CORPORATE GOVERNANCE REPORT


AFROCENTRIC BOARD OF DIRECTORS

Adds value through strategic leadership, guidance and ultimate oversight in ensuring a sustainable business
that is accountable to shareholders and responsible to other stakeholders.


The Board manages corporate governance and the execution thereof through the various Committees. These Committees monitor the proper operation of the structures and systems of the Company and report to the Board.

  
 
 
 
 
Audit and Risk
Committee		   Remuneration
Committee		   Nomination
Committee		   Investment
Committee		   Social and Ethics
Committee		   AfroCentric Health Transformation
Committee
Adds value by assessing and ensuring the Company’s financial sustainability, and by providing oversight over IT governance.   Adds value by ensuring optimal remuneration structures to attract, retain and motivate world-class employees who enable and support the business strategy.   Adds value by assisting the Board to identify and source appropriately skilled Directors who can individually and collectively add value to the Board.   Adds value by interrogating all capital projects above the Executive heads’ mandate against financial, technical and strategic metrics prior to action.   Adds value by investigating all claims of unethical behaviour and recommending appropriate action. Provides independent oversight on matters in the Remuneration and Risk Committees’ mandates by reviewing actions through a moral lens or based on a more holistic ethical view, and taking accountability for specific areas within its mandate.   Adds value by reviewing all codes on transformation and B-BBEE and employment equity practices.


In assisting the Board in discharging its responsibilities, the Committees provide comprehensive reporting and recommendations, ensuring transparency and full disclosure. This also provides the Board with internal and external indicators that allow it to formulate relevant strategy and mitigate risk.

GOVERNANCE PHILOSOPHY AND APPROACH

The AfroCentric Group is committed to sound and robust corporate governance standards and practices, compliance with legislation, regulation and governance principles, recognising the correlation between good corporate governance and long-term sustainable performance. AfroCentric’s Board of Directors (“the Board”) adopted an integrated approach to managing the Group to ensure that the governance structure actively identifies, responds to and communicates on those material issues that impact on the ability to create value. Corporate governance is an integral element in improving efficiency as well as growth and enhancing investor relations.

AfroCentric recognises that strategy, performance, sustainability and risk are inseparable. In all activities, at all levels, the Group is committed to the highest standards of governance, while embedding a culture that values and rewards ethical standards, integrity and mutual respect.

As the stewards of public trust, the Board acts for the good of the organisation, exercising reasonable care in all decision-making without placing the organisation under undue risk. Corporate governance provides the Board with a framework that supports transparency, sustainability, fairness and ethical conduct. The Board promotes and supports high standards of corporate governance and in so doing endorses the principles of King III and the JSE Listings Requirements.

The Board remains committed to the full implementation of King III throughout the Group. The Directors of AfroCentric believe that the King III principles are entrenched in the internal controls, policies and procedures governing corporate conduct within the Group. The diagram above presents a holistic view of our governance structures and processes.

APPLICATION OF AND APPROACH OF THE KING III PRINCIPLES

The Directors confirm that the Group has, in all material respects, applied the recommendations of King III. As previously reported, where compliance with the recommendations is not adhered, the Directors adhered to the “apply or explain” principle on which King III is based. Remedial action for non-application is being addressed and continuous improvement plans will ensure that the Group strives towards full compliance of the King III principles.

  • Principle 2.16 states that the Board should elect a Chairperson who is an Independent Non-executive Director. The Board Chairperson is a Non-executive Director who is not independent. Despite this classification, the Chairperson applies independence of mind in all matters under discussion. A lead Independent Non-executive Director, Mr GL Napier, serves as liaison among Board members and ensures open and transparent Board relations in line with King III principle 2.16.3.
  • Principle 2.18 recommends that the Board should comprise a majority of Non-executive Directors and that the majority of Non-executive Directors should be independent. In line with the recommendation of King III, AfroCentric has a unitary Board structure consisting of 15 members as at the reporting date. There are three Executive Directors and twelve Non-executive Directors, of which six are independent.

    An independent legal opinion was received in July 2015 on the status of the Directors. Mr MI Sacks and Mr JM Kahn were classified as Independent Non-executive Directors. This was included in the 2015 corporate governance report. The Board terms of reference/charter and Memorandum of Incorporation (“MOI”) ensure that proper voting principles and processes are employed to enable a balance of power.
  • Principle 9.3 states that sustainability reporting should be independently assured. The external auditors PricewaterhouseCoopers Inc. provided assurance on the Group Annual Financial Statements.

