Our top risks and opportunities

We consider each risk's potential impact on the achievement of the group's sustainable profitability journey and our strategy as well as the probability of each materialising. The risk rating position on the heat map reflects the residual risk position after considering the effectiveness of mitigation strategies and actions. We have ranked these risks in order of 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. The icons show the links to our material issues.


Our risk framework, risk management 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 reviews the level of risk exposure against our risk tolerance and appetite levels. Understanding our risk environment informs strategy and assists with decision making throughout the organisation.

We participate in the CDP (formerly the Carbon Disclosure Project) and have formalised our assessment of Nampak's impact on the environment both from an operational perspective and also in relation to our product stewardship.

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.

In order to support the board in the execution of its responsibilities, information management and key technology risks remain a key focus area for the risk and sustainability committee.

    Impact if not
    How we did in 2018     Value created from our
mitigation strategies
    Looking forward     Opportunities
for value
  Financial underperformance at certain operations             
    This can result in job losses, impairment of assets and harm the group's sustainable profitability    
  • DivFood benefited from improved supply chain management and operational performance
  • Plastic's gable-top cartons division performed strongly
  • Bevcan operations in Angola and Nigeria performed very well
  • Plastics SA consolidated the Industria and Isando sites
  • Plastics Europe turned around from a trading loss to a trading profit
  • Impaired R677 million at Glass
  • Continued to deliver on our drive towards improved productivity to extract value from our newer technologies and ensure readiness for higher volumes
  • Applied improved maintenance practices to limit associated downtime
  • Consistent engagement with customers to streamline our product mix, reducing complexity and providing opportunities to review cash fixed costs
  • Reduced cash fixed costs in Plastics SA
  • Plastics UK streamlined costs and concluded agreement with a large customer in Ireland with positive implications for future profitability
  • Head office cost reduction and procurement savings
  • Investment behind growth markets in Nigeria (food cans) and Angola (second beverage can line) is now feasible
  • Incremental improvements from various manufacturing projects
  • Cape Town beverage can line closure will result in annual savings of R60 million and head office cost savings of R5 million
  • Conclusion of the sale of crates and drums businesses expected in the new financial year
  • Focus on further simplification of the business and cost optimisation in Plastics SA
  • Plastics UK site optimisation to have further positive impacts on profitability
  • We have the established capacity to ramp up production to meet increased customer demand
  • Group restructuring initiatives to reduce complexity, limit non-value add activities and reduce cash fixed costs
  • Unlock greater productivity within our existing factories thereby improving economies of scale and return on net assets
  Dependence on foreign exchange liquidity and currency movements          
    High volatility in translated rand value of earnings from the Rest of Africa impacts on our financial performance. In-country dollar liquidity holds up the transfer of cash and places constraints on the purchase of imported raw materials and our ability to invest behind growth opportunities    
  • Nigerian liquidity provided by the NAFEX market continued with NIFEX and NAFEX rates almost in line with each other
  • Angolan liquidity improved significantly; we transferred R1.8 billion (US$138 million)
  • Highly cash-generative businesses in Zimbabwe faced liquidity constraints
  • Effective hedging in Angola avoided a potential R1.6 billion devaluation
  • Secured two revolving credit facilities, strengthening the group's financial position
  • Activities of the cash management committee ensured that cash flow management remained a strong focus
  • Strong management of capital expenditure and improvements in liquidity delivered a stronger balance sheet without compromising the integrity of property, plant and equipment
  • US$-indexed kwanza bonds increased from 89% to 94% providing highly effective hedges against the devaluation of the kwanza
  • Currency volatility and in-country US dollar availability in Angola and Zimbabwe will continue to have a bearing on financial results
  • Strengthened balance sheet is better able to withstand currency volatility and provide a strong base to fund the group for the next five years
  • Investment of R100 million behind growth in demand in our first food can line in Nigeria
  • Conversion of our tinplate beverage line to aluminium in Angola at a cost of US$20 million
  Challenging macroeconomic and political conditions in our key markets          
    Low economic growth in South Africa and high interest rates in key markets in the Rest of Africa result in reduced consumer demand which translates into lower volumes and revenue and pressure on profit margins. It also limits opportunities for growth    
  • Beverage can volumes grew in Nigeria
  • DivFood benefited from much improved demand from the fishing industry and some growth in food cans for vegetables
  • Foreign currency shortages for much of the year and a weakening kwanza impacted on volumes in Angola
  • Angolan volumes impacted by the requirement for customers to fund the purchases of raw materials in US dollars
  • US dollar shortages in Zimbabwe adversely impacted the Zimbabwean operations' ability to settle inter-group loans
  • Ongoing drive to deliver improved operating efficiencies and cash fixed cost reductions
  • Operations geared to meet increased capacity requirements
  • Further credit extension to Zimbabwe being closely managed with customers being required to pre-fund purchases with US dollars
  • Successfully negotiated arrangements with Angolan customers to fund raw material purchases in dollars
  • US dollar linked kwanza bonds continue to be purchased where possible to hedge against further Angolan currency devaluations
