Our top risks and opportunities

We consider each risk's potential impact on the achievement of the group's strategy, as well as the probability of each arising. The risk rating position on the heat map reflects the residual risk position after considering the effectiveness of the mitigation strategies. We have ranked these risks in order of their magnitude, although we recognise that these positions may change during the year. We have provided a forward-looking view of the risks and opportunities that we believe may impact future performance.

Our risk framework, risk guidelines and other group policies and procedures inform our risk management culture. The risk and sustainability committee considers the material outcomes of these processes and measures the level of risk exposure against risk appetite and tolerance levels. Understanding the risk environment informs the group strategy and assists with decision making at board level. We participate in the Carbon Disclosure Project (CDP) and have formalised our assessment of Nampak's environmental impact on climate change. In 2017, we extended this participation to include our approach to water management. Key risks are identified and disclosed through this process.

Information management services (IMS) is a standing agenda item for the risk and sustainability committee, with ultimate responsibility for IMS governance resting with the board.


Risk heat map


  Financial underperformance at certain operations   Challenging macro-economic and political conditions in our key markets   Uncertain regulatory and policy environment   Uncontrollable increases to legacy defined benefit liabilities
  Dependence on foreign exchange liquidity and currency movements   Not being able to retain key customers   Inadequate diversity, people development and a skills shortage   Potential to fall prey to cyber crime

The icons show the links to our material issues.


    Impact if not managed:   How we did in 2017:   Value created from our mitigation strategies:   Looking forward:   Opportunities for value:
  • This can result in asset impairments and harm the group’s profitability and sustainability
  • Reduced the carrying value of our Glass business
  • Provided for an onerous contract and reduced the carrying value of certain assets at our rigid plastics operation in Nampak Plastics Europe
  • Improved performance by our Bevcan operations offset poor performance at Glass and Nampak Plastics Europe
  • Continued to deliver on our drive towards advanced manufacturing by extracting value from newly installed technologies and improved processes and management methods
  • Improved plant maintenance
  • Reduced complexity in our manufacturing processes; engaged customers about further restructure of our product mix
  • Considered and implemented plant and line rationalisation
  • Plan to introduce external Glass technical skills in 2018
  • Continue to drive operational efficiencies
  • Introduced group restructuring initiative
  • Financial turnaround of our underperforming divisions
  • Group restructuring initiatives to reduce complexity, limit non-value-add activities and reduce cash fixed costs
  • Bevcan expanded ends plant’s delivery to performance targets
  • Improved operating efficiencies and reduced spoilage at Bevcan Springs plant will contribute to improved margins


    Impact if not managed:   How we did in 2017:   Value created from our mitigation strategies:   Looking forward:   Opportunities for value:
  • Swings in the translated rand value of earnings from the Rest of Africa impacts our financial performance. A lack of market liquidity holds up the repatriation of earnings and limits our ability to pay for raw material imports and investments
  • In Nigeria, we were able to extract cash as planned thanks to liquidity provided by the new NAFEX market
  • In Angola, our cash repatriation slowed in the year
  • Zimbabwe is strongly cash generative but experienced liquidity constraints
  • Our cash management committee, in its second year of operation, ensured cash flow remained a strong focus
  • We improved the strength of the balance sheet, with attention being paid to improved forecasting, capex management and a focus on cash generation
  • We increased our hedged exposure in Angola through US$-indexed kwanza bonds from 61% to 89%
  • Currency volatility will continue to have a bearing on financial results
  • Strengthened balance sheet is able to withstand further currency volatility
  • Our ability to invest in growth opportunities increases with improvements in forex liquidity


    Impact if not managed:   How we did in 2017:   Value created from our mitigation strategies:   Looking forward:   Opportunities for value:
  • Reduced consumer demand leads to lower volumes and revenue and pressure on profit margins. It also limits opportunities for growth
  • DivFood’s revenue and profitability declined on constrained demand
  • Plastics also felt the weight of the economic slowdown, with consumer demand declining
  • Strained economic activity across Africa, notably Nigeria and Zimbabwe affected group revenue and trading profit
  • Ongoing drive to deliver improved operating efficiencies and cash fixed cost reductions
  • Operations geared to meet increased capacity requirements
  • Business and consumer confidence in South Africa is likely to remain weak until there is some resolution to the uncertain political situation
  • Economic activity in Nigeria and Angola is showing signs of recovery
  • Potential impact of South African leadership succession
  • We are well positioned to take advantage of organic growth in our markets
  • Long-term fundamentals for packaging growth in African markets remains intact
  • Our market positions are strong with more than 60% of our customer base consisting of large multinationals with strong brands and strong credit ratings


