7. Financial risk
7.1 Financial instruments and risk management

Summary of material accounting policies

Recognition and initial measurement
Financial instruments are recognised when the Group becomes a party to the contractual arrangements.

All financial instruments are initially recognised at fair value plus or minus, in the case of financial assets and liabilities not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue. All regular way transactions are accounted for on settlement date. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace.

Classification and subsequent measurement

Financial assets: classification and subsequent measurement
The Group classifies financial assets on initial recognition as measured at amortised cost or fair value through profit or loss (FVTPL) on the basis of the Group's business model for managing the financial asset and the cash flow characteristics of the financial asset. Refer to note 7.1.2 for the categories of financial instruments.

Financial assets are subsequently measured at amortised cost where they are held with the objective to collect contractual cash flows that are solely payments of principal amount outstanding and interest on the outstanding amount. These include cash and cash equivalents, trade and other receivables and loans to subsidiaries.

All other financial assets not measured at amortised cost, as described above, are subsequently measured at fair value through profit or loss. These include other investments.

Financial liabilities: classification and subsequent measurement
Financial liabilities are classified as measured at amortised cost or fair value through profit or loss (FVTPL). Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on changes in fair value recognised in profit or loss to the extent that they are not part of a designated hedging relationship. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liabilities. Financial liabilities at amortised cost are initially recognised at fair value less transaction costs and are thereafter carried at amortised cost using the effective interest method. Any gain or loss on derecognition of the financial liabilities is also recognised in profit or loss.

Offsetting of financial instruments
Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously.

Derecognition of financial instruments

Financial assets
The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the right to receive the contractual cash flows in a transaction in which substantially all of the risk and rewards of ownership of the financial asset are transferred or in which the Group neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.

The Group accounts for the transfer or factoring of the financial asset to the third parties as follows:

  • If the entity transfers substantially all the risks and rewards of ownership of the financial asset, then the Group derecognises the financial asset.
  • If the entity retains substantially all the risks and rewards of ownership, then the Group continues to recognise the financial asset.

Where the Group retains the right to service the derecognised financial asset for a fee, service fees are accounted for as follows:

  • If the fee to be received is not expected to compensate the Group adequately for performing the servicing, a servicing liability for the servicing obligation shall be recognised at its fair value. If the fee to be received is expected to be more than adequate compensation for the servicing, a servicing asset shall be recognised for the servicing right at an amount determined on the basis of an allocation of the carrying amount of the larger financial asset. Where the benefits of servicing approximately compensate the service provider for its servicing responsibilities, there is no servicing asset or liability and the service contract's fair value is zero.

Financial liabilities
The Group derecognises a financial liability when its contractual obligations are discharged or cancelled or expire. The Group also derecognises a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognised at fair value.

On derecognition of a financial asset or liability, the difference between the consideration and the carrying amount on the settlement date is included in finance charges and fair value movements for the year.

Hedge accounting
The Group uses derivative financial instruments (such as forward currency contracts, cross currency swaps and options) to hedge its foreign currency risks, variability in cash flows and interest rate risks. Derivative financial instruments, including forward currency contracts that are designated as hedging instruments in an effective hedge, are initially recognised at fair value on the date on which a derivative contract is entered into. Telkom applies fair value hedge accounting for firm commitments.

The Group has elected to continue applying the hedge accounting requirements of IAS 39.

For fair value hedges, the designated hedging instruments and firm commitments are subsequently remeasured at fair value at each reporting date. The gain or loss relating to both the effective and ineffective portion of hedging instruments is recognised immediately in profit or loss on remeasurement. When a firm commitment is designated as a hedged item, the subsequent cumulative change in the fair value of the firm commitment attributable to the hedged risk is recognised as an asset or liability with a corresponding gain or loss recognised in profit or loss.

7.1.1 Financial risk management objectives and policies

The Group's principal financial liabilities, other than derivatives, comprise interest-bearing debt, lease liabilities and trade and other payables. The Group's financial liabilities are subjected to fair value measurements and adjustments.

The Group has finance lease receivables, trade and other receivables, contract assets, cash receivables, restricted cash and short-term deposits that arise directly from its operations. The main purpose of the interest-bearing debt is to raise finance for the Group's operations. The Group is exposed to liquidity, credit and market risks. The Group's senior management oversees the management of these risks.

7.1.2 Risk management

Treasury policies, risk limits and control procedures are continuously monitored by the Board through the Audit Committee and Risk Committee.

The Group holds or issues financial instruments to finance its operations, for the investment of short-term funds and to manage currency and interest rate risks. In addition, financial instruments such as trade receivables and payables arise directly from the Company's operations.

The Group finances its operations primarily by a mixture of issued share capital, retained earnings, and long-term and short-term loans. The Group uses derivative financial instruments to manage its exposure to market risks from changes in interest and foreign exchange rates. The derivatives used for this purpose are principally interest rate swaps and forward exchange contracts and the Group does not speculate in derivative instruments. The Group applied fair value hedge accounting in the current and prior financial years.

The table below sets out the Group's classification of financial assets and liabilities.

