Senwesbel Consolidated Financial Statements | Page 60

The potential impact of changes in Safex prices is illustrated below: GROUP 2020 R’m 2019 R’m Increase of R400 in Safex prices (5) 4 Increase of R250 in Safex prices (3) (2) Increase of R100 in Safex prices (1) (8) Decrease of R100 in Safex prices 3 (16) Decrease of R250 in Safex prices 6 (23) Decrease of R400 in Safex prices 9 (30) 24.1.1.2 Trading risk Market risk with regards to trading relates to the potential losses in the trading portfolio due to market fluctuations such as interest rates, spread between current and future prices of commodities, volatility of these markets and changes in market liquidity. Risk limits are set to govern trading within the risk appetite of the group by means of forward purchase and sales contracts. Forward purchase contracts represent contracts with producers for the procurement of physical commodities in the future. The forward sales contracts represent contracts with clients for the sale of physical commodities in the future. 24.1.1.3 Foreign exchange risk The group has exposure to fluctuations in mainly the rand/US dollar exchange rate in respect of imports and exports. Foreign currency transactions are mainly concluded for the purchasing and selling of inventory. Foreign exchange contracts are concluded for specific transactions to hedge against fluctuations in exchange rates. At year end the group had the following assets, liabilities and forward exchange contracts denominated in foreign currency in the following amounts: GROUP 2020 R’m 2019 R’m Foreign currency in US dollars 6 - Trade receivables denominated in US dollars 31 - Forward exchange contracts denominated in US dollars 92 - Trade and other payables denominated in euros (14) - Total 115 - Foreign exchange sensitivity analysis An assessment of the group’s sensitivity to the exchange rate shows that should the rand strengthen by 10%, the group’s profit before tax would increase by R3 million. A 10% weakening of the rand versus the US dollar would result in a loss of the same amount. The fair value adjustment on foreign exchange contracts is recognised through profit and loss. 59 SENWESBEL ANNUAL FINANCIAL STATEMENTS 2020 Senwesbel Limited Reg no: 1996/017629/06