Economic EC1-EC9

• EC1 Direct economic value generated and distributed, including revenues, operating costs, employee compensation, donations and other community investments, retained earnings, and payments to capital providers and governments.

  Integrated Report 2013:

  Our performance - Salient features Our performance - Salient features - Financial highlights Financial and non-financial indicators Statement of total value added Statement of total value added Summarised consolidated income statement

  Consolidated Annual Financial Statements 2013:

  Note 19 Note 20

  VALUE ADDED STATEMENT

  for the year ended 30 September

  A measure of the value created by the group is the amount of value added by its diverse manufacturing, distribution and other activities to the cost of raw materials, products and services purchased. This statement shows the total value created and how it was distributed

  

  Number of employees 19 692 up 2.4%   Revenue per employee R3.3m up 8.3%   Value created per employee R732 293 up 9.3%

  
  
  

  2013     2012     2011         Rm   %     Rm   %     Rm   %   Revenue from continuing operations     65 102         58 554         49 823       Paid to suppliers for products and services     51 074         46 049         39 086       Value added     14 028         12 505         10 737       Income from investments^     226         192         133       Total value created     14 254         12 697         10 870       VALUE DISTRIBUTION                                 • Employees (note 1)     8 537   60     7 661   60     6 786   62   • Capital providers     1 591   11     1 270   10     1 012   9     Finance costs     983         827         755         Dividends to Barloworld Limited shareholders     522         393         223         Dividends to non-controlling interest in subsidiaries     86         50         34       • Government (note 2)     978   7     778   6     642   6   • Communities (corporate social investment)     17         17         16       • Reinvested in the group to maintain and develop operations     3 131   22     2 971   24     2 414   23     Depreciation     1 961         1 805         1 620         Retained profit     1 156         939         679         Deferred taxation     14         227         115             14 254   100     12 697   100     10 870   100   VALUE ADDED RATIOS                                 Number of employees (30 September)     19 692         19 238         18 671       Revenue per employee (Rand)#     3 344 567         3 089 187         2 704 979       Value created per employee (Rand)#     732 293         669 883         590 163       Corporate social investment – % of profit after taxation, excluding exceptional items     1.0         1.1         1.6       Notes                                 1. EMPLOYEES                                   Salaries, wages, overtime payments, commissions, bonuses and allowances**     7 497         6 724         5 864         Employer contributions†     1 040         937         922             8 537         7 661         6 786       2. CENTRAL AND LOCAL GOVERNMENT                                   Current taxation     837         596         389         Rates and taxes paid to local authorities     64         70         66         Customs duties, import surcharges and excise taxes     38         76         163         Skills development levy     39         36         24             978         778         642       ^ Includes interest received, dividend income and share of associate companies’ and joint ventures’ retained profit. # Based on average number of employees. ** Represents the gross amounts paid to employees including taxes payable by the employees. † In respect of pension funds, retirement annuities, provident funds, medical aid and insurance.

  
  

• EC2 Financial implications and other risks and opportunities for the organisation's activities due to climate change.

  Integrated Report 2013:

  Managing risk - Barloworld group top risks 2013 Sustainable development - Barloworld's 2013 CDP Climate Change disclosure response Sustainable development - Barloworld's 2013 CDP Water disclosure response

  Barloworld has identified risks associated with climate change and financial implications thereof. These, together with the group’s responses to the identified risks, are disclosed in its responses to the CDPs Climate Change 2013 and the CDPs Water 2013 responses which can be viewed at www.barloworld.com. In identifying sustainable development as a strategic focus area, the group acknowledges the significance of such risks and opportunities and includes these in its strategic planning process and operational plans.

  Given Barloworld’s reliance on motor vehicles, plant and equipment (currently fossil fuel based technologies) as a core part of our business, these risks could be significant, potentially contributing to an increased cost base and decreased revenue. There are opportunities for competitive products and solutions with reduced carbon footprints (For more detail see also EN6, EN7, EN8).

  
  

• EC3 Coverage of the organisation's defined benefit plan obligations.

  Integrated Report 2013:

  Managing risk - Barloworld group top risks 2013

  Consolidated Annual Financial Statements 2013:

  Note 16

  It is the policy of the group to encourage, facilitate and contribute to the provision of retirement benefits for all permanent employees. To this end the group's permanent employees are usually required to be members of either a pension or provident fund, depending on their preference and local legal requirements.

  Altogether 54% of employees belong to one defined benefit and nine defined contribution retirement funds in which group employment is a prerequisite for membership. Of these, the defined benefit and five defined contribution funds are located outside of South Africa and accordingly are not subject to the provisions of the Pension Funds Act of 1956. 24% of employees belong to defined contribution funds associated with industry or employee organisations.

