Understanding our operating context

The context in which we operate has a profound influence on our business. We acknowledge the impact of global trends on the sustainability of our operations and develop our strategy in response to address the challenges they may pose, but also to take advantage of the opportunities they present.

Dimension Trend   Potential impact   Our response
Political and regulatory
Countries are increasingly adopting regional approaches to security   Adopting regional strategies increase the complexity of doing business in the global arena   Through our participation in industry bodies, we aim to seek common solutions for challenges
The ongoing United States-China trade war   The trade war between these countries limits the potential for growth in our operating areas   We continue to engage our customers to meet their needs and to take advantage of opportunities
Sanctions and geopolitical uncertainty in Russia   While Barloworld has proved resilient against the sanction regime, we continue to closely monitor developments as this could impact the profitability of our customers   We continue to monitor developments, and proactively engage our stakeholders for common solutions
Political uncertainty in South Africa as a result of policy changes and election rhetoric leading up to 2019   Decline in consumer and investor confidence   Our engagement with government institutions and our participation in industry bodies seek solutions for shared challenges
Mining Charter policy uncertainty in South Africa around the Mining Charter, that was gazetted at the end of September 2018   Curtailment of some mining investments in the region   Engagement and representation through industry bodies on responses of interest to the industry and government
Amendments to the mining regulation in the DRC, with certain minerals subject to higher royalties   Decline in consumer and investor confidence   We continue to engage our customers to ensure we understand the potential impact and offer cost effective, tailored solutions
Economic
Global economic growth is expected to remain stable at 3.1% for 20181   Economic gains are unevenly distributed between regions, underscoring the vulnerability of certain operating jurisdictions   We closely monitor economic developments in the regions where we operate and align our approach in response
South Africa experienced constrained economic growth and slipped into a technical recession during 2018   A constrained economy resulted in reduced consumer activity and oscillating investor confidence   We closely monitor the progress of the economic recovery plan launched in South Africa and seek to reduce our costs and remain agile
Russian economy is expected to grow by 1.9%2   Geopolitical factors may have an impact on pricing and the availability of products   We engage our customers and seek opportunities to ensure product availability
Many global commodity prices remain depressed, with certain commodities showing improvement   The impact is most acute for our equipment business servicing this market   Reduce costs and optimise efficiencies to take advantage of a potential upswing
Infrastructure spend in South Africa contracted, with some major companies in business rescue or liquidation   A contracting construction industry erodes our customer base   Closely monitor the plans for economic recovery in South Africa and reduce costs
Currency volatility in operating jurisdictions   Negative impact on infrastructure spend by governments   Closely monitor global currency trends and align our approach to respond
Social
Localisation remains the major social trend   Increasing focus on preserving local knowledge, employing local talent and ensuring execution strategies speak to the local context   Our CSI programmes prioritise local development while our talent acquisition approach gives priority to local talent for employment
Social unrest in South Africa impacted our Logistics business through asset destruction   Escalating social tension and associated violence threatens the security of our freight and people   Our engagement with government institutions seek common solutions for security threats
The standard of living increased exponentially in Russia in recent years   While growing concerns over the lack of structural reforms are evident, the majority of the population acknowledges the progress   Societal progress and a growing middle class could present opportunities for our business and broaden our customer base
Technology threatens job security as certain skills become redundant   Implement skills development initiatives that transition the workforce   We seek to diversify our skills to ensure we remain relevant and fit for opportunity
Technology
Autonomous, electrified, shared and connected transport solutions for individuals are imminent   Changing consumer preferences will require innovative solutions   We seek to understand and integrate new technology solutions to offer innovative solutions
Breakthroughs in artificial intelligence (AI)   Digital business models that will facilitate competitiveness are required   We leverage the latest technologies to build flexible, digital business models
The rise of contractual services where customers can access cloud-based platforms that coordinate real-time shipments   Disruptive industry forces or players will significantly alter the operating landscape of the future   Our technology-enabled solutions anticipate customer problems before they disrupt production
3D printing technology is rapidly transforming business models in the industrial world   Customers seek cost and production efficiencies from connected technologies   We are progressing the ability to digitally transform customer product requirements and service touch points
Environmental
Lower carbon future, water scarcity, responsible waste management   Public pressure for transparency increases and opens the way for companies to demonstrate sustainability leadership, including environmental stewardship   Internal strategies, policies and aspirational targets are in place aimed at reducing our environmental footprint and ensuring responsible corporate citizenship
Changing consumer preferences for more environmentally friendly products and solutions that assist them to reduce their environmental footprint   Innovative solutions are required to ensure products and solutions remain relevant and competitive   We leverage our experience, skills and networks to develop innovative products and solutions that assist customers to realise their environmental ambitions
Responsible investment practices and decisions are increasingly taking into account environmental factors   Organisations that do not practice responsible environmental stewardship may not be considered attractive investments   Our integrated management approach, including our values, embed sustainability. We report on environmental aspects and provide credible and relevant information, including external assurance for material environmental disclosures

1 https://www.worldbank.org/en/news/press-release/2018/06/05/global-economy-to-expand-by-3-1-percent-in-2018-slower-growth-seen-ahead
2 https://tradingeconomics.com/russia/gdp-growth-annual
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