Group

      Group 
2024  Notes  At fair value 
through 
profit or loss 
Rm
 
At 
amortised 
cost 
Rm
 
Classes of financial instruments per statement of financial position       
Assets    305  11 775 
Other investments1  7.2.3  237   
Trade and other receivables2  4.3    7 253 
SMME loans  7.3    72 
Other financial assets  7.3  51  84 
   Forward exchange contracts    35   
   Firm commitments    1   
   Interest rate swaps    15   
   Asset finance receivables      84 
Finance lease receivables  4.1.1    579 
Cash and cash equivalents  4.4    3 747 
Investment in equity fund  7.3  10   
Investment in first-party cell captive  7.3  7   
Restricted cash      17 
Loans and advances  7.3    23 
Liabilities    (76) (23 732)
Interest-bearing debt  6.4    (14 217)
Trade and other payables  4.5    (8 996)  
Shareholders for dividend  9.4    (24)  
Other financial liabilities  7.3  (76)  
   Forward exchange contracts    (21)  
   Firm commitments    (55)  
Asset finance payables  7.3    (323)
Vendor financing  7.3    (172)
1 Other investments are disclosed net of investments accounted for using the equity method of R10 million (31 March 2023: R9 million).
2 Trade and other receivables are disclosed excluding prepayments of R413 million (31 March 2023: R471 million) for the Company and R962 million (31 March 2023: R912 million) for the Group.
      Group 
2023    Notes   At fair value 
through 
profit or loss 
Rm 
At 
amortised 
cost 
Rm 
Classes of financial instruments per statement of financial position          
Assets     258  12 700 
Other investments1  7.2.3  160  – 
Trade and other receivables2  4.3  –  8 402 
SMME loans  7.3  –  72 
Other financial assets  7.3  81  93 
  Forward exchange contracts     45  – 
  Firm commitments     21  – 
  Interest rate swaps     15  – 
  Asset finance receivables     –  93 
Finance lease receivables  4.1.1  –  648 
Cash and cash equivalents  4.4  –  3 469 
Investment in equity fund  7.3  10  – 
Investment in first-party cell captive  7.3  – 
Restricted cash     – 
Short-term loans and advances     –  12 
Liabilities     (142) (25 326)
Interest-bearing debt  6.4  –  (14 356)
Trade and other payables  4.5  –  (10 419)
Shareholders for dividend  9.4  –  (25)
Other financial liabilities  7.3  (131) – 
  Forward exchange contracts     (45) – 
  Firm commitments     (86) – 
Asset finance payables   7.3  –  (309)
Financial guarantees  7.3  (11) – 
Vendor financing  7.3  –  (217)

The table below sets out the Company's classification of financial assets and liabilities.

      Company 
2024  Notes  At fair value 
through 
profit or loss 
Rm
 
At 
amortised 
cost 
Rm
 
Classes of financial instruments per statement of financial position          
Assets     205  16 744 
Other investments  7.2.3  141   
Trade and other receivables2  4.3    5 752 
SMME loans  7.3    72 
Loans to subsidiaries  7.2.2    9 018 
Other financial assets     48   
Forward exchange contracts     33   
Interest rate swaps     15   
Finance lease receivables    4.1.1    38 
Cash and cash equivalents  4.4  (1) 1 864 
Investment in equity fund  7.3  10   
Investment in first-party cell captive  7.3  7   
Liabilities     (49) (22 349)
Interest-bearing debt  6.4    (14 217)
Trade and other payables  4.5    (8 108)
Shareholders for dividend  9.4    (24)
Other financial liabilities  7.3  (49)  
Forward exchange contracts     (16)  
Firm commitments     (33)  
1 Other investments are disclosed net of investments accounted for using the equity method of R10 million (31 March 2023: R9 million).
2 Trade and other receivables are disclosed excluding prepayments of R413 million (31 March 2023: R471 million) for the Company and R962 million (31 March 2023: R912 million) for the Group.
     Company 
2023  Notes   At fair value 
through 
profit or loss 
Rm 
At 
amortised 
cost 
Rm 
Classes of financial instruments per statement of financial position          
Assets     154  19 368 
Other investments  7.2.3  60  – 
Trade and other receivables2  4.3  –  8 273 
SMME loans  7.3  –  72 
Loans to subsidiaries  7.2.2  –  9 164 
Other financial assets  7.3  77  – 
   Forward exchange contracts     40  – 
   Firm commitments     22  – 
   Interest rate swaps     15  – 
Finance lease receivables  4.1.1  –  52 
Cash and cash equivalents  4.4  –  1 807 
Investment in equity fund  7.3  10  – 
 Investment in first-party cell captive  7.3  – 
 Liabilities     (125) (27 255)
Interest-bearing debt  6.4  –  (14 356)
Trade and other payables  4.5  –  (12 874)
Shareholders for dividend  9.4  –  (25)
Other financial liabilities  7.3  (125) – 
   Forward exchange contracts     (39) – 
   Firm commitments     (86) – 
7.1.3 Fair value of financial instruments

Valuation techniques and assumptions applied for the purposes of measuring fair value
Fair value of all financial instruments noted in the statement of financial position approximates carrying value except as disclosed below.

The fair value of financial instruments is included at the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, or in its absence, the most advantageous market to which the Group has access at that date. The fair value of a liability reflects its non-performance risk. The fair value of cash and short-term deposits, trade and other receivables, contract assets, finance leases, shareholders for dividend and trade and other payables approximate their carrying amounts largely due to the short-term maturities of these instruments and market-related interest rates included in finance lease receivables. Long-term receivables and borrowings are evaluated by the Group based on parameters such as interest rates, specific country factors and the individual creditworthiness of the customer. Based on this evaluation, allowances are taken into account for the expected losses of these receivables. As at the reporting date, the carrying amount of such receivables, net of allowances, are not materially different from their calculated fair values. Fair values of quoted bonds are based on price quotations at the reporting date.