  Defined contribution plans

  The total cost charged to profit or loss of R542 million (2011: R472 million; 2009: R428 million) represents contributions payable to these schemes by the group at rates specified in the rules of the schemes.

  Defined benefit plans

  The triennial valuation of the United Kingdom defined benefit pension schemes was completed as at 1 April 2011 and updated at September 2013. The scheme reflected a deficit, calculated in terms of IAS 19 Employee Benefits of £85.4 million at the end of the financial year. A recovery plan has been negotiated with trustees to pay £3.2 million per annum for the next nine years. The scheme was closed to new entrants from 1 April 2002, with all new employees in the United Kingdom required to join the defined contribution scheme.

  The estimated contributions (inclusive of a recovery plan) to be paid to the plan during the next financial year amounts to £3.3 million (R54 million).

  Retirement benefit information It is the policy of the group to encourage, facilitate and contribute to the provision of retirement benefits for all permanent employees. To this end, the group’s permanent employees are usually required to be members of either a pension or provident fund, depending on their preference and local legal requirements. Altogether 54% of employees belong to one defined benefit and nine defined contribution retirement funds in which group employment is a prerequisite for membership. Of these, the defined benefit and five defined contribution funds are located outside South Africa and accordingly are not subject to the provisions of the Pension Funds Act of 1956. Altogether 21% of employees belong to defined contribution funds associated with industry or employee organisations. Defined contribution plans The total cost charged to profit or loss of R675 million (2012: R542 million; 2011: R472 million) represents contributions payable to these schemes by the group at rates specified in the rules of the schemes (note 20). Defined benefit plans Amounts recognised in the income statement in respect of defined benefit schemes are as follows:       2013     2012     2011         Rm     Rm     Rm   Current service cost     2     18     20   Interest costs     334     307     264   Expected return on plan assets     (385)     (316)     (287)   Change in RPI/CPI statutory index           (81)         Net (gain)/loss recognised in profit or loss (note 20)     (49)     (72)     (3)   Actual return on plan assets     356     684     6   The triennial valuation of the United Kingdom defined benefit pension schemes was completed as at 1 April 2011 and updated at 30 September 2013. The scheme reflected a deficit, calculated in terms of IAS 19 Employee Benefits of £85.4 million at the end of the financial year. A recovery plan has been negotiated with trustees to pay £3.2 million per annum for the next nine years. The scheme was closed to new entrants from 1 April 2002, with all new employees in the United Kingdom required to join the defined contribution scheme. The estimated contributions (inclusive of a recovery plan) to be paid to the plan during the next financial year amounts to£3.3 million (R54 million). During the year, as part of the trustee and company’s strategy to de-risk the scheme, the fund purchased an insurance policy structured as a buy in, for a category of pensioners. This was funded through the sale of government gilts and a special contribution by the company of £3.0 million.

  
  

• EC4 Significant financial assistance received from government.

  No significant financial assistance was received from government. If any, assistance is generally applicable in terms of legislation and across the relevant industries. It is principally in the context of training allowances and reimbursements from government such as Sector Educational Training Authorities (SETAs) in South Africa, training subsidies in Spain and Portugal, or various allowances under taxation legislation.

  
  

• EC5 Range of ratios of standard entry-level wage by gender compared to local minimum wage at significant locations of operation.

  Integrated Report 2013:

  People - Reward aligned to performance management Empowerment and transformation - Equality

  All remuneration and employee benefits are in line with relevant legislation.

  Remuneration exceeds legislated minimum country wage levels irrespective of gender. However, where industry-negotiated agreements and other relevant legislation apply, payment is made according to these obligations. Similarly, apprenticeships and learnerships are usually paid at industry levels.

  There are no structural disparities by gender in entry level wages.

  Given the vast range of countries and industries in which Barloworld operates, as well as the significant number of job categories in the group, it is not practical to disclose all detailed wage minimums as well as related Barloworld levels and ratios. However, examples of ratios of standard entry level wages range from 1.5 to over 5 times above the local minimum wage in certain African countries; 1.5 to 2 times in Europe and in Russia, depending on the region, 1.5 to 4 times above the local minimum wage. In South Africa, standard entry level wages are at agreed or above industry levels.

  As noted, the material issue for the group is that it does not pay below minimum legislated wage levels, is not exposed to risk in this regard and that its remuneration policy aligns with its need to attract and retain the required talent to realise its value creation objectives.

  As the group has implemented the Towers Watson global grading system in all operations, its positions are graded accordingly. Wage and salary levels are benchmarked by country and category. This ensures equity and non-discrimination in remuneration practices.