A schedule detailing the Group’s application of each King III principle, as required in terms of the JSE Listings Requirements, is available on the Group’s website.

COMPANY SECRETARY

The Board selects and appoints the Group Company Secretary and recognises this person’s pivotal role in entrenching good corporate governance. All Directors have access to the advice and services of the Company Secretary. The Board has an established procedure for Directors to obtain independent professional advice at the Group’s cost. The Group Company Secretary assists Directors, Board Committees and their members in obtaining professional advice.

The Company Secretary provides dedicated support to the Board, in particular the Non-executive Directors, and is a point of reference and support for all Directors. The Company Secretary consults regularly with the Directors to ensure that they receive any necessary information. With the Board Chairperson, the Company Secretary will regularly review the Board’s and AfroCentric’s governance processes with a view to ensuring they are fit for purpose and recommend or develop initiatives to strengthen the governance of AfroCentric.

As stipulated in the JSE Listings Requirements, a detailed assessment was conducted by the Board Chairperson, who is satisfied with the competence, qualifications and experience of the Company Secretary. Ms S Lutchan does not serve as a Director of the Board and the assessment confirmed her arm’s length relationship.

BOARD OF DIRECTORS

FUNCTIONING OF THE BOARD

The Directors aim to integrate growth and efficiency with governance and ethics. The Board of Directors, guided by the mission statement, formulates strategies and policies which focus on optimising value for stakeholders, including consumers, shareholders and the society at large.

The Board exercises leadership and judgement in directing the Group to achieve sustainable growth and to act in the best interests of the business and its stakeholders. The Board is responsible to shareholders for creating and delivering sustainable shareholder value through the management of the Group’s businesses, and therefore determines the strategic objectives and policies of the Group to deliver such long-term value. In providing overall strategic direction, the Board ensures that management strikes an appropriate balance between promoting long-term growth and delivering short-term objectives.

In the Board demonstrating ethical leadership and promoting the Company’s vision, values, purpose, culture and behaviour, Directors act in a way they consider in good faith to promote the success of the Company for the benefit of the shareholders as a whole.

Formal terms of reference/charter define the roles and responsibilities of the Board. The Board adheres to the fiduciary duties and duty of skill and care codified in the Companies Act. This is reflected in the conflicts of interest policy, which also applies to Directors. Declarations of interest are confirmed at each Board and Committee meeting and are recorded in the minutes.

BOARD MEETINGS

The Board had four scheduled meetings during the year under review and two special meetings, in addition to the Annual General Meeting (“AGM”) and Board strategy session. Non-executive Directors have unfettered access to Senior Executives in seeking explanation and clarification on matters prior to or following a Board meeting. This facilitates the Board’s discussions and assist in reaching prompt and informed decisions.

Operational responsibility for the Group’s subsidiary companies has been delegated to the individual Boards, which are accountable to the main Board for the ongoing management of the businesses. Operational reports are presented to the Board, prompting interactive engagements at meetings.

BOARD COMPOSITION

AfroCentric has a unitary Board structure with three Executive Directors and twelve Non-executive Directors. Six of the Non-executive Directors were classified as being independent at the financial year-end.

The following changes were made to the Board:
  • Mr WRC Holmes retired as an Executive Director and Group Chief Financial Officer effective 1 August 2015. This was highlighted in the 2015 corporate governance report.
  • Mr JW Boonzaaier was appointed as an Executive Director and the Group Chief Financial Officer effective 1 August 2015. An ordinary resolution approving this appointment was accepted by the shareholders at the AGM held on 5 February 2016.
  • Mr WH Britz was appointed as an Executive Director effective 1 August 2015. An ordinary resolution approving this appointment was accepted by the shareholders at the AGM held on 5 February 2016.
  • Ms LL Dhlamini was appointed as an Independent Non-executive Director and a member of the Audit and Risk Committee effective 2 December 2015. An ordinary resolution approving this appointment was accepted by the shareholders at the AGM held on 5 February 2016.
  • Dr ND Munisi was appointed as a Non-executive Director effective 7 December 2015. This will be included for shareholder approval at the upcoming AGM (1 November 2016).
  • Mr D Dempers stepped down as the Group Chief Executive Officer (“CEO”) on 8 December 2015, and the Chairperson assumed an executive role until the CEO position was filled on 16 March 2016. On 2 June 2016 Mr Dempers resigned as the Executive Director to pursue other business interests.
  • Mr AV Van Buuren was appointed as an Executive Director and the Group CEO effective 16 March 2016. This will be included for shareholder approval at the upcoming AGM (1 November 2016).
  • Mr IM Kirk and Mr A Banderker were appointed as Non-executive Directors effective 15 December 2015. This will be included for shareholder approval at the upcoming AGM (1 November 2016).
  • Subsequent to the financial year end, Ms Yasmin Masithela resigned as an Independent Non-executive Director and Chairperson of the Audit and Risk Committee, effective 15 September 2016.

