Our materiality, material risks and opportunities

Determination of materiality

The matters included in our integrated annual report are principally aimed at providers of financial capital in order to support their financial capital allocation assessments. The interests of the providers of financial capital are, however, largely aligned with other key stakeholders in that they also are focused on the creation of value in the long term.

In determining which matters are material for disclosure in our integrated annual report we have considered whether the matter substantively affects, or has the potential to substantively affect, our strategy, our business model or the forms of capital we utilise and ultimately our ability to create value over time.

The assessment of the magnitude of the impact and the likelihood of the occurrence of the group’s top risks and opportunities included below informed the identification and prioritisation of the material matters for inclusion in the integrated annual report. The matters identified were compared with those being reported on by organisations in the same or similar industries to ensure that relevant matters have not been excluded from the report.

Material risks and opportunities

The risk management process followed in identifying the group’s top risks and opportunities is included in the Corporate governance section. The matrix reflecting the assessment of movement in the magnitude of the impact and the likelihood of the occurrence of the group’s top risks and opportunities over the year is as follows:

The principal risks and opportunities facing the group and considered by the board are detailed below:

Principal risk landscapes     Specific risks we face     Potential impact     Risk responses     Associated strategic priorities  
Macro-economic environment
  • Reduced gaming spend
  • Reduction in travel spend
  • Growth negatively affected by macro-economic factors
  • Concentration of operations in South Africa
  • Lower revenue growth and profitability
  • Revised strategic priorities
  • Review organisational structures
  • Further focus on cost reduction
  • Renewed and focused marketing
  • Reward programmes
  • Sustainability – Financial strength and durability
  • Growth – Organic growth
Regulatory change and compliance
  • Additional casino licences or relocation of existing casino licences
  • Changes in casino licensing conditions
  • Loss of casino licences
  • Changes in labour legislation
  • Not meeting changing BBBEE requirements
  • Increased complexity of compliance, e.g. POPI, CPA and FICA
  • Smoking legislation
  • Advertising restrictions
  • Lower revenue, higher costs and reduced profitability
  • Engage authorities, including gambling boards
  • Submit comments to law makers through formal comment structures
  • Robust compliance procedures
  • Engage law makers through employer and industry bodies
  • Litigate where required
  • Sustainability – Deliver to our beneficiaries
  • Sustainability – Regulatory compliance
Adverse tax environment
  • Potential increased national and provincial gaming taxes
  • Increased rates and property taxes
  • Possible VAT increases
  • Reduced profitability
  • Uncertain operating environment resulting in frozen investment spend
  • Lobby government through CASA
  • Educate legislators regarding gaming impact through direct lobbying
  • Lodge of appeals on assessments and property valuations
  • Ensure property values are always accurate and at the disposal of municipalities
  • Sustainability – Deliver to our beneficiaries
  • Sustainability – Regulatory compliance
  • Growth – Organic growth
Portfolio management
  • Nodal shifts
  • Product relevance in target markets
  • Customers choose other leisure options
  • Reduced income and profitability
  • Obsolete hotel stock
  • Reduced footfall and customers
  • Overview of markets
  • Interaction with local authorities
  • Investment in facilities to ensure relevance
  • Market research to timeously spot trends
  • Partnerships with other leisure suppliers
  • Sustainability – Product relevance to customer experience
  • Growth – Organic growth
Capacity issues
  • Fixed cost nature of the business
  • Casino capacity constraints
  • Hotels oversupply in certain markets
  • Lower revenue growth and profitability
  • Review organisational structures
  • Further focus on cost reduction
  • Interaction with gambling boards and city officials
  • Renewed focus on reward programmes
  • Growth – Organic growth
Missed opportunities
  • New gaming opportunities
  • Hotels opportunities, local and offshore
  • Investments in expansion not yielding expected returns
  • Ineffective integration of acquired businesses
  • Lower revenue growth and profitability
  • Missed revenue opportunities
  • Wasted investment
  • Proper and robust evaluation of all new opportunities
  • Non-financial due diligence of opportunities
  • Review of plans and opportunities
  • Growth – Organic growth
  • Growth – Inorganic growth
Human resources
  • Employment equity challenges at senior levels
  • Lifestyle diseases, including HIV/Aids, hypertension and diabetes
  • Unrealistic expectations, social pressure and/or unresolved industrial relations issues leading to violent strikes and unrest
  • Limited pool of qualified, trained and talented staff
  • Failure to meet BBBEE targets
  • Reduced customer satisfaction, disruption to operations and reduced profitability
  • Work stoppages, reduced profitability and reputational impacts
  • Retention of staff through appropriate remuneration structures
  • Engage with and empower staff
  • Fast track and develop talented staff
  • Performance-driven culture
  • Focused employment equity strategy
  • Sustainability – Human resources
  • Sustainability – Deliver to our beneficiaries
Unreliable and costly utilities
  • Unreliable water supplies
  • Unreliable electrical supply
  • Rise in electricity and water costs
  • Increased diesel usage during load shedding
  • Disruption to operations and reduced profitability
  • Machinery breakdown
  • Demand-side management programmes to reduce consumption
  • Water handling/storage capacity for emergency supply
  • Self-reliance on generators for emergency electricity supply
  • Audits of the status of switchgear
  • Sustainability – Product relevance to customer experience
  • Growth – Organic growth
Crime and security
  • Casino and hotel robberies
  • Follow home robberies
  • Fraud by employees
  • Fraud from external sources
  • Lower revenue and profitability
  • Reputational risk
  • Physical security and surveillance procedures
  • Coordination with the South African Police Service
  • Crime intelligence
  • Internal control frameworks
  • Internal audit procedures
  • Sustainability – Regulatory compliance
Cyber, IT and information management
  • Hacking, Payment Card Industry Data Security Standards and hacktivism
  • POPI legislation
  • Sub-optimal online transacting
  • Reputational risk
  • Fines and penalties
  • Reduced income and profitability
  • IT security
  • Payment card industry standard compliance
  • Appointment of Information Officer
  • Review of online transaction opportunities
  • Increased IT auditing and assurance
  • Website rewrite
  • Sustainability – Regulatory compliance
  • Growth – Organic growth