,MAC2602 ASSESSMENT 1 SEMESTER 2 2026
DUE DATE: 8 SEPTEMBER 2026
PART A
A1 — Economic, social, environmental and governance factors affecting PG
The information provided in the scenario indicates that PG is exposed to several
economic, social, environmental and governance factors that may affect its operations
and long-term performance.
1. Economic factor — Interest rates and financing costs
PG financed the R2 billion acquisition entirely through a long-term loan at an annual
interest rate of 11%. Changes in interest rates can therefore affect PG’s financing costs
and cash-flow position. An increase in interest rates would increase the cost of
borrowing and could place additional pressure on the company’s profitability and
liquidity.
2. Economic factor — Taxation
PG is subject to a company tax rate of 27%. Changes in the South African corporate tax
rate could affect the after-tax cash flows generated by the facility. Tax allowances, such
as the wear-and-tear allowance on the fruit-canning machines, can reduce taxable
income and provide a tax benefit to PG.
3. Economic factor — Inflation and increases in municipal rates
, Municipal property taxes and rates are R100 000 per month and are expected to
increase by 6% in Year 2 and 8% in Year 3. These increases represent higher operating
costs and could reduce the future cash flows generated by the facility.
4. Social factor — Employment of local people
PG decided to prioritise hiring locals for in-service training after labour unions raised
concerns regarding contractors employing illegal immigrants. This represents a social
responsibility consideration because PG’s employment practices affect local
communities and its relationship with employees and labour unions.
5. Social factor — Labour relations
Labour unions have raised concerns about the employment of illegal immigrants by
some PG contractors. Poor labour relations could result in disputes, strikes, reputational
damage and interruptions to production. PG therefore needs to maintain constructive
relationships with employees, unions and contractors.
6. Environmental factor — Environmental footprint
Some of PG’s grain mills and food production plants have experienced challenges
relating to their environmental footprint. Manufacturing and food-processing activities
can generate waste and consume significant amounts of water and energy. PG may
therefore face additional costs associated with environmental compliance and reducing
its environmental impact.
7. Governance factor — Compliance with laws and regulations
PG operates across South Africa, Mozambique, Eswatini and Lesotho and employs more
than 15 000 people. The company must comply with employment, immigration,
DUE DATE: 8 SEPTEMBER 2026
PART A
A1 — Economic, social, environmental and governance factors affecting PG
The information provided in the scenario indicates that PG is exposed to several
economic, social, environmental and governance factors that may affect its operations
and long-term performance.
1. Economic factor — Interest rates and financing costs
PG financed the R2 billion acquisition entirely through a long-term loan at an annual
interest rate of 11%. Changes in interest rates can therefore affect PG’s financing costs
and cash-flow position. An increase in interest rates would increase the cost of
borrowing and could place additional pressure on the company’s profitability and
liquidity.
2. Economic factor — Taxation
PG is subject to a company tax rate of 27%. Changes in the South African corporate tax
rate could affect the after-tax cash flows generated by the facility. Tax allowances, such
as the wear-and-tear allowance on the fruit-canning machines, can reduce taxable
income and provide a tax benefit to PG.
3. Economic factor — Inflation and increases in municipal rates
, Municipal property taxes and rates are R100 000 per month and are expected to
increase by 6% in Year 2 and 8% in Year 3. These increases represent higher operating
costs and could reduce the future cash flows generated by the facility.
4. Social factor — Employment of local people
PG decided to prioritise hiring locals for in-service training after labour unions raised
concerns regarding contractors employing illegal immigrants. This represents a social
responsibility consideration because PG’s employment practices affect local
communities and its relationship with employees and labour unions.
5. Social factor — Labour relations
Labour unions have raised concerns about the employment of illegal immigrants by
some PG contractors. Poor labour relations could result in disputes, strikes, reputational
damage and interruptions to production. PG therefore needs to maintain constructive
relationships with employees, unions and contractors.
6. Environmental factor — Environmental footprint
Some of PG’s grain mills and food production plants have experienced challenges
relating to their environmental footprint. Manufacturing and food-processing activities
can generate waste and consume significant amounts of water and energy. PG may
therefore face additional costs associated with environmental compliance and reducing
its environmental impact.
7. Governance factor — Compliance with laws and regulations
PG operates across South Africa, Mozambique, Eswatini and Lesotho and employs more
than 15 000 people. The company must comply with employment, immigration,
