AGRIBEL HOLDINGS LTD FINANCIAL REVIEW 2021
24.1.2 Credit risk
Concentration risk The potential credit concentration risk relates mainly to trade debtors . Trade debtors consist of a large number of clients , spread over different geographic areas and credit is extended in accordance with the credit policy of the group . Prudent credit evaluation processes are strictly adhered to .
The value at risk is calculated as follows : Gross carry amount - Securities held = Gross exposure Gross exposure - Partial net asset value = Net exposure to credit risk after net asset value
1 . “ Gross carry amount ” is calculated by decreasing the total producer debtor balance by the security value held or ceded to Senwes as well as the appropriate allowance for expected credit losses . " Gross exposure " is calculated by decreasing the total gross carry amount by the securities held . " Net exposure " is calculated by decreasing the total gross exposure amount by the partial allocation of net asset value . " Security " may , without limiting the generality thereof , amongst others , assume the form of a special hypothec , a special notarial bond , right of retention , a lessor ’ s hypothec , pledge , cession , surety , option or any other form of security .
2 . Distribution ( spread ) is measured against best practices in the industry , given the concentration in respect of geography , stratification , categorisation and arrears . Sources for measurement of concentration risk are formulated by using various agricultural industry norms , market trends in large companies and own analyses . The spread will increase the value at risk should it be higher than the norm and will decrease the risk should it be lower than the norm .
The risk is measured in respect of concentration in the different areas , namely arrears , categorisation , stratification ( individual extent of the balance of the debtor account ) and geography and are discussed in detail below .
Geography Low concentration risk is applicable due to an extensively spread geographic area , mainly the Free State , North West and Northern Cape . Stratification and arrears
GROUP |
|
2021 |
|
2020 |
|
Stratification of the client base to the extent of credit extended |
Exposure of book |
Arrears |
Exposure of book |
Arrears |
R1 – R500 000 |
1.1 % |
4.2 % |
1.0 % |
32.3 % |
R500 000 – R1 250 000 |
1.7 % |
3.1 % |
1.7 % |
4.5 % |
R1 250 000 – R3 000 000 |
5.6 % |
1.0 % |
7.0 % |
4.3 % |
R3 000 000 – R5 000 000 |
14.6 % |
2.1 % |
13.7 % |
0.9 % |
R5 000 000 – R12 500 000 |
24.6 % |
0.5 % |
23.9 % |
3.2 % |
Above R12 500 000 |
52.3 % |
0.9 % |
52.2 % |
1.1 % |
Legal clients |
0.1 % |
70.3 % |
0.5 % |
91.5 % |
Total |
100.0 % |
|
100.0 % |
|
The total arrears for 2021 amounted to 2,52 % ( 2020 : 2,62 %). A fair distribution of client size and arrears is applicable and the size of the current book is in line with the risk appetite per segment of Senwes . Stages of debt
Distribution of debtors by category
GROUP 2021
Net exposure |
Gross |
Gross to credit risk |
|
Trade debtors
%
|
carrying amount
R ' m
|
exposure amount
R ' m
|
after net asset value
R ' m
|
Stage 1 |
48 % |
2 214 |
676 |
106 |
Stage 2 |
50 % |
2 274 |
587 |
62 |
Stage 3 |
2 % |
74 |
64 |
53 |
Total |
100 % |
4 562 |
1 327 |
221 |
52 AGRIBEL ANNUAL FINANCIAL REVIEW 2021 Agribel Holdings Limited Reg nr : 1996 / 017629 / 06