    Impact if not managed:   How we did in 2017:   Value created from our mitigation strategies:   Looking forward:   Opportunities for value:
  • Should key customers reduce their purchases we would lose revenue and margins
  • Impacted by backward integration by large customers in liquid plastics as well as entrance of international competitor
  • Prepared for start-up of competitor’s new manufacturing facilities in South Africa
  • Our R&D facility provided value-added benefits, specifically in respect of food safety and packaging lightweighting services
  • We continually work on understanding our cost competitiveness and levers of value creation
  • We have long-term customer relationships supported by long-term contracts
  • We apply a continuous improvement approach in order to improve service and product quality
  • New manufacturer recently commenced production of trial beverage cans and so we anticipate some loss of volume in 2018 in South Africa
  • Focus on reduction in cash fixed costs in 2018 including group restructuring initiative
  • In the rigid plastics division our capacity selling project is delivering revenue growth


    Impact if not managed:   How we did in 2017:   Value created from our mitigation strategies:   Looking forward:   Opportunities for value:
  • Given the complexity, magnitude and regular changes to laws, there are challenges to full compliance, failure to remain compliant could lead to penalties and affect our licence to operate
  • Continued to prepare to comply with potential regulatory changes such as the implementation of punitive post-consumer waste management responsibilities, carbon tax and sugar tax
  • Continued engagement with South Africa’s DEA, dti and Treasury on all aspects of proposed legislation both directly, with aligned stakeholders and through industry bodies
  • Participated in the establishment of a metals recycling producer responsibility organisation (PRO)
  • We have established governance procedures and practices in place and non-compliance is reported to the board sub-committees
  • Established process controls and internal audit practices
  • Our active participation in a number of industry PROs provides a solid foundation for engagement and alignment with government and other stakeholders on post-consumer packaging waste recycling objectives
  • The group has commenced defining its approach to combined assurance
  • Good corporate governance practices will continue to boost revenue and contractual arrangements and opportunities with large multinational customers


    Impact if not managed:   How we did in 2017:   Value created from our mitigation strategies:   Looking forward:   Opportunities for value:
  • Without transforming to a more equal society, the sustainability of our market in South Africa is in jeopardy
  • A poor B-BBEE rating could impact the revenues of the South African operations
  • Insufficient skills could impact operational effectiveness and our ability to deliver on strategy
  • B-BBEE rating declined to level 6 from 3 but we remained steadfast in our work to help transform South Africa
  • Established B-BBEE steering committee to oversee our efforts
  • Initiated work on a new B-BBEE ownership scheme, which is intended to minimise cost to shareholders
  • Maintained strong graduate development programme
  • Increased number of apprenticeships
  • Recorded a reduction in our investment in employee development
  • External managerial training and development course content aligned with Nampak skills imperatives for value creation
  • Proven track record of improvements in manufacturing efficiencies as a result of key technical partnerships with suppliers and customers
  • We have a clear and active plan in place to improve our
    B-BBEE rating in South Africa
  • Potential improvement in employee productivity with an improving skills profile
  • An improved B-BBEE rating can improve revenue in the South African operations through procurement benefits
  • A transformed and more equal society in South Africa would benefit the economy and therefore our operations


    Impact if not managed:   How we did in 2017:   Value created from our mitigation strategies:   Looking forward:   Opportunities for value:
  • If cost increases outstrip affordability, profits will be adversely affected
  • Deficits in the Nampak UK pension plan continued to increase, impacted by low interest rates, improved mortality and inflation as well as investment market volatility
  • 947 pensioners accepted the annuity offer in 2016 and 2017 with the cash purchase amount of R569.2 million for the annuities flowing in 2017
  • The remaining liability in South Africa continued to grow, hurt by medical inflation running above consumer price inflation
  • We review opportunities to derisk the defined benefit liabilities and provide pensioners with voluntary alternative offers when feasible
  • We have commenced
    with a voluntary
    enhanced transfer value
    exercise and sent transfer
    offers to qualifying
    members of the Nampak
    Staff Pension Plan
    in the UK. As part of the
    process, members have
    been provided with
    access to independent
    financial advice
  • Our defined benefit liabilities are reducing as benefits from the various derisking activities materialise


    Impact if not managed:   How we did in 2017:   Value created from our mitigation strategies:   Looking forward:   Opportunities for value:
  • Ransomware attacks could paralyse the business, rendering it unsustainable
  • Better understanding of the potential impact from a financial point of view (insurance) and from an operational point of view (carried out penetration tests and internal audit tests)
  • Increased awareness campaigns
  • Ongoing monitoring of risk and testing of strength of IT infrastructure, and implementation of actions to eliminate risk exposures
  • Preventing cyber crime is an ongoing commitment as hackers become more sophisticated
  • Greater security of IT infrastructure and business sustainability