being deregistered.

3,560 3,560 3,560 - - -

The Courier and Freight Namibia (Pty) Ltd

This loan is interest free and has no fixed terms of repayment. The full amount has been impaired. The company seized trading in 2005, is dormant and in the process of being deregistered.

2,294 2,294 2,294 - - -

The Courier and Freight Swaziland (Pty) Ltd

This loan is interest free and has no fixed terms of repayment. The full amount has been impaired. The company was deregistered during the year under review.

- 7,304 7,304 - - -

144




GROuP COMPANY

2014

R ‘000

2013(Restated)

R ‘000

2012 (Restated)

R ‘000

2014

R ‘000

2013(Restated)

R ‘000

2012 (Restated)

R ‘000


CFG Zimbabwe (Pty) Ltd

This loan is interest free and has no fixed terms of repayment. The full amount has been impaired. The company was deregistered during the year under review.

- 4,742 4,742 - - -

Total loans 5,854 17,900 17,900 269,024 307,873 269,688

Impairment of loans (5,854) (17,900) (17,900) (266,066) (266,047) (266,837)

Total loans net of impairment - - - 2,958 41,826 2,851

With the exception of the loan to the Courier and Freight Group (Pty) Ltd for R 38,921 million, the South African Post Office (SOC) Limited does not anticipate the recovery of the loans within the next 12 months.

Long term receivables

The Courier and Freight Group (Pty) Ltd This receivable accrues interest at the prime interest rate and has no fixed terms of repayment. The receivable has been subordinated in favour of creditors. The full amount has been impaired.

- - - 210,832 113,809 71,512

The Document Exchange (Pty) Ltd

This receivable accrues interest at the prime interest rate and has no fixed terms of repayment. The receivable has not been impaired.

- - - 530 - -

Total long term receivables - - - 211,362 113,809 71,512

Impairment of long term receivables - - - (210,832) (113,809) (71,512)

Total long term receivables net of impairment - - - 530 - -

The South African Post Office (SOC) Limited does not anticipate the recovery of the above mentioned receivables within the next 12 months.

Non-current assets - - - 3,488 2,905 2,851

Current assets - - - - 38,921 -

Total loans and long term receivables net of impairment

- - - 3,488 41,826 2,851

145




GROuP COMPANY

2014

R ‘000

2013(Restated)

R ‘000

2012 (Restated)

R ‘000

2014

R ‘000

2013(Restated)

R ‘000

2012 (Restated)

R ‘000


Credit quality of loans and long term receivables to group companies

The credit quality of loans and long term receivables to group companies that are neither past due nor impaired can be assessed by reference to the subsidiary companies’ abilty to generate profits.

Loans and long term receivables to subsidiaries amounting to R 476,898 million (2013: R 379,856 million) are subordinated in favour of creditors.

Loans and long term receivables to group companies impaired

As of 31 March 2014, loans and long term receivables to group companies of R 476,898 million (2013: R 379,856 million) were impaired and provided for.

The ageing of these loans is as follows:

3 to 6 months - - - 57,394 60,338 8,743

Over 6 months 5,854 17,900 17,900 422,997 361,344 323,833

The creation and release of provision for impaired loans and long term receivables have been included in operating expenses in the statement of comprehensive income (note 33). Amounts charged to the allowance account are generally written off when there is no expectation of recovering any cash.

The maximum exposure to credit risk at the reporting date is the fair value of each class of loan and long term receivable mentioned above. The group does not hold any collateral as security.

9. Investments and other financial assets

At fair value through profit or loss

Post Retirement Medical Aid Asset 833,103 768,085 669,230 833,103 768,085 669,230

Provident Fund Asset 18,032 16,046 48,154 18,032 16,046 48,154

Total at fair value through profit or loss 851,135 784,131 717,384 851,135 784,131 717,384

Available-for-sale

Gidani investment - - - - - -

Negotiable Certificate of Deposits 798,219 1,004,904 444,912 798,219 1,004,904 444,912

Promissory Notes 666,536 575,876 928,737 666,536 575,876 928,737

Unlisted shares - Centriq Insurance Innovation (Pty) Ltd 87,964 77,422 75,023 87,964 77,422 75,023

Total available-for-sale 1,552,719 1,658,202 1,448,672 1,552,719 1,658,202 1,448,672

146




GROuP COMPANY

2014

R ‘000

2013(Restated)

R ‘000

2012 (Restated)

R ‘000

2014

R ‘000

2013(Restated)

R ‘000

2012 (Restated)

R ‘000

9. Investments and other financial assets (continued)

Held to maturity

Fixed Deposits 1,527,612 1,225,000 2,492,005 1,512,000 1,210,000 2,477,005

Jibar Linked Notes 370,000 1,052,000 250,000 370,000 1,052,000 250,000

Total held-to-maturity 1,897,612 2,277,000 2,742,005 1,882,000 2,262,000 2,727,005

Total investments and other financial assets 4,301,466 4,719,333 4,908,061 4,285,854 4,704,333 4,893,061

Non-current assets

At fair value through profit or loss 565,521 567,945 531,296 565,521 567,945 531,296

Available-for-sale 87,964 77,422 75,023 87,964 77,422 75,023

Total non-current assets 653,485 645,367 606,319 653,485 645,367 606,319

Current assets

At fair value through profit or loss 285,614 216,186 186,088 285,614 216,186 186,088

Available-for-sale 1,464,755 1,580,780 1,373,649 1,464,755 1,580,780 1,373,649

Held-to-maturity 1,897,612 2,277,000 2,742,005 1,882,000 2,262,000 2,727,005

Total current assets 3,647,981 4,073,966 4,301,742 3,632,369 4,058,966 4,286,742

Total investments and other financial assets 4,301,466 4,719,333 4,908,061 4,285,854 4,704,333 4,893,061

147




GROuP COMPANY

2014

R ‘000

2013(Restated)

R ‘000

2012 (Restated)

R ‘000

2014

R ‘000

2013(Restated)

R ‘000

2012 (Restated)

R ‘000


The Negotiable Certificates of Deposits (NCDs), Cell Captive Money Market Assets and Promissory Notes are classified as available for sale financial assets, which are measured at fair value, with fair value gains and losses recognised directly in other comprehensive income.

The Fixed Deposits and Jibar Linked Notes are classified as held to maturity instruments, which are measured at amortised cost, using the effective interest method, less any impairment, with revenue recognised on an effective yield basis. The Fixed Deposits and Jibar Linked Notes shown above are greater than 90 days and less than 12 months in time to maturity. The Fixed Deposits and Jibar Linked Notes that are less than 90 days in maturity are classified as cash and cash equivalents and are included under short-term deposits in note 15.

The group owns an equity stake of 100 ordinary shares in Gidani Management (Pty) Ltd, which represents 10.00% of Gidani shares. The fair value of the shares was determined by the South African Post Office (SOC) Limited management to be zero at year end (2013: R 0). The shares were allocated to the South African Post Office (SOC) Limited by the Department of Trade and Industry.

The Post Retirement Medical Aid (PRMA) Asset of R 833,103 million (2013: R 768,085) has been ear-marked to partially fund the PRMA Liability of R 1,439 billion (2013: R 1,436 billion) of the South African Post Office (SOC) Limited (refer to note 21). The remaining liability is adequately offset by the other assets of some R 740,191 million (2013: R 705,985 million) emanating from a contribution holiday in 2005 when the Defined Benefit Pension Scheme was converted to a Defined Contribution Scheme.

The breakdown of the PRMA Asset is as follows:

PRMA Asset:

Local cash 145,010 119,803 119,613 145,010 119,803 119,613

Local bonds 311,219 265,545 221,396 311,219 265,545 221,396

Local equity 352,775 321,009 294,191 352,775 321,009 294,191

Foreign cash - 3,232 1,752 - 3,232 1,752

Foreign bonds 24,099 58,496 32,278 24,099 58,496 32,278

Total PRMA Asset 833,103 768,085 669,230 833,103 768,085 669,230

Fair value hierarchy of financial assets at fair value through profit or loss

For financial assets recognised at fair value, disclosure is required of a fair value hierarchy which reflects the significance of the inputs used to make the measurements.

Level 1 represents those assets which are measured using unadjusted quoted prices for identical assets in active markets.

Level 2 applies inputs other than quoted prices included in level 1, that are observable for the assets either directly (as prices) or indirectly (derived from prices).

Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market dates (unobservable inputs).

148




GROuP COMPANY

2014

R ‘000

2013(Restated)

R ‘000

2012 (Restated)

R ‘000

2014

R ‘000

2013(Restated)

R ‘000

2012 (Restated)

R ‘000


The tables below exclude the Provident Fund Asset, which does not represent financial instruments.

Level 1

Equity and bonds 583,093 605,719 523,554 583,093 605,719 523,554

Level 2

Equity and bonds 250,010 162,366 145,676 250,010 162,366 145,676

Total level 1 and 2 833,103 768,085 669,230 833,103 768,085 669,230

For the year ended 2014, there were no transfers between level 1, 2 and 3.

Financial assets at fair value through profit or loss are dominated in the following currencies:

Rand 809,004 706,357 635,200 809,004 706,357 635,200

Other 24,099 61,728 34,030 24,099 61,728 34,030

Fair value hierarchy of available-for-sale financial assets

For financial assets recognised at fair value, disclosure is required of a fair value hierarchy which reflects the significance of the inputs used to make the measurements.

Level 1 represents those assets which are measured using unadjusted quoted prices for identical assets in active markets.

Level 2 applies inputs other than quoted prices included in level 1 that are observable for the assets either directly (as prices) or indirectly (derived from prices).

Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market dates (unobservable inputs).

Level 2

Negotiable Certificates of Deposits

798,219 1,004,904 444,912 798,219 1,004,904 444,912

Promissory Notes 666,536 575,876 928,737 666,536 575,876 928,737

Unlisted shares - Centriq Insurance Innnovation (Pty) Ltd

87,964 77,422 75,023 87,964 77,422 75,023

Total level 2 1,552,719 1,658,202 1,448,672 1,552,719 1,658,202 1,448,672

For the year ended 2014, there were no transfers between level 1, 2 and 3.

Available-for-sale financial assets are denominated in the following currencies:

Rand 1,552,719 1,658,202 1,448,672 1,552,719 1,658,202 1,448,672

Held to maturity financial assets are denominated in the following currencies:

Rand 1,897,612 2,277,000 2,742,005 1,882,000 2,277,000 2,742,005

The maximum exposure to credit risk at the reporting date is the carrying amount of the held to maturity financial assets.

149




GROuP COMPANY

2014

R ‘000

2013(Restated)

R ‘000

2012 (Restated)

R ‘000

2014

R ‘000

2013(Restated)

R ‘000

2012 (Restated)

R ‘000

10. Deferred tax

Deferred tax liability

Available for sale financial assets adjustments

(12,214) (21,719) (10,104) (12,214) (21,719) (10,104)

Financial instruments (78,934) (69,591) (37,982) (78,934) (69,591) (37,982)

Property, plant and equipment (142,683) (155,269) (155,613) (141,935) (154,754) (155,073)

Trade and other payables (1,989) (1,707) (2,292) (1,989) (1,689) (2,275)

Trade and other receivables (8,467) (2,841) (2,007) (8,350) (2,841) (2,007)

Total deferred tax liability (244,287) (251,127) (207,998) (243,422) (250,594) (207,441)

Deferred tax asset

Income received in advance 70,988 33,583 25,877 69,701 32,254 24,846

Employee related 493,615 482,625 420,677 493,367 482,324 420,348

Provisions 146,188 137,997 90,295 145,470 136,730 89,051

Deferred tax balance from temporary differences other than unused tax losses

710,791 654,205 536,849 708,538 651,308 534,245

Tax losses available for set off against future taxable income

89,777 (9,332) 255 89,479 - -

Total deferred tax asset 800,568 654,537 537,104 798,017 651,308 534,245

Deferred tax liability (244,287) (251,127) (207,998) (243,422) (250,594) (207,441)

Deferred tax asset 800,568 654,537 537,104 798,017 651,308 534,245

Total net deferred tax asset 556,281 403,410 329,106 554,595 400,714 326,804

150




GROuP COMPANY

2014

R ‘000

2013(Restated)

R ‘000

2012 (Restated)

R ‘000

2014

R ‘000

2013(Restated)

R ‘000

2012 (Restated)

R ‘000

10. Deferred tax (continued)

Reconciliation of deferred tax assetAt beginning of year 403,410 329,106 284,798 400,714 326,804 282,280Accelerated capital allowances for tax purposes

8,473 347 (29,176) 8,719 319 (29,092)

Increases in tax loss available for set off against future taxable income

89,449 72 171 89,479 - -

Deductible temporary difference movement on heritage assets at fair value (OCI)

(4,101) - - (4,101) - -

Deductible temporary difference movement on available for sale financial instruments (OCI)

(1,371) (586) (10,104) (1,371) (586) (10,104)

Taxable (deductible) temporary difference movement on actuarial gains and losses on defined benefit plan (OCI)

8,666 43,571 (21,024) 8,666 43,571 (21,024)

Deductible temporary difference movement on financial instruments

(9,343) (21,615) (16,432) (9,343) (21,615) (16,432)

Taxable (deductible) temporary difference movement on income received in advance

37,405 7,707 (11,511) 37,447 7,408 (11,309)

Taxable temporary difference movement on provisions

6,155 47,702 47,590 6,793 47,680 47,687

Taxable (deductible) temporary difference movement on defined benefit plan

13,059 (8,979) 75,628 13,059 (8,979) 75,628

Taxable (deductible) temporary difference movement on trade and other payables

(300) 587 (1,088) (300) 585 (1,086)

Taxable (deductible) temporary difference movement on trade and other receivables

(5,509) (834) 1,634 (5,509) (834) 1,634

Taxable temporary difference on employee benefits

10,288 6,332 8,620 10,342 6,361 8,622

Total deferred tax asset 556,281 403,410 329,106 554,595 400,714 326,804

Recognition of deferred tax asset

An entity shall disclose the amount of a deferred tax asset and the nature of the evidence supporting its recognition, when:

• the utilisation of the deferred tax asset is dependent on future taxable profits in excess of the profits arising from the reversal of existingtaxabletemporarydifferences;and

• the entity has suffered a loss in either the current or preceding period in the tax jurisdiction to which the deferred tax asset relates.unrecognised deferred tax assetDeductible temporary differences not recognised as deferred tax assets, no expiry under current legislation

110,321 86,945 71,014 - - -

use and sales rateThe deferred tax rate applied to the fair value adjustments of financial assets is determined by the expected manner of recovery. Where the expected recovery is through sale, the capital gains tax rate of 18.67% (2013: 18.67%) is used. If the expected manner of recovery is through indefinite use the normal tax rate of 28.00% (2013: 28.00%) is applied.

If the manner of recovery is partly through use and partly through sale, a combination of capital gains rate and normal tax rate is used.

151




GROuP COMPANY

2014

R ‘000

2013(Restated)

R ‘000

2012 (Restated)

R ‘000

2014

R ‘000

2013(Restated)

R ‘000

2012 (Restated)

R ‘000

11. Inventories

Merchandise 35,898 31,638 36,079 35,898 31,638 36,079

Consumables 60,873 39,682 43,010 60,609 39,547 42,819

Total inventories 96,771 71,320 79,089 96,507 71,185 78,898

Write-downs (19,382) (20,466) (17,796) (19,382) (20,373) (17,796)

Total inventories net of write- downs 77,389 50,854 61,293 77,125 50,812 61,102

12. Current tax receivable (payable)

Current tax at the end of the year consists of:

Current tax payable - - (7,946) - - (7,947)

Current tax receivable 114 34,293 503 - 34,163 -

Balance at the end of the year 114 34,293 (7,443) - 34,163 (7,947)

13. Operating lease asset (accrual)

Current assets 26 6 - - - -

Non-current liabilities (76,491) (48,720) (44,047) (76,134) (48,498) (43,507)

Current liabilities (3,637) (20,421) (16,255) (3,123) (19,044) (15,159)

Net operating lease accrual (80,102) (69,135) (60,302) (79,257) (67,542) (58,666)

152




The group has entered into operating leases for buildings. The operating leases (as the lessee) are straight-lined over the period of the lease contract. Refer to note 42 for the future minimum payments under non-cancellable operating leases.

