Remuneration report

BACKGROUND STATEMENT

Remuneration Committee Chairperson's report

On behalf of the Remuneration Committee (the committee), I am pleased to present AfroCentric's remuneration report for the financial year ended June 2024. This report supplements the information provided in the corporate governance report. In addition, this report highlights the committee's focus areas for the year, outlines relevant policies and practices, and addresses the Group's performance and corresponding remuneration outcomes.

The past year in focus

The 2023/24 year in AfroCentric has been significantly shaped by the acquisition of a controlling shareholding in the Company by Sanlam at the end of May 2023.

This development has brought both opportunities and challenges to the Human Capital function due to the agreement and intent to drive alignment and integration on talent and reward policies and practices. This has been approached in a planned and systematic manner, with careful consideration given to the financial costs of policy integration and due recognition of the benefits arising from aligning talent and employee development practices. The AfroCentric Human Capital function is relatively mature, with established policies for many facets of the talent management cycle. Thus, the alignment has often been a two-way street of sharing practices and amending them when in the interests of the Company, staff and shareholders.

The committee has, amongst others, considered and supported the following key talent management activities:

• Alignment with the Sanlam talent review process. Their methodology complemented the existing AfroCentric framework, and the revised process enables key talent from both companies to be visible to the other, thereby creating an expanded talent pool and enhanced talent mobility for both organisations
• The adoption of the Sanlam annual performance cycle and rating scale is due to be implemented in January 2025. This will be invaluable when executing strategies, activities and practices designed to drive growth in both companies
• Sanlam and AfroCentric are both reviewing and refreshing their approach to employee assessment practices, and there has been positive sharing of frameworks and ideas. This will create a common language between the two organisations, again assisting with the talent mobility process
• The AfroCentric organisational design processes, including grading and job evaluation, are gradually being aligned with those in Sanlam. Sanlam has best-in-class practices that will serve AfroCentric well
• During the year, there has been a significant focus on the utilisation of engagement and diversity and inclusion surveys, both recommended and utilised by Sanlam. Results have been shared with the committee, and we have been encouraged by how employees have engaged with the surveys and the action plans designed to drive forward the high-performance and caring culture unique to AfroCentric
• Alignment concerning remuneration governance has been another key area of focus for the committee, which I touch upon in more detail later and on which the committee has spent considerable time

Over and above activities concerned with Sanlam, there have been several reward, talent and diversity initiatives to which the committee has applied its mind:

• Regarding the long-term incentive (LTI) scheme, AfroCentric's new LTI plan for the Group was introduced during 2022/2023. In the period under review, the committee awarded 12 995 532 shares with performance conditions for the November 2023 award cycle
• The annual salary increase process within AfroCentric includes wage negotiations with the two recognised unions in the Group: NEHAWU and SALU. Increases awarded to employees will be in place for July 2024 to March 2025 (nine months), after which period the Group will align to Sanlam's salary increase cycle from 1 April to 31 March
• The committee evaluated the overall performance of the Group in line with the BSC approved by the committee in 2023. The award of an annual short-term incentive (STI) pool is directly linked to performance against key measures within the scorecard. The committee reviewed the achievement against the stretch financial and strategic targets and determined that based on a scorecard outcome of 2.53 out of a maximum of 5, with 5 representing outperformance, a reduced bonus pool was merited to reward and retain top performers
• Significant attention has been paid to wellness initiatives designed to support and encourage staff during a year of transition and renewal. The Company's EAP is well utilised by staff and is a valuable resource to employees and their families
• The committee has been encouraged by some of the diversity indicators shared with us. Female representation in the management levels (middle management and upwards) has increased over the 23/24 year from 43.79% to 44.42%. Over the same period, there has been an overall 2.5% increase in representation of African, Indian and Coloured (AIC) incumbents in management (middle management and upwards).

Changes to the remuneration and related policies for the 2024 financial year

In keeping with our philosophy of ensuring fair and responsible remuneration, the committee continuously reviews the Group's remuneration policies and practices to ensure they remain relevant and responsive to organisational imperatives. While there are no material changes to reward and benefit practices, we are pleased that our commitment to significantly strengthen the overall governance of the policy and its implementation has been delivered. Management has leveraged the governance experience and frameworks of Sanlam, who have been happy to share their expertise.

