Note 2.1

Group composition

2.1

Investments in and loans to associates and joint ventures

Company	Associate Oxigen Services India Private Limited		Joint venture Blue Label Mexico S.A. de C.V.		Joint venture 2DFine Group¹
Principal activity	Airtime and payment solution provider		Distributor of terminals to vend e-tokens of value		Investment holding company
Country of incorporation	India		Mexico		Mauritius
	2016 R’000	2015 R’000	2016 R’000	2015 R’000	2016 R’000	2015 R’000
Cost and share of reserves at the beginning of the year	61 543	58 317	267 568	318 508	(23 806)	(13 483)
Acquisition of associates and joint ventures	167 762	—	42 654	50 033	—	—
Share of (losses)/profits from associates and joint ventures	2 307	2 621	(63 293)	(88 508)	(10 245)	(7 574)
Share of results after tax	(27 106)	4 095	(61 219)	(86 389)	(10 245)	(7 574)
Amortisation of intangible assets	(786)	(2 047)	(2 881)	(2 943)	—	—
Deferred tax on intangible assets amortisation	220	573	807	824	—	—
Dilution of associate²	29 979	—	—	—	—	—
Foreign currency translation reserve	71 150	1 445	7 926	(12 465)	(8 235)	(2 749)
Equity compensation benefit	750	548	—	—	—	—
Dividends received	—	(1 388)	—	—	—	—
Disposal of associate/joint venture included in other income	—	—	—	—	—	—
Cost and share of reserves at the end of the year	303 512	61 543	254 855	267 568	(42 286)	(23 806)
Loans at the beginning of the year	29 552	25 069	—	1 054	163 634	127 372
Loans granted to associates and joint ventures	—	—	—	48 979	20 454	15 027
Loans repaid by associates and joint ventures	—	—	—	—	—	—
Loan granted to joint venture capitalised	—	—	—	(50 033)	—	—
Unrealised foreign exchange profit on loans to associates and joint ventures	8 807	4 483	—	—	50 804	21 235
Loans at the end of the year	38 359	29 552	—	—	234 892	163 634
Closing net book value	341 871	91 095	254 855	267 568	192 606	139 828

Company	Joint venture SupaPesa Africa Limited		Other associates		Other joint ventures		Total
Principal activity	Content provider
Country of incorporation	Mauritius
	2016 R’000	2015 R’000	2016 R’000	2015 R’000	2016 R’000	2015 R’000	2016 R’000	2015 R’000
Cost and share of reserves at the beginning of the year	33 908	—	7 709	80 079	564	1 193	347 486	444 614
Acquisition of associates and joint ventures	—	29 951	59 949³	7 086	—	100	270 365	87 170
Share of (losses)/profits from associates and joint ventures	348	2 658	(3 606)	12 194	2 719	(729)	(71 770)	(79 338)
Share of results after tax	348	2 658	(3 606)	12 194	2 719	(729)	(99 109)	(75 745)
Amortisation of intangible assets	—	—	—	—	—	—	(3 667)	(4 990)
Deferred tax on intangible assets amortisation	—	—	—	—	—	—	1 027	1 397
Dilution of associate2	—	—	—	—	—	—	29 979	—
Foreign currency translation reserve	10 208	1 299	495	1 973	—	—	81 544	(10 497)
Equity compensation benefit	—	—	—	—	—	—	750	548
Dividends received	—	—	—	—	—	—	—	(1 388)
Disposal of associate/joint venture included in other income	—	—	—	(93 623)	(4)	—	(4)	(93 623)
Cost and share of reserves at the end of the year	44 464	33 908	64 547	7 709	3 279	564	628 371	347 486
Loans at the beginning of the year	—	—	—	—	7 900	—	201 086	153 495
Loans granted to associates and joint ventures	—	—	—	—	1 638	7 900	22 092	71 906
Loans repaid by associates and joint ventures	—	—	—	—	(593)	—	(593)	—
Loan granted to joint venture capitalised	—	—	—	—	—	—	—	(50 033)
Unrealised foreign exchange profit on loans to associates and joint ventures	—	—	—	—	—	—	59 611	25 718
Loans at the end of the year	—	—	—	—	8 945	7 900	282 196	201 086
Closing net book value	44 464	33 908	64 547	7 709	12 224	8 464	910 567	548 572

¹	2DFine Group consists of 2DFine Holdings Mauritius and 2DFine Investments Mauritius.
²	This dilution relates to the 2DFine Group’s shareholding in Oxigen Services India Private Limited decreasing from 37.22% to 34.42%. (The Group’s effective share decreased from 18.1% to 17.21%). Refer to the Financial Director's report.
³	This represents an equity loan granted to Lornanox Proprietary Limited. These loans are repayable from surplus reserves at the discretion of the board.