GROuP COMPANY

2014

R ‘000

2013(Restated)

R ‘000

2012 (Restated)

R ‘000

2014

R ‘000

2013(Restated)

R ‘000

2012 (Restated)

R ‘000

14. Trade and other receivables

Trade receivables 231,713 297,970 213,591 191,292 253,117 164,287

Employee costs in advance 1,725 3,097 4,362 1,699 3,081 4,354

Prepayments 63,719 46,300 11,721 63,719 37,368 11,721

Deposits 725 807 1,529 - - 671

VAT - 3,058 - - - -

Interest accrued on short-term investments

117,219 102,806 99,281 116,916 102,785 99,250

International debtors 140,668 138,311 123,059 140,668 138,311 123,059

Other receivables 44,823 1,352 67,938 43,782 9,462 55,436

Total trade and other receivables 600,592 593,701 521,481 558,076 544,124 458,778

Trade receivables consists of:

Trade receivables 278,021 341,837 267,596 230,881 286,941 202,893

Less: provision for impairment (46,308) (43,867) (54,005) (39,589) (33,824) (38,606)

Trade receivables - net 231,713 297,970 213,591 191,292 253,117 164,287

Trade and other receivables pledged as security

No trade or other receivables were pledged as security during the year.

Fair value of trade receivablesTrade receivables 231,713 297,970 213,591 191,292 253,117 164,287Trade receivebales are discounted at year end at the prime interest rate of 9.00% (2013: 8.50%) to bring them to their net present value. Trade receivables are shown net of impairment.

Trade receivables include related parties net of impairment. For more detail refer to note 44.

Long term related party receivables net of impairment have been reclassified to “Loans and long term receivables from group companies”. For more detail refer to note 8.

153




GROuP COMPANY

2014

R ‘000

2013(Restated)

R ‘000

2012 (Restated)

R ‘000

2014

R ‘000

2013(Restated)

R ‘000

2012 (Restated)

R ‘000

14. Trade and other receivables (continued)

Trade and other receivables past due but not impaired.

Trade and other receivables which are less than 30 days past due are not considered to be impaired.

At 31 March 2014, R 115,575 million (2013: R 56,944 million) were past due but not impaired.

The ageing of amounts past due but not impaired is as follows: Domestic

31 - 90 days past due 6,202 15,722 15,592 40,227 4,760 6,04491 - 120 days past due 41,020 41,020 25,356 42,211 30,853 23,870The ageing of amounts past due but not impaired is as follows: International

More than 12 months 29 202 262 29 202 262

Trade and other receivables impaired

As of 31 March 2014, trade and other receivables of R 14.461 million (2013: R 1.170 million) were impaired and provided for.Reconciliation of provision for impairment of trade and other receivables

Opening balance 43,867 54,005 37,322 33,824 38,606 19,187Provision for impairment 14,461 1,170 16,683 14,083 1,170 19,419Unused amounts reversed (12,020) (11,308) - (8,318) (5,952) -Total provision for impairment 46,308 43,867 54,005 39,589 33,824 38,606

The maximum exposure to credit risk at the reporting date is the fair value of each class of loan mentioned above. The group does not hold any collateral as security.

The company operates under various credit terms. Bulkmail is seven days from date of statement, and the rest of the business operates on thirty days from statement date. The group’s domestic trade receivables are R 198 million (2013: R260 million) of which R20 million (2013: R 20 million) are older than 30 days.

At each reporting date, the group assesses whether there is any objective evidence that trade and other receivables should be impaired. Individual significant financial assets are tested for impairment. Group impairment losses for trade and other receivables amounting to R 46 million (2013: R 44 million) have been raised in the statement of comprehensive income, where there was objective evidence that the group will not be able to collect all amounts due, in accordance with the original terms agreed upon. The impairment allowances are considered to be adequate for the group.

Included in the trade debtors are international debtors. Debts in this category are held with individual countries and trade is governed by rules set up by the Universal Postal Union (UPU) currently situated in Switzerland. Services are divided into various product categories and each product has a unique payment term ranging 12 months onwards. The nature of the business allows countries to operate trade debtors and creditors accounts. Average payment terms per country on letters and expedited mail services are about 18 months. International trade receivables are R 140 million (2013: R 123 million) of which R 0.092 million (2013: R 0.202 million) is older than 12 months.

The South African Post Office (SOC) Limited and its subsidiary companies fall outside of the definition of a “Credit Provider” for purposes of registration with the National Credit Regulator. The South African Post Office (SOC) Limited and its subsidiary companies nevertheless have to comply with the National Credit Act where accounts are opened for Juristic persons such as Sole Proprietors and Trusts, where less than 3 trustees are appointed.

Trade receivables comprise a large number of customers, dispersed across different industries and geographical areas. The group uses an internal/external credit scoring system to assess all potential customers’ creditworthiness. Customers credit is assessed manually, using information derived from credit bureaus, financial accounting records, bank records and other sources, after which they are put through an internal grading system. Where appropriate, the necessary credit guarantees or deposits will be required before opening an account. Accounts are opened for clients who are creditworthy and who accept the terms and conditions prescribed by The South African Post Office (SOC) Limited and its subsidiaries. Such accounts are assigned a credit limit. The account number, the terms as well as the credit limit is confirmed in writing to the customer. Assessments of accounts are done on a regular basis as outlined in the group procedure document. The frequency is determined by the nature of each business within the group.

Security or sureties are requested to support accounts which failed about 20% of the assessment criteria. Trade and other receivables discounted after impairment is R 3.2 million (2013: R4 million). The terms of trade receivables have not been re-negotiated.

154




GROuP COMPANY

2014

R ‘000

2013(Restated)

R ‘000

2012 (Restated)

R ‘000

2014

R ‘000

2013(Restated)

R ‘000

2012 (Restated)

R ‘000

15. Cash and cash equivalents

Cash and cash equivalents include cash on hand and actual bank balances and investments in money market instruments.

The effective interest rate of money market instruments is 5.64% (2013: 5.40%).

Cash and cash equivalents consist of:

Bank balances 1,962,923 1,875,770 2,247,136 1,926,705 1,836,409 2,207,102

Short-term deposits 2,048,191 1,400,985 1,030,000 2,048,191 1,400,985 1,030,000

Bank overdraft (311,378) - - (311,378) - -

Total cash and cash equivalents 3,699,736 3,276,755 3,277,136 3,663,518 3,237,394 3,237,102

Current assets 4,011,114 3,276,755 3,277,136 3,974,896 3,237,394 3,237,102

Current liabilities (311,378) - - (311,378) - -

Total cash and cash equivalents 3,699,736 3,276,755 3,277,136 3,663,518 3,237,394 3,237,102

Cash and cash equivalents held by the entity that are not available for use by the group.

3,699,736 3,276,755 3,277,136 3,663,518 3,237,394 3,237,102

This relates to funds collected on behalf of third parties as per note 28 and depositors’ funds as per note 27.

The total amount of undrawn facilities available for future operating activities and commitments

- - - - - -

16. Non-current assets held for sale

The non-current assets are to be sold piecemeal.

Assets and liabilities

Non-current assets held for sale

Property, plant and equipment - - 201 - - -

17. Share capital

Authorised

1000 000 000 Ordinary shares of R1

1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000

Issued

Ordinary shares of R1 each 200,940 200,940 200,940 200,940 200,940 200,940

799,060,179 unissued ordinary shares are held by the Department of Communication on behalf of the South African Government. This authority remains in force until the next Annual General Meeting.

155




GROuP COMPANY

2014

R ‘000

2013(Restated)

R ‘000

2012 (Restated)

R ‘000

2014

R ‘000

2013(Restated)

R ‘000

2012 (Restated)

R ‘000

18. Revaluation reserve

In terms of the ICASA license agreement, the South African Post Office (SOC) Limited is required to own a museum which contains assets of a historical nature, including stamps, paintings, artifacts and machinery.

The assets were recognised for the first time in the current year after management compiled a catalogue of and valued the assets.

A gain or loss arising on initial recognition of heritage assets at fair value less costs to sell is included in other comprehensive income and accumulated in the revaluation surplus in equity for the period in which it arises and may not be reclassified to profit or loss.

Any increase in an asset’s carrying amount, as a result of a revaluation, is credited to other comprehensive income and accumulated in the revaluation surplus in equity. The increase is recognised in profit or loss to the extent that it reverses a revaluation decrease of the same asset previously recognised in profit or loss.

Heritage assets 17,864 - - 17,864 - -

19. Fair value adjustment on assets-available-for-sale reserve

Financial assets are classified as available-for-sale where the intention with regard to the instrument and its origination does not fall within the ambit of other financial asset classification.

Negotiable Certificates of Deposits (NCDs), Promissory Notes and the unlisted shares held in the cell captive Centriq Insurance Innovation (Pty) Ltd are classified as available for sale financial assets.

Available-for-sale financial assets are measured at fair value, with fair value gains and losses recognised directly in other comprehensive income as the available-for-sale equity revaluation reserve. Interest is calculated using the effective interest method. Where the financial asset is disposed of or is determined to be impaired, the cumulative gain or loss previously recognised in the available for sale reserve is included in profit or loss for the period.

NCDs and Promissory Notes are measured to fair value using quoted market prices. The net asset value model is used in the determination of the fair value of unlisted shares for which no reference can be made to quote market prices.

Quoted market prices(1,805) (113) 10 (1,805) (113) 10

Unlisted shares55,235 46,822 44,869 55,235 46,822 44,869

Total fair value adjustment53,430 46,709 44,879 53,430 46,709 44,879

156




20. Convertible loans from shareholder

During the year, an amount of R 205,000 million was received from National Treasury for the corporatisation of Postbank. The Department of Communication still needs to issue South African Post Office (SOC) Limited shares in exchange. These funds are included in Postbank’s investment portfolio and are managed through Postbank’s Asset and Liability Committee (ALCO)processes. The amount is interest free and has no fixed terms of repayment. There is no expectation to repay these funds which are viewed as being equity in nature.

As a result of the incorporation of the former TBVC states i.e. Transkei, Bophuthatswana, Venda and Ciskei post offices, a shareholder loan to the amount of R 287,176 million was received. The incorporation was done in accordance with the Post and Telecommunications Reorganisation Act which provided for the integration of the departments of Post and Telecommunications of the TBVC states with Telkom and the South African Post Office (SOC) Limited. The amount was previously classified as a financial liability at cost and carried interest at a rate of 8.5% per annum in terms of section 80 of the Public Finance Management Act and there were no fixed repayment terms for this liability. The company has applied to the Department of Communication for permission to convert this loan to share capital, which was granted during the year and 287,176 million R1 shares will be issued as compensation.

In March 2005, an amount of R 750,000 million was received from the National Treasury in order to recapitalise in the South African Post Office (SOC) Limited. The amount is interest free and has no fixed terms of repayment and thus it is viewed asequity.

Department of Communications 205,000 - - 205,000 - -

(Postbank)

Department of Communications 287,176 - - 287,176 - -

(TBVC)

National Treasury 750,000 750,000 750,000 750,000 750,000 750,000

Total convertible loans from shareholder

1,242,176 750,000 750,000 1,242,176 750,000 750,000

21. Retirement benefits

South African Post Office (SOC) Limited retirement fund

In terms of section 10A of the South African Post Office Act (Act No 44 of 1958, as amended), the financial obligations of the South African Post Office (SOC) Limited retirement fund in respect of its defined benefit members and pensioners are guaranteed by the South African Post Office (SOC) Limited whilst the Government of the Republic of South Africa in turn guarantees the obligations of the South African Post Office (SOC) Limited in this regard.

In terms of a recent actuarial valuation, the fund was fully funded and the actuary concluded that it was in a sound financial position.

Post retirement telephone obligation

The group has undertaken to pay the telephone accounts for certain retired employees until either the time of their death, that of their spouse or when they change their address. The group’s net obligation in this regard is the amount of future benefits that the employees have earned in return for their service in the prior periods. Any unrecognised actuarial gains or losses and past service costs are recognised immediately. There are no plan assets for this liability and the employer funds this as the need to be settled arises.

157




GROuP COMPANY

2014

R ‘000

2013(Restated)

R ‘000

2012 (Restated)

R ‘000

2014

R ‘000

2013(Restated)

R ‘000

2012 (Restated)

R ‘000

21. Retirement benefits (continued)

Post retirement medical aid contribution

During the 2008/2009 financial period, R 456,800 million’s worth of assets were transferred to the South African Post Office (SOC) Limited as a result of the Registrar for Medical Schemes’ decision on 12 November 2008. The relevant assets are specifically and exclusively utilised for the future funding of the South African Post Office (SOC) Limited’s Post Retirement Medical Aid (PRMA) liability and have consequently been ear-marked and invested according to a specific unique investment mandate. The current value of the PRMA asset is R 833,104 million, (2013: R 768,085 million).

The company has negotiated with bargaining unit employees that employees retiring after 30 June 2005 will receive PRMA benefits. This curtailment of benefits was accounted for during the 2005 period. In addition, spouses and dependants of employees who passed away whilst in the service of the South African Post Office (SOC) Limited after 2005 will also receive medical aid benefits as part of the Defined Benefit Plan.

Carrying value

Present value of the PRMA liability

(1,434,228) (1,431,487) (1,293,162) (1,433,645) (1,430,874) (1,292,583)

Present value of the post retirement telephone obligation

(5,081) (5,348) (6,045) (5,081) (5,348) (6,045)

Total post retirement liabilities (1,439,309) (1,436,835) (1,299,207) (1,438,726) (1,436,222) (1,298,628)

Non-current liabilities (1,308,066) (1,310,187) (1,177,399) (1,307,524) (1,309,615) (1,176,861)

Current liabilities (131,243) (126,648) (121,808) (131,202) (126,607) (121,767)


Movements for the year

Opening balance (1,436,835) (1,299,207) (1,386,135) (1,436,222) (1,298,628) (1,385,565)

Benefits paid 126,648 121,808 129,396 126,607 121,767 129,355

Net expense recognised in profit or loss

(129,122) (259,436) (42,468) (129,111) (259,361) (42,418)


Net expense recognised in profit or loss

Interest cost (98,204) (103,797) (117,554) (98,161) (103,750) (117,505)

Actuarial (losses) gains (30,918) (155,639) 75,086 (30,950) (155,611) 75,087

Net post retirement expense (129,122) (259,436) (42,468) (129,111) (259,361) (42,418)

158





Key assumptions used

Assumptions used on last valuation on 31 March 2014.

Discount rates used 8.65 % 7.25 % 8.50 % 8.65 % 7.25 % 8.50 %

General inflation rates used 6.85 % 5.75 % 6.00 % 6.85 % 5.75 % 6.00 %

Benefit inflation rates used 7.85 % 6.50 % 7.00 % 7.85 % 6.50 % 7.00 %

Sarary inflation rates used 7.35 % 6.25 % 6.50 % 7.35 % 6.25 % 6.50 %

In determining the value to be placed on these post employment benefits, various assumptions in respect of various economic and demographic factors have been made. In order to have consistency between the benefits, the same assumptions for all benefits have been applied where relevant.

In assessing the appropriateness of the assumptions used, it is important to consider the assumptions as a whole rather than in isolation. In particular, the relationship between the assumptions for the discount rate and the rate of increase in benefits is important.

IAS 19 (AC 116) Employee Benefits (IAS19) requires that realistic assumptions be applied in the valuation and that this should be determined with reference to the yields on corporate stock of similar duration to the liabilities. The standard further indicates that if the corporate bond market is not sufficiently deep and liquid reference should be made to the yields on government stock. For the purpose of this valuation account has been taken of the yields on South African government stock as reflected in the yield curve of the Bond Exchange of South Africa. The basic inflation assumption has also been determined by reference to the inflation rate implied in the market by the difference between the yield on nominal and inflation linked government stock.

