Corporate Governance Review

Our aspiration of global leadership in sustainable, affordable and quality healthcare, and our ability to fulfil our stakeholder promises, require the highest standards of corporate governance.

AfroCentric aspires to become a leading responsible and diversified global healthcare investment company, and ensure our clients and other stakeholders benefit from our growth. AfroCentric's Board adopts an integrated approach to managing the Group to ensure the governance structure actively identifies, responds to and communicates material issues impacting its ability to create value. Corporate governance provides the board with a framework that supports transparency, sustainability, fairness and ethical conduct. One of the key principles in King IV is establishing a unitary board which reflects a balance of power, with no individuals yielding unfettered power on the Board. AfroCentric responded by appointing a Lead Independent Director and four Independent Non-executive Directors. We conclude that corporate governance is integral to our efficiency, growth and investor relations.

The Board believes it adhered to the Board Charter and the Group complied with the JSE Listings Requirements, Companies Act and King IV. The Board believes it ethically executed its responsibilities and reported on the outcomes of its direction in line with King IV.

The Board's application of King IV can be viewed on https://www.afrocentric-online.co.za/reports/afrocentric-ar2020/pdf/board-charter.pdf

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. The Board applies and leverages sound corporate governance in improving performance by:

• Enhancing accountability at all levels
• Determining how governance requirements, particularly King IV, can be implemented to add organisational value
• Guiding decision-making, reinforcing material disclosures and refining risk processes
• Ensuring certain powers are delegated to management for operational efficiency
• Implementing integrated reporting of all business aspects
• Embedding risk controls in day-to-day processes and decision-making
• Effectively identifying, understanding and managing stakeholders and their expectations to improve our ability to reduce risks

Company Secretary

Billy Mokale is the Group Company Secretary. The Board is satisfied that he possesses the requisite qualifications and experience to perform his duties since he is the repository of governance knowledge, advice and assurance for corporate integrity. The Group Company Secretary is independent of the Board and is not a director of the Group. He is responsible for the efficient administration of the Company, particularly for ensuring compliance with statutory and regulatory requirements and ensuring decisions of the Board are implemented.

All directors have access to the Group Company Secretary, and he continues providing dedicated support to the Board and its sub-committees on all matters of governance, risk, compliance and legal. Along with the Chairman, the Group Company Secretary regularly reviews the Board and AfroCentric's governance processes to ensure they are fit for purpose. He also recommends or develops initiatives to strengthen AfroCentric's governance.

The Group Company Secretary is the focal point of directors and employees' share trading, JSE Listings Requirements, and notification of open and closed periods.

The Board of Directors

The Board's powers and responsibilities are defined in the Board Charter, which is annually reviewed and approved. The Board Charter aligns with the JSE Listings Requirements, the Companies Act and King IV and can be viewed on https://www.afrocentric-online.co.za/reports/afrocentric-ar2020/pdf/king-iv-application-register.pdf

The Board's leadership and judgement direct the Group to sustainable growth and acting in the best interests of the business and its stakeholders. The Board is responsible to shareholders for creating and delivering sustainable shareholder value by managing the Group's businesses. Therefore, it determines the strategic objectives and policies required to deliver such long-term value. In providing overall strategic direction, the Board ensures management strikes an appropriate balance between long-term growth and short-term objectives.

The Board adheres to the Companies Act stipulations on skill, care and fiduciary duties. This is reflected in the conflicts of interest policy, which also applies to directors. In addition to annual declarations and the schedule 13 declarations to the JSE on new appointments, declarations of interest against the agenda items or contracts are confirmed at each Board and committee meeting and are recorded in the minutes.

Board and committee meetings

During the year, the Board had five scheduled meetings in addition to the AGM and Board strategy session. Prior to or following a Board meeting, Non-executive Directors have the unrestricted right to request any senior executive to clarify or explain any matter. This facilitates the Board's discussions and assists in reaching prompt and informed decisions.

Operational responsibility for the Group's subsidiary companies is delegated to the individual boards, which are accountable to the main Board for managing the businesses. Operational reports are presented to the Board, prompting interactive engagements at meetings.