All Directors exercise independent judgement at Board level, which is in the interests of the Group and its stakeholders, and this was also reaffirmed during the Board assessment process. The Non-executive Directors bring with them the experience, knowledge and practices followed in other companies resulting in absorbing the best practices in the industry. The Board induction is a process to on-board new Directors in line with the Companies Act and King III. The induction is carried out by the Company Secretary and exposes the new Directors to many facets of the Group, equipping Board members to be effective and fulfil their fiduciary duties. Director training and development is an ongoing exercise that requires their participation in various programmes designed to strengthen the shortfalls observed in the Board evaluation process.

In assessing the status of the Directors, an independent legal opinion was received in July 2015. Mr MI Sacks and Mr JM Kahn are now classified as Independent Non-executive Directors. The following criteria was achieved in assessing the Independent Directors:
  • They do not have a direct or indirect interest in AfroCentric which exceeds 5% of the Group’s total number of shares in issue.
  • They have not been employed by the Group in an executive capacity, or appointed as the designated auditor or partner in the Group’s external audit firm or senior legal adviser for the preceding three financial years.
  • They have not had, within the past three years, a material business relationship with the Group.
  • They do not have a member of immediate family in an executive capacity, are not professional advisors and do not receive remuneration contingent on the performance of AfroCentric.

The roles of the Board Chairperson, Dr ATM Mokgokong, and the CEO, Mr AV Van Buuren, are separate and clearly defined. The terms of reference/charter details the division of responsibilities between the Chairperson and the CEO. This helps to ensure a balance of power and authority and to guarantee that no Director has unfettered powers.

The Non-executive Directors do not have a service contract, and all remuneration paid to Non-executive Directors for services as Directors is in terms of approval by the shareholders at the AGM.

As the Board Chairperson is not classified as independent, the Board has an appointed lead Independent Non-executive Director, Mr GL Napier. The lead Independent Director serves as a liaison among Board members to ensure open and transparent Board relations.

The table below illustrates the Directors’ attendance at meetings for the year ended 30 June 2016.

        Board  
  Number of meetings held     6  
    Scheduled
4		   Special
2		  
  Attendance        
  ATM Mokgokong – Chairperson 4   1  
  MJ Madungandaba – Deputy Chairperson 4   2  
  Independent Non-executive Directors        
  Y Masithela 4   1  
  GL Napier 4   2  
  NB Bam 4   2  
  LL Dhlamini1 2   –  
  MI Sacks 3   1  
  JM Kahn 4   1  
  Non-executive Directors        
  JG Appelgryn2 4   2  
  ND Munisi3 2   –  
  A Banderker4 2   –  
  IM Kirk4 1   –  
  Executive Directors        
  D Dempers5 3   2  
  WH Britz 4   2  
  AV Van Buuren5 2   –  
  JW Boonzaaier6 4   2  
1 LL Dhlamini was appointed as an Independent Non-executive Director and member of the Audit and Risk Committee on 2 December 2015.
2 JG Appelgryn attended one meeting in his capacity as a member of the Audit and Risk Committee. He was no longer classified as independent and therefore could not serve on this Committee effective October 2015.
3 ND Munisi was appointed as a Non-executive Director on 7 December 2015.
4 A Banderker and IM Kirk were appointed as Non-executive Directors on 15 December 2015.
5 Group Chief Executive Officer (D Dempers) stepped down as CEO on 7 December 2015 and resigned as a Board member on 2 June 2016. AV Van Buuren was appointed as the Group CEO on 16 March 2016.
6 JW Boonzaaier was appointed as the Group Chief Financial Officer on 1 August 2015.

