11.5 Continued
The client is automatically in default if:
• The client fails to effect any payment on the Payment Day.
• The client fails to fulfil any other obligation in terms of the Agreement properly and timeously.
• The client alienates or encumbers any assets over which a notarial bond is registered in favour of Senwes, or any other
securities in favour of Senwes.
• The client passes away.
• The client applies the production credit for a purpose other than for which it was granted.
• The controlling equity in the client (where the client is a juristic person) or the majority of trustees of a trust change without
the prior approval of Senwes.
• Any judgement against the client is not satisfied within 7 days or is not set aside within a reasonable time.
• The client commits any act of insolvency.
• The client is placed under provisional sequestration, liquidation or business rescue, or if any application therefor is delivered
and the applicant’s claim is not fully settled within seven days after issue thereof.
For trade and other receivables, other than mortgage loans, as stated in note 9, the simplified approach in accordance with
IFRS 9 Financial instruments is applied.
Impairment is determined on the following basis for the below trade receivables:
Production accounts
Payment period of these accounts is 12 months. No lifetime expected credit losses are necessary.
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. No lifetime expected credit losses are necessary.
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 credit-impaired 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:
Impairment = Total book x 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 determined for each debtor
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 includes 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 = PD (arrears
default % + drought loss default % + Long-term drought/ 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;
• Number of droughts expected in the next 10 years.
LGD was adjusted by adding 13% of the pre-season contracts value to securities.
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SENWESBEL ANNUAL FINANCIAL STATEMENTS 2020 Senwesbel Limited Reg no: 1996/017629/06