Focus areas

The committee envisages the following focus areas in advancing the organisation's value proposition:

2024 focus areas (July to December)		2025 focus areas
Continued focus on Sanlam alignment process and leveraging relevant best practice people practices to drive successful integration and unlock business value. Remuneration governance to remain top of mind with a greater focus on approval frameworks given the larger Sanlam Group structure AfroCentric is now part of.		Initiatives to drive culture transformation will support the Company's strategy refresh. Adoption of Sanlam values (Care, Integrity, Innovation, Collaboration) as a key part of this. Introduction of additional reward policies that enhance remuneration governance. Consideration will be given to a minimum shareholding requirement (MSR) for those participating in the LTI.

Shareholder engagement and voting

Shareholder voting results

RESOLUTION	November 2023	November 2022
Ordinary resolution on non-binding advisory vote on remuneration policy	99.67%	99.78%
Ordinary resolution on non-binding advisory vote on implementation report	50.26%	99.78%
Special resolution of Non-executive Directors' fees	100%	98.78%
Special resolution of general authority to repurchase shares	100%	99.78%

The remuneration policy and implementation report were presented for shareholder voting at the AGM held on 9 November 2023. 99.67% of our shareholders endorsed the policy, and the implementation report received an in-favour vote of 50.26%. This latter vote prompted a constructive engagement with the Sanlam Group who had voted against the implementation report for reasons that were shared with us.

As required by the Companies Act and King IV^TM, the above resolutions will be tabled for shareholder voting at the AGM, details of which can be found in the Notice of AGM.

In the event that either the remuneration policy or the implementation report, or both, are voted against by 25% or more shareholders, the Board will engage with shareholders to understand the concerns raised. This engagement may be done by virtual meeting or in writing and will be implemented at a time after the voting results are released. Where possible and prudent, objections are taken into consideration when formulating any amendments to the Company's remuneration policy and implementation report in the following financial year.

Appreciation

As the newly appointed Chairperson of the Remuneration Committee, I would like to offer my sincere thanks to Joe Madungandaba, who has led the committee admirably for many years. Notably, Joe has presided over the Remuneration Committee during a recent and key period of transition and renewal. His wisdom and expertise have enabled the committee to deliver on its mandate.

Joe has articulated his gratitude to his fellow committee members for their contributions and support during his tenure: "It has been a privilege to have served with such a competent and thoughtful team of people. Together, we have worked hard to ensure the Company's capacity to attract and retain key and diverse talent over this period has gained momentum, and I am satisfied that the committee's decisions have strengthened the overall value proposition. I am confident in my assertion that the committee has responsibly and professionally discharged its obligations."

Thank you to our shareholders for your support and engagement. We look forward to further interaction on AfroCentric's remuneration policy.

Alice le Roux

Remuneration Committee Chairperson

8 October 2024

REMUNERATION OVERSIGHT AND POLICIES

Remuneration governance

AfroCentric's remuneration policy, structures and processes are set within a governance framework with designated levels of authority.

While we apply a common remuneration structure across the Group, we differentiate its implementation according to the size and operating models of various entities within the Group.

Remuneration policy design principles

Our remuneration policy provides a framework for managing total remuneration within the Group and supports the Group's employee value proposition.

Remuneration objectives

Remuneration principles

Employees are at the core of our business, as we require highly skilled, competent and experienced employees to drive our business growth. Accordingly, AfroCentric's remuneration policy is designed to reward employees for their performance and contribution towards value for our shareholders. The following principles govern Group-wide remuneration at all levels:

Pay for performance

Executives' remuneration is based on the level of accountability, complexity and nature of the role, which is sized relative to the organisation's turnover, number of employees (including wage bill), market cap, assets and net after-tax profitability benchmarked to the external market. The table below shows the relationship between the Group's strategy, its pay-for-performance philosophy and the requirements set out in King IV^TM:

Strategic aspiration: Operating profit (EBIT) target as agreed with the Board from time to time
The pillars of the BSC support the delivery of our strategic objectives
Strategic impact		FINANCIAL (50% weighting) ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) AND RISK MANAGEMENT (10% weighting) LEADERSHIP, CULTURE AND TRANSFORMATION (10% weighting) CLIENT PERCEPTION AND GROWTH (12.5% weighting) STRATEGIC INITIATIVES (17.5 % weighting)
Sanlam-aligned scheme Client value proposition New target operating model Fix technology platforms and automate key functions Medscheme operating model: Focus on customer experience aspects that are linked to scheme objectives Optimise human capital

Our deliverables, contained in our BSCs, are derived from and directly support the Group strategy. The Group BSC cascades to the various business units and is aligned with the business unit and individual performance objectives.