Company	Associate Oxigen Services India Private Limited		Joint venture Blue Label Mexico S.A. de C.V.		Joint venture 2DFine Group¹		Joint venture SupaPesa Africa Proprietary Limited
Principal activity	Airtime and payment solution provider		Distributor of terminals to vend e-tokens of value		Investment holding company		Content provider
Country of incorporation	India		Mexico		Mauritius		Mauritius
	2016 R’000	2015 R’000	2016 R’000	2015 R’000	2016 R’000	2015 R’000	2016 R’000	2015 R’000
Statement of financial position
Non-current assets	339 096	129 691	171 701	214 368	154 706	118 463	10 654	8 207
Current assets	451 256	226 721	193 490	150 609	59	45	8 645	6 906
Cash and cash equivalents	168 248	119 757	88 498	46 320	2	1	4 702	—
Other current assets	283 008	106 964	104 992	104 289	57	44	3 943	6 906
	790 352	356 412	365 191	364 977	154 765	118 508	19 299	15 113
Total equity	224 477	75 737	228 233	261 721	(84 570)	(47 611)	7 889	5 380
Non-current liabilities	10 864	36 687	7 464	8 483	—	—	9 855	8 207
Current liabilities	555 011	243 988	129 494	94 773	239 335	166 119	1 555	1 526
Trade and other payables	368 146	180 044	129 090	93 564	897	191	1 311	1 154
Other current liabilities	186 865	63 944	404	1 209	238 438	165 928	244	372
	790 352	356 412	365 191	364 977	154 765	118 508	19 299	15 113
Effective percentage held	58.18	55.83	47.56	46.64	50	50	37.5	37.5
Net assets	224 477	75 737	228 233	261 721	(84 570)	(47 611)	7 889	5 380
Company net assets	207 571	59 252	209 039	239 959	(84 570)	(47 611)	7 889	5 380
Carrying value of purchase price allocations net of deferred taxation	16 906	16 485	19 194	21 762	—	—	—	—

Interest in associate and joint ventures	123 664²	36 148²	108 548	122 067	(42 286)	(23 806)	3 944⁵	2 690⁵
Goodwill	179 848	25 395	146 307	145 502	—	—	40 520	31 215
Balance at the end of the year	303 512	61 543	254 855	267 569	(42 286)	(23 806)	44 464	33 905
Statement of comprehensive income
Revenue	6 391 207	4 858 126	4 016 614	3 526 451	—	—	13 052	8 110
Operating profit before depreciation, amortisation and impairment charges	5 061	25 219	(70 042)	(124 452)	(645)	(907)	1 583	5 900
Depreciation and amortisation	(34 037)	(16 030)	(67 425)	(68 275)	—	—	—	—
Finance costs	(22 284)	(10 132)	—	—	(19 844)	(14 240)	(865)	(420)
Finance income	5 491	4 679	1 927	1 719	—	—	—	—
Net profit/(loss) before taxation	(45 769)	3 736	(135 540)	(191 008)	(20 489)	(15 147)	718	5 480
Taxation	(2 292)	957	1 109	(2 671)	—	—	(22)	(164)
Net profit/(loss) after taxation	(48 061)	4 693	(134 431)	(193 679)	(20 489)	(15 147)	696	5 316
Other comprehensive income/(loss)	25 932	(2 484)	16 370	(14 765)	(16 470)	(5 499)	1 811	64
Total comprehensive income/(loss)	(22 129)	2 209	(118 061)	(208 444)	(36 959)	(20 646)	2 507	5 380
Effective percentage held	58.18	55.83	47.56	46.64	50	50	37.5⁵	37.5⁵
Share of total comprehensive income	(16 940)³	1 233	(55 696)⁴	(92 749)⁴	(18 479)	(10 323)	1 254	2 690

We have aligned prior year disclosure in line with current year.