  Remuneration practices are regularly reviewed and the group is committed to removing unfair discrimination in pay scales. In South Africa, differentials are disclosed in terms of employment equity legislation.

  Group policies and practices are fair and do not unfairly discriminate based on gender.

  
  

• EC6 Policy, practices, and proportion of spending on locally-based suppliers at significant locations of operation.

  Integrated Report 2013:

  Progress on Strategic Focus Areas People - Workforce by region Empowerment and transformation Empowerment and transformation - Transformation in South Africa Empowerment and transformation - Equality Empowerment and transformation - Barloworld Siyakhula

  Barloworld is committed to stakeholder value creation and supporting local communities as far as possible. A significant aspect of this spend is remuneration for locally resident employees. The number of employees by region who benefit from employment is reflected below.

  Workforce by region:

  		2013		2012		2011		2010
  	RSA	13 877		12 570		11 403		11 267
  	Rest of Africa	2 418		2 334		1 905		1 650
  	UK & Europe & Russia	2 632		3 548		3 743		3 198
  	Middle East & Asia	242		244		291		771
  	Australia	510		528		492		477
  	North America	13		14		837		804
  	Total	19 692		19 238		18 671		18 167

  By operating in communities, Barloworld creates significant value for local suppliers including Original Equipment Manufacturers (OEMs) and sub-contractors. This is reduced where plant and equipment can only be sourced from offshore principals, in which event the commitment is to spend the balance locally.

  In South Africa,  Equipment divisions’ products are sourced from overseas principals resulting in some 20% local spend, while Automotive and Logistics division sources vehicles through local OEMs resulting in 99% (including salaries and wages) of its spend being locally based. Sourcing varies by regions of activity and division. Handling in the Netherlands source 99% locally, while South African operations source some 40% from local suppliers. In Russia, given the nature of the Equipment business and sourcing Caterpillar product, some 10% of spend is locally based. Whilst, international sourcing of products within the Agriculture Russia business leaves little opportunity for local spend, AGCO products are sourced from local suppliers within Russia.

  Logistics business sub-contracts a large portion of its business to local contractors. Its freight management services’ spend is with international airlines and shipping companies as well as international customs clearing agents and accordingly is weighted towards international suppliers.

  Direct value for communities includes the group’s support for enterprise development initiatives under Barloworld Siyakhula and other community investment activities.

  These principally benefit communities in South Africa with accumulated funds of  R103 million  for enterprise development initiatives over a six year period and R40.8 million invested through the groups social economic development programmes over a five year period.

  Indirect economic impacts include: employee spending, providing products and services, enhancing the image and reputation of areas, and job creation which reduces demand on the fiscus and enables resources to be redirected to other areas.

  In South Africa, an effective way of bringing previously disadvantaged groups into the economy is through procurement. Preferential procurement varies by business unit and is influenced by the source and nature of their requirements, as well as the Broad-Based Black Economic Empowerment (B-BBEE) status of represented OEMs / suppliers. At group level, some R15.7 billion is procured from black owned and empowered suppliers, or 81% of measured procurement spend in terms of the dti’s B-BBEE codes of good practice.

  
  

• EC7 Procedures for local hiring and proportion of senior management hired from the local community at significant locations of operation.

  Integrated Report 2013:

  Progress on Strategic Focus Areas People - Workforce by region Empowerment and transformation - Employees by ethnic background in South Africa

  At Barloworld, unfair discrimination based on gender, race, religion, sexual preference or age is not permitted. All employees have access to the same opportunities. In South Africa, historically disadvantaged South Africans or HDSAs are actively recruited and promoted. Transformation objectives in this country ensure a commitment to local recruitment and employee development. In other regions, applicable localisation requirements also inform recruitment procedures.

  In South Africa, mandatory employment equity plans and progress reports are submitted to the Department of Labour. These set out employment targets that address race, gender and disability. Over and above this, some divisions within the group have implemented localisation targets for their African operations.

  Where the required skills are not available, the focus is on expatriate assignments, with the commitment to develop a local skills base. There is a small contingent of 312 international assignees who principally support operations in southern Africa. Senior managers in all divisions are mostly locally based, with 12 currently in expatriate positions.

  Overall 1.58% of employees are expatriates, with the balance of 19 380 (98.42%) employees hired from the respective local communities. We comply with legislation when recruiting locally and procedures for hiring include advertising, developing people from within the company, involvement in the community and schools to source potential employees and learners.

  Empowerment and transformation legislation and objectives in South Africa ensure commitment to local recruitment and development of employees (see table below for breakdown of employee profile). In other regions localisation requirements also inform recruitment procedures.  