	Meeting attendance
Member	Board	Audit and Risk	ICT Steering	Investment	Social and Ethics	Remuneration	Nomination
Dr Anna Mokgokong Chairman and Non-executive Director	4/4*						3/3*
Joe Madungandaba Deputy Chairman and Non-executive Director	4/4			6/6*		4/4*	3/3
Dr Nkateko Munisi Non-executive Director	4/4			6/6	4/4*
Ian Kirk Non-executive Director	0/1
Ahmed Banderker Group CEO and Executive Director	4/4	4/5	3/3	6/6	3/4	4/4	3/3
Hannes Boonzaaier Group CFO and Executive Director	4/4	5/5	3/3	6/6	4/4
Willem Britz Executive Director	4/4			4/6		1/4
Lindani Dhlamini Independent Non-executive Director	3/3	4/4
Sello Mmakau Group CIO and Executive Director	4/4	5/5	3/3*
Grathel Motau Independent Non-executive Director	1/1	3/4		3/5
Bruno Fernandes Independent Non-executive Director	4/4	5/5*		6/6
Professor Shirley Zinn Independent Non-executive Director	4/4	1/1			4/4	4/4
Thinus Alsworth-Elvey Non-executive Director	3/4	3/5		4/6		4/4
Gary Allen Non-executive Director	4/4
Alice le Roux Independent Non-executive Director	1/1	1/1
Mmaboshadi Chauke Independent Non-executive Director	1/1

*	Committee Chairperson.

Board composition

AfroCentric has a unitary Board structure with four Executive Directors, five Non-executive Directors and four Independent Non-executive Directors. The Board's members have appropriate industry knowledge and qualifications, and sufficiently diverse experience to effectively discharge their duties.

The Non-executive Chairman of the Board is Dr Anna Mokgokong. The Chairman is not classified as independent and, to strengthen good corporate governance as recommended by King IV, Bruno Fernandes is the appointed Lead Independent Director. The roles and responsibilities of the Chairman and the CEO are separate.

Appointment and retirement of directors

One-third of 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. Directors appointed during the year are required to have their appointments ratified at the following AGM. Alice le Roux, Mmaboshadi Chauke and Jurie Strydom were appointed directors during the year and their appointments will be submitted for ratification at the AGM scheduled for 10 November 2020. Ms le Roux and Ms Chauke replaced Ms Motau and Ms Dhlamini as both Independent Non-executive Directors and members of the Audit and Risk Committee. Jurie Strydom replaced Thinus Alsworth-Elvey as a Non-executive Director.

Board effectiveness

Board evaluations are critical structural processes for assessing how effective and efficient the Board and its committees are. In line with King IV, the Board and sub- committees' performance was assessed and reported to the Nomination Committee as part of its adjudication process on effective performance of individual Board members. The Group Company Secretary, in consultation with the Chairman, is responsible for implementing any actions emanating from this evaluation to improve the Board's effectiveness. The Board is satisfied with the overall execution of its oversight role and there is a joint effort to ensure the Board adheres to its strategic directive.

Directors' remuneration

Non-executive Directors do not have a service contract, and all their remuneration for services as directors is in terms of approval by the shareholders at the AGM. Board remuneration is based on a retainer determined by the Remuneration Committee.

Executive Directors' remuneration is determined by the Remuneration Committee according to AfroCentric's policy. AfroCentric's executive remuneration is based on the principle of 'pay for performance' where members are remunerated in line with the success criteria measured against the Group balance scorecard. Our remuneration policy represents good corporate governance as outlined in King IV.

Further information on directors' remuneration appears on of the Group AFS (supplementary information).

Board committees and attendance

The Board established and delegated specific roles and responsibilities to sub-committees. Each committee's roles, responsibilities and membership follow their Board approved charter. The directors have delegated specific responsibilities to committees to assist the boards of AfroCentric Investment Corporation Limited and the major subsidiary, AHL, in meeting their oversight responsibilities. However, the delegation of authority does not absolve the Board or its directors of their fiduciary responsibilities. The directors confirm that the committees have functioned within their charters during the financial year. The Board and committee charters embrace the principles of King IV.

The AHL Executive Enterprise Risk Committee and Transformation Committee do not operate at Group level. The Board relies on the sub-committees of AHL and trusts them to function and operate as intended and update the Board on any material matters.

The Board is satisfied that the sub-committees fulfilled their responsibilities in accordance with their respective mandates for the reporting period.