The carrying amount of financial instruments approximates fair value, with the exception of interest-bearing debt (at amortised cost) for the Company and Group which has a fair value of R14 380 million (31 March 2023: R14 395 million) and a carrying amount of R14 217 million (31 March 2023: R14 356 million).

The fair value of financial assets and financial liabilities that are traded in active markets are based on quoted market prices or dealer price quotations.

For financial assets and liabilities not traded in an active market, a valuation technique is applied to derive the fair value, which takes into account quoted prices for similar or identical liabilities in active markets using observable inputs where necessary.

Type of financial instrument – Group Fair value at 
31 March 
2024 
Rm 
  Valuation technique Significant inputs
Derivative assets 51    Discounted cash flows Yield curves
Market interest rates
Derivative liabilities (76)      
Investment in FutureMakers entities 96    Discounted cash flows Cash flow forecasts and market-related discount rates
Investment in equity fund 10    Discounted cash flows Cash flow forecasts and market-related discount rates
Investment in first party cell captive   Discounted cash flows Cash flow forecasts and market-related discount rates
Interest-bearing debt (14 380)   Discounted cash flows and quoted bond prices Market interest rates
Market foreign exchange rates

Fair value hierarchy
The following table presents the Group's assets and liabilities that are measured at fair value at reporting date. The different levels have been defined as follows:

Level 1: Quoted prices in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices that are observable for the asset or liability.
Level 3: Inputs for the asset or liability that are not based on observable market data.

There were no transfers between levels in the current financial year.

    Group
31 March 2024 Notes Total
Rm
Level 1
Rm
Level 2
Rm
Level 3
Rm
Assets measured at fair value          
Derivative assets          
  Forward exchange contracts 7.3 35 35
  Firm commitments 7.3 1 1
  Interest rate swaps 7.3 15 15
Investment made by FutureMakers 7.2.3 96 96
Investment in equity fund 7.3 10 10
Investment in first-party cell captive 7.3 7 7
Liabilities measured at fair value          
Derivative liabilities          
  Forward exchange contracts 7.3 (21) (21)
  Firm commitments 7.3 (55) (55)
Liabilities measured at amortised cost          
Interest-bearing debt1 6.4 (14 380) (14 380)
31 March 2023          
Assets measured at fair value          
Derivative assets          
  Forward exchange contracts 7.3 45  45 
  Firm commitments 7.3 21  21 
  Interest rate swaps 7.3 15  15 
Investment made by FutureMakers 7.2.3 99  –  99
Investment in equity fund 7.3 10  –  10
Investment in first-party cell captive 7.3 –   7
Liabilities measured at fair value          
Derivative liabilities          
  Forward exchange contracts 7.3 (45) (45)
  Firm commitments 7.3 (86) (86)
  Financial guarantees 7.3 (11) –   (11)
Liabilities measured at amortised cost          
Interest-bearing debt1 6.4 (14 395) (14 395)
    Company
2024 Notes Total
Rm
Level 1
Rm
Level 2
Rm
Level 3
Rm
Assets measured at fair value          
Derivative assets          
  Forward exchange contracts 7.3 33 33
  Interest rate swaps 7.3 15 15
Investment in equity fund 7.3 10 10
Investment in first-party cell captive 7.3 7 7
Assets measured at cost          
Investment property 5.4 2 038 2 038
Liabilities measured at fair value          
Derivative liabilities          
  Forward exchange contracts 7.3 (16) (16)
  Firm commitments 7.3 (33) (33)
Liabilities measured at amortised cost          
Interest-bearing debt1 6.4 (14 380) (14 380)
2023          
Assets measured at fair value          
Derivative assets          
  Forward exchange contracts 7.3 40 40
  Firm commitments 7.3 22 22
  Interest rate swaps 7.3 15 15
Investment in equity fund 7.3 10 10
Investment in first-party cell captive 7.3 7 7
Assets measured at cost          
Investment property 5.4 2 014 2 014
Liabilities measured at fair value          
Derivative liabilities          
  Forward exchange contracts 7.3 (39) (39)
  Firm commitments 7.3 (86) (86)
Liabilities measured at amortised cost          
Interest-bearing debt1 6.4 (14 395) (14 395)
1 The carrying amount of interest-bearing debt is R14 217 million (31 March 2023: R14 356 million) for the Group and the Company. Interest-bearing debt is measured at amortised cost, however is included in the fair value hierarchy table above to achieve the IFRS 13 disclosure requirements relating to the disclosure of fair value.
7.1.4 Credit risk

Significant accounting judgements, estimates and assumptions

Impairment of financial assets (expected credit losses)

Trade receivables and finance lease receivables
IFRS 9 (Financial Instruments) requires the Group to recognise expected credit losses on financial assets that are measured at amortised cost (loans, trade receivables, other receivables, and cash and cash equivalents) or at fair value through other comprehensive income, on a lease receivable and on a contract asset, either on a 12-month or lifetime basis.

The Group has elected the simplified approach to recognise lifetime expected losses for its trade receivables and lease receivables as permitted by IFRS 9. The historical loss rates are adjusted when their impact is material to reflect current and forward-looking information on macro-economic factors affecting the ability of the customers to settle the financial asset.

For trade receivables, impairment losses calculated using the simplified approach are calculated using a provision matrix. The provision matrix is a probability-weighted model, which applies an expected loss percentage, based on the net write-off history experienced on receivables, to each ageing category of receivables at the end of each month in order to calculate the total provision to be raised on the receivable balances.

Trade receivables have been grouped together based on similar credit characteristics and a separate expected loss provision matrix has been calculated for each of the categories based on the net loss history associated with the specific category of receivables. Following the adoption of IFRS 9, the Group implemented a process whereby trade receivable balances are only written off at the point where there is no longer any probable recovery on a trade receivable balance.

