Fraud recoupment

The Group uncovered a fraudulent scheme, operating since 2015, which was perpetrated by two former senior key executives (the perpetrators) of a subsidiary company (the subsidiary). These fraudulent transactions were performed primarily outside the course and scope of the subsidiary's immediate field of commercial dealings, whereby the perpetrators interposed themselves between intermediary companies and the subsidiary for their own benefit. In addition, certain transactions were identified evidencing theft of funds from the subsidiary and the fraudulent concealment thereof. Settlement agreements were signed with the perpetrators in late October 2021, in terms of which rights to all, but a few, assets of the perpetrators were signed over to the Group. The Group holds Powers of Attorney over these assets. As of 31 October 2021, the aggregate value of assets either realised by or signed over to the Group as a result of the fraudulent scheme, amounted to R315 million, which has been recognised as recoupment income within other income, and comprised the following:

collectable at  
31 October  
in cash 
collectable at 
31 May 
Rights to: 
Immovable property  42 2951 (11 354) (30 941) — 
Loans made to third parties  62 7722 (3 524) (8 292) 50 956 
Unlisted shares  13 1003 —  (13 100) — 
Listed share portfolio  7504 (750) —  — 
Bank accounts  191 5275 (189 825) —  1 702 
Inventory  448   —  (448) — 
Other  4 240   (140) (4 100) — 
Receivables  —   —  60 483  60 483 
315 132   (205 593) 3 602  113 141 
1 Rights to immovable property have been accounted for as rights to receive non-current assets and were recognised initially at their fair value using comparable market prices. As it is not the intention of the Group to acquire legal title to the properties or to keep the rights for the long term, the Group is actively marketing these properties and expects to realise them all within the next 12 months. Accordingly, the rights to receive immovable property have been classified as non-current assets held-for-sale and are presented as such under current assets on the statement of financial position. These rights are measured at the lower of the initial amount recognised and fair value less costs to sell. Since the perpetrators are required to bear the costs to sell, these have been assumed to be zero for the Group's measurement purposes. All properties were sold by 31 May 2022, resulting in the derecognition of the related right and the recognition of a receivable for the sale proceeds which are expected to be received within the next 12 months where the transfer of title to the property has not yet taken place.
2 The right to a loan made to a third party with a carrying amount of R49.5 million has been accounted for as a financial asset at fair value through profit or loss. Early prepayment features resulted in the underlying loan failing the requirements for amortised cost accounting. The rights to the remaining loans receivable have been measured at amortised cost.
3 At about the time of the settlement agreement, an agreement was reached for the sale of certain unlisted shares owned by the perpetrators, the proceeds of which are payable to the Group within the next few months. Accordingly, the Group recognised a receivable for such proceeds, measured initially at fair value, which is subject to the Group's accounting policy for expected credit losses.
4 The right to the listed share portfolio has been accounted for as a financial asset at fair value through profit or loss based on quoted share prices.
5 Substantially all funds that were found to be held in bank accounts have been transferred to the Group's bank accounts.

Subsequent to year-end, R20.8 million of the balance remaining to be collected at 31 May 2022 was collected.

Professional fees incurred relating to the fraud recoupment amounted to R67.9 million to the end of May 2022 and have been included in other expenses.

As the fraudulent activities had a direct impact on the Group's operating cash flows, the realisation of the recoupment income is recognised in cash flows from operating activities in the cash flow statement.

Subsequent to the fraud investigation and detailed review of the control environment and business processes within the subsidiary, management has implemented the necessary improvements relating to the existing control environment.