A discount rate of 8.65% p.a. (2013: 7.25%) was assumed in this valuation. This is a 1.4% increase in the prior year valuation interest rate and reflects the general increase in market interest rates over the ye based on standard actuarial tables and other assumption rates that are generally used in the market place for the valuation of liabilities of this nature. Allowance has been made for AIDS related deaths in respect of the long service and leave encashment benefits, but not the PRMA benefits, using the Actuarial Society of South Africa AIDS model.

The results of the valuation are highly dependent on the choice of assumptions and the relationship between them. Therefore, in order to assist the user in interpretation of the valuation results show the impact on the liabilities of a number of different assumptions.

Actuarial valuations are performed on an annual basis.

Sensitivity analysis - Post retirement telephone obligation

Discount rate analysis LIABILITY CHANGE IN LIABILITY

2014

R ‘000

2013(Restated)

R ‘000

2012(Restated)

R ‘000

2014

%

2013(Restated)

%

2012(Restated)

%+ 1 % 4,714 4,942 5,602 (7.2) (7.6) (7.3)Central 5,081 5,348 6,045 - - -- 1 % 5,501 5,813 6,551 8.3 8.7 8.4

Benefit obligation at year-end 2011(Restated)

R ‘000

2012(Restated)

R ‘000

2013(Restated)

R ‘000

2014

R ‘000

2015

R ‘000Projected benefit obligation 6,494 6,045 5,348 5,081 5,021

Sensitivity analysis - PRMA

Benefit inflation analysis LIABILITY CHANGE IN LIABILITY

2014

R ‘000

2013(Restated)

R ‘000

2012(Restated)

R ‘000

2014

%

2013(Restated)

%

2012(Restated)

%

+ 1 % 1,571,149 1,571,575 1,415,101 9.6 9.8 9.4

Central 1,433,645 1,430,874 1,292,583 - - -

- 1 % 1,314,927 1,309,621 1,187,581 (8.3) (8.5) (8.2)

159




Figures in Rand thousands


Discount rate analysis LIABILITY CHANGE IN LIABILITY

2014

R ‘000

2013(Restated)

R ‘000

2012(Restated)

R ‘000

2014

%

2013(Restated)

%

2012(Restated)

%

+ 1 % 1,313,161 1,307,827 1,186,052 (8.4) (8.6) (8.2)

Central 1,433,645 1,430,874 1,292,583 - - -

- 1 % 1,575,707 1,576,277 1,417,725 9.9 10.2 9.7

Benefit obligation at year-end 2011(Restated)

R ‘000

2012(Restated)

R ‘000

2013(Restated)

R ‘000

2014

R ‘000

2015

R ‘000

Projected benefit obligation 1,379,641 1,293,162 1,431,487 1,434,228 1,420,057

22. Provisions

Reconciliation of provisions - Group - 2014Opening balance

Additionsutilised

during the year

Change in discount

factorTotal

Bonus 65,515 276,843 (273,205) - 69,153General provision 132,943 130,151 (133,016) - 130,078Leave pay 169,677 131,565 (94,006) - 207,236Long service cash awards 50,716 3,844 (9,813) - 44,747Long service leave awards 11,845 1,602 (1,190) - 12,257Onerous contract 7,325 - (7,325) - -Site restoration 248,396 40,668 - (23,078) 265,986Total provisions 686,417 584,673 (518,555) (23,078) 729,457

Reconciliation of provisions - Group - 2013 (Restated) Opening

balanceAdditions

utilised during the

year

Change in discount

factor

Total

Bonus 61,465 12,387 (8,337) - 65,515General provision 95,190 174,376 (136,623) - 132,943Leave pay 144,335 109,584 (84,242) - 169,677Long service cash awards 47,442 11,259 (7,985) - 50,716Long service leave awards 10,348 2,576 (1,079) - 11,845Onerous contract 7,325 - - - 7,325Site restoration 168,361 61,577 - 18,458 248,396Total provisions 534,466 371,759 (238,266) 18,458 686,417

Reconciliation of provisions - Group - 2012 (Restated) Opening

balanceAdditions

utilised during the

yearTotal

Bonus 59,698 59,702 (57,935) 61,465General provision 123,811 329,628 (358,249) 95,190Leave pay 116,074 96,054 (67,793) 144,335Long service cash awards 49,648 8,554 (10,760) 47,442Long service leave awards 9,181 2,388 (1,221) 10,348Onerous contract 7,325 - - 7,325Site restoration 8,652 159,773 (64) 168,361Total provisions 374,389 656,099 (496,022) 534,466

160





22. Provisions (continued)

Reconciliation of provisions - Company - 2014Opening balance

Additionsutilised

during the year

Change in discount

factorTotal

Bonus 64,117 241,313 (236,440) - 68,990

General provision 127,446 125,616 (125,846) - 127,216

Leave pay 160,097 126,348 (88,659) - 197,786

Long service cash awards 50,306 3,742 (9,782) - 44,266

Long service leave awards 11,845 1,602 (1,190) - 12,257

Site restoration 246,250 40,488 - (23,079) 263,659

Total provisions 660,061 539,109 (461,917) (23,079) 714,174

Reconciliation of provisions - Company - 2013 (Restated) Opening

balanceAdditions

utilised during the

year

Change in discount

factorTotal

Bonus 59,702 8,024 (3,609) - 64,117

General provision 92,598 170,860 (136,012) - 127,446

Leave pay 134,961 103,154 (78,018) - 160,097

Long service cash awards 46,988 11,164 (7,846) - 50,306

Long service leave awards 10,348 2,576 (1,079) - 11,845

Site restoration 166,344 61,448 - 18,458 246,250

Total provisions 510,941 357,226 (226,564) 18,458 660,061

Reconciliation of provisions - Company - 2012 (Restated) Opening

balanceAdditions

utilised during the

yearTotal

Bonus 56,998 59,702 (56,998) 59,702

General provision 118,861 327,721 (353,984) 92,598

Leave pay 106,931 90,680 (62,650) 134,961

Long service cash awards 49,236 8,454 (10,702) 46,988

Long service leave awards 9,181 2,388 (1,221) 10,348

Site restoration 6,571 159,773 - 166,344

Total provisions 347,778 648,718 (485,555) 510,941

GROuP COMPANY

2014

R ‘000

2013(Restated)

R ‘000

2012(Restated)

R ‘000

2014

%

2013(Restated)

%

2012(Restated)

%

Non-current liabilities 399,348 372,788 282,877 393,594 366,981 270,067

Current liabilities 330,109 313,629 251,589 320,580 293,080 240,874

Total provisions 729,457 686,417 534,466 714,174 660,061 510,941

General provision

The provision relates to various items such as the provisions for audit fees, legal fees, travel and car rentals, pension payments, shortages and possible losses under investigation and other similar obligations.

161





Leave obligation

Employees are entitled to 22 days leave per annum. Provided that a staff member has taken at least 15 days in a period the remaining leave may be carried over into future years. Any leave balance remaining when an employee leaves the service of the South African Post Office (SOC) Limited for whatever reason (e.g. resignation, death, retirement) is encashed at that time.

Sensitivity analysis - Leave obligation

Discount rate analysis Liability Change in liability

2014

R ‘000

2013(Restated)

R ‘000

2012(Restated)

R ‘000

2014

%

2013(Restated)

%

2012(Restated)

%

+ 1 % 192,618 164,324 139,210 3.0 3.2 3.6

Central 198,775 169,677 144,335 - - -

- 1 % 205,745 176,094 148,229 (3.3) (3.8) (2.0)

Capped leave

In addition to their “normal” current accrued leave some staff members also have an amount of “capped” leave. During 2001 and 2002 the South African Post Office (SOC) Limited negotiated with staff in different categories that leave accrued up till that date would in future only be encashed at the salary as at that time. This leave can be taken as leave or encashed, but only after all other accrued leave has been taken. Any remaining balance will be paid out as cash when the employee leaves the service of the South African Post Office (SOC) Limited.

Given these rules, the South African Post Office (SOC) Limited recognises that the balances in both the “capped” leave and “normal” accrued leave will not be settled in the 12 months following the date of calculation, and therefore some form of calculation is required. In performing these calculations, we have applied an assumption, that 50% of the balance standing in the “normal” accrued leave will be taken as leave, in the next 12 months. The remainder of the “normal” and the balance in the “capped” leave will be paid out in cash when the employee leaves the service of the post office by death, resignation or retirement. In the case of the “accrued” leave, this will be based on the salary applicable at that date, and in the case of the “capped” leave, based on the current fixed rate.

A restricted number of employees are members of the leave provident fund. This provident fund provides for leave in excess of 60 days at a specific point in time. No additional employees may become members of this fund. Leave in this fund can only be encashed when the employee retires or resigns and cannot be utilised as leave. As provident fund assets are sufficient this leave is not accrued by the company.

Long service leave awards

The group has different policies in respect of long service leave awards. The group has valued this benefit in the current period, and shall be valuing the benefit annually. Any unrecognised actuarial gains or losses and past service costs are recognised immediately.

Sensitivity analysis - Long service leave awards


2014

R ‘000

2013(Restated)

R ‘000

2012(Restated)

R ‘000

2014

%

2013(Restated)

%

2012(Restated)

%

+ 1 % 21,616 11,271 9,841 4.0 4.8 4.9

Central 22,438 11,845 10,348 - - -

- 1 % 23,342 12,475 10,905 (4.2) (5.3) (5.4)

Long service cash awards

The group has a policy of increasing leave days due to employees reaching ten years with the South African Post Office (SOC) Limited. The increase in leave days is from 22 to 24 days in the employee’s tenth period only. Any unrecognised actuarial gains or losses and past service costs are recognised immediately.

162





Sensitivity analysis - Long service cash awards


2014

R ‘000

2013(Restated)

R ‘000

2012(Restated)

R ‘000

2014

%

2013(Restated)

%

2012(Restated)

%

+ 1 % 43,064 49,140 45,108 3.6 3.1 5.1

Central 44,747 50,716 47,422 - - -

- 1 % 46,567 53,417 49,028 (4.0) (5.3) (3.4)

Onerous lease

The Courier and Freight Group (Pty) Ltd entered into a property lease agreement for a period of three years commencing on 01 October 2010 and terminating on 30 September 2013.

Site restoration

The provision relates to the decommissioning costs that are expected to be incurred upon the termination or conclusion of lease agreements. These costs have been capitalised in terms of the relevant lease agreements. It is uncertain whether these leases will be extended or terminated earlier and this creates uncertainties regarding the amount and timing of the cash flows. There are no expected reimbursements for the costs that will be incurred.

The main assumptions used in the calculation of this provision are as follows:

The Universal Service Obligations (USO) obliges the South African Post Office (SOC) Limited to expand its presence in South Africa (SA), especially in rural SA. This means that the South African Post Office (SOC) Limited would most probably not reduce the number of leasehold premises, but instead expand its presence to more buildings. The type of leasehold premises has been taken into account in arriving at a conclusion regarding possible restoration. A vacant stand with a Mail Collection Point (MCP) would probably not require restoration should they ever wish to relocate. The South African Post Office (SOC) Limited may not wish to relocate from shopping centres and malls. In the event that it does relocate the terms of the lease and the nature of its business are such that restoration of the premises would not be required. The date that the South African Post Office (SOC) Limited originally occupied the leasehold premises is also an indication of the chances of ever moving out of the premises, thus negating the liability to restore such leasehold premises. During the 2014 financial period, the South African Post Office (SOC) Limited relocated from 16 (2013: 16) leasehold premises of which six (2013: six) of the lessors required restoration, thus further supporting the expectation that relocation and thus restoration would not occur in most instances.

23. Amount owing to shareholder

GROuP COMPANY

2014

R ‘000

2013(Restated)

R ‘000

2012(Restated)

R ‘000

2014

%

2013(Restated)

%

2012(Restated)

%

Department of Communications - 270,674 248,327 - 270,674 248,327

The amount owing to the shareholder is the liability that arose as a result of the incorporation of the former TBVC states i.e. Transkei, Bophuthatswana, Venda and Ciskei post offices. The incorporation was done in accordance with the Post and Telecommunications Reorganisation Act which provided for the integration of the departments of Post and Telecommunications of the TBVC states with Telkom and the South African Post Office (SOC) Limited. The liability is classified as a financial liability at cost and bears interest at a rate of 8.5% per annum (2013: 8.5%) in terms of section 80 of the Public Finance Management Act. There are no fixed repayment terms on this liability.

Permission to convert this loan to share capital was granted during the year. Refer to note 20 for more information.

Fair value of loans to shareholder

Department of Communications - 270,674 248,327 - 270,674 248,327

163




GROuP COMPANY

2014

R ‘000

2013(Restated)

R ‘000

2012 (Restated)

R ‘000

2014

R ‘000

2013(Restated)

R ‘000

2012 (Restated)

R ‘000

24. Government grants

At fair value through profit or loss

Subsidy unutilised 85,305 94,401 108,670 85,305 94,401 108,670

Current liabilities

Fair value through profit or loss 85,305 94,401 108,670 85,305 94,401 108,670

The Government provided the company with a subsidy to cover a portion of its operating expenditure and to fund specific projects. The balance has been ringfenced for USO obligations. The balances and transactions are summarised as below:

Subsidies received

Current period - 51,965 180,442 - 51,965 180,442

Roll over from prior period 79,580 94,602 237,458 79,580 94,602 237,458

Less: expenditure acknowledged

Infrastructure (9,805) (14,619) (14,404) (9,805) (14,619) (14,404)

Universal service obligation - (45,583) (242,567) - (45,583) (242,567)

System improvements - (404) (44,167) - (404) (44,167)

VAT - (6,381) (22,160) - (6,381) (22,160)

Total subsidy unutilised 69,775 79,580 94,602 69,775 79,580 94,602

The Department of Communication provided the company with a subsidy specifically for the Public Information Terminals and Citizens Post Offices during the past. However, no funding has been received for the last two financial years. The balances and transactions are summarised as below:

Subsidies received

Current period - interest accrued 709 753 751 709 753 751

Roll over from prior period 14,821 14,068 13,317 14,821 14,068 13,317

Total subsidy unutilised 15,530 14,821 14,068 15,530 14,821 14,068

164




GROuP COMPANY

2014

R ‘000

2013(Restated)

R ‘000

2012 (Restated)

R ‘000

2014

R ‘000

2013(Restated)

R ‘000

2012 (Restated)

R ‘000

25. Trade and other payables

Trade payables 379,843 258,168 248,542 303,099 247,874 210,828

Deposits received 77,825 70,472 68,624 76,496 69,232 67,516

Employee benefit payments (43,812) 17,648 40,492 14,919 14,171 37,748

Government grants 57,337 8,138 9,273 57,337 8,138 9,273

Operating lease payables - 17 17 - - -

Other accrued expenses 254,148 276,084 307,790 204,410 238,330 275,345

Other payables 51,788 39,621 34,277 50,241 37,996 33,076

VAT 31,871 32,415 29,269 31,398 32,395 28,440

Total trade and other payables 809,000 702,563 738,284 737,900 648,136 662,226

The average credit period on all purchases is 60 days. The group has a policy in place with its payables not to pay interest on late payments. All invoices were paid within the 60 days time frame in the financial year 2014. The group has financial risk management policies in place to ensure that all payables are paid within the credit time frame.

Fair value of trade and other payables

Trade payables 379,843 258,168 248,542 303,099 247,874 210,827

Trade payables are discounted at year end at the prime interest rate of 9.00% (2013: 8.50%) to bring them to their net present value.

26. unearned revenue

Unearned revenue consists of the following:

Bulk mail, parcels and registered letters revenue 6,822 19,918 19,918 6,822 19,918 19,918

Franking mail revenue 6,666 7,414 7,414 6,666 7,414 7,414

Box revenue 217,108 229,607 229,607 217,108 229,607 229,607

Stamp and envelope revenue 16,946 7,247 23,917 16,946 7,247 23,917

Key deposit fees 55,591 52,312 52,312 55,591 52,312 52,312

Speed services revenue 1,822 66 1,540 1,822 66 1,540

International revenue 486 888 898 486 888 898

Electronic Bill Presentments and Payments revenue (EBPP) 7,482 - - 7,482 - -

XPS freight 875 653 498 - - -

PX containers 456 709 1,640 - - -

Subscription fees 10,377 12,048 27,331 - - -

Total unearned revenue 324,631 330,862 365,075 312,923 317,452 335,606

165




26. unearned revenue (continued)

Relating to South African Post Office (SOC) Limited (company):

Bulk mail, parcels and registered letters revenue

The deferred revenue calculation is based on the mail delivery performance statistics. Assumptions were used that 25% of all mail posted was delivered within the same region and 75% delivery between regions.

