Material matters definitions

Our material matters are defined in the table below, featuring risks and opportunities related to each. We linked these to the Company’s related strategic objectives.
No Material matter Contextualisation of risks and opportunities Strategic objective Term impact
1 Persistent low demand leading to a lack of growth in the mining, iron, steel and general fabrication sectors in the South African market
  • Stagflation has the potential to affect customer demand levels of Afrox products widely used in the manufacturing industry.
  • Economic difficulty may lead to a reduction in customer market sizes and an increase in competition.
  • This may cause Afrox to absorb product costs to limit passing these on to consumers (the exception is the LPG sector, where a portion of the pricing is government regulated) and negatively impact margins and revenue growth.
  • Opportunities persist through consumer-led markets such as retail. See the Emerging Africa growth material matter for further contextualisation.

Maintain and grow profitability and operating performance

Ensure sustainable growth while enhancing competitiveness

S, M
2 South African economic environment
  • The South African economic environment is characterised by high interest rates, unemployment and inflation, which directly impact our customers.
  • The political environment influences the operating environment through policy and legislation causing various socioeconomic impacts.
  • Macroeconomic weakening and the lack of investment are exacerbated by potential credit rating downgrades that erode investor confidence.
  • Infrastructure constraints such as electricity and water shortages persist, leading to supply chain volatility.
  • Industrial action is predominantly linked to wage negotiations in South Africa and may affect Afrox customers and, in turn, product demand.
  • In terms of opportunities, Afrox has a healthy balance sheet that enables management of risk exposure and provides a degree of flexibility.

Maintain and grow profitability and operating performance

Ensure sustainable growth while enhancing competitiveness

S, M
3 Emerging Africa1 growth
  • The collapse in commodity prices resulting from the slowdown in Chinese demand continues to have serious effects on commodity exporters in Emerging Africa. This leads to substantially reduced export revenues and an adverse impact on countries’ trade balances. The net effect is often an increase in interest rates by central banks while governments cut spending and raise taxes, creating additional strain on the African consumer.
  • The growth of the middle-class segment of economies throughout the continent provides an opportunity to develop through consumer-led growth. In addition, the lack of electricity in certain areas continues to spur demand for alternative energy, often in the form of LPG.
  • The healthcare sector, light manufacturing and CO2 speciality markets in Emerging Africa continue to grow, requiring a slight shift in service offerings to appropriately serve these markets. The Company experienced improved volume demand in the Emerging Africa geographies.
  • Afrox is still considering appropriate opportunities to expand operations into Emerging Africa.

Maintain and grow profitability and operating performance

Ensure sustainable growth while enhancing competitiveness

M, L
4 Customer value creation
  • Afrox is exploring new methods of improving customer experiences and ensuring customer satisfaction. The Company intends to improve satisfaction levels through a focus on providing positive outcomes through a highly driven customer-centric performance culture and complete product solutions to meet customers’ needs.
  • Opportunities exist to improve customer interaction through the Company’s e-channel. This digital platform allows users to customise their purchase experience and make payments electronically at their convenience.

Maintain and grow profitability and operating performance

Ensure sustainable growth while enhancing competitiveness

S, M
5 Supply chain reliability, efficiency and cost base
  • The risk of inadequately and inconsistently supplying products may result in a loss of customers and market share. This could be caused by poor supply from Afrox’s supplier base, industrial action, lack of electricity or water, for example.
  • Afrox obtains CO2 from a limited number of local suppliers that may be unable to meet the future demand needs of the region. Additional suppliers are being sought to ensure security of supply.

Ensure sustainable growth while enhancing competitiveness

S, M
6 Attracting, developing and retaining talent
  • The Company continuously seeks to recruit, develop and retain the right employees to maintain and improve its high- performance culture and deliver on the Company’s strategy while ensuring a reliable pipeline of appropriate talent.
  • Appropriate talent aids us in obtaining and retaining market share, innovating to produce new products and services, and ultimately delivering exceptional customer service.

Maintain and grow profitability and operating performance

Build a performance culture

S, M, L
7 Transformation including BBBEE and employment equity
  • Afrox is required to comply with BBBEE legislation and sector charters. The Company’s current level may adversely affect contract and government tender opportunities.
  • Transformation levels in the Company will gain greater attention in the year ahead in order to further align to the demographics of South Africa. This will allow Afrox to further participate in developing the previously disadvantaged component of our society and align with the national agenda of job creation.

Maintain and grow profitability and operating performance

M
8 Safety performance and culture
  • Safety is a non-negotiable element of Afrox’s operations. Unforeseen incidents and a lack of controls or appropriate procedure have the potential to negatively impact our business, employees, customers, the environment and the society we serve.

Maintain and grow profitability and operating performance

Embed advanced performance in areas of safety, health, environment and quality

Build a performance culture

M
9 Government regulation
  • The Company is required to comply with all relevant regulations and laws set by government to avoid penalties and fines, or risk our licence to operate.
  • A portion of LPG costs are regulated and priced through reference to the crude oil price. Thus, exchange rate fluctuations and crude oil prices have significant impacts on the LPG input cost and a corresponding impact on sales prices.
  • The ongoing Competition Commission market inquiry into the LPG sector has the potential to influence the market and/or pricing.

Maintain and grow profitability and operating performance

S, M, L
10 Competition challenges
  • Traditional and non-traditional competitors can challenge Afrox’s market share. The environment is already characterised by low demand and a limited customer base. This is particularly true for the LPG market, which experienced an increase in smaller businesses challenging for market share.

Ensure sustainable growth while enhancing competitiveness

M

S – Short term (2017); M – Medium term (2018 to 2020); L – Long term (Beyond 2020).

1 Emerging Africa is defined as all of Afrox’s operations excluding South Africa, Lesotho and Swaziland.

Year-on-year movement on our material matters

The restructure programme is no longer classified as a material matter, as the restructure of the business and various business segments is complete. Refer to the strategy overview chapter for details on the business’s approach to value creation post-restructure.

Material matters hierarchy

A visual representation of where the material matters rank on a scale of impact and likelihood.


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