Composition

	Member	Number of meetings	Meeting attendance (%)
	Bruno Fernandes Independent Non-executive Director (Chairperson)	5/5	100
	Lindani Dhlamini* Independent Non-executive Director (Former Chairperson)	4/4	100
	Grathel Motau* Independent Non-executive Director	3/4	75
	Shirley Zinn Independent Non-executive Director	1/1	100
	Ahmed Banderker** Group CEO and Executive Director	4/5	80
	Alice le Roux Independent Non-executive Director	1/1	100
	Other invitees
	Hannes Boonzaaier Group CFO and Executive Director	5/5	100
	Sello Mmakau Group CIO and Executive Director	5/5	100
	Thinus Alsworth-Elvey* Non-executive Director	3/5	60

*	Grathel Motau and Lindani Dhlamini resigned on 7 November 2019 and 31 March 2020 respectively. Thinus Alsworth-Elvey resigned 31 July 2020.
**	Ahmed Banderker attends the committee in his ex-officio capacity as the Group CEO.

Independence of committee

100%

Composition

	Member	Number of meetings	Meeting attendance (%)
	Joe Madungandaba Non-executive Director (Chairperson)	6/6	100
	Dr Nkateko Munisi Non-executive Director	6/6	100
	Grathel Motau* Independent Non-executive Director	3/5	60
	Bruno Fernandes Independent Non-executive Director	6/6	100
	Ahmed Banderker Group CEO and Executive Director	6/6	100
	Other invitees
	Hannes Boonzaaier Group CFO and Executive Director	6/6	100
	Willem Britz Executive Director	4/6	67

*	Grathel Motau resigned on 7 November 2019.

Independence of committee

100%

Composition

	Member	Number of meetings	Meeting attendance (%)
	Sello Mmakau Group CIO and Executive Director (Chairperson)	3/3	100
	Ahmed Banderker Group CEO and Executive Director	3/3	100
	Hannes Boonzaaier Group CFO and Executive Director	3/3	100

Independence of committee

0% The ICT Steering Committee is an internal management committee.

Composition

	Member	Number of meetings	Meeting attendance (%)
	Dr Anna Mokgokong Non-executive Director (Chairman)	3/3	100
	Ahmed Banderker Group CEO and Executive Director	3/3	100
	Joe Madungandaba Non-executive Director	3/3	100

Independence of committee

100%

Composition

	Member	Number of meetings	Meeting attendance (%)
	Joe Madungandaba Non-executive Director (Chairperson)	4/4	100
	Shirley Zinn Independent Non-executive Director	4/4	100
	Ahmed Banderker Group CEO and Executive Director	4/4	100
	Thinus Alsworth-Elvey Non-executive Director	4/4	100
	Ronnie Wa-Mundalamo Independent member	4/4	100
	Other invitees
	Willem Britz Executive Director	1/4	25

Independence of committee

100%

Composition

	Member	Number of meetings	Meeting attendance (%)
	Dr Nkateko Munisi Non-executive Director (Chairperson)	4/4	100
	Shirley Zinn Independent Non-executive Director	4/4	100
	Ahmed Banderker Group CEO and Executive Director	3/4	75
	Other invitees
	Hannes Boonzaaier Group CFO and Executive Director	4/4	100

Independence of committee

100%

Governance policies, procedures and processes

Compliance

During the year, we focused on the following material regulatory developments impacting our business:

• Group compliance universe: The legislative compliance universe was reviewed, monitored and reported on. A key framework that facilitates a compliance environment is our approved compliance universe containing applicable legislation. The legislation is categorised according to significance, namely core/primary, secondary and topical.
• Protection of Personal Information (PoPI) Act: With the impending effective date on application of PoPI, we complied with readiness on legislative requirements and the General Data Protection Regulation (GDPR). To effectively manage this project, AfroCentric Group adopted a three-step approach to track progress. Firstly, discover as much information as possible; secondly, conduct workshops or interviews to assess the AfroCentric Group's compliance with PoPI; and thirdly, document findings by drafting and delivering responses on the gap analysis report, including actions required to ensure compliance.

Conflicts of interest

Declaration of interest

The Group has policies to manage potential conflicts of interest. Directors sign a declaration stating that they are unaware of any undeclared conflicts of interest due to their interest in, or association with, any other company. In addition, directors disclose interests in contracts and related party transactions for the Board to assess whether such transactions are done on arm's length commercial terms.

In such instances, the directors in question will recuse themselves from deliberations.

All information acquired by directors while performing their duties, which is not disclosed publicly, is treated as confidential. Directors may not use, or appear to use, such information for personal advantage or for the advantage of third parties.

Dealings in shares

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 the Company's shares 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 cautionary note. 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's shares during certain restricted periods may not be undertaken. The Board reviews its current share policy and updates the policy to improve processes. This was carried out during the year under review.