Franking mail revenue

The deferred revenue calculation is based on the assumption that eight working days revenue is unearned. This period is formulated on a combination of the mail delivery standard and the holding time of customers after purchase.

Box revenue

The renewal cycle for the rental of the boxes is a calendar period from 1 January to 31 December, however, the financial period for the South African Post Office (SOC) Limited is 1 April to 31 March. This means that revenue for three months of the renewal cycle is earned for that financial period and the remaining nine months of the renewal cycle is regarded as deferred revenue.

Stamp and envelope revenue

The deferred revenue is based on the assumption that ten working days revenue is unearned. This period is formulated on a combination of the mail delivery standards and the holding time of customers after purchase.

Key deposit fees

According to the current delivery policy, key deposits are payable in all cases when a client applies for a postbox service. The collected deposit fees for all box keys are not recognised as revenue.

Speed services revenue

Domestic items:

40% of the revenue generated on the 31 March is deferred to the new financial year. This is due to the fact that the parcels must be delivered overnight and thus some of the parcels are only delivered on 1 April.

International items:

80% of the revenue generated on the 31 March is deferred to the new financial year. This is due to the fact that the parcels must be delivered overnight and thus the majority of the parcels are only delivered on 1 April.

International revenue

As revenue has to be recognised when services are rendered and in terms of terminal dues, it will be recognised when items are delivered to their destinations. The mail delivery standards are applied for the different categories on a weighted average basis. The last seven days sales were extracted and the mail delivery performance statistics were used to calculate the revenue to be deferred for those days.

EBPP revenue

The deferred revenue is for advance payments received for services that still needs to be rendered.

Relating to The Courier and Freight Group:

XPS freight

A report is extracted from the operational system, UNIVERSE, showing all items billed in the year, but not yet delivered. Deferred revenue was calculated based on the stage of completion method, as follows:

The amount of days after year end until delivery divided by the total amount of days to complete delivery multiplied by the revenue billed and recognised.

PX containers

A report is extracted from the operational system, INTAC, showing all containers billed in the year, but not yet delivered. Deferred revenue was calculated based on the stage of completion method, as follows:

The amount of days after year end until delivery divided by the total amount of days to complete delivery multiplied by the revenue billed and recognised.

Relating to The Document Exchange (Pty) Ltd:

Subscription fees

Members pay the subscription fee annually. In cases where the membership overlaps two financial years, the portion of the amount belonging to the next financial year is the unearned revenue and is deferred to the next financial year.

166




GROuP COMPANY

2014

R ‘000

2013(Restated)

R ‘000

2012 (Restated)

R ‘000

2014

R ‘000

2013(Restated)

R ‘000

2012 (Restated)

R ‘000

27. Deposits from the public

Term deposits 167,658 173,159 185,025 167,658 173,159 185,025

Transactional and savings accounts

4,569,952 4,319,052 4,072,839 4,569,952 4,319,052 4,072,839

Total deposits from the public 4,737,610 4,492,211 4,257,864 4,737,610 4,492,211 4,257,864

Deposit products include transactional savings accounts and term deposits. Transactional and savings accounts are all overnight deposits which are all payable on demand. Term deposits vary from one month to five years. All amounts owed to the depositors are classified as financial liabilities at cost. Interest payable on both transactional and deposit accounts are capitalised monthly. All account holders are individuals within the Republic of South Africa.

Interest paid on overnight deposit accounts is fixed and varies from 0.00% to 2.83% per annum (2013: 0.00% to 4.95%) depending on the account balance. Term deposits attract interest that varies from 4.80% to 5.30% per annum (2013: 4.80% to 5.30%) and all rates are linked to prime rate.

Deposits from the public are fully covered by investments and other financial assets as well as cash and cash equivalents, and these amounts are included in the total balances reflected in notes 9 and 15.

28. Funds collected on behalf of third parties

Agency services and collections 68,042 90,317 212,138 68,042 90,317 212,138

Money and postal orders 23,998 31,928 32,528 23,998 31,928 32,528

Total funds collected on behalf of third parties

92,040 122,245 244,666 92,040 122,245 244,666

Funds collected from the customers of the group third party clients are paid into their bank accounts within 24 hours following the collection at Post Office outlets. In terms of service level agreements with the clients, no interest will be paid to clients for the 24 hour period before the money collected is paid into the client’s respective accounts. Money and postal orders are unclaimed obligations that are payable on demand.

167





29. Financial assets by category

The accounting policies for financial instruments have been applied to the line items below:

Group - 2014Loans and receivables

Fair value through profit

or loss - held for trading

Held to maturity investments

Available-for- sale

Total

Cash and cash equivalents - 33,034 3,978,080 - 4,011,114

Investments and other financial assets

- 833,103 1,897,612 1,552,719 4,283,434

Trade and other receivables 536,873 - - - 536,873

Total financial assets 536,873 866,137 5,875,692 1,552,719 8,831,421

Group - 2013 (Restated)Loans and receivables

Fair value through profit

or loss - held for trading

Held to maturity investments

Available-for- sale

Total



- 768,085 2,277,000 1,658,202 4,703,287



Company - 2014

Loans and receivables

Fair value through

profit or loss - held for trading

Held to maturity

investments

Available-for- sale

Total



- 833,103 1,882,000 1,552,719 4,267,822

Loans and long term receivables to group companies

3,488 - - - 3,488



Company - 2013 (Restated)

Loans and receivables

Fair value through

profit or loss - held for trading

Held to maturity

investments

Available-for- sale

Total



- 768,085 2,262,000 1,658,202 4,688,287


41,826 - - - 41,826



Trade and other receivables in the above tables exclude prepayments and VAT, which do not represent financial instruments.

Other financial assets in the above tables exclude the Provident Fund Asset, which does not represent financial instruments.

168





30. Financial liabilities by category

The accounting policies for financial instruments have been applied to the line items below:

Group - 2014Financial

liabilities at amortised cost

Fair value through

profit or loss - designated

Total

Bank overdraft 311,378 - 311,378

Deposits from the public 4,737,610 - 4,737,610

Funds collected on behalf of third parties 92,040 - 92,040

Trade and other payables 379,843 397,286 777,129

Total financial liabilities 5,520,871 397,286 5,918,157

Group - 2013 (Restated)Financial


Fair value through


Total

Amount owing to shareholder 270,674 - 270,674





Company - 2014Financial


Fair value through


Total

Bank overdraft 311,378 - 311,378





Company - 2013 (Restated)Financial


Fair value through


Total

Amount owing to shareholder 270,674 - 270,674





At year-end there were no financial liabilities held for trading.

Trade and other payables numbers in the above tables exclude VAT, which do not represent financial instruments.

169




GROuP COMPANY

2014

R ‘000

2013 (Restated)

R ‘000

2014

R ‘000

2013(Restated)

R ‘000

31. Revenue

Postbank 308,159 314,447 308,159 314,447

Postbank interest revenue 275,576 275,891 275,576 275,891

Retail products 77,973 14,863 77,973 14,863

Services rendered - Postal 4,076,325 4,006,160 4,062,814 3,968,580

Services rendered - Agency and money transfer 353,061 405,478 353,061 405,478

Services rendered - Courier 687,346 672,706 320,378 334,981

Total revenue 5,778,440 5,689,545 5,397,961 5,314,240

Revenue comprise income from services provided and the sale of retail products, excluding VAT, rebates, and discounts as well as Postbank finance income, excluding VAT.These services include work performed as an agent of certain Government departments, other authorities and businesses.

32. Other income

Commissions received 1,781 1,342 1,781 1,342

Discount received - 17,544 - 17,544

Fees earned 16,230 14,140 16,230 14,140

Government grants - 10 - 10

Other income 44,134 27,399 40,960 24,184

Pension fund surplus 1,986 5,604 1,986 5,604

Profit and loss on exchange differences 5,308 3,873 5,308 3,873

Profit and loss on sale of property, plant and equipment (2) 5,388 - -

Recoveries 45,071 85,553 143,943 116,362

Rental income 49,838 28,550 49,635 27,566

Sundry income 6,303 9,919 5,973 9,841

Technology 31,637 27,721 31,637 27,721

Total other income 202,286 227,043 297,453 248,187

33. Operating loss

Operating loss for the year is stated after accounting for the following:

Operating lease charges

Premises

• Contractual amounts 351,361 317,500 337,426 300,894

Motor vehicles


Equipment


Total operation lease charges 494,812 440,146 458,008 414,044

170




GROuP COMPANY

2014

R ‘000

2013 (Restated)

R ‘000

2014

R ‘000

2013(Restated)

R ‘000

33. Operating loss (continued)

Loss on sale of property, plant and equipment (2) 5,388 - -

Transport costs 747,353 648,068 559,766 453,047

Inventory written off 1,084 2,598 991 2,577

Trade and other receivables written off 3,498 10,140 175 4,782

Impairment on other financial assets (921) 921 96,233 39,719

Profit on exchange differences (5,308) (3,873) (5,308) (3,873)

Amortisation of intangible assets 33,730 26,463 33,183 25,913

Depreciation of property, plant and equipment 132,888 145,894 129,844 141,556

Depreciation of investment property 514 568 514 546

Employee costs 3,665,103 3,369,687 3,494,745 3,215,404

Research and development costs 818 3,334 818 3,334

Business restructuring 11,995 5,746 11,995 5,723

Licenses 19,857 20,114 19,857 20,104

Delivery standard measurement 1,273 724 1,273 724

Postbank corporatisation 100 4,833 - 4,833

Forensic audit 11,811 12,025 11,811 12,025

Revenue protection - (192) - (192)

Delivery standard measurement

The universal service aims to ensure that basic postal services and financial transactions which are essential to social and economical inclusion are available to everybody in an appropriate way at an affordable cost. This is intended to ensure that people living in rural areas obtain the advantage of postal and financial services, irrespective of whether the income generated is less than the cost of providing the service.

License agreement

In terms of Section 16(3) of the Postal Services Act, 1998 (Act No 124 of 1998) the Minister of Communications granted and issued a license to the Post Office of South Africa (SOC) Limited with a period of validity of 25 years, effective 1 April 2000.

In terms of the license conditions the Post Office of South Africa (SOC) Limited must pay the National Reserve Fund (or SA Government) an annual license fee equal to 0.55% of its annual regulated turnover.

34. Finance income

Dividend revenue

Unlisted financial assets - Local - 1,917 - 1,917

Interest revenue

Available-for-sale 135 3,854 135 3,854

Held-to-maturity 117,569 131,372 118,804 132,700

Trade and other payables discounting 23,875 (17,561) 23,652 (17,716)

Total interest revenue 141,579 117,665 142,591 118,838

Total finance income 141,579 119,582 142,591 120,755

Interest income on impaired financial assets amounted to R 2,205 million (2013: R 3,535 million).

171




GROuP COMPANY

2014

R ‘000

2013 (Restated)

R ‘000

2014

R ‘000

2013(Restated)

R ‘000

35. Fair value adjustments

Other financial assets 65,019 98,855 65,019 98,855

The fair value gains and losses recognised are derived from financial assets subsequently measured at fair value through profit and loss and relate to the Post Retirement Medical Aid Asset as noted in note 21.

36. Interest paid

Actuarial valuations 108,087 227,544 107,757 226,800

Finance leases - 1,572 - -

Former TBVC states loan 17,229 22,347 17,229 22,347

Interest paid other 12,067 451 12,271 1,875

Postbank finance cost 35,613 44,635 35,613 44,635

Trade and other receivables discounting (1,073) 3,048 (1,073) 3,048

Unwinding of site restoration provision 20,622 17,937 20,622 17,937

Total interest paid 192,545 317,534 192,419 316,642

172




GROuP COMPANY

2014

R ‘000

2013 (Restated)

R ‘000

2014

R ‘000

2013(Restated)

R ‘000

37. Taxation

Major components of taxation

Current

Local income tax - current period 45 41 - -

Local income tax - recognised in current tax for prior periods - (435) - (435)

Total current tax 45 (394) - (435)

Deferred

Originating and reversing temporary differences (75,346) 25,580 (76,328) 25,901

Arising from previously unrecognised tax loss/tax 79 - - -

credit/temporary difference

Benefit of unrecognised tax loss/tax credit/temporary (91,486) (73) (91,437) -

difference used to reduce deferred tax expense

Originating and reversing temporary differences (OCI) 16,310 (53,560) 16,310 (53,560)

Arising from prior period adjustments 336 (3,262) 335 (3,262)

Total deferred tax (150,107) (31,315) (151,120) (30,921)

Total taxation (150,062) (31,709) (151,120) (31,356)

Reconciliation of the tax expense

Reconciliation between applicable tax rate and average effective tax rate.

Applicable tax rate 28.00 % 28.00 % 28.00 % 28.00 %

Exempt income 14.90 % 23.55 % 15.63 % 24.60 %

Increase in tax rate (0.02)% (2.13)% - % (2.39)%

Disallowable charges (19.99)% (29.81)% (21.75)% (37.19)%

Restatement of opening deferred tax balance (0.04)% 0.93 % (0.05)% 1.05 %

Current tax relating to prior year - % 0.10 % - % 0.11 %

Subject to tax at reduced rate 0.81 % 2.14 % 0.89 % 2.40 %

Net deferred tax not raised (3.13)% (3.59)% - % - %

Recognised in equity (0.10)% (2.32)% (0.11)% (2.61)%

Effective tax rate 20.43 % 16.87 % 22.61 % 13.97 %

Deductible temporary differences, unused tax losses and unused tax credits for which no deferred tax asset has been recognised.

112,784 86,945 - -

173





38. Other comprehensive income

Components of other comprehensive income - Group - 2014

Gross Tax Net

Items that will not be reclassified to profit or loss

Movements on revaluation

Gains on first time recognition of heritage assets 21,965 (4,101) 17,864

Remeasurements on net defined benefit liability

Remeasurements on net defined benefit liability (30,918) 8,666 (22,252)

Total items that will not be reclassified to profit or loss (8,953) 4,565 (4,388)

Items that may be reclassified to profit or loss

Available-for-sale financial assets adjustments

Revaluation gains on available for sale financial assets 8,264 (1,543) 6,721

Total items that may be reclassified to profit or loss 8,264 (1,543) 6,721

Total other comprehensive income (689) 3,022 2,333

Components of other comprehensive income - Group - 2013 (Restated)

Gross Tax Net







Revaluation gains on available for sale financial assets 2,250 (420) 1,830

Total items that may be reclassified to profit or loss 2,250 (420) 1,830

Total other comprehensive income (153,389) 43,151 (110,238)

174





38. Other comprehensive income (continued)

Components of other comprehensive income - Company - 2014

Gross Tax Net


Movements on revaluation

Gains on first time recognition of heritage assets 21,965 (4,101) 17,864






Revaluation gains on available for sale financial assets 8,264 (1,543) 6,721

Total items that may be reclassified to profit or loss 8,264 (1,543) 6,721

Total other comprehensive income (721) 3,022 2,301

Components of other comprehensive income - Company - 2013 (Restated)

Gross Tax Net







Revaluation gains on available for sale financial assets 2,250 (420) 1,830

Total items that may be reclassified to profit or loss 2,250 (420) 1,830

Total other comprehensive income (153,361) 43,151 (110,210)

175




GROuP COMPANY

2014

R ‘000

2013 (Restated)

R ‘000

2014

R ‘000

2013(Restated)

R ‘000

39. Auditors’ remuneration

Fees 15,591 13,857 13,409 11,383

There are no unfulfilled conditions or contingencies.