Remuneration arrangements for other employees

Recognising the need to remunerate executive management fairly and responsibly in the context of the overall remuneration, we awarded higher increases to bargaining unit employees compared to executive levels (5.59%). Increases in respect of the bargaining unit are negotiated annually with NEHAWU and SALU, the recognised labour unions, considering various internal and external factors such as affordability, market conditions and benchmark information. Remchannel Salary Survey formed the basis for market benchmark information to facilitate the remuneration review.

Differences in remuneration policy for executives compared to other employees

There are differences in the structure of the remuneration policy for Executive Directors, prescribed officers and other salaried employees, which are necessary to reflect the different levels of responsibility and market practices. The key difference is the increased emphasis on incentives or variable performance-related pay in senior roles. Lower maximum variable pay limits, as a percentage of guaranteed pay, apply for roles below the executive level, driven by market benchmarks and the relative impact of the role.

Senior executives, general management and key strategic resources at senior management, middle management or specialist levels may participate in STI and LTI schemes, where these plans are targeted at individuals with the greatest responsibility for Group performance.

General staff are eligible to participate in a performance-based bonus scheme.

Remuneration model

AfroCentric's remuneration model balances short-term and long-term financial and non-financial rewards to drive a high-performance culture. The critical components of this model, including policy elements, are illustrated below:

Guaranteed pay

This comprises the benchmarked, market-related fixed component of AfroCentric's remuneration offering, which is designed to attract and retain qualified and experienced employees.

Base pay benefits and allowances		Benefits and allowances
Market-related salary reflecting individual contributions, roles and responsibilities		Market-related benefits including medical aid, retirement fund1 and insured benefits such as Group death and disability benefits, Nedbank workplace banking benefits
Purpose		Purpose
To attract and retain qualified and experienced employees		To retain employees and contribute to their overall wellbeing
Mechanics		Mechanics
All employees Pay bands are set with reference to industries For executives, benchmarks are derived from similar comparator groups Salaries are paid monthly Employees are eligible for adjustments when promoted to other positions; however, specific conditions apply Market benchmarking according to job family grouping, job grade and individual long-term performance		Applicable to all employees Allowances are paid in terms of statutory requirements or policy Contributions to all benefits are made by both the employer and the employee Beneficiaries of employees who pass away while in service receive additional benefits, such as education benefits, medical aid, premium waivers, etc.
Maximum opportunity		Maximum opportunity
Cost of annual increases is approved by the Remuneration Committee and set in accordance with expected market movements, affordability and forecast inflation Increases granted to bargaining and non-bargaining unit employees are linked to individual performance		In addition to the standard basket of benefits, employees can buy additional benefits at Group rates, e.g. extended family funeral cover

1	Employees elect participation in either a pension fund or the NEHAWU Provident Fund, the latter only available to NEHAWU members.

Variable pay

Variable pay relates to additional financial compensation in the form of STIs and LTIs aligned with the Group's performance, strategy and value creation.

STI scheme		LTI scheme
Performance-based Group annual incentive schemes Management strategic incentive scheme Management performance bonus scheme Performance-based bonus for all general staff Actuarial incentive scheme Other sales incentive schemes (self-funding)		Share scheme designed to incentivise the delivery of long-term strategic goals aligned with shareholder expectations
Purpose		Purpose
To motivate employees, management and executives to achieve short-term strategic, financial and non-financial objectives To reward Company, business unit and individual performance To recognise, motivate, attract and retain		To retain, motivate and reward executives and senior management or individuals who influence the long-term sustainability, value creation and strategic objectives of the Group on a basis that aligns their interests with those of the Group's shareholders
Mechanics		Mechanics
Executive Committee members, general management2, senior management3 and management4 at corporate and business unit level, as well as general staff The STI consists of Group and individual performance targets Group targets on a BSC basis are set each year and cascaded Business unit targets are set in line with the approved business plans Individual targets are recorded in the performance contract with reference to the role's requirements Performance below the threshold results in a zero score, and the individual will not be eligible for an STI award Hurdle for payment of any STI is the achievement of EBIT targets; however, a sliding scale is applicable at the Remuneration Committee's discretion upon achieving all other key performance area targets The committee approves any payments in respect of performance-based STIs Other STIs, such as general staff performance bonuses or commissions, are paid quarterly or monthly as per the respective set of rules		Vesting share scheme Executive Committee members, general and senior management at Group and business unit levels The LTI scheme consists of a forfeitable share plan (FSP) subject to performance vesting conditions in year three after the award Governing resides with the committee, which considers annual awards for eligible employees Annual awards are linked directly to the role as well as long-term individual performance and potential Share value is determined by volume- weighted average price measured 30 days prior to the award date Group performance targets include financial (50%), ESG and risk management (10%), leadership, culture and transformation (10%), client perception and growth (10%), and strategic Initiatives (20%)
Maximum opportunity		Maximum opportunity
Stretch performance percentage of 150% of on-target quantum, or 14th cheque, depending on the scheme in which the employee participates Participation is limited to one scheme only		The employee's job grade determines the maximum allocation
Number of participants		Number of participants
540 for management; 3 320 for general staff		118

