Review from the company secretary

	The board accepted and approved a revised board charter and the terms of reference for all board committees in line with King III. An external appraisal of the effectiveness of the board was conducted during the period.
Nonqaba Katamzi

The recent changes in the legislative, regulatory and best practice standards of the corporate governance environment in South Africa necessitated diligent consideration and review of governance policies and procedures. Group Five continuously strives to maintain and enhance sound governance standards through constant review of current and emerging legislation and requirements.

Of particular relevance during the year was the proclamation of the Companies Act No 71 of 2008 and Companies Regulations 2011 in May 2011. The group has also progressed well in terms of addressing non-compliance gaps relating to the implementation of The King Code of Governance for South Africa 2009 (King III). For a summary of the non-compliance issues identified in the prior year and how we have progressed in addressing these, refer to page 119.

• Material issues during the year and how these were managed

  Companies Act No 71 of 2008 and Regulations (new Companies Act)

  With the coming into effect of the new Companies Act, it has been necessary for the group to address certain key governance and/or corporate administrative factors prescribed in the new legislation. At the time of drafting this report, the group was in the process of assessing the Act to determine the extent of non-compliance and to formulate a work plan to address those. On the next two pages we outline initial relevant areas we have identified.

   

  Section reference		New Companies Act amendment		Application to the group
  Compliant
  Section 29		Annual financial statements to bear, on the first page of the statements, a prominent notice indicating whether the statements are audited or reviewed and who prepared or supervised the preparation of those statements.		A statement confirming these details is disclosed on the first page of the annual financial statements with the statement of responsibility by the board of directors.
  Section 30(1)		Preparation of annual financial statements is required within six months after the end of the group’s financial year end.		The group’s annual financial statements are prepared and released within two months after its financial year end.
  Section 30(4)		Companies must include particulars on remuneration (as defined in sub-section (6)) received by each director or individual who holds or has held any prescribed office in the company.		Particulars on the remuneration received by each director and prescribed officer in the group are provided on pages 72 to 76 of this integrated report.
  Section 38		The board of a company may resolve to issue shares of the company at any time, but only within classes and to the extent that the shares have been authorised by the Memorandum of Incorporation.		Issue of authorised but unissued shares is subject to consideration and approval of the board.
  Section 59		The board of a company may set a record date for the purpose of determining which shareholders are entitled to receive notice of a shareholders’ meeting, participate in and vote at a shareholders’ meeting, decide any matter by written consent or electronic communication, as contemplated in Section 60; exercise pre-emptive rights, as contemplated in Section 39; receive a distribution; or be allotted or exercise other rights.		The group has set a record date for shareholders’ eligibility. Refer to the notice of AGM on page 256.
  Section 66(9)		Remuneration of directors may be paid only in accordance with a special resolution approved by the shareholders.		A special resolution for approval by shareholders is included for the forthcoming annual general meeting (AGM) agenda. Refer to page 256.
  Section 73(7)		Board resolutions must be dated and sequentially numbered and are effective as at the date of the resolution unless otherwise stated.		Board resolutions are dated and sequentially numbered.
  Section 94		The audit committee (comprising at least three members) to be elected at each AGM.		Members of the audit committee are recommended to the AGM for shareholder approval.

  

  Section reference		New Companies Act amendment		Application to the group
  In the process of ensuring compliance
  Section 24		Retain the following documents, in written form, for a period of seven years: – Record of directors – Copies of all reports presented at an AGM – Annual financial statements and accounting records – Notices, minutes and resolutions of shareholders’ meetings – Notices, minutes and resolutions of all board, audit, committee meetings – Securities register – Registration of company secretary and auditors		The group currently has a five-year record keeping policy in place. This will be addressed immediately.
  Section 45		Approval by shareholders via special resolution for the provision of loans and other financial assistance to directors, prescribed officers, related and/or inter-related companies. If the board adopts a resolution it is required to advise shareholders and trade unions within ten days.		The group does not provide financial assistance to directors or to prescribed officers. It does, however, provide financial assistance to its subsidiaries in varying forms. This financial assistance was largely in place by 1 May 2011. The board has included a special resolution for approval by shareholders at the forthcoming AGM requesting general authority to issue such financial assistance. The group notes that there continues to be much debate as to the application of this section. It has developed a work plan to address the Act requirements and has sought external legal advice in support of the workplan.
  Section 72(4) to (10)		The Minister of the Department of Trade and Industry may by regulation prescribe that a company or a category of companies must have a social and ethics committee, if it is desirable in the public interest, having regard to its annual turnover, the size of its workforce, or the nature and extent of its activities.		The board has not yet established a committee with a mandate to oversee the responsibilities envisaged by the Act for the social and ethics committee. This forms part of the group’s work plan to close out gaps of noncompliance with the Act. The group is required to have addressed this by May 2012.
  Section 75(6)		If a director of a company acquires a personal financial interest in an agreement or other matter in which the company has a material interest, or knows that a related person has acquired a personal financial interest in the matter, after the agreement or other matter has been approved by the company, the director must promptly disclose to the board, or to the shareholders in the case of a company, the nature and extent of that interest and the material circumstances relating to the director or related person’s acquisition of that interest.		The group maintains a Conflict of Interest Policy. This requires all directors, prescribed officers and business unit directors to confirm any conflict of interest which may arise when the individual acquires a personal financial interest in an agreement or other matter in which the group has a material interest or knows that a related person has acquired a personal interest. This is declared on a quarterly basis. The policy, however, only states that disclosure needs to be made at each quarterly board meeting and not when the conflict arises. The policy has been amended and will be presented to the board for approval and implementation.