Whenever a finance lease receivable is billed, the amount is moved from finance lease receivables to trade receivables and forms part of the trade receivables balance. To determine an expected credit loss for the outstanding lease receivables, the total outstanding amounts are proportioned into the various ageing buckets based on the proportions experienced in trade receivables. The same loss rates that are used for the fixed-line trade receivables segment are then applied to the outstanding lease receivables balance to derive the expected loss on finance lease receivables over the lifetime of the instrument. The underlying assumption attached to this is that the exposure to the finance lease balance will realise as the balance is billed to the customer over the lifetime of the instrument and will thus follow the same pattern of expected loss as the trade receivable balance.

Contract assets
The Group has elected the simplified approach to recognise lifetime expected losses for its contract assets as permitted by IFRS 9. The expected credit loss is calculated as a function of default rate multiplied by the balance of the contract asset. The expected loss is calculated using a probability weighted model, which applies an expected loss percentage based on net write-off history experienced over the average contract remaining period.

Cash and cash equivalents
Expected credit losses on cash and cash equivalents are calculated using the general approach. As cash and cash equivalents are current assets, 12-month and lifetime expected losses are the same. For disclosure purposes, expected credit losses on cash and cash equivalents will be calculated based on a 12-month period if the debtors/bank has low credit risk. Impairment on cash and cash equivalents is calculated at each reporting date. However, no impairment loss is recognised on cash and cash equivalents where the calculated expected credit loss is not material.

Other receivables, loans and financial assets at amortised cost
The Group uses the general approach to calculate expected credit losses on all other receivables, loans and other financial assets that are measured at amortised cost or at fair value through other comprehensive income. The general approach is based on a stage approach – stage one being 12-month expected losses and stage two being lifetime expected losses. Impairments of all other financial assets that are not measured using the simplified approach will be calculated as the difference between the carrying value of the asset and the present value of the expected cash flows, discounted at the original effective interest rate of the instrument.

Forward-looking information consideration
Historical credit loss rates are adjusted by a forward-looking estimate when there is reason to believe that forward-looking information will have a significant impact. Forward-looking information can be based on the future projections of macro‑economics and other available market information. The Group used macro-economics to calculate a forward-looking top-up.

Credit risk management
Credit risk, or the risk of financial loss, is the risk that a counterparty will not meet its contractual obligations as they fall due per the stipulated contractual terms. The Group is exposed to credit risk from its operating activities and from investing activities, including deposits with banks and financial institutions. The Company is not exposed to significant concentrations of credit risk as credit limits are set on an individual basis and reviewed annually.

The Group's maximum exposure to credit risk is represented by the gross carrying amount of the financial assets that are exposed to credit risk.

The Group's exposure to credit risk is influenced mainly by the individual characteristics of each type of customer. Management reduces the risk of irrecoverable debt by improving credit management through credit checks and limits. To reduce the risk of counterparty failure, limits are set based on the individual ratings of counterparties by well-known rating agencies. Trade receivables comprise a large and widespread customer base covering residential, business, government, wholesale, global and corporate customer profiles.

Credit checks are performed on all customers, other than pre-paid customers, on application for new services on an ongoing basis, where appropriate.

Credit risk from balances with banks and financial institutions is managed by the Group's treasury department in accordance with the Group's policy. Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counterparty. Counterparty credit limits are reviewed annually or when the need arises. The limits are set to minimise the concentration of risks and therefore mitigate financial loss through potential counterparty failure.

The Group and Company have the following types of assets that are subject to the expected credit loss model:

  • Trade receivables from the Group's ordinary activities
  • Contract assets
  • Finance lease receivables
  • Other receivables
  • Loans
  • Asset finance receivables
  • Cash and cash equivalents
  • Restricted cash

The maximum exposure to credit risk for financial assets at the reporting date by type of instrument and counterparty was:

      Group – Carrying amount  Company – Carrying amount 
      2024 
Rm 
2023 
Rm 
2024 
Rm 
2023 
Rm 
Trade receivables (refer to note 4.3) 6 174  6 877  3 874  4 875 
Telkom SA  9 161  9 627  6 698  7 113 
   Business and residential  4 425  3 974  4 027  3 741 
   Global, corporate and wholesale  3 960  4 344  1 906  2 199 
   Government  774  1 163  765  1 173 
   Other customers  2  146    – 
BCX subsidiaries – External  208  158    – 
Impairment of trade receivables (refer to note 4.3) (3 195) (2 908) (2 824) (2 238)
Contract assets (refer to note 3.2.4.1) 2 204  2 440  2 204  2 440 
   Gross contract assets  2 808  2 948  2 808  2 948 
   Impairment of contract assets (refer to note 3.2.4.1) (604) (508) (604) (508)
Subtotal for trade receivables and contract assets  8 378  9 317  6 078  7 315 
Other receivables  1 079  1 525  1 878  3 398 
Loans to Openserve (refer to note 7.2.1)   –  8 662  8 760 
   Loans granted to Openserve    –  8 719  8 817 
   Impairment of Openserve loans    –  (57) (57)
SMME loans (refer to note 7.3) 72  72  72  72 
   SMME loans granted  78  99  78  99 
   Impairment of SMME loans  (6) (27) (6) (27)
Derivatives  36  66  33  62 
Other investments  96  99    – 
Finance lease receivables  615  673  48  62 
Cash and cash equivalents  3 747  3 469  1 863  1 807 
Restricted cash  17    – 
   14 040  15 225  18 634  21 476 

Impairment of financial assets
The Group's approach and methodology when calculating expected credit losses under IFRS 9 are shown in the sub-sections below. Refer to note 4.3 for the reconciliation of the expected credit loss balances recognised.

