Financial liabilities and equity instruments issued by the Group are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Refer to accounting policies on borrowings and trade and other payables for financial liabilities (which exclude employee-related liabilities and VAT), and share capital for equity instruments issued by the Group.

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade payables are classified as current liabilities if payment is due within the normal operating cycle of the business. If not, they are presented as non-current liabilities.

Borrowings are recognised initially at fair value, net of transaction costs incurred, when the relevant contracts are entered into. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest rate method.

Financial liabilities are derecognised when the obligation specified in the contract is discharged, cancelled or expired.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after year-end.

The table below details the facilities drawn upon at 31 May 2019. For terms of theses facilities, refer to note 3.2.

The Group did not default on any loans or breach any terms of the underlying agreements during the period.

Non-interest-bearing borrowings are secured and are repayable in 18 instalments 13 months after effective date of the loan grant.

Changes in liabilities arising from financing activities

Financial guarantee contracts are recognised at fair value, on the date that the Group becomes a party to an irrevocable commitment. Financial guarantee contracts are subsequently stated at the higher of the amount determined by the ECL model and the amount initially recognised. Any difference between the redemption value guarantee obligation and the amount paid is recognised in the income statement.

No financial guarantee contract obligations have been called upon in the current year.

Included in the balance above are guarantees to the value of R121.6 million (2018: R100.8 million) that have been issued in favour of RBL Bank. The Group does not have access to R48.2 million (2018: R37.8 million) of its cash while the guarantee is in place. Should these guarantees be called upon, the Group will be required to settle these amounts within seven days.

Financial guarantee contracts from the acquisition of subsidiaries relates to a guarantee within Glocell Distribution Proprietary Limited issued in favour of Investec Limited. An amount of R125 million, subsequently reduced to R121.7 million by 31 May 2019, is owed to Investec Limited by Glocell Proprietary Limited, and has been guaranteed by Glocell Distribution Proprietary Limited should the former not be able to meet its obligations.

The Group has not raised a liability for its guarantee to the consortium of financial institutions in respect of Cell C’s funding of R1.25 billion due to the fact that it holds sufficient collateral, which the Group expects to realise. Refer to note 2.1.