40. Cash used in operations

Loss before tax (511,272) (258,590) (534,735) (235,949)

Adjustments for:

Depreciation and amortisation 167,132 172,925 163,541 168,015

Loss (profit) on sale of assets 2 (5,388) - -

Dividends revenue - (1,917) - (1,917)

Interest revenue (141,579) (117,665) (142,591) (118,838)

Interest paid 192,545 317,534 192,419 316,642

Fair value adjustments (65,019) (98,855) (65,019) (98,855)

Impairment loss on other financial assets (921) 921 96,233 39,719

Movements in operating lease assets and accruals 10,967 8,833 11,715 8,876

Movements in retirement benefit assets and liabilities 3,535 6,832 3,504 6,770

Movements in provisions 43,040 151,951 54,113 149,120

Discount received - (17,544) - (17,544)

Profit and loss on exchange differences (5,308) (3,873) (5,308) (3,873)

Providend fund actuarial gain (1,986) (5,604) (1,986) (5,604)

Recoveries (45,071) (85,553) (143,943) (116,362)

General expenses 224 (1,801) 1,874 (8,371)

Changes in working capital:

Inventories (26,535) 10,439 (26,313) 10,290

Trade and other receivables (6,891) (72,220) (13,952) (85,346)

Trade and other payables 106,437 (35,721) 89,764 (14,090)

Unearned revenue (6,231) (34,213) (4,529) (18,154)

Funds collected on behalf of third parties (30,205) (122,421) (30,205) (122,421)

Total cash used in operations (317,136) (191,930) (355,418) (147,892)

41. Tax refunded (paid)

Balance at the beginning of the year 34,292 (7,444) 34,163 (7,947)

Current tax for the year recognised in profit or loss (45) 394 - 435

Balance at the end of the year (114) (34,292) - (34,163)

Tax refunded (paid) 34,133 (41,342) 34,163 (41,675)

176




GROuP COMPANY

2014

R ‘000

2013 (Restated)

R ‘000

2014

R ‘000

2013(Restated)

R ‘000

42. Commitments

Authorised capital expenditure

Already contracted for but not provided for

• Property, plant and equipment 181,344 287,913 180,899 287,203

Not yet contracted for and authorised by directors

• Property, plant and equipment 221,901 19,758 221,901 19,458

This committed expenditure relates to plant and equipment and will be financed by available bank facilities, retained profits, rights issue of shares, issue of debentures, mortgage facilities, existing cash resources, funds internally generated, etc.

Operating leases – as lessee (expense)

Minimum lease payments due - Buildings

• within one year 207,172 187,403 197,608 175,437

• in second to fifth year inclusive 603,733 585,852 598,907 561,457

• later than five years 74,531 138,948 74,531 138,948

Total minimum lease payments due 885,436 912,203 871,046 875,842

None of the lease agreements contain any contingent rent clauses and it is assumed that there are no contingent rent payments. It is also assumed that there are no restrictions that would impose additional debts that are not covered in the minimum contract terms. Rental payments are based on a rate per square meter relating to the prevalent market rate at the inception of the contract. Escalation clauses vary from contract to contract averaging at 8.00% (2013: 8.00%). Contract renewal options are assumed to be exercised by the company, unless decided otherwise by management.

Minimum lease payments due - Vehicles

• within one year 86,263 48,368 80,236 46,311



The group leases vehicles from Avis Fleet Services and Fleet Africa under Full Maintenance Lease (FML) agreements. The lease period ranges from two to five years at an interest rate of prime less 2.00% to prime plus 2.25% (2013: prime less 2.00% to prime plus 2.25%). The vehicles are being utilised for the delivery of parcels and mail.

Operating leases – as lessor (income)

Minimum lease payments due - Buildings

• within one year 7,869 5,866 8,303 5,866


• later than five years 1,507 1,382 1,507 1,382


Rental income has been based on a rate per square meter relating to the prevalent market rate at the inception of each contract. Escalation clauses vary from contract to contract with an average of 7.00% (2013: 7.00%). Lease agreements are entered into for a minimum of two years to a maximum of three year period. Contract renewal option period is assumed to be exercised by the company, unless decided otherwise by management. None of the lease agreements contain any contingent rent clauses.

Minimum lease payments due - Vehicles

• within one year - - 4,715 3,144

• in second to fifth year inclusive - - 3,144 9,431

Total minimum lease payments due - - 7,859 12,575

Vehicles are leased to The Courier and Freight Group (Pty) Ltd (a subsidiary) for a period of 36 months at amounts of R 392 939 per month with an interest cost of prime plus 1.00%.

177




GROuP COMPANY

2014

R ‘000

2013 (Restated)

R ‘000

2014

R ‘000

2013(Restated)

R ‘000

43. Contingencies

The following contingent liabilities were identified:

Bank guarantees 8,353 6,756 6,275 6,756

Employees 40,400 9,238 40,400 9,238

Guarantees in respect of employee housing loans 1,503 1,504 1,503 1,504

Summons 296,725 346,725 296,725 346,725

Service providers 17,982 12,518 16,601 12,518

Total contingencies 364,963 376,741 361,504 376,741

The South African Post Office (SOC) Limited is in receipt of a summons in which the plaintiff has claimed R 296,725 million (2013: R 296,725 million) in damages arising out of an alleged breach of an agreement, purportedly concluded between the parties during 2004. The South Africa Post Office (SOC) Limited is defending the damages action.

44. Related parties

Relationships

Ultimate holding company South African Government

Holding company South African Post Office (SOC) Limited

Subsidiaries Refer to note 7

Shareholder with significant influence The Department of Communications

Post employment benefit plan for employees Old Mutual Corporate Limited

Members of key management: Refer to note 45

Related party balances

Loans and long term receivables - Owing (to) by related parties

CFG Zimbabwe (Pty) Ltd - 4,742 - -

Department of Communications - (270,674) - (270,674)

Sapos Properties (Bloemfontein) (Pty) Ltd - - 397 351

Sapos Properties (Cape Town) (Pty) Ltd - - 1,394 1,238

Sapos Properties (East Rand) (Pty) Ltd - - 2,962 2,905

Sapos Properties (Port Elizabeth) (Pty) Ltd - - 714 1,152

Sapos Properties (Rossburgh) (Pty) Ltd - - 3,322 3,066

The Courier and Freight Botswana (Pty) Ltd 3,560 3,560 - -

The Courier and Freight Group (Pty) Ltd - - 471,071 412,970

The Courier and Freight Namibia (Pty) Ltd 2,294 2,294 - -

The Courier and Freight Swaziland (Pty) Ltd - 7,304 - -

The Document Exchange (Pty) Ltd - - 530 -

178




GROuP COMPANY

2014

R ‘000

2013 (Restated)

R ‘000

2014

R ‘000

2013(Restated)

R ‘000

44. Related parties (continued)

Related party balances (continued)

Amounts included in trade receivables regarding related parties

Auditor-General 50 60 50 1

Centriq Insurance Innovation (Pty) Ltd 3,321 3,271 3,321 3,271

Department of Communications 1,422 45 200 -

National Treasury - 2 - -

The Courier and Freight Group (Pty) Ltd - - - 1,125

The Document Exchange (Pty) Ltd - - 497 992

The Presidency 43 16 26 -

Amounts included in trade payables regarding related parties

Centriq Insurance Innovation (Pty) Ltd - - - 3,280

National Treasury 2,235 677 2,235 678

The Courier and Freight Group (Pty) Ltd - - 5,523 -

The Independent Communications Authority of South Africa (ICASA)

65 23 65 23

Convertible loans from shareholder

Department of Communications 287,176 - 287,176 -

National Treasury 955,000 750,000 955,000 750,000

Operating lease liability

The Courier and Freight Group (Pty) Ltd - - 3 1


Provisions

Centriq Insurance Innovation (Pty) Ltd - - 4,493 779

Government grant

South African Government 69,775 79,580 69,775 79,580

Travel advances to key management personnel

Travel and subsistence advances - 22 - 22

179




GROuP COMPANY

2014

R ‘000

2013 (Restated)

R ‘000

2014

R ‘000

2013(Restated)

R ‘000

44. Related parties (continued)

Related party transactions

Interest paid to (receivable from) related parties

Department of Communications 709 753 709 753

The Courier and Freight Group (Pty) Ltd - - (2,205) (3,535)

Purchases from related parties


National Treasury 399,937 - 399,937 -

The Independent Communications Authority of South Africa (ICASA) 26,244 7,023 26,244 7,023

The Presidency - 131 - -

Sales to related parties

Auditor-General 27 77 10 13


Department of Communications 1,684 1,655 - 18

National Treasury 11 - 1 -

The Presidency 119 - - -

Management fees expensed in relation to related parties

The Courier and Freight Group (Pty) Ltd - - 47,963 53,853

Commission and administration fees received in relation to related parties

Centriq Insurance Innovation (Pty) Ltd - - 1,876 2,993

The Document Exchange (Pty) Ltd - - 1,200 1,200

Shared services recoveries in relation to related parties

The Courier and Freight Group (Pty) Ltd 558 - 45,911 35,608

Leases recoveries in relation to related parties

The Courier and Freight Group (Pty) Ltd - - - 1,572

Rent received from related parties

The Courier and Freight Group (Pty) Ltd - - 41 13


180





45. Directors’ and prescribed officers’ emoluments

Executive

2014

EmolumentsPension paid or

receivableExpense

allowanceOther benefits ¹ Total

Mr CJ Hlekane 2 2,844 264 - - 3,108

Ms K Mzozoyana 3 2,098 194 53 - 2,345

Mr B Yafele 4 1,463 - 9 - 1,472

Mr S Adam 5 1,825 169 - 9 2,003

Mr MJ Mathibe 6 1,890 220 36 9 2,155

Total executive emoluments 10,120 847 98 18 11,0831. Other benefits include mainly telephone and various travel related reimbursements.2. Group CEO. Also a director of The Courier and Freight Group, The Document Exchange and Sapos Properties. 3. Group CFO. Also a director of The Courier and Freight Group, The Document Exchange and Sapos Properties. 4. Group COO. Retired 14 November 2013.5. Acting MD: Postbank. Retired 15 October 2014.6. MD: The Courier and Freight Group. Also Acting MD: The Document Exchange. Retired 25 July 2014. Retired implies resigned, retired or dismissed.

2013 (Restated)

EmolumentsPension paid or

receivableExpense

allowanceOther benefits ¹ Total

Mr CJ Hlekane 2 1,421 134 - - 1,555

Mr MJ Mathibe 3 1,561 150 30 18 1,759

Ms K Mzozoyana 4 517 49 13 - 579

Ms TN Mashanda 5 216 - - - 216

Mr NJD Buick 6 498 48 13 107 666

Mr S Adam 7 1,600 147 - 9 1,756

Total executive emoluments 5,813 528 56 134 6,5311. Other benefits include mainly telephone and various travel related reimbursements.2. Group CEO. Appointed 1 October 2012. Also a director of The Courier and Freight Group, The Document Exchange and Sapos Properties.3. Acting group CEO from 1 June 2012 to 30 September 2012. Also MD: The Courier and Freight Group. Also MD: The Document Exchange.4. Group CFO. Appointed 1 January 2013. Also a director of The Courier and Freight Group, The Document Exchange and Sapos Properties.5. Acting CFO from 15 November 2012 to 31 December 2012.6. Group CFO. Retired 30 June 2012.7. Acting MD: Postbank.Retired implies resigned, retired or dismissed.

181





45. Directors’ and prescribed officers’ emoluments (continued)

Non-executive

2014

Emoluments ¹Expense

allowance ²Total

Dr HN Manzini 3 526 19 545

Mr H Daniels 4 546 21 567

Mr MS Patel 5 615 40 655

Ms SP Mothelesi 6 123 1 124

Mr JS Ngubane 6 128 3 131

Mr PT Mageza 6 141 7 148

Mr S Gounden 6 122 5 127

Mr R Sishuba 7 588 32 620

Ms G Simelane 8 519 17 536

Ms N Kela 9 597 17 614

Ms NG Mthethwa 10 650 18 668

Mr G Mothema 11 75 2 77

Total non-executive emoluments 4,630 182 4,8121. Emoluments include both directors’ fees for meetings and annual/quarterly retainer fees.2. The group re-imburses travel and accommodation expenses for members outside the Gauteng province.3. Acting Chairperson of the Board. Retired 07 November 2014.4. Retired 22 April 2014.5. Also a director of The Courier and Freight Group. Retired 07 November 2014.6. Appointed 17 December 2013. Retired 07 November 2014.7. Also Chairperson of the Board of The Document Exchange. Retired 23 October 2014.8. Retired 22 October 2014.9. Also a director of The Courier and Freight Group and The Document Exchange. Retired 07 November 2014.10. Also Chairperson of the Board of The Courier and Freight Group and a director of The Document Exchange. Retired 23 October 2014.11. Retired 26 June 2013.Retired implies resigned, retired or dismissed.

2013 (Restated)

Emoluments ¹Expense

allowance ²Total

Dr HN Manzini 3 313 9 322

Adv LP Nobanda 250 16 266

Mr G Mothema 768 27 795

Mr H Daniels 272 6 278

Mr MS Patel 4 428 99 527

Mr R Sishuba 479 27 506

Mr SEO Dietrich 105 4 109

Mr TC Ngcobo 4 437 14 451

Ms G Simelane 410 14 424

Ms K Sicwebu 342 5 347

Ms N Kela 497 14 511

Ms NG Mthethwa 565 16 581

Total non-executive emoluments 4,866 251 5,1171. Emoluments include both directors’ fees for meetings and annual/quarterly retainer fees.2. The group re-imburses travel and accommodation expenses for members outside the Gauteng province.3. Acting Chairperson of the Board. Also a director of The Courier and Freight Group.4. Also a director of The Courier and Freight Group.

182






Prescribed officers

2014

EmolumentsPension paid or receivable

Expense allowance

Leave payOther

benefits ¹ Total

Adv MM Mphelo 2 881 83 - - - 964

Mr MS Diaz 3 973 90 20 53 16 1,152

Ms S Myburg 4 975 90 36 - 9 1,110

Ms M Lancaster 5 822 87 20 84 16 1,029

Mr L Lose 6 1,369 127 30 - 68 1,594

Mr MC Sebusi 7 273 - 6 - 2 281

Mr CA Phillips 8 1,245 115 30 - 23 1,413

Mr M Faasen 9 1,103 120 30 - - 1,253

Mr P Ngomane 10 933 86 36 - 9 1,064

Mr KT Rapoo 11 974 90 30 - - 1,094

Mr DD Jacobs 12 601 - - - 8 609

Mr LP Govender 13 1,233 114 30 - 9 1,386

Mr M Borotho 14 625 59 12 - - 696

Ms BS Bulunga 15 969 90 28 - 21 1,108

Ms NJ Dewar 16 1,615 150 - - 9 1,774

Mr JS Kotsi 17 1,454 135 30 - 23 1,642

Mr NA Mnisi 18 1,301 123 - - 23 1,447

Mr B Tiribabi 19 914 85 16 - - 1,015

Mr TE Xiphu 20 1,362 126 10 - 23 1,521

Mr K Mothobi 21 1,427 - - - - 1,427

Total prescribed officers emoluments 21,049 1,770 364 137 259 23,5791. Other benefits include mainly telephone and various travel related reimbursements.2. Acting group Company Secretary. Appointed 15 February 2014.3. GE: Human Resources. Retired 30 November 2013.4. Acting GE: Human Resources. Appointed 01 July 2013.5. Acting CIO. Also GE: Strategy. Retired 03 December 2013.6. GE: Corporate Affairs.7. GM: Treasury. Retired 30 June 2013.8. Chief Audit Executive.9. Group Principal Officer.10. GM: Security & Investigation Services.11. Acting MD: Sapos Properties.12. Executive Legal Advisor. Retired 30 September 2013.13. GE: Management Accounting. Also acting GE: Supply Chain Management until 30 September 2013.14. GE: Supply Chain Management. Appointed 01 October 2013.15. Group Company Secretary. Retired 14 February 2014.16. CFO: Postbank.17. GE: Mail Business.18. GE: Retail. Retired 30 April 2014.19. Acting group CIO. Appointed 19 April 2013.20. GE: Government Relations.21. Acting GE: CEO. Contracted employee. Retired implies resigned, retired or dismissed.

