Page 44 - Capricorn IAR 2020

FINANCIAL DIRECTOR’S REVIEW STRATEGY AND MATERIAL MATTERS GOVERNANCE REPORT
While monetary policy-makers pulled out all the stops, it has become clear that fiscal policy will have to step in to stabilise final demand. The USA approved a stimulus bill of U$2 trillion. Add this to the deficit of U$1 trillion, and the total deficit equals 15% of GDP. In South Africa, a fiscal package of ZAR500 billion was announced. Not all of it will have a direct cash flow impact, but the country’s original total budget deficit was ZAR350 billion.
Similarly, in Namibia, a plan worth N$8.1 billion was announced, the equivalent of 4.5% of GDP. In the face of falling revenue due to widespread economic weakness, the shortage was already expanding above budget, and the latest estimate amounts to 12.5% of GDP. The resultant debt-to-GDP ratio is fast approaching 70%. This means that fiscal metrics have worsened substantially.
Creditworthiness would have, understandably, suffered further in the region. South Africa lost its last remaining investment grade rating, Namibia’s sovereign rating was pushed deeper into non-investment grade and Zambia is being regarded as in, or on the verge of, default. Reflecting this view is the 2022 maturity Eurobond that trades at a yield of 52%. Botswana’s rating was pegged back a notch by Standard & Poor’s (“S&P”) but remains at investment grade.
The earlier positive growth outlook for 2020 has been replaced by expectations of deep economic contractions of (6.9%) in Namibia, (5.4%) in Botswana and (3.5%) in Zambia.
Floris Bergh
Chief economist
Capricorn Asset Management
Capricorn Group material matters at a glance
Ethical leadership
(business and management)
Financial and cybercrime
Demand for specialist skills driving focused development, training and diversity
Fintech, insurtech and evolving digital assets
We connect material matters
to risk and strategy processes
Capricorn Group’s ability to create value over the short, medium and long term relies on the Group’s response to those matters that can materially affect us – positively or negatively. We assess our operating context, business trends and stakeholder feedback to continuously evaluate these matters. We describe these external and internal factors in other sections of this report.
We first identified the Group’s material matters in 2016 and have since integrated the process of identifying, reviewing and evaluating our effective responses with our risk and strategy processes. The eight material matters are linked to our principal risks, and board governance oversight accountability is assigned to each. Material matters are discussed at the quarterly Group principal risk officer (“GPRO”) meetings and the business unit strategy sessions.
The board approved the material matters for 2020 as part of the AsOne2023 strategy in May 2020. The material matters remained largely the same as in 2019, with our top matter becoming even more pertinent in the past year.
Credit risk management and mitigating losses due to bad debt
Meeting customer needs and expectations
Responding to a changing regulatory and operating context
Enhancing and optimising management and operational systems
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