  The board is of the view that the group is compliant with the Companies Act to the extent required and where practically possible. It has initiated a process of addressing areas of non-compliance to gain full compliance.

  King III report

  The group continued to address gaps identified through the King III analysis conducted in F2010. Various initiatives implemented by the group in response to these have resulted in the streamlining of governance areas. This includes, for example, the establishment of the IT steering committee, an advisory committee of the group’s IT function and management that reports on an annual basis to the audit committee. Other notable changes include the first stages in the development of succession plans for executive directors and a review of the board structure, in particular the composition of board committees, such as the audit committee.

  Board processes

  An external appraisal of the effectiveness of the board was conducted during the period. The appraisal was benchmarked against the group’s strategic requirements to ensure the capacity of the board to deliver these requirements and to strengthen the diversity and sector expertise of directors. The outcome of the appraisal was mainly positive, with the board being reported to be vigilant in terms of its role on governance and strategy. Contributions made by the board to operational issues were, however, found to be reactive. To address this, selected audit committee and risk committee members joined executive management on a site visit to the Middle East to independently assess macro risks.

  During the period under review, the board also accepted and approved a revised board charter and the terms of reference for all board committees in line with King III requirements. The key areas addressed were the annual appointment of the chairperson of the board and the annual performance review process of board committees. This especially includes the audit committee whose members are subject to formal approval by shareholders at an annual general meeting.

  Areas identified for improvement include ensuring the development of a formal induction process, which was not addressed in the period under review, continuing education of directors and a requirement to recruit additional directors with relevant experience and industryspecific expertise to further strengthen the skills of the board. This has been addressed with the appointment in August 2011 of two new directors, Mr OA Mabandla and Mr DDS Robertson.

  Although directors attend strategy sessions with management twice a year and attend site visits and internal industry-specific awareness programmes from time to time, the group currently does not have a formal induction process. The board’s succession plan must also be presented to the board for consideration and approval.

  Following the assessment of the main board, in the coming year the group will access the effectiveness of the sub-committees.

  Employee share scheme

  The company secretary is responsible for administrating the group’s broad-based employee share scheme, the share appreciation rights scheme and the black managers’ scheme together with an external service provider. During the year, there were a number of issues that required attention. These included errors resulting in delayed delivery of shares to the beneficiaries of these schemes. In the coming year, we will focus on completing an automation process and addressing all administrative issues.

  Tip-offs anonymous line

  The company secretary is also responsible for administrating the group’s Tip-offs Anonymous line. The group experienced an increase in fraudulent and unethical behaviour during the year. Pleasingly, a 48% increase was seen in the number of tip-offs received through the group’s ethics line and directly by the risk department. We believe this indicates that increased awareness and training has resulted in employees being more observant and willing to report incidents. Management’s swift action in response to unethical acts has also communicated a clear message and potentially increased employee confidence in the process.

• Looking forward

  Key focus areas for F2012	Desired results
  Companies Act No 71 of 2008 and Companies Regulations 2011.	Gain full compliance with the Act
  Establishment of a social and ethics committee and management of Tip-offs Anonymous line.	Define and recommend terms of reference, strategic drivers and membership for consideration and approval of the board and effective management of the Tip-offs Anonymous line
  King III requirements.	Review and recommend actions to close gaps for consideration and approval of the board
  Further improve operational knowledge of the board.	Equip the board with technical knowledge to further improve the quality of guidance given to executives
  Address board processes requiring implementation.	Implementation of formal induction and succession plans. Development of a continued education programme for the board
  Employee share scheme.	Ensure all administrative issues are addressed

• Appreciation

  I wish to thank the Group Five board members for their continued support during the year. A special word of appreciation to our chairperson for her sustained focus on strengthening corporate governance. I also thank our group risk officer for his guidance during the year. I look forward to continuing to improve our governance processes in the coming year.

  N (Nonqaba) Katamzi
  Company secretary

  5 August 2011