Trade receivables and contract assets
The Group's receivables are split between different customer segments. Lifetime expected credit losses are calculated per segment for trade receivables using the simplified approach as the instruments do not contain a significant financing component. This is calculated using a provision matrix which has been derived from the Group's historical ageing and write-off data by considering the expected provision of a debtor based on its age at the end of the reporting period, as well as a provision being raised for the debtor based on the likelihood of it ending up in the ageing category where the instrument is likely to be written off.

For contract asset debtors, the Group uses loss rates from the trade receivables ageing analysis. These are not applied at a segment level, but an average loss rate is calculated per ageing bucket, evenly weighting the various segments and applying these across the contract asset debtors.

Application of forward-looking information
The Group calculated ECL on trade receivables, finance lease receivables, contract assets, cash and cash equivalents, and other receivables and loans, based on the IFRS 9 principles. In the current year, the Group adjusted the ECL rates for forward-looking information based on professional judgement around the future projections of macro-economics and other market-available information. The Group used macro-economics to calculate forward-looking values. Based on the above, the Group did not adjust the ECL rates for forward-looking information as the impact was determined to be immaterial.

Post write-off recoveries
The Company's receivable and contract assets' book data shows that a large proportion of recoveries relative to the write-off came through subsequent to an account being written off. Post write-off recoveries are considered in the expected credit loss model to better reflect the appropriate customer credit risk view.

Default
Financial assets are in default when contractual payments are 90 days past due contractual payment terms. This term of 90 days past due is viewed as appropriate considering the Group collection processes, volume of customers, as well as the customer relationship experience.

  Group – Carrying amount Company – Carrying amount
Impairment of receivables, contract assets and loans  2024 
Rm 
Restated1
2023 
Rm 
 2024 
Rm 
Restated1
 2023 
Rm 
Impairment of receivables (refer to note 4.3) (1 285) (1 094) (1 048) (945)
Impairment of contract assets (refer to note 3.2.4.1) (397) (116) (397) (116)
Impairment of Openserve loans (refer to note 7.2.2)   –    (57)
Impairment of SMME loans (refer to note 7.3) (6) (27) (6) (27)
  (1 688) (1 237) (1 451) (1 145)
1 Refer to note 2.7.
  Group Company
Post write-off recoveries credited within the impairment of receivables, contract 2024
Rm
2023
Rm
2024
Rm
2023
Rm
Post write-off recoveries 233 162 233 162

During the current financial year, R998 million (31 March 2023: R500 million) for Group and R422 million (31 March 2023: R252 million) for Company of trade receivables and R301 million (31 March 2023: R104 million) for Group and Company of contract assets were written-off and are still subject to enforcement activity, such as external debt collection processes and Credit Bureau listing. Refer to notes 4.3 and 3.2.4.1 for details.

  Group – Carrying amount
2024
Company – Carrying amount
2024
The ageing of trade receivables at the reporting date was: Trade
receivables
ageing
Rm
Allowance
for expected
credit
losses
ageing
Rm
Average
expected
credit
loss
ratio
%
Trade
receivables
ageing
Rm
Allowance
for expected
credit losses ageing
Rm
Average
expected
credit
loss
ratio
%
Current 4 618 200 4.3 3 311 162 4.9
21 to 60 days past due 1 091 340 31.2 757 322 42.5
61 to 90 days past due 306 186 60.8 201 172 85.6
91 to 120 days past due 283 180 63.6 215 151 70.2
121 days to 150 days past due 294 165 56.1 159 151 95.0
151 days to 240 days past due 500 428 85.6 389 365 93.8
241 days to 330 days past due 693 322 46.5 304 294 96.7
331 days to 361 days past due 170 147 86.5 154 134 87.0
361+ days past due 1 414 1 227 86.8 1 207 1 074 89.0
  9 369 3 195 34.1 6 697 2 825 42.2

Significant changes within ageing brackets
The increase in the 61 to 90, 121 to 150 and 151 to 240 ageing brackets is due to the mobile dealers balance in the prior year being higher due to outstanding net-offs that have been processed in the current year, as a result of a change in the express stores consignment stock model.

The increase in the 241 to 330 ageing bracket for Company is due to an increase in the mobile ECL provision due to higher termination penalties and an increase in ceased and suspended customers.

  Group – Carrying amount
2023
Company – Carrying amount
2023
The ageing of trade receivables at the reporting date was: Trade
receivables
ageing
Rm
Allowance
for
expected
credit
losses
ageing
Rm
Average
expected
credit
loss
ratio
%
Trade
receivables
ageing
Rm
Allowance
for
expected
credit
losses
ageing
Rm
Average
expected
credit
loss
ratio
%
Current 5 140 336 6.5 3 578 214 6.0
21 to 60 days past due 925 140 15.1 546 126 23.1
61 to 90 days past due 350 142 40.6 267 133 49.8
91 to 120 days past due 255 132 51.8 198 125 63.1
121 days to 150 days past due 369 124 33.6 322 86 26.7
151 days to 240 days past due 578 279 48.3 489 209 42.7
241 days to 330 days past due 381 214 56.2 362 198 54.7
331 days to 361 days past due 144 109 75.7 137 101 73.7
361+ days past due 1 643 1 432 87.2 1 214 1 046 86.2
  9 785 2 908 29.7 7 113 2 238 31.5

The decrease in gross trade receivable of R416 million for Group was mainly due to payments made by mobile dealers and government departments as well as write-offs. The increase in the impairment of receivables of R173 million was driven by an increase in default rates and higher write-offs experienced in the current year as a result of the current macro-economic conditions.