183






2013 (Restated)

Emoluments Pension paid or receivable

Expense allowance

Other benefits ¹

Total

Adv MM Mphelo 2 881 83 - - 964

Mr MS Diaz 3 1,387 131 30 23 1,571

Ms M Lancaster 4 1,204 116 30 23 1,373

Mr L Lose 5 1,272 122 30 9 1,433

Mr MC Sebusi 6 339 - 8 2 349

Mr CA Phillps 7 1,156 112 30 23 1,321

Mr M Faasen 8 309 27 8 - 344

Mr P Ngomane 9 851 83 36 9 979

Mr KT Rapoo 10 896 87 30 9 1,022

Mr DD Jacobs 11 400 - - - 400

Mr LP Govender 12 1,142 110 30 9 1,291

Ms BS Bulunga 13 975 95 30 23 1,123

Ms NJ Dewar 14 1,537 114 - 9 1,660

Mr JS Kotsi 15 1,355 130 30 23 1,538

Mr NA Mnisi 16 1,249 117 - 23 1,389

Mr NF Dikgale 17 591 57 15 4 667

Mr TE Xiphu 18 1,265 122 30 23 1,440

Mr K Mothobi 19 430 - - - 430

Total prescribed officers emoluments

17,239 1,506 337 212 19,294

1. Other benefits include mainly telephone and various travel related reimbursements.2. Assistant group Company Secretary.3. GE: Human Resources.4. Acting CIO. Also GE: Strategy.5. GE: Corporate Affairs.6. GM: Treasury.7. Chief Audit Executive.8. Group Principal Officer.9. GM: Security & Investigation Services.10. Acting MD: Sapos Properties.11. Executive Legal Advisor. Appointed 03 December 2012.12. GE: Management Accounting. Also acting GE: Supply Chain Management.13. Group Company Secretary.14. CFO: Postbank.15. GE: Mail Business.16. GE: Retail.17. Executive Legal Services. Retired 28 September 2012.18. GE: Government Relations. 19. Acting GE: CEO. Contracted from 05 December 2012. Retired implies resigned, retired or dismissed.

184




GROuP COMPANY

2014

R ‘000

2013 (Restated)

R ‘000

2014

R ‘000

2013(Restated)

R ‘000

46. Risk management

Capital risk management

Capital risk refers to the risk that the group will become unable to absorb losses, maintain public confidence and support the competitive growth of the business. The management of capital risk will ensure that opportunities can be acted on timeously while solvency is never threatened.

The group’s objectives when managing capital are to safeguard the group’s ability to continue as a going concern in order to provide returns for shareholder and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

The capital structure of the group consists of debt, which includes the borrowings (excluding derivative financial liabilities) disclosed in notes 8, 23 & 24, cash and cash equivalents disclosed in note 15, and equity as disclosed in the statement of financial position.

In order to maintain or adjust the capital structure, the group may adjust the amount of dividends paid to shareholder, return capital to shareholder, issue new shares or sell assets to reduce debt.

The group monitors capital on the basis of the gearing ratio.

This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including ‘current and non-current borrowings’ as shown in the statement of financial position) less cash and cash equivalents. Total capital is calculated as ‘equity’ as shown in the statement of financial position plus net debt.

The group’s exposure to capital risk arises from primarily the following:

• Funds which are being received from the shareholder may cease before completion of the projects that they are intended to financed;and

• Funds received from the shareholder are specifically for certain identified projects.

The capital risk is managed in terms of certain guidelines agreed between the group and shareholder.

There are no externally imposed capital requirements.There have been no changes to what the entity manages as capital, the strategy for capital maintenance or externally imposed capital requirements from the previous year.

The gearing ratio at 2014 and 2013 respectively were as follows:

Total borrowings

Amount owing to shareholder 23 - 270,674 - 270,674

Bank overdraft 15 311,378 - 311,378 -

Deposits from the public 27 4,737,610 4,492,211 4,737,610 4,492,211

5,048,988 4,762,885 5,048,988 4,762,885

Less: Cash and cash equivalents 15 4,011,114 3,276,755 3,974,896 3,237,394

Net debt 1,037,874 1,486,130 1,074,092 1,525,491

Total equity 2,438,296 2,304,990 2,441,836 2,330,970

Total capital 3,476,170 3,791,120 3,515,928 3,856,461

Gearing ratio 30 % 39 % 31% 40 %

185




46. Risk management (continued)

Financial risk management

The group’s `activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk.

A comprehensive treasury policy has been compiled and approved by the board to ensure that all financial risks to which the group is exposed are understood and managed. The treasury policy covers all key areas of risk management namely identification, measurement, management and reporting of risk. Governance structures are in place to achieve effective independent monitoring and management of market risks through:

• The group’s Asset and Liability Management (“ALM”) function that is responsible for the day to day monitoring, evaluationandreportingofallmarketrisks;

• The group’s Asset and Liability Committee (“ALCO”) which is responsible for ensuring that the impact of financial risks is being effectively managed and reported throughout the group and that all policies, risk, limits, and relevant marketriskissuesarereportedtotheGroupRiskCommittee;

• The board’s Group Risk Committee which is responsible for ensuring that from a strategic perspective, risk is handledasanareaofcompetitiveadvantageandakeysourceofinnovation;and

• The group ALCO reports on a quarterly basis to the board’s Group Risk Committee.

Financial risk management objectives

The group’s ALM function monitors and manages financial risks relating to the treasury operations of the group through internal risk reports which analyse the degree and magnitude of risks. These risks include fair value interest rate risk, currency risk, credit risk, liquidity risk and cash flow interest rate risk.

The group seeks to minimise the effects of the negative impact of these risks by ensuring compliance with the treasury policy limits and benchmarks with regard to the following:

• Proposedmoneymarketinvestmentstrategiesdonotresultinthebreachofasset/liabilitymismatchgaplimit;

• Ensuringthatthenetinterestincomevolatilityiswithinapprovedbenchmark;

• Adequateovernightliquiditylimitiscompliedwithbyhavingsufficientcallbalances;

• The South African Post Office (SOC) Limited’s credit exposure is diversified across a range of acceptable counterparties and the maximum investment with a particular counterparty will be limited to 25% of the total investments. Where the amount to be invested per entity is less than or equal to R50 million, the minimum investment with any one counterparty should be limited to 50% + 1 of the total investment and not exceeding R25 million;and

• Instrument limits are set to avoid excess concentration in any given financial investment instrument.

Overall the group’s main financial risk management objective is to ensure enhanced return within the risk profiles or parameters approved by the board.

186





Fair value assumptions of financial instruments

The fair value of financial assets and financial liabilities are determined as follows:

• The fair value of financial assets and financial liabilities with standard terms and conditions and traded on active liquidmarketsisdeterminedwithreferencetoquotedmarketprices;

• The fair value of other financial assets and financial liabilities (excluding derivative instruments) is determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices from observablecurrentmarkettransactionsanddealerquotesforsimilarinstruments;and

• The fair value of foreign currency forward contracts is measured using quoted forward exchange rates and interest rate differential between local and foreign rates derived from quoted interest rates matching maturities of contracts.

Valuation of unlisted shares in Gidani Management (Pty) Ltd

The group had previously owned an equity stake of 1125 shares in Uthingo Management (Pty) Ltd. The liquidation of Uthingo Management (Pty) Ltd was finalised in the financial year ending 31 March 2010. The group received a final termination dividend of R 1,917 million) in the previous financial year. (Refer to note 34).

Subsequent to the liquidation of Uthingo Management (Pty) Ltd, the group had been allocated 100 ordinary shares in Gidani Management (Pty) Ltd, which represent 10% of Gidani shares. The shares were allocated to the South African Post Office (SOC) Limited by the Department of Trade and Industry on 28 July 2010.

The fair value of the South African Post Office (SOC) Limited’s stake in Gidani was determined by management to be zero. The discounted cash flow model was used in the determination of the fair value of the South African Post Office (SOC) Limited’s shareholding in Gidani.

Liquidity risk

Liquidity risk is the risk that the group will not be able to meet both expected and unexpected current and future cash flow needs without negatively affecting either the daily operations or the financial condition of the group.

The group’s exposure to liquidity risk arises mainly as a result of the following:

• UnexpectedwithdrawalofcashbyPostbankclients;

• Dailyworkingcapitalrequirements;and

• The group has signed contracts with third parties where its retail network is used as a collection agent for municipalities and other institutions. All contracts stipulate that funds collected for third parties are paid over to them after 24 hours.

Liquidity risk is managed in terms of the board approved treasury policy with appropriate dashboard liquidity risk profiles which are monitored by the group’s ALM function. The management of liquidity risk and particularly the group’s cash flows is strongly focused on the short to medium term to ensure that the group ALM function and the Treasury are quick to respond to immediate cash flow requirements under different stress scenarios.

On a quarterly basis, the group ALM function performs behavioural and stress analyses to identify business as usual as well as potential stress cash flow requirements. Medium and long term liquidity strategies are approved by the group’s ALCO and implemented by the group’s Treasury.

187






The group manages its daily liquidity by having cash reserves on overnight call balances of at least R 250 million and maintaining overdraft credit facilities with all the major banks. The group’s ALM function monitors the forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities of the banking division.

At year-end, the group had overnight call balances of R 346,504 million (2013: R 474 million) and R 50 million (2013: R 50 million) in overdraft/credit facilities with the major banks. R 311,378 million overdraft facility was utilised at year-end (2013: R 0 million).

Actions in managing liquidity risk at group ALCO meetings are reported to the Group Risk Committee of the board on a quarterly basis.

Liquidity risk tables

The tables below detail the group’s remaining contractual maturity for its financial assets and financial liabilities. The figures have been compiled based on the undiscounted cash flows based on the earliest date on which the group can be required to recognise financial assets and settle financial liabilities.

The liquidity risk table below shows the contractual maturity gap at period end. The tables include both interest and principal cash flows.

Group

At 31 March 2014 OvernightLess than 3

months

Between 3and 12 months

Greater than1 year

Equity Total

Cash and cash equivalents 1,402,833 2,394,784 - - - 3,797,617

Investments - 211,664 972,698 2,222,984 - 3,418,346

Other financial assets 144,543 31,902 103,318 247,715 325,775 880,253

Trade and other receivables - 536,873 - - - 536,873

Deposits from the public (4,572,931) (42,247) (102,802) (19,630) - (4,737,610)


(92,040) - - - - (92,040)

Trade and other payables - (777,129) - - - (777,129)

(3,117,595) 2,355,847 973,214 2,462,069 352,775 3,026,310

At 31 March 2013 (Restated) OvernightLess than 3

months


Greater than1 year

Equity Total


Investments - 639,019 3,405,797 - - 4,044,816



Amounts owing to shareholder - (270,674) - - - (270,674)

Deposits from the public (4,321,124) (43,872) (58,051) (49,760) (19,404) (4,492,211)


(122,245) - - - - (122,245)


(2,458,265) 1,680,353 3,423,390 107,793 301,605 3,054,876

188




GROuP COMPANY

2014 R ‘000

2013 R ‘000

2012 R ‘000

2014 R ‘000

2013 R ‘000

2012 R ‘000


Company

At 31 March 2014Overnight

Less than 3 months


Greater than1 year

Equity Total


Investments - 211,664 743,052 957,215 2,233,984 3,402,863


- - - 3,488 - 3,488



Deposits from the public (4,572,931) (42,247) (102,802) (19,630) - (4,737,610)


(92,040) - - - - (92,040)


(3,153,818) 2,172,295 895,703 2,279,870 99,388 2,293,438

At 31 March 2013 (Restated)Overnight

Less than 3 months


Greater than1 year

Equity Total


Investments - 639,019 3,390,413 - - 4,029,432


- 9,714 29,033 3,079 - 41,826



Amounts owing to shareholder - (270,674) - - - (270,674)

Deposits from the public (4,321,160) (43,872) (58,015) (49,760) (19,404) (4,492,211)


(122,245) - - - - (130,703)


(2,497,346) 1,652,480 3,437,075 110,872 301,605 3,004,686

189





Market risk

Market risk is the potential negative impact on earnings resulting from unfavourable changes in exchange rates, interest rates, prices and other market volatilities i.e. the risk that the fair value or future cash flows of financial instruments will fluctuate.

The group’s exposure to market risk arises primarily from its activities in four main areas:

• Interest rate risk in the group’s portfolio as a result of the financial assets and financial liabilities re-pricing mismatch in line with the groupALCO’sviewoftheinterestrates;

• Repricing risk is the risk of adverse impact on the group’s interest return from mismatched financial assets and liabilities. Investment risk arising from the group’s surplus cash flow. The investment risk is the risk of falling interest rates at the time of the investment or re-investment of the group’s surplus cash or the risk of the cash reserves maturing being re-invested at lower rates thanexpected;

• Foreign exchange risk arising from the group’s exposure to international postal services and products as well as the import of capitalgoodssourcedoffshore;and

• Systemic risk is the risk that events either globally or locally threaten the ongoing financial soundness of financial markets.

The group manages the market risk it is exposed to in its banking division’s money market portfolio by restricting the money market re-pricing mismatch or gap between interest rate sensitive financial assets and financial liabilities to a percentage gap or difference agreed at the group ALCO meetings and documented in the group treasury policy.

The group manages the foreign exchange risk by hedging exposures that are above a certain limit as per the requirements of the group treasury policy.

Market risk is quantified by performing sensitivity analyses on both interest and exchange rates. For interest rate risk, the policy stipulates that a 1% point adverse shift in the yield curve should not result in a 10% reduction in the projected income in the money market portfolio return over a 12 months horison. This is done for both the held to maturity portfolio where cash flow interest sensitivity is measured and the available for sale portfolio in respect of fair value sensitivity analysis.

The group’s exposure to currency risk is also evaluated by the exchange rate sensitivity analysis. The group only enters into a foreign exchange forward cover where the foreign exposure is greater than R 1 million and a 1% point adverse move in the exchange rate result in a loss of R 0.5 million over a one day horison.

It is the responsibility of the group ALM function to monitor compliance with risk limits and all breaches are discussed at the monthly group ALCO meetings.

All measures actioned in managing market risk at the group ALCO meetings are reported to the group Risk Committee of the board on a quarterly basis.

Interest rate risk

Interest rate risk is the risk that the group’s earnings or economic value of the financial assets will decline as a result of changes in the interest rates.The group’s exposure to interest rate risk arises primarily from the following:

• Re-pricingrisk(mismatchrisk)-timingdifferencesinthematurityandre-pricingoffinancialassetsandfinancialliabilities;and • Investment risk on the group’s surplus operational cash reserves arising from adverse movements in the interest rates.

The interest rate risk is managed in terms of the board approved treasury policy. The policy specifies a percentage gap or re- pricing mismatch between interest rate sensitive financial assets and financial liabilities which in turn is monitored and measured by the group’s ALM function. Interest rate limit breaches are reported at the group ALCO meetings.

Activities in managing interest rate risk at group ALCO meetings are reported to the group’s Risk Committee of the board on a quarterly basis.

Appropriate interest rate risk dashboard indicators have been compiled to provide the group ALCO members with the necessary interest rate risk information on a weekly basis, including a measure of compliance with approved limits and benchmarks.

190




GROuP COMPANY

2014

R ‘000

2013 (Restated)

R ‘000

2014

R ‘000

2013(Restated)

R ‘000


Cash flow interest rate risk

The table below reflects net interest income sensitivity for a given 1% up and downward shift in interest rates at year-end:

Increase (decrease)

1% increase in interest rates 44,875 25,992 44,875 25,554

1% decrease in interest rates (44,875) (42,403) (44,875) (41,964)

Fair value interest rate risk

The table below reflects the impact on the available-for-sale equity reserve for a given 1% up and downward shift in interest rates at year end:

Increase (decrease)

1% increase in interest rates (7,625) (6,747) (7,625) (6,747)

1% decrease in interest rates 7,718 6,834 7,718 6,834

Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in the financial loss to the group.

The group’s exposure to credit risk arises primarily from credit sales to its clients and money market investment activities.

Credit risk is managed in terms of the board approved group treasury risk policy, which in turn encompasses comprehensive credit procedures, limits and governance structure. Formal credit ratings are utilised in the credit evaluation process of the counterparties.