¹	2DFine Group consists of 2DFine Holdings Mauritius and 2DFine Investments Mauritius.
²	The purchase price allocation arose when the 2DFine Group purchased its holding into OSI in June 2011. The Group therefore only accounts for its effective share of the carrying value of the purchase price allocations. The effective share is 17.21% (2015: 18.61%).
³	During the year BLT increased its effective holding by 2.35% to 58.18% in OSI.
⁴	During the year BLT increased its holding by 0.92% to 47.56% in BLM. In the prior year BLT increased its shareholding by 1.07% to 46.64% in BLM.
⁵	Viamedia Proprietary Limited (75% owned by the Group) holds 50% of SupaPesa Africa Proprietary Limited. Therefore the Group equity accounts for 50% of net assets.

The Group’s interests in its other associates, which are unlisted, are as follows:

	Country of incorporation	Non- current assets R’000	Current assets R’000	Non- current liabilities R’000	Current liabilities R’000	Revenues R’000	Net profit/ (loss) R’000	Total comprehensive profit/ (loss) R’000	Effective percentage interest held %	Carrying value of investment R’000
2016
Lornanox Proprietary Limited	South Africa	40 464	111 732	—	97 626	149 044	(11 389)	(11 389)	40	61 394
Mpower Softcomm Private Limited	India	20 958	15 819	3 170	11 632	49 160	6 711	6 711	21.6	3 153
2015
Lornanox Proprietary Limited	South Africa	—	6 000	—	—	—	—	—	40	6 000
Mpower Softcomm Private Limited	India	17 700	7 288	282	12 801	23 262	1 323	2 227	21.6	1 709
Forensic Intelligence Data Solutions Proprietary Limited	South Africa	1 328	3 063	—	2 011	2 641	11 908	11 908	20.25	—

The Group’s interests in its other joint ventures, which are unlisted, are as follows:

	Country of incorporation	Non- current assets R’000	Current assets R’000	Non- current liabilities R’000	Current liabilities R’000	Revenues R’000	Net profit/ (loss) R’000	Total comprehensive profit/ (loss) R’000	Effective percentage interest held %	Carrying value of investment R’000
2016
Supa Pesa South Africa Proprietary Limited	South Africa	148	4 618	7 308	404	973	4 530	4 530	37.5	9 750
Banosign Proprietary Limited	South Africa	118	5 356	1 638	4 600	2 414	(764)	(764)	50.1	1 254
Datacision Proprietary Limited	South Africa	—	15 654	37	3 784	10 858	1 520	1 520	40.5	1 220
2015
Supa Pesa South Africa Proprietary Limited	South Africa	142	1 186	8 429	378	2 180	*	*	37.5	8 000
Datacision Proprietary Limited	South Africa	*	14 513	2	4 199	22 454	3 174	3 174	40.5	464

* Less than R1 000.

Loans to associates and joint ventures

	Interest rate	2016 R’000	2015 R’000
Oxigen Services India Private Limited	LIBOR + 1.50%	38 359	29 552
2DFine Holdings Mauritius*	10%	234 892	163 634
Supa Pesa South Africa Proprietary Limited	11%	7 307	7 900
Banosign Proprietary Limited	0%	1 638	—
		282 196	201 086

* Refer to note 8 for details on the surety relating to this loan.

The loans are neither past due nor impaired with a low risk of default.

The loans to associates and joint ventures are repayable on demand.

The Group considers its maximum exposure in respect of these loans, without taking into account any collateral and financial guarantees, to be as follows:

	2016 R’000	2015 R’000
Group 1	—	7 900
Group 2	282 196	193 186
Group 3	—	—
	282 196	201 086

The Group has subordinated a portion of its loan to 2DFine Holdings Mauritius Limited in favour of other creditors, to the value of R41 million.

The rating groups for counterparties are categorised as follows:
Group 1 – New customers/related parties (less than six months).
Group 2 – Existing customers/related parties (more than six months) with no defaults in the past.
Group 3 – Existing customers/related parties (more than six months) with some defaults in the past.

Impairment of associates and joint ventures
There was no impairment of investment in associates and joint ventures. This was tested by comparing the recoverable amount against the carrying value of the investment in associates and joint ventures.

The recoverable amount is the higher of fair value less cost of disposal and the value-in-use. These value-in-use calculations use cash flow projections based on financial budgets approved by the Board of Directors for the forthcoming year and forecasts for up to five years which are based on assumptions of the business, industry and economic growth. Cash flows beyond this period are extrapolated using terminal growth rates, which do not exceed the expected long-term economic growth rate.