APPOINTMENT AND RETIREMENT OF DIRECTORS

One third of the Directors are required to retire by rotation at the AGM of shareholders and may offer themselves for re-election. Being eligible for re-election, Directors offer themselves for reappointment by the Board. Directors appointed during the year are required to have their appointments ratified at the following AGM. Consequently, Mr JG Appelgryn, Mr GL Napier and Dr NB Bam will retire by rotation and offer themselves for reappointment.

Mr AV Van Buuren was appointed as an Executive Director and the Group CEO effective 16 March 2016. This appointment went through a formal process via the Nomination Committee and the Board. A SENS announcement dated 16 March 2016 was released notifying shareholders of the appointment. In line with AfroCentric’s MOI, any Board appointments made during a year under review must be confirmed by shareholders at the next AGM of shareholders, following such an appointment. Accordingly, Mr AV Van Buuren shall be included in the notice.

Executive Directors have no fixed term of appointment and retire in line with AfroCentric’s internal employment policies.

BOARD DIVERSITY

The AfroCentric Board believes that a Board made up of highly qualified Directors from diverse backgrounds, reflective of the changing demographics of the economy, promotes better governance. The diversity criteria include gender, age, ethnicity and geographic background in addition to meeting the Board’s requirements for skills and qualifications. At AfroCentric, 50% of the Directors are from previously disadvantaged groups and 25% are women. The Chairperson is a black female who believes that diversifying the Board is a step towards better governance. AfroCentric recognises that a diverse Board is able to make decisions more effectively by reducing the risk of ‘groupthink’, paying more attention to managing and controlling risks, and having a better understanding of the Group’s clients.

BOARD EVALUATION AND PERFORMANCE

Board, Committee and individual Director evaluations are undertaken annually as recommended by King III. The Board evaluation includes an evaluation of the Board, of each Board Sub-committee, of the Chairperson and each Director to review their ability to add value to the Board. This is performed through self-assessments and peer review processes. In addition, the Remuneration Committee facilitates the evaluation of executive management.

The performance review of the Board indicated that sound corporate governance is in place and is working well with executive management. The Board is informed and attentive to key issues. It continues to focus on ensuring that the profile, skills set, diversification, qualifications and individual qualities of its Executive and Non-executive Directors serve the current and future needs of the business and the ever-changing environment in which it operates.

DIRECTORS' REMUNERATION

Non-executive Directors receive a fee for membership of the Board and that of Sub-committees on which they serve. The fee structure is based on an all-inclusive retainer structure. Fees are determined by the Remuneration Committee and approved by the shareholders at the AGM. The remuneration of Executive Directors is determined by the Remuneration Committee according to AfroCentric’s policy.

BOARD COMMITTEES

The Board established and delegated specific roles and responsibilities to Sub-committees. Each Committee’s roles, responsibilities and membership are according to their Board-approved terms of reference/charter. The Directors have delegated specific responsibilities to Committees to assist the Boards of AfroCentric Investment Corporation Limited and the major subsidiary, AfroCentric Health (Pty) Ltd, in meeting their oversight responsibilities. The delegation of authority does not absolve the Board and its Directors of their fiduciary duties and responsibilities. The Directors confirm that the Committees have functioned within their charters during the financial year.

As illustrated, the combined Social and Ethics Committee and the Investment Committee operate at both the AfroCentric Group and AfroCentric Health subsidiary levels. ACT Healthcare Assets (part of the AfroCentric Group) has a 100% shareholding in AfroCentric Health following the Scheme of Arrangement process that was finalised prior to year end. Accordingly, AfroCentric Health is no longer a public company and has been converted to a private company. The AHL Risk Committee and Transformation Committee do not operate at the AfroCentric Group level. The Board relies on the Sub-committees of AfroCentric Health and entrusts them to function and operate as intended while updating the Board as to any material matters.

AUDIT AND RISK COMMITTEE

The main purpose of the Audit and Risk Committee is to assist the Board in ensuring that management has an effective risk management process that identifies and monitors the key risks facing the Group in an integrated and timely manner.

As at the financial year-end the Audit and Risk Committee comprised of three Independent Non-executive Directors, with Executive Directors as standing invitees to the Committee meetings. The Chairperson of the Board is not the Chairperson of the Audit and Risk Committee. The internal and external auditors have unrestricted access to the Chairperson of the Audit and Risk Committee.