  Workforce by region

  		2013		2012		2011		2010
  	RSA	13 877		12 570		11 403		11 267
  	Rest of Africa	2 418		2 334		1 905		1 650
  	UK & Europe & Russia	2 632		3 548		3 743		3 198
  	Middle East & Asia	242		244		291		771
  	Australia	510		528		492		477
  	North America	13		14		837		804
  	Total	19 692		19 238		18 671		18 167

  Employees by ethnic background in South Africa

  			2013				2012				2011				2010
  			AIC		White		AIC		White		AIC		White		AIC		White
  	Board*		1		4		1		4		1		4		1		4
  	Executive		5		13		4		14		4		13		5		8
  	Senior Management		16		46		16		41		14		41		11		42
  	Middle Management		722		1 135		692		1 073		648		1 006		621		1 003
  	Skilled Upper		4 548		2 416		4 161		2 386		3 794		2 189		3 654		2 235
  	Semi skilled/apprentices/trainees		4 373		427		3 568		446		3 106		383		3 076		383
  	Labour/Unskilled		170		1		163		1		199		1		222		2
  	Total		9 835		4 042		8 605		3 965		7 766		3 637		7 590		3 677

  * excludes non-executive directors

  ** AIC: African, Indian, Coloured

  Workforce in South Africa – Race and Gender 2013

  	Male					Female
  	African	Coloured	Indian	White	Total	African	Coloured	Indian	White	Total	Grand total
  Board*	1	0	0	4	5	0	0	0	0	0	5
  Executive	3	0	2	12	17	0	0	0	1	1	18
  Senior Management	2	4	5	43	54	3	2	0	3	8	62
  Middle Management	163	79	191	789	1 222	131	66	92	346	635	1 857
  Skilled Upper / Technical	1 798	735	653	1 609	4 795	764	340	258	807	2 169	6 964
  Semi-skilled / Apprentices / Technical Trainees	2 952	447	244	283	3 926	479	139	112	144	874	4 800
  Labour/Unskilled	92	8	5	1	106	57	8	0	0	65	171
  Total	5 011	1 273	1 100	2 741	10 125	1 434	555	462	1 301	3 752	13 877

  * excludes non-executive directors

  For more detail see also case study Programme to Improve Learner Outcomes (PILO)
  

• EC8 Development and impact of infrastructure investments and services provided primarily for public benefit through commercial, in-kind, or pro bono engagement.

  Integrated Report 2013:

  Empowerment and transformation - Barloworld Siyakhula Sustainable development - Making a difference by empowering communities

  Barloworld is committed to responsible corporate citizenship, including being responsive to the welfare and socio-economic development needs of the communities in which it does business, custodianship of the natural environment and efforts to address climate change.  It approaches these objectives from a moral and commercial perspective, founded on sound business acumen. 

  In the course of its business, through extensive, ongoing interactions, Barloworld engages with a wide range of stakeholders to understand their interests and concerns so as to construct its value propositions. The group seeks to provide leadership in society by encouraging its leaders to contribute to developmental challenges and act as role models, and by helping to create the responsible leaders of the future.

  The group is committed to spending at least 1% of its worldwide profits after tax on corporate social investment. 

  Through its social investments, the group has over many years sought strategic partnerships, synergies and innovations in public-service delivery that can be taken to scale by the public sector. Through grants, networking, referrals and its insistence on sound management practices, responsible governance and accountability, Barloworld endeavours to build capacity and sustainability in its development partners, where necessary. The group has invested R69 million in such initiatives over the past five years, and R150 million over the past ten years.

  The Barloworld Trust, which implements Barloworld’s corporate social investment (CSI) programme in South Africa, differentiates itself from its operations’ local, product- or cause-related marketing activities through its structural approach to development, finding and supporting promising initiatives that underpin social and economic development, in order to have greatest impact. 

  The education challenges in South Africa are immense.  As a result, the Barloworld Trust’s core focus is on improving the quality of teaching and learning, and providing better access to education. Its strategic approach is to work in long term partnerships with organisations that create sustainable innovations in both public and private education institutions, aiming for early adoption and support of these innovations in education, which can then be taken to scale by the public or private sectors.

  In 2013, Barloworld’s anchor CSI project was the Programme to Improve Learner Outcomes (PILO), a bold, large-scale intervention with broad-based stakeholder commitment and support, aimed at sustainably improving the public education system.

  Barloworld has supported PILO since its early inception by offering the company’s facilities for some of its early stakeholder meetings, as well as funding its open source school management team training materials which cost R1 million in 2013.

