8.7

Implementation of employee and community empowerment scheme

During 2020, Exxaro implemented Phase II of the Replacement BEE Transaction, by utilising 10% of Exxaro’s interest in Eyesizwe for the empowerment of relevant Exxaro employees (ESOP arrangement) and communities (Community arrangement).

ESOP arrangement

On 27 March 2020, the ESOP arrangement was successfully implemented.

Exxaro sold 5% of its interest in Eyesizwe to the newly established subsidiary, Exxaro ESOP SPV. Exxaro ESOP Trust subscribed for 100% of the ordinary shares of Exxaro ESOP SPV, utilising the contributions received from participating Exxaro business units. Exxaro subscribed for 100% of the A ordinary shares of Exxaro ESOP SPV.

The beneficiaries of Exxaro ESOP Trust are the relevant Exxaro employees who are identified as qualifying employees in terms of the trust deed.

The beneficiaries will participate in distributions of Exxaro ESOP Trust as and when distributions are declared by Exxaro ESOP Trust for so long as they are in the employment of one of the relevant employer companies within the Exxaro group.

The beneficiaries do not have rights to the allocated units, nor do they retain a right to the allocated units on leaving the employment of the relevant employer companies.

The group therefore recognises a staff cost expense only when a distribution is declared by the Exxaro ESOP Trust, being the point when an unconditional liability is incurred to settle the distribution to the employees.

Community arrangement

On 11 May 2020, the Community arrangement was successfully implemented.

Exxaro sold 5% of its interest in Eyesizwe to the newly established subsidiary, Exxaro Community NPC. The share purchase was funded utilising contributions received by Exxaro Community NPC from the participating Exxaro business units.

Exxaro Community NPC is an NPC established for the benefit of communities in areas where Exxaro and its subsidiaries operate.

An additional donation of R34 million was made by Exxaro to Exxaro Community NPC to fund the first project focused on aiding communities which have been negatively impacted by the COVID-19 pandemic.

Costs are recognised as and when Exxaro Community NPC incurs costs to execute the various community projects.