Subsequent to the financial year end, Ms Y Masithela resigned as an Independent Non-executive Director and Chairperson of the Audit and Risk Committee, effective
15 September 2016. The resignation resulted in the minimum constitution of the Audit and Risk Committee not being met. This is in breach of the Companies Act and JSE Listings Requirements. In order to comply with the Companies Act, the Board appointed Mr A Banderker as a member of the Audit and Risk Committee. Section 94(4) of the Act has therefore been complied with.

The full report of the Audit and Risk Committee is outlined in the 2016 Group Annual Financial Statements (supplementary information).

Three meetings were held in the year under review.

Apart from the statutory duties of the Audit and Risk Committee as set out in the Companies Act, provisions of the JSE Listings Requirements and King III principles, the duties of the Committee incorporated in the terms of reference/charter also include the following:
  • Examine and review the Group’s Annual Financial Statements and report on interim and final results, the accompanying message to stakeholders and any other announcements on the Group’s results or other financial information to be made public
  • Oversee co-operation between internal and external auditors and serve as a link between the Board and these functions
  • Oversee the external audit function
  • Review and confirm the adequacy of insurance cover
  • Monitor processes and procedures to deal with and review the disclosure of information to clients
  • Formulate criteria for the appointment of a Risk Manager and terms of reference/charter for the Risk Management functions
  • Review the risk management reports regarding the adequacy and overall effectiveness of the Company’s risk management function and its implementation by management. Review risk in its widest sense including but not limited to: technology risk, disaster recovery plan, operational risk, prudential risk, reputational risk, competitive risk, legal risk, compliance and control risk, concentration of risk across a portfolio dimensions, asset valuation risk
  • Approve the internal audit plan and qualifications of the internal auditors
  • Evaluate the qualifications and independence of the external auditor
  • Approve external audit fees
  • Ensure effective internal financial controls are in place
  • Review the integrity of financial risk control systems and policies
  • During the year under review the Committee satisfied itself that the Finance Director possesses the appropriate level of expertise and experience to fulfil his responsibilities as Group Chief Financial Officer to the Board and the Company

The Committee and the Board are satisfied that there is adequate segregation between the external and internal audit functions, and that the independence of the internal and external auditors is not in any way impaired or compromised.

      Audit
and Risk
Committee		  
  Number of meetings held   3  
  Attendance      
  Independent Non-executive Directors      
  Y Masithela – Chairperson   3  
  GL Napier   3  
  LL Dhlamini1   2  
  Non-executive Directors      
  JG Appelgryn2   1  
1 LL Dhlamini was appointed as an Independent Non-executive Director and member of the Audit and Risk Committee on 2 December 2015.
2 JG Appelgryn attended one meeting in his capacity as a member of the Audit and Risk Committee. He was no longer classified as independent and therefore could not serve on this Committee effective October 2015.

REMUNERATION COMMITTEE

The Committee’s mandate is to ensure that remuneration arrangements support the strategic aims of the business and enable the recruitment, motivation and retention of Senior Executives while complying with regulatory and governance principles. It has oversight regarding new Board appointments. There are three members in the Committee, two of whom are Independent Non-executive Directors and one Non-executive Director. In terms of the King III requirements, the composition of the Committee is required to comprise a majority of Independent Non-executive Directors. As at 30 June 2016, the Group complied with this requirement.

Two meetings were held in the year under review.

The Committee has access to independent surveys and consultants. The Chairperson reports to the main Board on the activities and recommendations made by the Committee. The duties and responsibilities as contained in the terms of reference/charter include:
  • Agree and develop the Group’s general policy on executive and senior management and employee remuneration. This general policy will be referred to shareholders in order for such shareholders to pass a non-binding advisory vote on AfroCentric’s annual remuneration policy
  • Determine the specific remuneration packages for Executive Directors of the Company
  • Identify the criteria necessary to measure the performance of Executive Directors in discharging their functions and responsibilities
  • Review (at least annually) the terms and conditions of Executive Directors’ service agreements, taking into consideration information from comparable companies, where relevant
      Remuneration
Committee		  
  Number of meetings held   2  
  Attendance      
  MJ Madungandaba – Chairperson   2  
  Independent Non-executive Directors      
  MI Sacks   2  
  JM Kahn   2  

 

NOMINATION COMMITTEE

The Committee is responsible for providing recommendations to the Board on all new Board and Committee appointments. A formal process of reviewing the balance and effectiveness of the Board and its Committees, identifying the skills needed and the individuals to provide such skills in a fair and efficient manner, is required of the Committee to ensure the Board and its Committees remain effective and focused. This includes a regular review of the composition of the Board Committees and includes assisting the Chairperson with the annual evaluation of Board performance.