The key assumptions used for the value-in-use calculations are as follows:

	2016		2015
	Growth rate %	Discount rate %	Growth rate %	Discount rate %
Oxigen Services India Private Limited	5.0	35.00	5.0	21.00
SupaPesa Africa Limited	4.0	17.74	4.0	17.38
Blue Label Mexico S.A.de C.V.	3.5	16.44	3.5	18.46

The discount rates used are post-tax and reflect specific risks relating to the relevant associates and joint ventures. The growth rate is used to extrapolate cash flows beyond the budget period. The growth rates were consistent with publicly available information relating to long-term average growth rates for each of the markets in which the companies operate.

The inputs used when calculating the value-in-use would need to be increased/(decreased) by the following amounts before any impairment would need to be recognised:

	2016
	Growth rate %	Discount rate %
SupaPesa Africa Limited	(3)	2

For Oxigen Services India Private Limited and Blue Label Mexico S.A. de C.V., if one or more of the inputs were changed to a reasonable possible alternative, there would be no impairments that would have to be recognised.

In considering the impairment of the Group’s investment in Oxigen Services India Private Limited (OSI), the Group has evaluated the company’s historical performance and future strategy. OSI currently has 127 000 touch points operational in its offline division, with the Group’s share of profits from this division increasing by R21.4 million in the current year. In India there has been a shift in demand for online wallets. Accordingly a strategic decision was made to enter this market. Through the extensive marketing OSI has undertaken, the number of wallet subscribers acquired as well as the volume of transactions performed will continue to increase. This growth is evidenced by the fact that the wallet subscriber base has increased from 5.4 million to 22.6 million in the current financial year. Daily money transfer deposits have grown from USD3.3 million per day as at 31 May 2015 to USD4.0 million per day as at 31 July 2016, increasing exponentially through its connectivity with the National Payment Corporation of India. Accordingly, the Group’s share of losses generated by the online division increased by R31.5 million in the current year.

In assessing the Group’s investment into the 2DFine Group, the factors relating to OSI above were taken into account as this is 2DFine Group’s main investment.

Based on these factors, as well as the impairment testing performed the Group has concluded that no impairment is indicated.

The Group has concluded that no impairment of its investment in Blue Label Mexico S.A. de C.V. (BLM) is required. The losses in BLM are primarily due to BLM becoming a multi-carrier distributor as opposed to historically being confined to one network. This has created a more competitive environment amongst the networks to the benefit of BLM. The introduction of the distribution of starter packs that generate monthly compounded annuity income is expected to gain momentum which will result in further declines in losses going forward.

Shares in associates and joint ventures acquired during the current year

		Date acquired	Effective percentage
Banosign Proprietary Limited	Joint venture	01-Apr-16	50.1
Oxigen Services India Private Limited	Associate	01-Mar-16	2.35
Blue Label Mexico S.A. de C.V.	Joint venture	01-Sep-15	0.92

The Group’s effective shareholding in OSI prior to March 2016 was 55.83%. Of this shareholding, 37.22% was held by Gold Label Investments (GLI), a wholly owned subsidiary of the Group and 18.61% indirectly through the Group’s 50% shareholding in 2DFine Holdings Mauritius. In March 2016, a rights issue was offered by OSI for USD10.5 million. The Group exercised its rights for the entire amount through GLI congruent with 2DFine Holdings Mauritius waiving its rights. The effect of this is that GLI’s shareholding has increased from 37.22% to 40.97% and its indirect shareholding of 18.61% has been diluted to 17.21%. The latter has in turn resulted in a gain of R30 million on dilution, being the Group’s share of the increased net asset value emanating from the rights issue. The Group’s effective shareholding in OSI therefore increased by 2.35% to 58.18%. The amount paid for this was R159.4 million, the difference of R8.3 million relates to foreign exchange differences.

In September 2015 BLT increased its holding by 0.92% to 47.56% in BLM for an amount of R42.5 million.

Shares in associates disposed of during the current year

			Date disposed		Effective percentage
Forensic Intelligence Data Solutions Proprietary Limited	Associate		01-Dec-15		20.25

The Group disposed of Forensic Intelligence Data Solutions Proprietary Limited for a nominal value.

Blue Label Telecoms Limited has guaranteed 45% of the amount owed by BLM to Radiomovil Dipsa S.A. de C.V. (trading as Telcel). At year-end there is no balance due to them by BLM.

There are no other contingent liabilities relating to the Group’s interest in joint ventures.

For details on related-party transactions, refer to note 8.