  • Business and consumer confidence in South Africa are likely to remain weak in the short to medium term
  • Economic activity in Nigeria and Angola is showing signs of slow recovery
  • Further devaluation in the kwanza is expected to occur and where possible be hedged through the use of US dollar kwanza linked bonds with in-country US dollar liquidity being closely managed
  • 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 global brands and strong credit ratings
  • Hedging strategies in Angola to optimise the group's position
  Key customers diversifying their supplier base          
    Certain customers wish to limit their supply risks by appointing more than one supplier of primary packaging    
  • Some volumes lost in South Africa to new second beverage can manufacturer
  • Drop in sales volumes and profitability of liquid packaging and plastic closures after the loss of a key customer
  • Footprint of factories which affords customers with better security of supply
  • Value-added services provided by Nampak R&D
  • Continued emphasis on price, safety, quality, reliability, good governance and on-time delivery
  • Opportunity to take advantage of growing demand for environmentally friendly packaging by extending the reach of gable-top cartons to other liquid and dry food products
  Uncertain regulatory and policy environment          
    Changes in regulations affecting Nampak and our customers could negatively impact on demand or result in uncontrollable increases in cash fixed costs. Failure to comply with regulations can result in penalties and affect our licence to operate    
  • Continued to focus on the provisions of the Waste Management Act, the health promotion levy and carbon tax
  • The Industry Waste Management Plan has been developed and submitted to the relevant authorities
  • Continued focus on recycling initiatives across all substrates
  • Ongoing engagement and alignment with government and other stakeholders on post-consumer packaging waste recycling objectives
  • Good corporate governance principles, policies and practices will continue to protect sustainable profitability
  Inadequate diversity, people development and a skills shortage          
  • Without transforming to a more equal society, the sustainability of our market in South Africa may be in jeopardy
  • A poor B-BBEE rating could impact the revenue of the South African operations
  • Insufficient skills could impact on operational effectiveness and our ability to deliver on strategy
  • Maintained our B-BBEE rating at level 6
  • Retained B-BBEE as a component of the management STI structure
  • Maintained our focus on management graduate, apprenticeship development programmes as well as various technical skills and safety programmes
  • Kept up our technical partnerships with key suppliers and customers
  • Our aligned skills development initiatives result in improved productivity and faster problem solving as products are manufactured
  • Besides protecting employees from injuries, good safety practices result in reduced downtime, cost savings and improved productivity
  • B-BBEE steering committee mandated to implement plans for an improved rating as well as to review potential ownership structures
  • Training and development outcomes evaluated annually and aligned to business requirements
  • Depth of diverse qualified succession pool as well as opportunities for personal growth underpin sustainable profitability
  Uncontrollable increases to legacy defined benefit liabilities          
    If cost increases associated with providing the benefits outstrip affordability, profits will be adversely affected    
  • Continued with de-risking activities in the Nampak Staff Pension Plan in the UK
  • Evaluated the annuity market for further opportunities to provide annuities for retired employees in receipt of post-retirement medical benefits in South Africa
  • Steady reduction in the overall liability over the past few years
  • Medical inflation remains above the consumer price index, placing upward cost pressure on the group's remaining post-retirement medical liability
  • Less volatility in deficits in the UK pension plan is anticipated with the introduction of underlying gilt-yield type investments which provide some hedge against movements in interest and inflation rates
  • The group will continue to consider and implement feasible buy-out and de-risking opportunities that are beneficial for all parties
  Potential to fall prey to cyber crime          
    Ransomware attacks could result in catastrophic loss of data and paralyse the business, rendering it unsustainable    
  • Embedded vulnerability management and patch management process
  • Used email filtering for malware
  • Continued to conduct penetration, cyber footprint and cyber assessments
  • Carried out disaster recovery tests of corporate systems
  • Introduced certain insurance covers
  • Ongoing employee awareness campaigns
  • Consistent upgrading to protect against latest attacks
  • Provision of email continuity in the event of an attack
  • Preventing cyber crime is an enduring commitment as hackers become more sophisticated
  • Provision of email continuity to all UK and Africa sites
  • Improving security across all sites
  • Enhanced business continuity position for Nampak
  • Reducing the risk of the severity of the impact in the event of a cyber attack
  • Reduction of duplicated security strategies across Nampak
  Increased public pressure on plastic packaging          
    Negative publicity and strong public reaction to plastic packaging waste could negatively impact demand    
  • Participated in industry initiatives to increase recycling rates
  • Increased the use of recycled content in our plastic bottles
  • Developed light-weighting plastic packaging opportunities for customers
  • Carried out consumer education programmes on the value and cost effectiveness of plastic packaging
  • Continued research and development into opportunities for further light-weighting and the use of more recycled material in primary plastic packaging
  • Ongoing engagement with other industry players on alternative solutions for plastic packaging waste that limit its impact on the environment
  • Opportunity to work with customers on alternative primary packaging solutions
  • Greater public awareness of which plastics products are not recyclable. All of Nampak's products are recyclable