The Group used macro-economic factors such as GDP projections, inflation rate, interest rates and high fuel prices in the ECL estimate.

The movement in the allowance for impairment in respect of trade receivables during the year is disclosed in note 4.3. Included in the allowance for impairment for the Company are individually impaired receivables with a balance of R209 million (31 March 2023: R169 million) which have been identified as being unable to service their debt obligation. The impairment recognised represents the difference between the carrying amount of these trade receivables and the present value of the future cash flows. The Group does not hold any collateral over these balances.

The Group and Company do not age the contract asset as none of the amounts related to the contract asset is past due. Telkom uses one rate across all the contract assets and that rate is the average of the contract assets over the average remaining life of the contract asset.

Cash and cash equivalents
As at the reporting date, the Group has not recognised any expected credit losses for cash and cash equivalents. This approach will only be reconsidered should there be a future downgrade of the banks with which the amounts are invested.

7.1.5 Liquidity risk management

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group is exposed to liquidity risk as a result of variable cash flows as well as capital commitments of the Group.

The Group's treasury department manages liquidity risk in accordance with policies and guidelines formulated by the Group's Executive Committee. In terms of the borrowing requirements, the Group ensures that sufficient facilities exist to meet its immediate obligations. Short-term liquidity gaps may be funded through undrawn facilities and commercial paper bills.

The table below summarises the maturity profile of the Group's financial liabilities based on undiscounted contractual cash flows at the reporting date.

    Group
2024 Notes Carrying
amount
Rm
Contractual cash flows
Rm
0 – 12
months
Rm
1 – 2
years
Rm
2 – 5
years
Rm
>5
years
Rm
Non-derivative financial liabilities              
Interest-bearing debt 6.4 14 217 18 161 3 795 3 334 7 155 3 877
Lease liabilities 6.3.2 6 461 8 995 2 965 1 716 3 494 820
Trade and other payables 4.5 8 996 8 996 8 996
Shareholders for dividend 9.4 24 24 24
Asset finance payables 7.3 323 357 150 109 98
Vendor financing 7.3 172 172 172
Derivative financial liabilities              
Firm commitments 7.3 55 55 55
Forward exchange contracts 7.3 21 21 21
    30 269 36 781 16 178 5 159 10 747 4 697
    Group
2023 Notes Carrying
amount
Rm
Contractual
cash flows
Rm
0 – 12
months
Rm
1 – 2
years
Rm
2 – 5
years
Rm
>5
years
Rm
Non-derivative financial liabilities              
Interest-bearing debt 6.4 14 356 18 232 3 435 4 504 8 334 1 959
Lease liabilities 6.3.2 5 889 7 530 1 616 1 557 3 096 1 261
Trade and other payables 4.5 10 419 10 419 10 419
Shareholders for dividend 9.4 25 25 25
Asset finance payables 7.3 309 309 309
Financial guarantees 7.3 11 11 11
Vendor financing 7.3 217 217 217
Derivative financial liabilities              
Firm commitments 7.3 86 86 86
Forward exchange contracts 7.3 45 45 45
    31 357 36 874 16 163 6 061 11 430 3 220
    Company
2024 Notes Carrying
amount
Rm
Contractual
cash flows
Rm
0 – 12
months
Rm
1 – 2
years
Rm
2 – 5
years
Rm
>5
years
Rm
Non-derivative financial liabilities              
Interest-bearing debt 6.4 14 217 18 161 3 795 3 334 7 155 3 877
Lease liabilities 6.3.2 5 154 6 296 1 651 1 484 2 539 622
Trade and other payables 4.5 8 108 8 108 8 108
Shareholders for dividend 9.4 24 24 24
Derivative financial liabilities              
Firm commitments 7.3 33 33 33
Forward exchange contracts 7.3 16 16 16
    27 552 32 638 13 627 4 818 9 694 4 499
    Company
2023 Notes Carrying
amount
Rm
Contractual
cash
flows
Rm
0 – 12
months
Rm
1 – 2
years
Rm
2 – 5
years
Rm
>5
years
Rm
Non-derivative financial liabilities              
Interest-bearing debt 6.4 14 356 18 232 3 435 4 504 8 334 1 959
Lease liabilities 6.3.2 5 355 6 668 1 516 1 446 2 879 827
Trade and other payables 4.5 12 874 12 874 12 874
Shareholders for dividend 9.4 25 25 25
Derivative financial liabilities              
Firm commitments 7.3 86 86 86
Forward exchange contracts 7.3 39 39 39
    32 735 37 924 17 975 5 950 11 213 2 786

Supplier financing arrangements
The Group participates in supply chain financing (SCF) arrangements. The Group continues to pay its suppliers based on the agreed payment terms and provides no guarantees granted to the participating funders. The arrangement does not have an impact on the Group’s trade payables, net debts and cash flows. Invoices subject to supplier finance are classified as trade payables based on management's judgement applied. Cash paid in relation to these suppliers is recognised as part of cash paid to suppliers and employees in operating activities in the cash flow statement.

The supplier's participation is entirely at the supplier’s discretion. The arrangement allows suppliers to trade the invoice and receive the funding earlier than the invoice due date. During the current reporting period, suppliers have traded invoices amounting to R3 674 million through SCF, of which R488 million is due after 31 March 2024 (31 March 2023: suppliers have traded invoices amounting to R3 600 million through SCF, of which R530 million was due after 31 March 2023).