  PILO’s support to the South African government is based on substantial local and international expertise, wide-ranging educational experience, and both private and public sector insights into large scale change and performance improvement, and is led by a team of seasoned education veterans and business leaders.  For more detail see also case study on Programme to Improve Learner Outcomes (PILO)

  Understanding that our natural environment sustains every form of human endeavour, the group has supported the research, advocacy, environmental management and conservation work of non-profit organisations which lead in these fields for many years.

  Barloworld Siyakhula, the group’s enterprise development vehicle in South Africa, promotes black economic empowerment by providing financial and non-financial support to small and medium-sized suppliers, contractors and enterprises in its supply chain. Some R103 million in accumulated funds are currently committed

  Over the past five years the group has invested R69 million through group corporate social investment programmes, of which R41 million was accredited socio-economic development spend.  R16.9 million (2012 R16.6 million) was invested in 2013.  

  Group CSI spend

  SO1 to SO10; EC1 and EC8, Barloworld Corporate Social Investment policy

  
  

• EC9 Understanding and describing significant indirect economic impacts, including the extent of impacts.

  Integrated Report 2013:

  People - Workforce by region Sustainable development - Making a difference by empowering communities

  Given the nature of our operations and locations, major indirect impacts result from employee spending and local sourcing. The number of people by region who benefit from employment is reflected below. The overwhelming majority of employees are local.

  Workforce by region

  		2013		2012		2011		2010
  	RSA	13 877		12 570		11 403		11 267
  	Rest of Africa	2 418		2 334		1 905		1 650
  	UK & Europe & Russia	2 632		3 548		3 743		3 198
  	Middle East & Asia	242		244		291		771
  	Australia	510		528		492		477
  	North America	13		14		837		804
  	Total	19 692		19 238		18 671		18 167

  Indirect economic impacts include: employee spending, providing products and services, enhancing the image and reputation of areas, and job creation that reduces demand on the fiscus and enables resources to be redirected elsewhere. Improving skills is also a benefit.

  Indirect impacts also include providing services and customer solutions that address customer needs and enable them to operate. The group’s products and services contribute to the establishing, developing and maintaining of communities, particularly in mining, agriculture, infra-structure, transport and logistical support. Examples include equipment operations in remote mining locations which enable these to continue with benefits for regions and communities.

  Similarly, providing power solutions, such as the Anixas power station in Namibia, provides electricity for local consumption aiding development of communities and industry. On a lesser scale, other power solutions supply power to customers enabling their operations to continue in the event of power supply interruptions. Handling’s supply of agriculture equipment, services and solutions, often in remote regions, enable farming activities to continue with consequent indirect benefits.

  Equipment South Africa’s Technical Training Academy is an accredited Caterpillar Regional Centre which means it can conduct various technical training courses on behalf of Caterpillar primarily for sub-Sahara Africa dealers including Mauritius, Reunion and Madagascar. As an established mining dealer, mining training will probably also be conducted for Africa, Europe and Middle East Caterpillar dealers.

  More directly, by operating in communities Barloworld creates significant value for local suppliers which include OEMs and sub-contractors. This is reduced where plant and equipment can only be sourced by offshore principals, in which case the commitment is to spend the balance locally. In the Automotive division some 99% of spend is local (including salaries and wages).

  In South Africa,  Equipment divisions’ products are sourced from overseas principals resulting in some 20% local spend, while Automotive and Logistics division sources vehicles through local OEMs resulting in 99% (including salaries and wages) of its spend being locally based. Sourcing varies by regions of activity and division. Handling in the Netherlands source 99% locally, while South African operations source some 40% from local suppliers. In Russia, given the nature of the Equipment business and sourcing Caterpillar product, some 10% of spend is locally based. Whilst, international sourcing of products within the Agriculture Russia business leaves little opportunity for local spend, AGCO products are sourced from local suppliers within Russia.

  Logistics sub-contracts a large portion of its business to local contractors. Its freight management services’ spend is with international airlines and shipping companies as well as international customs clearing agents and accordingly is weighted towards international suppliers

  Indirect value for communities also includes the group’s support for enterprise development initiatives under the Barloworld Siyakhula umbrella. This principally benefits communities in South Africa, as do the group’s preferential procurement initiatives under the B-BBEE umbrella which amounted to some R 15.7 billion for the year.

  Barloworld Siyakhula, the group’s enterprise development vehicle in South Africa, promotes Broad-Based Black Economic Empowerment through providing financial and non-financial support to small and medium-sized suppliers, contractors and enterprises in its supply chain. Some R103 million in accumulated funds are currently committed.

  Over the past five years R69 million has been invested through the group’s corporate social investment programmes with R16.9 million being invested in 2013 (2012: R16.6 million ).