Notes to the Group annual financial statements | Note 3.2

3. Financial risk management and financial instruments
3.2 Liquidity risk
 

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due, both under normal and stressed circumstances.

The Group’s objective is to maintain prudent liquidity risk management by maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. Due to the dynamic nature of the underlying businesses, the Group aims to maintain flexibility in funding by keeping committed credit lines available. Cash flow forecasting is performed in the operating entities of the Group to ensure sufficient cash to meet operational needs, while maintaining sufficient headroom to ensure that borrowing limits (where applicable) are not breached.

Surplus cash held by the operating entities over and above the balance required for working capital management is transferred to Group treasury. Group treasury invests surplus cash in interest-bearing accounts, identifying instruments with sufficient liquidity to provide adequate headroom as determined by the above mentioned forecasts.

Maturity of financial liabilities

The table below analyses the undiscounted cash flows for the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the statement of financial position date to the contractual maturity date.

      Payable in:    
Notes Less than
one month
or on
demand
R’000		 More than
one month
but not
exceeding
one year
R’000		 More than
one year
but not
exceeding
two years
R’000 		More than
two years
but not
exceeding
five years
R’000 		More than five years R’000
2022
Interest-bearing borrowings 3.6.2 14 130 2 198 187 495 308 — —
Non-interest-bearing borrowings 3.6.2 719 — — — —
Trade and other payables* 3.6.1 2 369 306 3 560 412 — — —
Lease liabilities 3.9 2 676 36 306 7 096 3 210 —
Derivative liability 3.7 — 110 000 — — —
Other financial liabilities at fair value through profit or loss 3.7 — 23 282 — — —
Financial guarantee contracts 3.6.3 — — — — —
Bank overdraft 3.5.4 63 11 — — —
Total 2 386 894 5 928 198 502 404 3 210 —
2021
Interest-bearing borrowings 3.6.2 3 138 1 710 718 2 778 — —
Non-interest-bearing borrowings 3.6.2 989 — — — —
Trade and other payables* 3.6.1 2 148 300 3 739 653 — — —
Lease liabilities 3.9 2 341 33 331 36 197 9 346 —
Derivative liability 3.7 — 201 678 — — —
Financial liability at fair value through profit or loss 3.7 564 — — — —
Financial guarantee contracts 3.6.3 104 950 671 — — —
Bank overdraft 3.5.4 118 — — — —
Total 2 260 400 5 686 051 38 975 9 346 —
* Trade and other payables exclude non-financial instruments, being VAT, deferred revenue and certain amounts included within accruals and sundry creditors.

For details of the maturity of the financial asset at fair value through other comprehensive income at the statement of financial position date to the contractual maturity date, refer to note 3.3.

As part of the restructure of the debt into Cell C by third-party lenders, The Prepaid Company was required to provide liquidity support to Magnolia Cellular Investment 2 (RF) Proprietary Limited (SPV2), which is 100% held by 3C Telecommunications Proprietary Limited, of up to USD80 million, which liquidity support was to be provided over 24 months in the form of subordinated funding to SPV2. Oger Telecoms contributed USD36 million of the aforesaid USD80 million, thus reducing The Prepaid Company’s obligation in this regard to a maximum of USD44 million. As at 31 May 2021, the Group had contributed the full USD44 million to SPV2.

Group facilities

The Group has access to the following facilities in order to meet its liquidity needs:

 
Facility Borrower Investec African
Bank		 Value
R’000		 Interest
rate		 Interest
period		 Repayment
date
Facility A The Prepaid Company Proprietary Limited 100% — 1 125 000 Prime Monthly 31 March 2023*
African Bank Comm Equipment Company Proprietary Limited — 100% 1 900 000 11.05%
fixed for 24 months		 Monthly 25 November 2023
3 025 000
* Subsequent to year-end, the Group has renewed these facilities until 30 September 2023. Refer to note 9.

The working capital loan facilities available to The Prepaid Company at year-end amounted to R1.125 billion (2021: R1.45 billion), of which R942 million (2021: R1.3 billion) had been utilised. Refer to note 3.6.2.

  • The working capital loan facility available to The Prepaid Company at year-end is required to reduce by R120 million in September 2022, to R1.005 billion.
  • The following debt covenants applied to the TPC facilities with Investec:
    • debt to EBITDA ratio must be less than 2.5 times;
    • the sum of 70% of debtors and 80% of stock must exceed the utilised value of the facility, and must exceed 100% of the utilised facility at year-end and half-year-end; and
    • BLT’s market capitalisation must exceed R2 billion.

The Group has not been in breach in respect of these covenants.

The Group has pledged certain securities in respect of this facility. Refer to notes 3.5.2 and 4.4.

Comm Equipment Company Proprietary Limited (CEC) has a financing facility with African Bank of R1.9 billion (2021: R410.5 million with Investec Bank).

  • The utilised portion of the facility at year-end amounted to R1.623 billion (2021: R410.5 million from Investec Bank). Refer to note 3.6.2.
  • The Group has pledged the outstanding value of handset receivables totalling R1.8 billion as security for the utilised facility.

In addition to these facilities, the Group has sufficient working capital resources in the form of cash, trade receivables and realisable inventory to be able to adequately meet its short-term obligations.

Pledges, guarantees and sureties

The shares in CEC have been pledged as security for the R1.125 billion Investec Bank facilities. Blue Label Telecoms and The Prepaid Company have issued guarantees to the value of R250 million for the African Bank facility.

The Group has overdraft, credit card and debit order collection facilities with FNB, a division of First National Bank Limited (FNB). These facilities have been secured through Group cross-sureties issued by the Company and certain subsidiary companies. These facilities, which remain substantially unchanged from the prior year, comprised an overdraft facility of R19.85 million, credit card facility of R1.4 million and a debit order settlement facility of R11 million.

Guarantees to the value of R2.4 billion (2021: R2.1 billion) are issued by the Group’s bankers in favour of suppliers on behalf of the Group. The Group does not have access to this portion of its facilities while amounts owing to suppliers are outstanding.