7.1.6 Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. The objective of market risk management is to manage and control market risk exposure. Market risks comprise four types of risk: interest rate risk, currency risk, commodity price risk and other price risk, such as equity risk.

Changes in the market prices have an impact on the values of the underlying derivatives, and an analysis has been prepared on the basis of changes in one variable and all other variables remaining constant.

The Financial Stability Board has initiated a fundamental review and reform of the major interest rate benchmarks used globally by financial market participants. This review seeks to replace existing interbank offered rates (IBORs) with alternative risk-free rates (ARRs) to improve market efficiency and mitigate systemic risk across financial markets. The South African Revenue Bank (SARB) has indicated its intention to move away from JIBAR and to create an alternative reference rate for South Africa. The SARB has indicated its initial preference for the adoption of the South African Rand Overnight Index Average (ZARONIA) as the preferred unsecured candidate to replace JIBAR in cash and derivative instruments. In November 2023, the SARB designated ZARONIA as the successor rate to replace JIBAR. The observation period for ZARONIA ended on 3 November 2023 and the SARB has indicated that market participants may use the published ZARONIA as a reference rate in pricing financial contracts going forward. The SARB has indicated that the transition from JIBAR to ZARONIA is a multi-year initiative and has not yet communicated a cessation date for JIBAR.

Interest rate risk management
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Interest rate risk arises from the repricing of the Group's forward cover and floating rate debt as well as incremental funding or new borrowings and refinancing of existing borrowings.

The Group's policy is to manage interest cost through the utilisation of a mix of fixed and floating rate debt. In order to manage this mix in a cost efficient manner and to hedge specific exposure in the interest rate repricing profile of the existing borrowings, the Group makes use of interest rate swaps. Fixed rate debt represents approximately 32% (2023: 29%) of the total debt. The debt has been maintained to limit the Group's exposure to interest rate increases.

The targeted fixed/floating debt ratio is 30:70, but adjusted to market conditions. In a scenario of low interest rates, a higher ratio may be established.

The table below summarises the interest rate swaps outstanding as at the reporting date:

  Group Company
  Average
maturity
Notional
amount
Rm
Average
maturity
Notional
amount
Rm
2024        
Interest rate swaps outstanding        
Pay fixed and receive floating  1.38 years  2 777  1.38 years  2 777
2023        

Interest rate swaps outstanding

       
Pay fixed and receive floating 1.25 years 2 277 1.25 years 2 277

The floating rate is based on the three-month JIBAR, and is settled quarterly in arrears. The interest rate swaps are used to manage interest rate risk on debt instruments.

Foreign currency exchange rate risk management
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group's foreign currency exposure arises in its procurement environment where opex and capex items are procured from international suppliers. The Group manages its foreign currency exchange rate risk by hedging all identifiable exposures via various financial instruments suitable to the Group's risk exposure.

The Group enters into forward exchange contracts to hedge foreign currency exposure of the Group's operations and liabilities. Refer to note 7.3 for the balances recognised relating to hedging instruments and hedged items.

The following table details the forward exchange contracts outstanding at the reporting date:

  Group Company
Purchased Foreign
contract

value
m
Contract
value
Rm
Foreign
contract

value
m
 Contract
value
Rm
2024        
Currency        
USD 129 2 451 111 2 098
Euro 8 167 6 133
GBP 1 13 1
Chinese Yuan 45 117 45 117
    2 748   2 349
         
2023        
Currency        
USD 191 3 423 167 3 004
Euro 14 284 10 201
Chinese Yuan 202 533 202 533
    4 240   3 738
  Group Company
Sold Foreign
contract
value
m
Contract
value
Rm
Foreign
contract
value
m
Contract
value
Rm
2024        
Currency 2 34 34 645
USD 6 131
Euro 43 114
    34   890
         
2023        
Currency        
USD 1 18
Euro 1 16
    34  

The Group has various monetary assets and liabilities in currencies other than the parent company's functional currency. The following table represents the net currency exposure (net carrying amount of foreign denominated monetary assets and liabilities) of the Group according to the different foreign currencies.

   Group  Company 
Euro 
Rm
 
United 
States 
Dollar 
Rm
 
Chinese 
Yuan 
Rm
 
British 
Pound 
Sterling 
Rm
 
Other 
Rm
 
Euro 
Rm
 
United 
States 
Dollar 
Rm
 
Chinese 
Yuan 
Rm
 
Other 
Rm
 
2024                            
Net foreign currency monetary assets/(liabilities)                  
Functional currency of company operation                            
South African rand  (3)  (1 058)  (32)  (1)    (1)  (718)  (3)   
2023                            
Net foreign currency monetary assets/(liabilities)                  
Functional currency of company operation                            
South African rand  (41) (1 272) (236) (1) (32) (1 180) (204) (1)

Sensitivity analysis

Interest rate risk
An interest rate sensitivity analysis is based on an increase or decrease of 1% (100 basis points) in the South African market interest rates and the prevailing information as at the reporting date.

The analysis assumes that all other variables remain constant. The analysis and changes in interest rates are performed on the same basis as was used in prior years.

If interest rates had been 100 basis points higher/lower and all other variables were held constant, the profit/loss for the year ended 31 March 2024 would decrease/increase by R54 million (31 March 2023: decrease/increase by R44 million) for the Group and R40 million (31 March 2023: decrease/increase by R32 million) for the Company.