The minimum credit ratings for counterparties are Fitch National Long Term Rating ‘A’ and Fitch National Short Term Rating ‘F1’. The credit quality of counterparties is monitored by the group ALM function. The group’s credit exposure is diversified across a range of acceptable counterparties and the maximum investment with any counterparty is limited to 25% of total investments. All counterparty limits are reviewed in line with balance sheet growth and at least on an annual basis.

It is the responsibility of the group ALM function to monitor compliance with the approved counterparty credit limits and any breach is reported to the monthly group ALCO meeting.

Activities in managing credit risk at the group ALCO meetings are reported to the group Risk Committee of the board on a quarterly basis.

The carrying amounts of financial assets recorded in the financial statements represents the group’s maximum exposure to credit risk. The group is further exposed to the credit risk as a result of the housing guarantees that it issues on behalf of a certain category of its employees. At year-end the maximum amount the group could have to pay if the guarantees are called on amounts to R 1,502 million, (2013: R 1,504 million).

All financial assets except for those that are measured at fair value through profit or loss are assessed to determine any evidence of impairment. Any deterioration in any counterparty credit rating is regarded as evidence of impairment. During the course of the year, there was no evidence of impairment observed in held to maturity financial assets and available for sale assets held by the group.

The group credit risk is considered to be limited because all its counterparties are major banks with high credit ratings and other investments are in Government and liquid corporate paper. The credit risk profile and quality of the group’s counterparties is considered to be sound, well managed and commensurate with the risk appetite of the board.

191




GROuP COMPANY

2014

R ‘000

2013 (Restated)

R ‘000

2014

R ‘000

2013(Restated)

R ‘000


Foreign exchange risk

Foreign exchange risk is the risk of the decline in the earnings or realisable value in the net financial asset position of the group arising from adverse movements in foreign exchange rates.The group is exposed to foreign exchange risk as a result of exposures that arise from rendering of international postal services and products as well as capital imports that are sourced offshore.

The group manages the foreign currency exposures relating to international postal services through the utilisation of Universal Postal Union (UPU) approved netting agreements between South Africa and debtor and creditor countries. In the event where the exposure after netting exceeds the limit specified below, a forward foreign exchange contract is taken to hedge the foreign exchange risk.

The group manages foreign exchange risk arising from capital imports sourced offshore by utilisation of forward foreign exchange contracts as documented in the board approved treasury policy. The treasury policy stipulates the following in respect of utilisation of forward cover:

• No forward cover is required where the currency exposure is less than R 1 million in value and a 1% adverse exchange rate move does not result in a R 0,5 million currency loss.

• Forward cover is taken where the exposure in respect of a specific foreign currency commitment is more than R 1 million and 1% adverse move in the exchange rate results in the group experiencing a loss of more than R 0,5 million. Actions taken in managing foreign exchange risk at the group ALCO meetings are reported to the group Risk Committee of the board on a quarterly basis.

At year-end, the group was exposed to the following foreign currency denominated financial assets and financial liabilities for which no forward cover had been taken out:

Foreign currency exposure at the end of the reporting period

Financial assets

Botswana Pula 2 11 2 11

Euro 49 76 49 76

Great Britain Pounds 1,148 1,417 1,148 1,417

Special drawing rights 8,789 10,191 8,789 10,191

United States Dollars 1,213 995 1,213 995

Financial liabilities

Botswana Pula 299 273 299 273

Euro 412 361 412 361

Kenyan Shilling 9 173 9 173

New Zealand Dollars - 11 - 11

Special drawing rights 10,595 9,860 10,595 9,860

Swiss Franc 9 3 9 3

United States Dollars 49 21 49 21

Zambian Kwacha 5 4 5 4

At year-end, the group’s net income at risk from foreign exposure arose from the net asset currency position. A depreciation of 1% in the exchange rate would result in R 0,033 million foreign currency gain for the group (2013: R 0,290 million currency gain).

Price risk

The table below reflects the impact on the group’s income for a given 1% up and downward shift in market rates at period end:

Increase (decrease)

1% increase in interest rates (5,622) (5,706) (5,622) (5,706)

1% decrease in interest rates 6,479 6,656 6,479 6,656

192





Method and assumptions: Sensitivity analyses of financial assets and liabilities

(i) Fair value interest sensitivity

On Government and corporate bonds classified as available for sale assets, the group determines fair value interest sensitivity using quoted yield to maturity rates for specific Government and corporate bonds held by the group. The group calculates the fair value interest sensitivity for a one day horison and is measured for a 1% parallel shift in the rates. For fair value sensitivity the group Treasury policy stipulates that a 1% adverse change in the rates should not result in a 0.75% capital loss in the portfolio over a one day period.

(ii) Cash flow interest sensitivity

The group calculates the cash flow interest sensitivity to determine interest at risk on held to maturity financial assets and financial liabilities at amortised cost (note that none of the loans and receivables are interest bearing). The cash flow interest sensitivity includes all variable interest bearing financial assets and liabilities included in these categories. The sensitivity is calculated by interpolating along the Jibar and FRA quoted rates. The interpolation is performed to coincide with the maturities and re-investments of the principal cash flows. The calculation of the cash flow interest sensitivity analysis is in line with the group’s investment strategy. The cash flow sensitivity is measured for a 1% parallel shift in the rates.

(iii) Foreign currency sensitivity

The group calculates foreign currency risk sensitivity on both the hedged and uncovered foreign currency exposures. The sensitivity is calculated by using the quoted exchange rates against the local currency i.e. rand. The foreign exchange rate sensitivity is calculated for one day holding period on uncovered foreign exposures. The exchange rate sensitivity is measured for a 1% change in the rates.

(iv) Equity risk sensitivity

At year-end, the group had unlisted shares in Gidani Management (Pty) Ltd. The directors had used the discounted cash flow model in determining the fair value of the shares. The equity risk in the shares was considered to be minimal as the equity holding wasn’t exposed to the volatility of the stock market. On listed shares, the equity price risk is measured for 1% change in the share prices.

(v) Fair value of financial assets and financial liabilities recorded at amortised cost

The directors consider the carrying amount of financial assets and financial liabilities recorded at amortised cost and having a duration that is less or equal to twelve months as approximating their fair value. At year-end there were no financial assets and financial liabilities having a duration greater than twelve months that were carried at amortised cost.

(vi) Fair value measurements recognised in the statement of financial position

For an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3, based on the degree to which the fair value is observable, see note 9.

47. Going concern

For the year ended 31 March 2014 the group generated net losses of R 361,210 million (2013: R 226,881 million), while the total assets exceeded the total liabilities by R 2,438 billion (2013: R 2,305 billion), which implies that the entity is technically solvent.

The organisation has been experiencing cash constraints, and as such has not had sufficient working capital. The cause of the deterioration of the group’s liquidity position is both due to internal and external factors, such as the migration of customers towards digital communication, a general decline in the mail business revenue as well as an inappropriate and inefficient business model. This has resulted in the group not generating sufficient revenue to finance its high cost-base and thus a material uncertainty of the entity’s ability to continue as a going concern for the foreseeable future.

To assist the entity with working capital, realising its assets and discharging its liabilities in the normal course of business, an overdraft of R 320 million has been secured with Standard Bank, which is guaranteed by the Shareholder. In addition, the directors have received a letter of guarantee of R 1,67 billion from the shareholder to act as a letter of comfort to the creditors, which also supports the going concern assumption on which the financial statements have been prepared. The terms of the guarantee are as follows:

• The guarantee will be reduced by any appropriation or transfer made by either the Department of Telecommunications and Postal Services (DTPS) oftheTreasurythroughthebudgetprocess;

• The South African Post Office (SOC) Limited will require Government approval of the terms of the financing raised against the guarantee before concludinganyagreements;

• Consideration is to be given to establishing a separate Postbank holding company independent of South African Post Office (SOC) Limited, to be establishedanddesignatedasabankcontrollingcompanyforthePostbank;

• Inaddition,thenetprofittargetwillberesetinlinewiththelatestnetlossprojectionsofR676millionforthe2014/15financialyear;

• AllsalaryincreasesmustbeapprovedbytheMinisterofFinanceandtheMinisterofTelecommunicationsandPostalServices;

• Should labour increases exceed the assumptions included in the turnaround plan, measures will have to be taken to ensure that overall salary bill remainswiththebudgetsidentifiedintheturnaroundplan;

• TheR1,67billionguaranteespecificallyexcludestheguaranteeingoftheoverdraftfacilityasthiswasnotincludedintheheadroomcalculations;

• All conditions attached to the R 320 million also applies to this guarantee.

The directors have had to critically examine the financial health of the organisation and as a result a new operation model has been designed. This seeks to address the high fixed cost structure and will see the organisation freeing up cash of R1,5 billion over the next 3 years, which in turn will lead to better working capital management with less dependency on the overdraft facility. Accordingly the consolidated annual financial statements have been prepared on a going concern basis.

193




GROuP COMPANY

2014

R ‘000

2013 (Restated)

R ‘000

2014

R ‘000

2013(Restated)

R ‘000

48. Fruitless and wasteful expenditure

Opening balance 39,132 38,338 31,455 30,661

Fruitless and wasteful expenditure - current year 2,065 794 2,065 794

Less: Amounts condoned - - - -

Total fruitless and wasteful expenditure 41,197 39,132 33,520 31,455

Analysis of current fruitless and wasteful expenditure - current year

3G cards - 148 - 148

Human capital management: CCMA and associated costs 8 - 8 -

Penalties and interest 2,057 614 2,057 614

Rent paid without occupation - 32 - 32

Total current fruitless and wasteful expenditure- current year 2,065 794 2,065 794

Other expenditures in the statement of comprehensive income includes fruitless and wasteful expenditures that were incurred during the period under review. These expenditures are made up of fines and penalties of suppliers and third party customers, as well as rental incurred on leased property before taking up occupation.

49. Material losses due to criminal conduct

Fraudulent incident relating to Post Office Treasury 5,275 5,275 5,275 5,275

Commercial crime 5,629 - 5,629 -

Total material losses due to criminal conduct 10,904 5,275 10,904 5,275

50. Irregular expenditure

Opening balance 117,381 71,713 117,381 71,713

Add: Current year irregular expenditure 96,274 1,049,949 71,012 795,708

Add: Prior year irregular expenditure - 1,116,760 - 876,920

Less: Amounts condoned - (2,121,041) - (1,626,960)

Irregular expenditure awaiting condonation 213,655 117,381 188,393 117,381

Analysis of awaiting condonation per age classification

Current year 96,274 45,668 71,012 45,668

Prior years 117,381 71,713 117,381 71,713

Total irregular expenditure awaiting condonation 213,655 117,381 188,393 117,381

Irregular expenditure is expenditure other than unauthorised expenditure, incurred in contravention of or that is not in accordance with a requirement of any applicable legislation, including: • thePFMAAct;or • theStateTenderBoardAct,1968(ActNo86of1968),oranyregulationsmadeintermsofthatAct;or • any provincial legislation providing for procurement procedures in that Provincial Government.

194




GROuP COMPANY

2014

R ‘000

2013 (Restated)

R ‘000

2014

R ‘000

2013(Restated)

R ‘000

50. Irregular expenditure (continued)

Categories of irregular expenditure include:

• Irregular expenditure incurred as a result of non-compliance with a Treasury Regulation which required cognisance to be take of a National Treasury determination. For example, a department, trading entity, constitutional institution or public entity procured goods or services by means of price quotations where the value of the purchase exceeded the threshold values determined by the NationalTreasuryforpricequotations;

• Irregular expenditure incurred as a result of institutions procuring goods or services by means other than through competitive bids and where reasons for deviating from inviting competitive bids have not been recorded and approved by the accounting officer or accountingauthority;and

• Irregular expenditure incurred as a result of non-compliance with a requirement of the institution’s delegations of authority issued in terms of the PFMA.

The South African Post Office (SOC) Limited started reporting on irregular expenditure in the 2011 financial year in accordance with the PFMA requirement and continued accordingly. The South African Post Office (SOC) Limited is addressing the root causes resulting in irregular expenditure and it should also be noted that a total solution will only be achieved in the medium term due to the interventions considered and currently being implemented.

The process to identify any other irregular expenditure is continuing in order to have these investigated and condoned where relevant. Also, the expenditure was incurred or paid to address institutional requirements.:

An amount of R 30,926 million of the total of R 96,274 million disclosed as “irregular expenditure” for the 2013/14 financial year,relates to contracts previously disclosed as irregular and which are in the final stages of being regularised. The process is inthe final stages of being completed.

An amount of R 157,452 million of the total of R 213,655 million disclosed as “awaiting condonation” concerns a particular contractwhere an investigation was initiated and where the results are pending in order to determine third party liability or not. These amounts cannot be condoned until the investigation has been concluded.

The group has identified an amount of R 10,039 million of potential “irregular expenditure” during the 2013/14 financial year and these instances are currently being investigated in accordance with the National Treasury Regulations. This amount is not reflected above, but will be disclosed as and when the investigation is completed and confirmed as “irregular”.

Included in the group is an amount of R 23,304 million that relates to “irregular expenditure” for the Courier and Freight Group (Pty) Ltd.

Included in the group is an amount of R 1,958 million that relates to “irregular expenditure” for the The Document Express (Pty) Ltd.

51. Deregistered Entities

The following dormant subsidiary entities, which have never been consolidated were deregistered in the 2013/2014 financial year and the accumulated losses per the entities’ 2007 annual financial statements were as follows:

Subsidiary company

The Courier and Freight Swaziland (Pty) Ltd 7,742 7,742 - -

CFG Zimbabwe (Pty) Ltd 698,384 698,384 - -

Total accumulated losses 706,126 706,126 - -

The accumulated losses in the companies were allocated to the loan accounts which were subsequently impaired.

195




GROuP COMPANY

2013R ‘000

2012 R ‘000

2013R ‘000

2012 R ‘000

52. Comparative figures

Certain comparative figures have been reclassified.

The effects of the reclassification are as follows:

Statement of Financial Position

Loans and long term receivables to group companies (Non-Current Assets)

- - (38,921) -

Loans and long term receivables to group companies (Current Assets)

- - 38,921 -

Trade and other receivables 3,058 (129) - -

Trade and other payables (3,058) 129 - -

Subsidy unutilised (14,821) (14,068) (14,821) (14,068)

Trade and other payables 14,821 14,068 14,821 14,068

Funds collected on behalf of third parties 8,458 14,427 8,458 14,427

Trade and other payables (8,458) (14,427) (8,458) (14,427)

Employee costs (227,544) (253,518) (226,800) (252,748)

Interest paid 227,544 253,518 226,800 252,748

53. Change in estimate

Property, plant and equipment

The useful life of certain buildings have been revised during the current year. The effect of this revision has decreased the depreciation charges for the current and future periods by R 2,140 million.

The impact on tax is an increase of R 0,599 million.

The useful life of certain data processing equipment have been revised during the current year. The effect of this revision has increased the depreciation charges for the current and future periods by R 7,276 million.

The impact on tax is a decrease of R 2,037 million.

The useful life of certain furniture and fixtures have been revised during the current year. The effect of this revision has increased the depreciation charges for the current and future periods by R 1,765.


The useful life of certain leasehold improvements have been revised during the current year. The effect of this revision has increased the depreciation charges for the current and future periods by R 45,512 million.


The useful life of certain motor vehicles have been revised during the current year. The effect of this revision has increased the depreciation charges for the current and future periods by R 1,614 million.


The useful life of certain plant and machinery has been revised during the current year. The effect of this revision has increased the depreciation charges for the current and future periods by R 8,518 million.


Intangible assets

The useful life of certain software has been revised during the current year. The effect of this revision has increased the depreciation charges for the current and future periods by R 2,249 million.


Investment properties

The useful life of certain investment properties have been revised during the current year. The effect of this revision has increased the depreciation charges for the current and future periods by R 0,036 million.


196




54. Changes in accounting policy

The consolidated annual financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) on a basis consistent with the prior year except for the adoption of the following new or revised standards.

IFRS 10 Consolidated Financial Statements

The group adopted “IFRS 10 Consolidated Financial Statements” in the current year.