The Committee is responsible for identifying appropriate Board candidates and evaluating them against the specific disciplines and areas of expertise required.

Two meetings were held in the year under review.

In terms of the King III requirements, the Committee is required to comprise a majority of Independent Non-Executive Directors. As at 30 June 2016, the Group did not comply with this requirement as the membership of this Committee comprises one Independent Non-executive Director and three Non-executive Directors. A review of the constitution of this Committee is not necessary at present as the members fulfil their roles independently when carrying out their Committee duties.

The Chairperson of the Committee is the Chairperson of the Board and reports to the ACT Board on the activities and recommendations made by the Committee. The duties and responsibilities as contained in the terms of reference include:
  • Formulate and adopt a clear, transparent process for the selection, nomination and appointment of Directors to the Board
  • Provide recommendations to the Board on the appointment of new Executive and Non-executive Directors, including providing recommendations on the composition of the Board and the balance between Executive and Non-executive Directors appointed to the Board
  • Ensure that succession plans are in place, particularly for the Chairperson and CEO positions
  • Liaise with the Board in relation to the preparation of the Committee’s report to shareholders, as required
      Nomination
Committee		  
  Number of meetings held   2  
  Attendance      
  ATM Mokgokong – Chairperson   2  
  Non-executive Directors      
  MJ Madungandaba   1  
  A Banderker1   2  
  Independent Non-executive Director      
  JM Kahn   1  
1 A Banderker was appointed as Non-executive Directors on 15 December 2015.  

Combined Investment Committee

During the year under review, the Investment Committee comprised four members, two Non-executive Directors and two Executive Directors. The constitution of this Committee is under review to align to best practice. The Investment Committee meets at least twice a year and additional meetings are held when required. During the year under review, the Committee held seven meetings.

The Committee oversees the approval processes for investments. These are designed to ensure alignment with the Group’s agreed strategies and values. Risks are identified and evaluated, investments are fully optimised to produce the maximum shareholder value within an acceptable risk framework and appropriate risk management strategies are pursued. The duties of the Investment Committee include:

  • Considering commitments, acquisitions or disposals by the Group
  • Considering initial investments in the Group
  • Considering any other investment over R5 million – smaller investments may be tabled at the Committee
  • Performing such investment-related functions as may be delegated by the Board from time to time
  • Considering the viability of the capital project and/or acquisition and/or disposal and the effect it may have on the Group’s cash flow, and whether it will align with the Group’s overall strategy
  • Ensuring due diligence procedures are adhered to when acquiring or disposing of assets
    Investment
Committee		  
  Number of meetings held 7  
  Attendance    
  MJ Madungandaba – Chairperson 7  
  Non-executive Directors    
  A Banderker 3  
  Executive Directors    
  D Dempers1 7  
  WH Britz 5  
  AV Van Buuren1 7  
  JW Boonzaaier2 6  
 
1. Group Chief Executive Officer (D Dempers stepped down as CEO on 7 December 2015 and resigned as a Board member on 2 June 2016. AV Van Buuren was appointed as the Group CEO on 16 March 2016.
2. JW Boonzaaier was appointed as the Group Chief Financial Officer on 1 August 2015.
 

Combined Social and Ethics Committee

The Social and Ethics Committee is constituted as a statutory committee for purposes as contained in Section 72 of the Companies Act. The Committee is governed by a terms of reference/charter and monitors Group performance in terms of defined social and ethics performance indicators that were formulated with reference to Regulation 43(5) of the Companies Act. This is further supported by a detailed work plan that guides the Committee on its mandate and responsibilities.

The Committee comprised of four Independent Non-executive Directors. The Chairperson of the Committee submits a report to the Board on its initiatives and mandate.

Three meetings were held in the year under review.

