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33. Risk management - (continued)
Interest rate risk
The group has no significant interest-bearing assets other than the Micro-Credit loans.The Micro-Credit loans are granted
at fixed interest rates with the rate determined with reference to the National Credit Act, therefore the group’s income
and operating cash flows are substantially independent of changes in market interest rates.
At 30 September 2011 the Group had converted all long term borrowings into fixed interest rate instruments to limit the
interest rate risk. The group’s interest rate risk in previous periods arose from long-term borrowings. Borrowings issued at
variable rates exposed the group to cash flow interest rate risk. Based on the interest bearing instruments at 30 June 2010,
the effect of a 1% movement in interest rates on profit was approximately R101,050 per annum.
Credit risk
Credit risk is managed on a group basis.
Credit risk consists mainly of cash deposits, cash equivalents and trade debtors. The company only deposits cash with
major banks with high quality credit standing and limits exposure to any one counter-party.
Trade receivables comprise a widespread customer base. Management evaluated credit risk relating to customers on an
ongoing basis. If customers are independently rated, these ratings are used. Otherwise, if there is no independent rating,
risk control assesses the credit quality of the customer, taking into account its financial position, past experience and
other factors.
Financial assets exposed to credit risk at 15 months end were as follows:
Financial instrument
Group
Company
2011
2010
2011
2010
Trade and other receivables
1 869 621
535 859
206 795
-
Cash and cash equivalents
309 166
45 798
81 407
19
Other financial assets
4 677 045
-
-
-