Agribel Annual Financial Review | Page 43

AGRIBEL HOLDINGS LTD FINANCIAL REVIEW 2021

Impairment is determined on the following basis for trade and other receivables and loans below :

* Production accounts Payment period of these accounts is 12 months . Impairment losses recognised reflect the expected losses over the lifetime of the instrument .

* Deferred payment arrangements Payment period varies but must be settled within 12 months . Impairment losses recognised reflect the expected losses over the lifetime of the instrument .

* Term loans Represent debtors for financing of mortgage loans granted over varying terms of up to 120 months . An allowance for impairment is made on the total net exposure over the lifetime of the loan in respect of term loans that are assessed for impairment individually or term loans owing by legal clients . In addition , interest income recognition reflects the impairment in respect of debts owing by legal clients whose debts are viewed as creditimpaired financial assets . The impairment allowance in respect of term loans falling within the portfolio impairment , reflect the lifetime expected credit losses .

The amount of the respective allowance for impairment losses is determined using the following formula :

Production credit and deferred payment arrangements ( with no indicator of default ): Impairment = Total book x PD ( consolidation default %) x Loss Given Default ( LGD ).

Term loans : Impairment = Total book x probability of default ( PD = Arrears , consolidation default % + loss default % + future loss default %) x Loss Given Default ( LGD ).

The relevant inputs for the respective categories of instruments are : Individual impairment assessment and specifically impaired ( legal clients ): The inputs are determined for each debtor and reflect the actual risk ( LGD ) for possible bad debt determined by the legal department , taking into account all securities and the client ’ s balance sheet . The factors that influence management ' s estimates and judgement include whether customers that have been handed over to the legal department for collection are specifically provided for , based on the exposure and the estimation of the quality and expected realisation of securities held for the specific customers . Portfolio impairment ( non-legal clients ) – The group impairment % is calculated as follows : Impairment = Total book x PD ( arrears default % + loss default % + future loss default %) x LGD . The factors that influence management ' s estimates and judgement for losses expected in the 12- month period include :

• Crop estimates and yields specific to the customers ’ region ;

• The number of hectares planted ;

• The expected realisation price , which is the Safex price adjusted by grade differences and transport differentials and which is determined by customer region ;

• The input costs specific to the customers ’ region ;

• The quality and expected realisation of securities held for customers ; and ,

• Number of droughts expected in the next 10 years .

There were write-offs of Rnil for trade and other receivables during the year ( 2020 : R1 million ). These amounts were written-off subject to enforcement activity .

The impairment allowance on trade and other receivables is R132 million ( 2020 : R104 million ), the details of which are as follows :

GROUP

Specific impairment ( 29 ) ( 19 ) Balance at the beginning of the year ( 19 ) ( 9 )

Portfolio impairment ( 103 ) ( 85 ) Balance at the beginning of the year ( 85 ) ( 88 ) Transfer between portfolio and specific impairment 2 1 Decrease /( increase ) in allowance during the year ( 20 ) 2 Total allowance for impairment ( 132 ) ( 104 )

2021 R ' m

2020 R ' m

Agribel Holdings Limited Reg nr : 1996 / 017629 / 06 AGRIBEL ANNUAL FINANCIAL REVIEW 2021

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