IFRS 10 was issued in May 2011 and replaces the guidance on control and consolidation of “IAS 27 Consolidated and Separate Financial Statements”, “SIC-12 Consolidation Special Purpose Entities” and “SIC 33 Consolidation”. IFRS 10 establishes a new definitionofcontrol,wherebyanentityhascontrolofaninvesteewhenithaspowerovertheinvestee;itisexposedtoorhasrightstovariablereturnsfrominvolvementwiththeinvestee;andithastheabilitytouseitspowerovertheinvesteetoaffecttheamountof the investor’s returns.

The potential implications of the adoption of IFRS 10 on the group are as follows:

• Certain investee’s which were previously consolidated would continue to be consolidated.

• Certain investee’s which were previously consolidated would no longer be consolidated.

• Certain investee’s which were not previously consolidated would now be consolidated.

The adoption of IFRS 10 has been applied in accordance with the applicable transitional provisions as set out below:

Transitional provisions - previously consolidated investees

When the group concludes, at the date of initial application, that an investee that was previously consolidated in accordance with IAS 27 or SIC-12 should now be consolidated in accordance with IFRS 10, the following transitional provisions apply:

The interest in the investee is measured by the group at the amount it would have been measured at if IFRS 10 was effective when the group became involved with the investee (without control in accordance with IFRS 10) or lost control of the investee. Only the annual period immediately preceding the initial application date is adjusted retrospectively. If the date that the group became involved with the investee (without control in accordance with IFRS 10) or lost control of the investee is established as being earlier than the beginning of the immediately preceding year, then an adjustment is made to equity at the beginning of the immediately preceding annual period. The adjustment is determined as the difference between the previous carrying amounts of assets, liabilities and non-controlling interest recognised and the recognised amount of the group’s interest in the investee.

It is therefore not a requirement to present restated figures for years earlier than the immediately preceding year. IFRS 10 also provides that it is not required to quantify the impact of the change in accounting policy on the current year.

Application - previously consolidated investees

Management have applied the principles of IFRS 10, and concluded that Centriq Insurance Innovation (Pty) Ltd, an investee which was previously consolidated under IAS 27 or SIC-12, shall no longer be consolidated into the group. Adjustments have been made in accordance with the transitional provisions by measuring the interest in Centriq Insurance Innovation (Pty) Ltd as of the beginning of the current period.

IAS 19 Employee Benefits Revised

During the year, the group changed its accounting policy with respect to the treatment of the recognition of changes in the net defined benefit liability (asset) including immediate recognition of defined benefit cost, disaggregation of defined benefit cost into components, recognition of remeasurements in other comprehensive income, plan amendments, curtailments and settlements. In order to conform with the benchmark treatment in of IAS19 – Employee Benefits. The group now recognises all remeasurements (actuarial gains and losses) in other comprehensive income.

The aggregate effect of the changes in accounting policy on the consolidated annual financial statements for the year ended 31 March 2013 is as follows:

197




GROuP COMPANY

2013R ‘000

2012 R ‘000

2013R ‘000

2012 R ‘000

54. Changes in accounting policy (continued)


Investments in subsidiaries

Previously stated - - 37,639 37,745

Adjustment - IFRS 10 - - (20,050) (20,050)

- - 17,589 17,589


Previously stated 4,740,622 4,922,721 4,626,911 4,818,038

Adjustment - IFRS 10 (21,289) (14,660) 77,422 75,023

4,719,333 4,908,061 4,704,333 4,893,061

Deferred tax

Previously stated 345,521 316,425 342,072 313,560

Adjustment - IFRS 10 (1,972) (10,826) (1,219) (10,263)

Adjustment - IAS 19 43,744 17,702 43,744 17,702

387,293 323,301 384,597 320,999

Trade and other receivables


Adjustment (9,372) 8,337 - -

599,101 536,036 552,583 473,205

Non-distributable reserves

Previously stated (749,887) (750,010) (749,887) (750,010)

Adjustment - IFRS 10 (46,822) (44,869) (46,822) (44,869

(796,709) (794,879) (796,709) (794,879)

Retained income

Previously stated (1,582,683) (1,761,247) (1,551,170) (1,709,935)

Adjustment - IFRS 10 47,504 54,878 (9,331) 160

Adjustment - IAS 19 175,680 45,466 175,708 45,522

(1,359,499) (1,660,903) (1,384,793) (1,664,253)

Retirement benefit obligation


Adjustment - IAS 19 (219,424) (63,168) (219,452) (63,224)

(1,436,835) (1,299,207) (1,436,222) (1,298,628)

Current tax payable

Previously stated (826) (8,937) - (7,947)

Adjustment - IFRS 10 826 990 - -

- (7,947) - (7,947)

Trade and other payables


Adjustment - IFRS 10 5,720 (4,492) 62 57

(714,326) (752,481) (662,957) (677,294)

unearned revenue


Adjustment - IFRS 10 24,079 7,974 - -

(330,862) (375,075) (317,452) (335,606)

Outstanding insurance claims

Previously stated (700) (2,433) - -

Adjustment - IFRS 10 700 2,433 - -

- - - -

198




GROuP COMPANY

2013R ‘000

2012 R ‘000

2013R ‘000

2012 R ‘000

54. Changes in accounting policy (continued)

Profit or Loss

Revenue

Previously stated 5,696,236 5,700,797 5,314,239 5,322,616

Adjustment - IFRS 10 (6,691) (11,444) - -

5,689,545 5,689,353 5,314,239 5,322,616

Other income


Adjustment - IFRS 10 4,545 (2,466) - -

227,043 399,189 248,188 425,803

Operating expenses


Adjustment - IFRS 10 21,452 (8,027) - -

Adjustment - IAS 19 226,927 115,264 226,183 114,437

(6,064,764) (5,922,069) (5,690,119) (5,568,684)

Finance income


Adjustment - IFRS 10 (5,517) (5,435) - -

138,040 161,546 139,213 158,876

Taxation

Previously stated 28,295 (184,542) 28,947 (88,189)

Adjustment - IFRS 10 10,497 3,714 9,493 (159)

Adjustment - IAS 19 (17,529) 38,726 (17,529) 38,726

21,263 (142,102) 20,911 (49,622)

Remeasurements on net defined benefit asset

Previously stated - - - -

Adjustment - IAS 19 (155,639) 75,086 (155,611) 75,087

(155,639) 75,086 (155,611) 75,087

Income tax relating to items that will not be reclassified

Previously stated - - - -

Adjustment - IAS 19 43,579 (21,024) 43,571 (21,024)

43,579 (21,024) 43,571 (21,024)

Available for sale financial assets adjustments

Previously stated (149) (852) (149) (852)

Adjustment - IFRS 10 2,399 54,973 2,399 54,973

2,250 54,121 2,250 54,121

Income tax relating to items that may be reclassified

Previously stated 26 - 26 -

Adjustment - IFRS 10 (446) (10,104) (446) (10,104)

(420) (10,104) (420) (10,104)

199




GROuP COMPANY

2013R ‘000

2012 R ‘000

2013R ‘000

2012 R ‘000

55. Prior period errors

In the past, the provision for site restoration was not calculated on all leases with a restoration clause, but only on leases where restoration was likely. In order to conform with the benchmark treatment in of IAS37 – Provisions, Contingent Liabilities and Contingent Assets, the group now recognises a provision for each lease that contains a restoration clause.

The correction of the error results in adjustments as follows:


Property, plant and equipment 171,608 139,872 171,608 139,872

Provisions (239,257) (160,032) (239,257) (160,032)

Retained ncome 52,158 14,609 51,472 14,298

Deferred tax 16,117 5,805 16,117 5,805

Profit or Loss

Depreciation expense 11,093 8,169 11,093 8,169

Finance Income 18,458 - 18,458 -

Interest paid 17,937 11,990 17,937 11,990

Deferred tax (10,445) (5,805) (10,445) (5,805)

200



Supplementary Information

GROuP COMPANY

Note(s)2014

R ‘000

2013 (Restated)

R ‘000

2014

R ‘000

2013(Restated)

R ‘000

Detailed Income Statement

Revenue

Retail services

Postbank 308,159 314,447 308,159 314,447

Retail products 77,973 14,863 77,973 14,863

Services rendered

Agency and money transfer services 353,061 405,478 353,061 405,478

Courier services 687,346 672,706 320,378 334,981

Postal 4,076,325 4,006,160 4,062,814 3,968,580

Postbank interest revenue 275,576 275,891 275,576 275,891

Services rendered - - - -

Total revenue 31 5,778,440 5,689,545 5,397,961 5,314,240

Other income

Commissions received 1,781 1,342 1,781 1,342

Discount received - 17,544 - 17,544

Dividends received 34 - 1,917 - 1,917

Fair value adjustments 35 65,019 98,855 65,019 98,855

Fees earned 16,230 14,140 16,230 14,140

Gains on disposal of assets - 5,388 - -

Government grants - 10 - 10

Interest received 34 118,501 117,665 142,591 118,838

Other income 44,134 27,399 40,960 24,184

Profit and loss on exchange differences 5,308 3,873 5,308 3,873

Provident fund actuarial gain 1,986 5,604 1,986 5,604

Recoveries 45,071 85,553 143,943 116,362

Rental facilities income 31,637 27,721 31,637 27,721

Rental income 49,838 28,550 49,635 27,566

Skills development levy refund 6,301 9,919 5,973 9,841

Total other income 408,884 445,480 505,063 467,797

Expenses (Refer to page 108) (6,506,051) (6,076,081) (6,245,340) (5,701,344)

Operating loss 33 (318,727) 58,944 (342,316) 80,693

Interest paid 36 (192,545) (317,534) (192,419) (316,642)

Loss before taxation (511,272) (258,590) (534,735) (235,949)

Taxation 37 150,062 31,709 151,120 31,356

Loss for the year (361,210) (226,881) (383,615) (204,593)

201




GROuP COMPANY

Notes2014

R ‘000

2013 (Restated)

R ‘000

2014

R ‘000

2013(Restated)

R ‘000

Detailed Income Statement

Expenses

Administration and management fees 540 5,998 47,963 53,835

Advertising 50,800 87,102 49,446 85,879

Assessment rates & municipal charges 224,230 207,830 219,040 202,207

Auditors remuneration 39 15,591 13,857 13,409 11,383

Bad debts (2,671) 27,936 208 27,765

Bank charges 108,672 142,813 108,220 142,407

Cleaning 1,570 1,728 - -

Commission paid 513 450 118 99

Computer expenses - 673 - -

Consulting and professional fees 184,453 168,649 172,356 158,630

Consumables 137,194 72,128 131,906 68,448

Delivery expenses 36,157 43,890 34,543 32,467

Depreciation, amortisation and impairments 166,211 173,846 259,774 207,734

Donations 2,326 3,690 2,244 3,289

Employee costs 3,665,103 3,369,687 3,494,745 3,215,404

Entertainment 305 359 315 272

Fines and penalties 2,207 432 2,116 375

General expenses (25,735) 1,233 26,233 651

Insurance 59,316 46,659 57,444 43,094

International terminal fees 97,898 77,588 97,898 77,588

Lease rentals on operating lease 494,812 440,146 458,008 414,044

Legal expenses 39,660 27,038 39,653 26,989

Magazines, books and periodicals 1,881 1,513 1,881 1,513

Motor vehicle expenses 85 134 48 54

Petrol and oil 117,903 110,589 86,434 77,316

Printing and stationery 38,377 34,889 38,182 34,232

Profit and loss on sale of assets and liabilities 2 - - -

Promotions 230 1,067 213 1,052

Protective clothing 1,840 8,161 1,841 7,982

Repairs and maintenance 184,324 189,181 163,691 170,754

Research and development costs 818 3,334 818 3,334

Royalties and license fees 20,515 20,114 20,505 20,104

Security 6,911 5,273 6,768 5,186

Software expenses 107,582 92,752 106,906 92,752

Staff welfare 2,425 3,877 2,370 3,869

Storage fees 2,320 1,747 2,259 1,740

Subscriptions (22,343) 199 - -

Telephone and fax 158,856 147,312 150,789 139,371

Training 14,529 15,610 14,529 15,610

Transport and freight 495,310 415,867 340,843 265,622

Travel - local 83,991 91,536 75,097 84,558

Travel - overseas 31,343 19,194 16,527 3,735

Total expenses 6,506,051 6,076,081 6,245,340 5,701,344

202




1. Three year period review - Group

Statement of financial position 2014

R ‘000

2013 (Restated)

R ‘000

2012(Restated)

R ‘000

Funds supplied

Non-current assets 2,954,225 2,731,892 2,552,563

Current assets 8,337,216 8,029,574 8,162,155

Non-current assets held for sale - - 201

Total assets 11,291,441 10,761,466 10,714,919

Funds used

Equity 2,438,296 2,304,990 2,642,113

Non-current liabilities 2,028,192 1,982,822 1,712,321

Current liabilities 6,824,953 6,473,654 6,360,485

Total equity and liabilities 11,291,441 10,761,466 10,714,919

Statement of comprehensive income 2014

R ‘000

2013 (Restated)

R ‘000

2012(Restated)

R ‘000

(Loss) profit before tax (511,272) (258,590) 33,717

Finance income 141,579 119,582 161,546

Interest paid (192,545) (317,534) (317,093)

Statement of cash flows 2014

R ‘000

2013 (Restated)

R ‘000

2012(Restated)

R ‘000

Net cash (used in) generated from operating activities (333,969) (429,652) 157,074

Net cash from investing activities 306,551 142,959 750,107

Net cash generated from (used in) financing activities 450,399 286,312 (11,852)

Total cash movement for the year 422,981 (381) 895,329

Solvency and liquidity 2014

R ‘000

2013 (Restated)

R ‘000

2012(Restated)

R ‘000

Debt-equity ratio 3.631 : 1 3.669 : 1 3.055 : 1

Current ratio 1.222 : 1 1.240 : 1 1.283 : 1

Acid test ratio 1.210 : 1 1.232 : 1 1.283 : 1

203



Glossary

ALCO Asset and Liability Committee

ALM Asset and liability management

ATR Annual training report

BBA Bachelor in Business Administration

BBBEE Broad-based black economic empowerment

BU Business unit

CAE Chief Audit Executive

CIT Cahs in Transit

Capex Capital expenditure

CDP Carbon disclosure project

CEO Chief Executive Officer

CFC Customer foreign currency

CFG Courier Freight Group

CFO Chief Financial Officer

CIO Chief Information Officer

CIPC Commission for Intellectual Properties and Companies

CNG Compressed natural gas

COO Chief Operating Officer

CPD Continuous professional development

CRM Customer relationship management

Docex Document Exchange

EMMS Environmental measuring and monitoring system

ER Employee relations

FAIS Financial and Intermediary Services

FECs Foreign exchange forward contracts

FML Full maintenance lease

FPP Fraud prevention plan

FSB Financial Services Board

FVTPL Fair value through profit or loss

GAAP Generally Accepted Accounting Practice

GCEO Group Chief Executive Officer

GCIS Government Communication and Information Services

GRI Global Reporting Initiative

HRTC Human Resources and Training Committee

IAS International Accounting Standards

ICASA Independent Communications Authority of South Africa

204



IFRS International Financial Reporting Standards

IGF Intermediaries Guarantee Facility Limited

IOD Incidents on duty

IPC International Post Corporation

ICT Information and communications technology

IT Information technology

MCP Mail collection point

MD Managing Director

MOI Memorandum of Incorporation

MTEF Medium-term expenditure framework

NCD Negotiable certificate of deposits

NT National Treasury

PAA Public Audit Act

PFMA Public Finance Management Act

PRMA Post-retirement medical assets

RemCom Remuneration Committee

ROE Return on expenditure

RPL Recognition of prior learning

SAAA South African Accreditation Authority

SADC Southern African Development Community

SARS South African Revenue Service

SASSA Social Security Agency

SOC State-owned company

SU Support Unit

TCTC Total cost to company

TTD Temporary total disability

TVBC Transkei, Venda, Bophuthatswana and Ciskei

UPU Universal Postal Union

USO Universal service obligation

VCCT Voluntary confidential counselling and testing

WRE Webriposte

WSP Workplace skills plan

Glossary