Notes to the Group annual financial statements | Note 3.4

3. FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS
3.4 Financial liabilities
 

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.
3.4.1 Trade and other payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers.

  2023
R’000 		2022
R’000
Trade payables  4 330 101 4 208 011
Accruals  163 242 426 920
Employee benefits 125 516 132 286
Sundry creditors 674 342 425 353
VAT 23 539 18 438
Payables to related parties (refer to note 8)  319 530 858 019
  5 636 270 6 069 027

CEC and Cell C entered into an agreement whereby on recapitalisation of Cell C, set-offs were performed resulting in an adjusted existing claim of R1.1 billion by CEC against Cell C. CEC accounted for the change in repayment terms as a significant modification, which resulted in the derecognition of the previous trade receivable and the recognition of a new long-term loan. Trade and other payables amounting to R872 million were set-off against trade and other receivables in line with the recapitalisation agreement. Refer to note 2.1.2 for details of the deferral loan.

The fair value of the trade and other payables approximates their carrying amounts.
3.4.2 Borrowings
  2023
R’000		 2022
R’000
Interest-bearing borrowings 4 070 401 2 567 752
Non-interest-bearing borrowings   2 719 719
    4 073 120 2 568 471
Amounts included in non-current portion of borrowings   1 842 765 474 471
Amounts included in current portion of borrowings   2 230 355  
Categories of borrowings:      
Airtime sale and repurchase obligations   988 245 —
Class A Preference Shares   171 453 —
Facilities   2 902 722 2 564 926
Other third-party borrowings   10 700 3 545
Total borrowings   4 073 120 2 568 471
  Airtime sale and repurchase obligations  Preference
Share A* 
  From  
lenders 
R'000  		 From other  
third parties  
R'000  		 Total  
R'000  		 R'000  
Opening balance as at 1 June 2022   —     —  —     —    
Long-term borrowings raised   1 146 707    217 391    1 364 098      165 966  
Interest expense   276 003    31 031    307 034      12 534  
Gain on modification of financial liability   —      —      —        (7 047)
Repayments   (565 391)  (117 496)  (682 887)    —    
Closing balance as at 31 May 2023   857 319    130 926    988 245      171 453  
Amounts included in current portion  of borrowings   598 879    130 926    729 805      —    
Amounts included in non-current portion of borrowings   258 440    —      258 440      171 453  
Funds borrowed (R'000) 1 238 707  217 391      165 966 
Transaction costs (R'000) 92 000   —          —    
Effective interest rate (%) 40.4  25.75       11  
* The preference dividends are indexed to 15% of the 'upside' realised by TPC on the Debt Funding to Cell C (refer to "Loans to Cell C" in note 2.1.1). The liability has been modified for the change in expectations of the future dividends payable based on the updated expectation of the future cash flows related to the Debt Funding.

TPC borrowings – from lenders and Preference Share A

The airtime sale and repurchase from lenders represents a financing transaction, with the airtime as security, together with the issue of the Class A, and Class B, Preference Shares, which provide the lenders with additional compensation for their risk. As such the amount of borrowings was attributed to these three elements at their respective fair values. Refer to note 3.5 for further details on the accounting treatment of the Class B Preference Shares.

The airtime sale and repurchase loan, and the Class A Preference Shares were recognised initially at their fair values less transaction costs and have been accounted for as financial liabilities at amortised cost. Given that the indexation of the cash flows under the Class B Preference Shares to a 5% shareholding in Cell C results in them containing an embedded derivative which would otherwise need to be stripped out and accounted for separately, the Class B Preference Shares have been designated to be financial liabilities at fair value through profit or loss.

TPC borrowings – from other third parties

The airtime sale and repurchase from third party represents a financing transaction, with the airtime as security.

The airtime sale and repurchase loan was recognised initially at its fair value less transaction costs and has been accounted for as a financial liability at amortised cost.

  Facility utilised
Facility 2023
R’000 		2022
R’000
General banking facility – Investec 70 722  —  
General banking facility – RMB 32 000  —  
Revolving Facility A – Investec 660 000 941 584
Revolving Facility B – RMB 240 000  —  
African Bank 1 900 000 1 623 342
Total borrowings 2 902 722 2 564 926

For terms of these facilities, refer to note 3.2.2.

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

The fair value of the borrowings approximates their carrying amounts.

Changes in liabilities arising from financing activities

   Borrowings 
due within 
one year 
R'000  		 Borrowings 
due after 
one year 
R'000  		 Total 
R'000  
Opening balance as at 1 June 2021  1 704 374  2 778  1 707 152 
Non-interest-bearing borrowings raised  —  —  — 
Non-interest-bearing borrowings repaid  (270) —  (270)
Interest-bearing borrowings raised through the acquisition  of non-controlling interest  104 950  —  104 950 
Interest-bearing borrowings raised  1 155 448  471 693  1 627 141 
Interest accrued on interest-bearing borrowings*  183 280  —  183 280 
Interest-bearing borrowings capital repaid  (870 502) —  (870 502)
Interest-bearing borrowings interest repaid  (183 280) —  (183 280)
Closing balance as at 31 May 2022   2 094 000  474 471  2 568 471 
Acquisition of subsidiaries interest-bearing borrowings   12 672    —      12 672  
Acquisition of subsidiaries non-interest-bearing borrowings   2 000    —      2 000  
Movement between current and non-current   (156 964)  156 964    —    
Loan forgiveness   —      (2 778)  (2 778)
Loan modification   —      (7 047)  (7 047)
Interest-bearing borrowings raised   701 479    1 207 966    1 909 445  
Interest accrued on interest-bearing borrowings*   630 221    13 189    643 410  
Interest-bearing borrowings capital repaid   (422 832)  —      (422 832)
Interest-bearing borrowings interest repaid   (630 221)  —      (630 221)
Closing balance as at 31 May 2023   2 230 355    1 842 765    4 073 120  
* Of the total interest accrued on interest-bearing borrowings, Rnil (2022: R17 million) is accounted for as finance costs incurred in the generation of revenue on the Group income statement. The balance is accounted for in finance costs on the Group income statement.