Finance charges of R51 million (31 March 2019: R59 million) were capitalised to property, plant and equipment and intangible assets in the current financial year.

The capital expenditure under property, plant and equipment relates to expansions of R3 647 million for Group and R3 156 million for Company (31 March 2019 expansions: R2 898 million for Group and R2 741 million for Company). Expenditure due to maintenance of R3 119 million for Group and R2 956 million for Company (31 March 2019 maintenance: R4 345 million for Group and R4 274 for Company).

No material property, plant and equipment has been pledged as security.

Property, plant and equipment with a carrying amount of R6.5 million is held for sale at the 31 March 2020 reporting date for Group and Company. As this is not material, it has not been disclosed separately on the statement of financial position.

32% of the capital expenditure in Telkom Company relates to the expansion of existing networks and services. Expansion of the Mobile network also contributed to a 52% growth in PPE. 11% of capital expenditure was on the Next Generation Network programme. The balance of 5% capital expenditure is mainly attributable to investment in Network Evolution initiatives, sustainment programmes, IT and OSS systems and property upgrades and growth projects. The build programme that provides capacity for growth in services and for migrations of services, with focus on Next Generation Network technologies, is expected to continue over the next few years.

The Group and Company has a process of determining whether an asset which incorporates both a tangible and an intangible element, should be recognised as a tangible or an intangible asset, based on management’s judgement, facts available and the significance of each element to the total value of the asset. Assets with a carrying value to the net amount of R53 million (31 March 2019: R101 million) for Group and R23 million (31 March 2019: R91 million) for Company were reclassified from property, plant and equipment to intangible assets in the current year.

Assets with a carrying value of R66.1 million (31 March 2019: R475.4 million) for Group and R66.1 million (31 March 2019: R474.4 million) for Company relates to inventory that was transferred to property, plant and equipment in the current year.

Changes to the estimated useful lives of property, plant and equipment resulted in a decrease in depreciation to the value of R272 million (31 March 2019: R509 million) for Company and R284 million (31 March 2019: R512 million) for Group. Refer to note 6 for the useful lives.

Where assets have become technologically obsolete or damaged and can no longer contribute towards the Group and Company’s revenue generating capacity, they are written off or impaired.

At Group, transfers were effected between property, plant and equipment, intangible assets and inventory. Transfers in Company mostly related to property, plant and equipment, assets held for sale and intangible assets.

In addition to the goodwill in the consolidated financial statements, the impairment considerations apply equally to the investment in BCX (refer to note 16.3) and the property, plant and equipment in the separate financial statements.

Property, plant and equipment consists mainly of network equipment. The network equipment within the Company does not generate cash inflows that are largely independent of those from other assets or Groups of assets. This resulted in PPE having to be assessed for impairment as part of the Telkom CGU. The recoverability of PPE is largely dependent on macro-economic factors, which include cash flows to be generated through the network assets, as well as internal assumptions and estimates related to realisation levels and operating costs. The impairment test included assessing the recoverable amount of PPE, with reference to all cash flows (including the fair value contributory asset income), and comparing this to the carrying amount of the PPE. Refer to note 14.