The following table illustrates the sensitivity to a 100 basis points change in the interest rates (1%) on profit/loss before taxes, with all other variables held constant:

   Group
movement
 
Company
movement
 
Classes of financial instruments per statement of financial position  + 1% 
Profit 
Rm
 
- 1% 
Profit 
Rm
 
+ 1% 
Profit 
Rm
 
- 1% 
Profit 
Rm
 
2024             
Assets             
Other financial assets  48  (48)  31  (31) 
   Forward exchange contracts  3  (3)  2  (2) 
   Cash and cash equivalents  10  (10)     
   Interest rate swaps  29  (29)  29  (29) 
   Finance lease receivables  6  (6)     
Liabilities             
Other financial liabilities  (3) 3     
   Asset finance payable  (3) 3     
Interest-bearing debt  9  (9)  9  (9) 
      54  (54)  40  (40) 
                 
2023             
Assets             
Other financial assets  41  (41) 26  (26)
   Forward exchange contracts  (5) (5)
   Interest rate swaps  21  (21) 21  (21)
   Cash and cash equivalents  (9) –  – 
   Finance lease receivables  (6) –  – 
Liabilities             
Other financial liabilities  (3) (6)
   Forward exchange contracts  (6) (6)
Asset finance payable  (3) –  – 
      44  (44) 32  (32)

Foreign exchange currency risk
The foreign currency sensitivity analysis is based on a 10% strengthening or weakening of the rand against all currencies from the rates applicable and prevailing information as at the reporting date.

If foreign exchange rates had been 10% higher/lower and all other variables were held constant, the Group's and Company's profit/loss for the year ended 31 March 2024 would increase/(decrease) by R78 million for Group (31 March 2023: increase/(decrease) by R305 million) and R78 million for Company (31 March 2023: increase/(decrease) by R303 million).

The following table illustrates the sensitivity to a 10% change in the exchange rates before taxes, with all other variables held constant:

      Group  Company 
Classes of financial instruments per statement of financial position  + 10%
movement 
(Depreciation)
Rm
 
- 10%
movement 
(Appreciation)
Rm
 
+ 10%
movement 
(Depreciation)
Rm
 
- 10%
movement 
(Appreciation)
Rm
 
2024             
Assets             
Other financial assets  214  (214) 214  (214)
   Forward exchange contracts  214  (214) 214  (214)
Liabilities             
Other financial liabilities  (136) 136  (136) 136 
   Firm commitments  (66) 66  (66) 66 
   Forward exchange contracts  (70) 70  (70) 70 
      78  (78) 78  (78)
2023             
Assets             
Other financial assets   161   (161)  161   (161)
   Firm commitments  123  (123) 123  (123)
   Forward exchange contracts  38  (38) 38  (38)
Liabilities             
Other financial liabilities   (455)  455   (454)  454 
   Firm commitments  (123) 123  (123) 123 
   Forward exchange contracts  (332) 332  (331) 331 
Interest-bearing debt  (10) 10  (10) 10 
Financial guarantees  (1) –  – 
      (305) 305  (303) 303 
7.1.7 Equity price risk
 

The Group's investments are susceptible to market price risk arising from uncertainties about future values of the investment securities. Changes in the fair value of equity securities held by the Group will fluctuate because of changes in market prices caused by factors specific to the individual equity issuer, or factors affecting all similar equity securities traded on the market. The Group is not exposed to commodity price risk. The Group manages the equity price risk through diversification and placing limits on individual and total equity instruments. Reports on the equity portfolio are submitted to the Group's senior management on a regular basis. The Group's Board reviews and approves all equity investment decisions above R100 million.

At the reporting date, the total amount for local equity investments was R102 million (31 March 2023: R103 million). A 10% increase (31 March 2023: 10% increase) in the local equity portfolios at the reporting date would have increased profit or loss by R10 million 31 March 2023: R10 million) before tax. An equal and opposite change would have decreased profit or loss. A 10% fluctuation represents management's assessment of the reasonably possible changes in equity prices.

There will be no other impact on equity as the equity securities are classified as at fair value through profit or loss. The analysis assumes that all other variables remain constant and it is performed on the same basis as the prior year.

7.1.8 Capital management

The Group's policy is to manage the capital structure to ensure maximisation of shareholders' return, growth and ability to meet its obligations. Capital comprises equity and net debt which is monitored using, inter alia, a net debt to EBITDA ratio.

Net debt is defined as interest-bearing debt and credit facilities utilised, less restricted cash and cash and cash equivalents. EBITDA is defined as earnings before investment income and finance cost (which includes gains and losses on foreign exchange transactions), tax, depreciation, amortisation and write-offs, impairments and losses of property, plant and equipment and intangible assets, and is also presented inclusive of interest revenue and interest on overdue accounts.

The net debt (excluding lease liabilities) to EBITDA at reporting date was as follows:

   Group  Company 
  31 March 
2024 
Rm
 
Restated1
31 March 
2023 
Rm 
31 March 
2024 
Rm
 
Restated
31 March 
2023 
Rm 
Non-current portion of interest-bearing debt  11 535  11 999  11 535  11 999 
Current portion of interest-bearing debt  2 682  2 357  2 682  2 357 
Less: Cash and cash equivalents  (3 747) (3 469) (1 863) (1 807)
Less: Restricted cash  (17) (4)   – 
Net debt  10 453  10 883  12 354  12 549 
EBITDA1  9 428  8 022  4 385  4 817 
1 EBITDA has been restated due to IFRS 17 implementation and Swiftnet being classified as a discontinued operation. Refer to note 2.7.