In response to the requirements of the Companies Act, the performance in the following areas was reviewed:
  • Group policies (ethics, whistle-blowing, anti-corruption and procurement)
  • Employment equity
  • Socio-economic development
  • Environmental impact
  • B-BBEE
  • Review of disclosure of information to clients
      Social and
Ethics
Committee		  
  Number of meetings held   3  
  Attendance      
  Independent Non-executive Directors      
  GL Napier – Chairperson   3  
  M Mashigo – Co Chairperson (Independent Non-executive Director AHL)   3  
  Y Masithela   2  
  NB Bam   3  

Transformation Committee

The Transformation Committee functions only at the AfroCentric Health level as this is where the matters of transformation and B-BBEE are required for the operating activities of the Group. The Committee is responsible for driving transformation and B-BBEE compliance across the Group.

The Committee comprises of fifteen members. Regular meetings were held in the year under review.

The duties of the Transformation Committee include:
  • Monitoring and reporting on performance against the B-BBEE scorecard
  • Identifying any items that are not aligned to the Group’s Transformation strategy, highlighting the cause and agreeing on remedial action plans
  • Measuring performance against key competitors
  • Reporting on implemented initiatives, projects and their progress and whether the initiatives assist in achieving transformation objectives
CONFLICTS OF INTEREST

Directors are required to declare their personal financial interests, and those of related persons, annually, in terms of the Companies Act and the MOI. Declaration of interests is a standing agenda item on all Board and Committees (including those of subsidiary Boards). During the year under review, a policy was developed to address any potential conflicts of interest. Based on these declarations, Directors with material interests in any transactions with the Group during the financial period are disclosed in note 33 of the Group Annual Financial Statements and shareholding as per the Shareholder Analysis of the Group Annual Financial Statements (supplementary information).

DEALINGS IN SECURITIES

Directors and officers are prohibited from dealing directly or indirectly in AfroCentric’s ordinary shares on the basis of unpublished price-sensitive information regarding its business or affairs. Similarly, no Director or officer may trade in shares of the Company during a closed period, as determined by the Board according to JSE Listings Requirements. The Group’s closed periods are between the last day of the reporting period and the publication of the results, and during those periods when the Group trades under a caution. The Group Company Secretary regularly disseminates written notice to all Directors and executive management throughout the Group, highlighting the provisions of the Financial Markets Act and JSE Listings Requirements and informing them that dealing in AfroCentric shares during certain restricted periods may not be undertaken. The Board reviews its current share dealing policy and updates the policy to improve processes. This was carried out during the year under review.

During the year under review, the JSE was informed of the following non-compliance in respect of Directors’ dealings:
  • Mr TM Rametse (Executive Director: Medscheme Holdings being a major subsidiary of the Company) had directly (in his own name) traded in AfroCentric shares (sale) without obtaining the necessary approval
  • Mr AV Van Buuren (CEO: AfroCentric Health (Pty) Ltd being a major subsidiary of the Group) and Mr WH Britz had indirectly (both representing WAD Holdings (Pty) Ltd) traded in AfroCentric shares (purchase). The required broker’s notes were not provided to AfroCentric timeously and hence a late SENS announcement was released

Consequently, the JSE imposed private sanctions on the above members via formal communication to the individuals. AfroCentric made a commitment to the JSE to review and strengthen its internal controls and processes relating to trading in AfroCentric’s securities. An information and share dealings policy was drafted and approved by the Board on
29 June 2016. Controls are in place and the Board was inducted on the JSE rules in respect of share dealings. Constant updates are provided to the Board via the Company Secretary.

INTERNAL CONTROLS

Organisational policies, procedures, structures and approval frameworks provide direction, accountability and segregation of responsibilities and contain self-monitoring mechanisms. Operational and executive management closely monitor the controls and actions taken to correct weaknesses as they are identified. The Head of Group Finance reports directly to the Group Chief Financial Officer, who is responsible for the overall financial control and reporting.

Standards of disclosure increased significantly and internal governance structures and roles were reviewed and improved, where necessary, to reflect best practices. This occurred at Board and management levels. The internal audit function is governed by an internal audit charter which is approved by the Audit and Risk Committee and is reviewed annually.

INTERNAL AUDIT

AfroCentric Internal Audit is an independent function governed by an internal audit charter which is approved by the Audit and Risk Committee and is reviewed annually. The Internal Audit Charter defines the role, organisational status authority, responsibilities and scope of the Internal Audit Activity (“IAA”). It also includes the principles underlying the realisation of the objectives of the IAA and the translation thereof into operational activities. The General Manager: Internal Audit reports at each Audit and Risk Committee meeting and has a direct reporting line to the Chairperson of the Audit and Risk Committee. The internal audit function operates independently of executive management and is not authorised to perform any operational duties in the Group. For administrative purposes, the General Manager: Internal Audit reports to the Group Chief Executive Officer. The internal audit team collectively possesses the knowledge, skills, experience, tenure and other competencies needed to fulfil its mandate in an effective and competent manner. Where specific specialist skills or additional resources are required, these are obtained from third parties.