During the year under review, there were no compliance concerns in respect of directors' dealings. An information and share dealings policy exists. Controls are in place and the Board was inducted on the JSE rules in respect of share dealings. Regular updates are provided to the Board via the Group Company Secretary.

Enterprise risk management

Our robust approach to risk management supports the implementation of our strategy and enables us to identify opportunities.

AfroCentric's risk management is overseen by the Board and its sub-committees and managed by governance structures throughout the Group. These structures are chaired by senior members of the management team and are accountable to Board sub-committees. Risk management systems are effectively governed and managed by the Group risk management function.

We strive to mitigate risks and identify opportunities with our robust risk management processes.

Enterprise Risk Management framework

AfroCentric's Enterprise Risk Management (ERM) framework is aligned with King IV principles, the Committee of Sponsoring Organisations of the Treadway Commission's (COSO's) ERM framework, and the International Organization for Standardization (ISO) 31000:2018 risk management framework. The ERM framework provides a structured and systematic enterprise-wide approach to risks within the Group.

We gain insight into our risk landscape by considering factors in our external and internal environments which could positively or negatively influence our strategic objectives.

Reporting, communication and consultation		Identification Strategic risks are identified at Group level and cascaded down to business units which identify operational risk through their respective risk registers.IT, cybersecurity, economic/growth, people, regulatory and compliance, financial, legal, and internal fraud and external fraud risks and opportunities are identified.		Monitoring and reviewing risks
The Board and senior management receive regular reports on the risk profile.				We consistently monitor ERM and regularly conduct comprehensive risk assessments.
Training promotes risk management across the Group.
		Analysis The Group assesses the likelihood of the risks in the absence of controls and provides a residual risk rating. The Group has Board approved risk quantification levels to measure the potential impact of risks.
		Evaluation The risk management system is regularly assessed by the Group which implements internal controls for each risk. The BarnOwl risk management system is used to evaluate each control.
		Categorising residual risks Each residual risk is categorised as high, medium or low impact.
		Formulation of risk mitigation strategies The Board approves the risk management policy and framework that define the Group's risk appetite and tolerance levels.

Risk appetite and tolerance

A detailed Board approved risk appetite statement for individual risk categories applies to all Group entities. The Group did not experience any material breaches, or undue, unexpected or unusual risks beyond risk appetite levels in 2020.

Combined assurance

Our combined assurance framework is supported by a three lines of defence model that specifies and delegates accountability for managing, overseeing and independently assuring risks across the Group. The duties of each line of defence are described below.

The combined assurance framework provides principles and guidelines used in implementing combined assurance across the Group and continues to evolve as this process is embedded and matures.

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 CFO, who is responsible for the overall financial control and reporting.

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

Internal audit

AfroCentric's internal audit is an independent function governed by an internal audit charter, approved by the Audit and Risk Committee and annually reviewed. 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 IAA's objectives and the translation thereof into operational activities. The Chief Audit Executive reports at each Audit and Risk Committee meeting and has a direct reporting line to its Chairperson. Internal audit operates independently of executive management and is not authorised to perform any operational duties in the Group. For administrative purposes, the Chief Audit Executive reports to the Group CFO.

The internal audit team is fully capacitated with 25 professionals who collectively possess the knowledge, skills, experience, tenure and other competencies to effectively and competently fulfil its mandate. Specific specialist skills and additional resources are obtained from third parties.

The vision of internal audit is to add proactive, objective and independent value and assist with 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 and some of its clients 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.

The Institute of Internal Auditors' (IIA) standards require an external quality assessment on an entity's IAA at least every five years. AfroCentric's internal audit was subjected to an independent external quality assessment in August 2019. The overall rating as assessed by the IIA was 'generally conforms'. This is consistent with the previous rating achieved in August 2016. The internal audit function aims to meet and exceed the IIA standards and Code of Ethics.

Information and security governance

IT governance is defined in King IV 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 risks are managed appropriately.

The AfroCentric Group applies the principles of King IV in its governance frameworks, as far as it is appropriate, and regards the requirements of Cobit, ISO 27001, ITIL and ISO 38500:2015 in IT governance. The Group adopted a formal IT governance framework to standardise IT practices across the organisation and formalise the good governance requirements stipulated in King IV.

In addition to applying due governance across our IT areas, external auditors did an extensive review of our ICT controls (ISAE3402) within our governance framework; the report of which is shared with our clients as further assurance.