2	General management is defined as positions at grade levels E1 to E3 on the Paterson grading scale.
3	Senior management is defined as positions at grade levels D3 and D5 on the Paterson grading scale.
4	Management is defined as positions at grade level D2 on the Paterson grading scale.

STI schemes

The Group relies on various bonus schemes designed to achieve its strategic objectives.

Individual performance below the threshold results in a zero score, and the employee will not be eligible for consideration for an STI award.

Management strategic incentive scheme

The annual strategic management incentive scheme focuses on the executive team and tier two managers, who report directly to the executives and employees selected for value contribution and scarce and critical skills. This applies to employees whose roles directly impact the Group's strategic imperatives.

Strategic incentives are calculated as shown below; however, any payment is subject to achieving the Group performance scorecard on a sliding scale basis.

ON-TARGET % X BUSINESS MULTIPLIER X INDIVIDUAL PERFORMANCE MULTIPLIER

Group performance

While the performance conditions for the STI bonus were not achieved for the year ending June 2024, management recommended a discretionary reduced bonus pool relative to the Group's overall 2.53 performance score on a 5-point rating scale.

Management performance bonus scheme

The management performance bonus scheme was introduced during the 2017 financial year at the request of the Remuneration Committee. This scheme targets exceptional performance through a reward of 100% of the guaranteed monthly package and additional bonus payments as prescribed in the rules.

Bargaining unit performance-based bonus

The performance-based bonus scheme was introduced in 2019 with the Remuneration Committee's support. This scheme is aimed at non-management level employees and ensures an all-inclusive performance-based total reward strategy for the Group across all levels.

STIs on termination of employment

There is no automatic entitlement to annual STIs on termination, but it may be considered at the committee's discretion, considering performance measures during the period. Any such payment will be pro-rated to service. The governing rules require active employment on the date of payment. No bonus will be payable unless otherwise justified by special conditions.

LTI scheme

AfroCentric introduced a new FSP LTI scheme in November 2022, following Board approval. The Remuneration Committee approves the allocations for all participants.

Malus and clawback

Where defined trigger events occur, provision is made for redress against remuneration through either malus (pre-vesting forfeiture) or clawback (post-vesting forfeiture). Malus and clawback provisions and the application thereof to trigger events are governed by the Group Malus and Clawback Policy.

Vesting share scheme

Remuneration mix

To maintain a high-performance culture and alignment with shareholders through value creation, the total reward mix for the Group CEO, Executive Directors, executives and senior management is geared towards a higher percentage of variable pay 'at risk' for achieving stretch goals.

The chart below represents the potential mix of guaranteed pay, STI and LTI for the Group CEO at below, on-target and stretch levels. The below target assumes no variable incentive payments.

		Chairman		Deputy Chairman		Directors and Lead Directors		Committee
Objective		A market-related fee to attract and retain experienced and diverse Non-executive Directors				Fees to reflect the additional responsibilities undertaken through membership of committees. Committee chairpersons receive an additional amount
Fee principles		Fees are reviewed annually, and fees in respect of the Chairman and Deputy Chairman were adjusted during the reporting period following the benchmark done by PwC Fees reflect the time commitments in respect of meetings and additional stakeholder relations as well as other standard duties associated with each role Fees are fully inclusive The Remuneration Committee recommends the fees to the Board for final approval
Payable		Main Board: quarterly Subsidiary board: monthly				Per-meeting fee payable monthly