The vision of Internal Audit is to add value on a proactive, objective and independent basis and assist with the achievement of the Group’s business strategy and objectives while upholding the core values of mutual respect, accountability, empowerment, integrity, innovation, accessibility, commitment, efficiency, proactivity and professionalism. According to its core values, AfroCentric’s internal audit endeavours to comply with the highest professional standards of integrity, sound practice and transparency to build trust and maintain the interests of client schemes and shareholders at the forefront of our corporate agenda.

Internal Audit assists AfroCentric to accomplish its strategic objectives by bringing a systematic, disciplined approach to evaluating and improving the effectiveness of risk management, control, and governance processes. This is achieved by managing the significant risk exposures and control issues, corporate governance issues and other matters. These detailed reports of specific results and their action plans are available on request from the Audit and Risk Committee. Detailed reports on all audit projects are distributed to Executive management. Management action plans to audit findings are communicated in detailed form.

The Institute of Internal Auditors (IIA) standards require that an external quality assessment be conducted on the Internal Audit Activity of an entity at least every five years. Afrocentric Internal audit has been subjected to two Independent external quality assessment reviews in the year 2011 and recently in August 2016. The overall rating as assessed by the IIA was “Generally Conforms” in both years and thus the function is entitled to use the “in accordance with the Standards” statement in their internal audit reports. IAA aims to meet and exceed the IIA Standards and Code of Ethics.

INFORMATION AND SECURITY GOVERNANCE

IT Governance is defined in King III as the “effective and efficient management of IT resources to facilitate the achievement of corporate objectives”. It exists to inform and align decision-making for IT planning, policy and operations to meet business objectives and to ensure that risks are managed appropriately.

The AfroCentric Group applies the principles of King III in its governance frameworks, as far as it is appropriate, and also has regard to the requirements of Cobit, ISO 27001, ITIL and ISO 38500:2015 in the governance of IT.

The Group adopted a formal IT Governance Framework, which aims to provide standardisation of IT practices across the organisation and formalise the good governance requirements stipulated in Chapter 5 of King III.

The main objectives of IT Governance are to:
  • Enable the strategic and tactical alignment of IT and business
  • Understand the value and impact of IT investments
  • Identify opportunities for improved IT utilisation
  • Support visible and transparent decision-making
  • Establish and sustain effective IT policies
  • Establish performance measurements
  • Identify and mitigate risks
  • Satisfy regulatory and formal compliance requirements
IT Governance is overseen by the IT Steering Committee, comprising of representatives from Business and IT, and ultimately reports to the Audit and Risk Committees of the Board. The following areas are regularly reported on to the IT Steering Committee:
  • IT security
  • IT and business applications
  • IT architecture
  • Computer operations and helpdesk
  • Network infrastructure
  • Project management office
  • Disaster recovery and business continuity
  • IT procurement and IT asset management
  • Change management
  • IT risks

GOVERNANCE OUTLOOK

Failures in corporate governance proved to be a real threat to the sustainability of many organisations globally. The standards of corporate governance are changing rapidly in response to changing events in a global economy that is constantly evolving. AfroCentric aims to go beyond achieving minimum compliance and strives to ensure a sustainable and successful organisation. AfroCentric would like to build a better future not only for its shareholders, but for all stakeholders, i.e. employees, customers, suppliers, community, industry and business partners.

Having effective governance processes, built on the core values as recommended by King III, will provide AfroCentric with a competitive advantage that also attracts and retains talent and generates positive reaction in the marketplace.

There is much to be done to achieve this goal, and more emphasis needs to be placed on:
  • Improvement on independence standards by instilling Directors’ values in line with their fiduciary requirements. A review of service providers such as consultants, advisors, and major suppliers needs to be carried out to resolve potential conflicts of interest before they arise
  • Culture, whistle-blowing, anti-corruption – the Board should pay special attention to this area as it has the potential to contribute to ethical practices throughout the organisation
  • Strengthening of IT governance to ensure that IT risks is appropriately mitigated