RAND WATER ANNUAL REPORT 2023

Consolidated Annual Financial Statements for the year ended 30 June 2023

Notes to the Consolidated Annual Financial Statements 17. Post retirement medical benefit (Continued)

Figures in Rand thousand

2023

2022

2021

Sensitivity analysis

Decrease Increase Decrease Increase Decrease Increase

1% increase/decrease in the health care cost assumption on the obligation 1% increase/decrease in the health care cost assumption on service costs and interest cost A one year decrease/ increase in expected retirement age Withdrawal for both males and females between 0% ‑ 15% pa

32 201

37 577

37 326

43 902

38 760

45 815

4 967

5 819

5 668

6 700

5 436

6 459

2 295

227

2 209

385

4 005

579

-

2 957

-

21 989

5 364

-

A 2 year reduction with 1.0% improvement p.a from 2006

-

18 957

-

4 453

61 955

-

The above sensitivity analysis display the impact on the defined benefit obligation as a result of reasonable changes in the key assumptions for three comparative years.

As of 30 June 2023, the plan typically exposes the Group to actuarial risks such as: Investment risk, market risk, change in legislation, longevity risk, health care cost inflation risk, cash flow risk and salary variant risk as defined below:

Investment risk:

The present value of the defined plan obligation is calculated using a discount rate determined by reference to the nominal bond curve as compiled by the Johannesburg Stock Exchange (JSE). Currently the plan assets are held in the Prescient Income Provider Fund and Guaranteed portfolio. Due to the long term nature of the plan liabilities, the Board of Rand Water considers it appropriate that a reasonable portion of the plan assets should be invested in the above mentioned portfolios to leverage the return generated by the fund.

Changes in bonds yields:

Decrease in the bond yields used to determine the discount rate will increase the employer’s reported post‑employment healthcare liability.

Longevity Risk :

The longevity risk is that pensioners will live longer than expected. Possible contributing factors are medical advances, better healthcare and greater emphasis on following healthier lifestyles. This would lead to benefits payable for longer than expected.

The employer’s subsidy covers the post‑employment medical scheme contributions in retirement until the main pensioner’s death. On the main pensioner’s death, the subsidy will continue at a reduced level based on the contributions for the remaining dependants.

Cash flow risk:

The employer pays the subsidy amounts in respect of the pensioners either directly to the pensioner or to the medical aid. There is a risk to the employer that, due to unforeseen circumstances, funds may not be available at the time that it is required.

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