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BLUE LABEL INTEGRATED ANNUAL REPORT 2016
14
Understanding material matters
Risk
Context
Mitigating factors
Fluctuating
economic
conditions,
including
political, social
and
environmental
conditions in
South Africa and
on the
international
front
These factors can affect
consumer health, and in turn
could have an adverse effect on
revenue and profitability, in
spite of the Group’s historical
resilience to adverse economic
conditions.
It has been the Group’s experience that the diversity of its
mix of products and services and distribution channels has
limited its exposure to economic downturns and strikes.
Consumers appear to be unwilling to reduce spending on
utilities, transport and airtime. In this regard the Group’s
products continue to be in demand and remain resilient to
downturns.
The Group is focusing on its existing platforms, both locally
and internationally. Its vast geography of point-of-sale
presence afford continuous opportunities to provide
additional products and services to be expedited on these
expanding points of presence.
Margin
compression
The network operators
determine the margins to the
prepaid airtime distribution
channel. The Group may not
always be able to pass on to
the retailer, merchant or
customer any margin
compression enforced by the
network operators.
Management is confident that based on historical trends,
the Group will be able to continue to pass on any margin
compression to the distribution channel. Any margin
compression is also likely to force inefficient distributors out
of the distribution chain, a trend welcomed by
management. In addition, the Group is constantly looking
to add new product and service offerings at comparatively
higher margins than its traditional business, through the
leverage of its significant distribution footprint and
merchant relationships.
Declines in
interest rates
As the Group is highly liquid,
declines in interest rates could
have an effect on finance
income.
Wherever possible, free cash flow is utilised for early
settlements or bulk buying in order to obtain discounts in
excess of prevailing interest rates.
Further increases
in rand/foreign
exchange rates
Fluctuations in exchange rates
affect the results reported
from, and any refinancing
required by, associate and joint
venture companies in India,
Mauritius and Mexico.
Every effort will be made to secure the best available
foreign exchange rate for any further financing required.
In most instances, forward cover is placed with reputable
banking institutions relating to the importing of devices,
tablets, phones, accessories and hardware.
Non-compliance
with legislation
Non-compliance with
legislation applicable to the
Group could lead to fines and
negative reputational impact,
i.e. POPI, CPA, WASPA
legislation, Companies Act,
Income Tax Act, Value Added
Tax Act, JSE Listings
Requirements, OHSA, BEE Act,
Employment Equity Act,
industry charters and
scorecards.
Legislation that affects the Group is identified, analysed and
categorised according to its impact and relevance. The
process is ongoing in order to test and ensure total
compliance at an operational level.
The compliance function is managed by Group Legal and
Company Secretarial, as assisted by KPMG.