Corporate governance review

Introduction

PPC Ltd (the company) and its subsidiaries (the group) are committed to maintaining a high standard of corporate governance and, as a listed public company, PPC complies with the King III Code on Corporate Governance.

After lengthy public consultation, the King IV Report on Corporate Governance for South Africa was officially launched on 1 November 2016. The final report, which reflects some changes and refinement since the draft, replaces King III (2009) in its entirety and is effective for financial years from 1 April 2017. While PPC has started the process of understanding and applying King IV, this review is based on the requirements of King III.

To avoid duplicating information, we cross reference to other sections such as the reports of the audit committee, risk and compliance committee, and directors.

This review is structured in two parts, in line with best practice in governance reporting:

The governance

Part1

PPC’s governance philosophy

PPC Ltd was established in 1892 as De Eerste Cement Fabrieken Beperkt. Our history is closely linked to the growth and development of South Africa and PPC has produced cement for many of the country’s most famous landmarks and construction projects.

The group has nine manufacturing facilities and three milling depots in South Africa, Botswana, DRC, Ethiopia, Rwanda and Zimbabwe that can produce around eight million tonnes of cement products each year. As part of its strategy and long-term plan to grow revenue, the group is expanding its operational footprint into the rest of Africa. PPC also produces aggregates, metallurgical-grade lime, burnt dolomite and limestone.

Governance in PPC is subject to oversight by the group board of directors and its board charter assigns responsibility for strategic direction and control of the company to the board. The board exercises this control through the company’s governance framework (shown below), which includes detailed reporting to the group board and its committees, and a system of assurances on internal controls.

Shareholders

Ethics

Ethics are the rules or standards that govern the decisions made in PPC on a daily basis. Ethics implicitly regulate areas and details of behaviour that lie beyond governmental control. The ethical issues encountered by businesses on a daily basis include the rights and duties between the businesses and their employees, suppliers, customers and neighbours, as well as its fiduciary responsibility to its shareholders. Also related is the approach to corporate governance; corporate social entrepreneurship; political contributions; and various other legal issues across the company.

The social, ethics and transformation committee of the board carries the mandate of the board to assume responsibility for the governance of ethics by setting the direction for how ethics are approached and addressed by the group. The committee has approved a codes of conduct and ethics policy that articulate and give effect to group ethics in PPC. Important developments during the year have been the roll-out of ethic call lines in the rest of Africa subsidiaries, as well as the implementation of practical guidelines for employees who may encounter fraud and corruption. Ongoing training on matters of ethics will remain a key focus in the next financial year.

Key board membership changes

Peter Nelson was appointed interim chairman of the board on 29 March 2016 when Bheki Sibiya retired. Having successfully led the board during the capital raise period, and given his contribution as interim chairman, Peter was appointed permanent chairman from 24 October 2016.

Peter is assisted by Tim Ross, lead independent director and a capable team of directors. At 31 March 2017, 12 directors served on the group board. The majority were non-executive directors, with an independent majority when classified against the JSE Listings Requirements.

More information on board composition and activities follows in this report. Most notably, Nonkululeko Gobodo was appointed as a non-executive director by the board from 8 February 2017. Her appointment will be tabled at the upcoming AGM for confirmation by shareholders.

Bridgette Modise, who was required to retire by rotation at the shareholders’ meeting on 31 October 2016, decided not to stand for re-election. She was appointed to the board in 2010 and her contribution often extended beyond the ordinary course of business. The board wishes her well in her future endeavours and thanks her for her valuable contribution.

In addition to changes to the board, there have also been changes in the membership of board committees. Nicky Goldin joined the audit committee, serving with Todd Moyo and Tim Ross, and Nonkululeko Gobodo joined this committee on 8 February 2017.

Timothy Leaf-Wright was appointed chairman of the risk and compliance committee on 31 October 2016.

Membership of the board

As at 31 March, the members of the board were:

  Non-executive directors Status
  Dakile-Hlongwane Non-executive
  Gobodo Independent
  Goldin Independent
  Leaf-Wright Independent
  Mboweni Independent
  Mhlarhi Non-executive
  Moyo Independent
  Naude Independent
  Nelson Independent
  Ross Independent
  Executive directors  
  Castle Executive
  Ramano Executive

Directors are appointed through a formal process and the nominations committee assists in identifying suitable candidates to be proposed to shareholders. This process is detailed in PPC’s selection and appointment policy. The primary objective of this policy is to provide a transparent framework and set standards for the selection and appointment of high-calibre executive and non-executive directors with the capacity and ability to lead the company in sustainable value creation and long-term growth. The nominations committee oversees this policy.

A formal induction programme is in place for new directors, and directors with less experience are developed through training programmes. For continuing development, PPC encourages directors to attend the professional development programmes of the Institute of Directors in Southern Africa (IoDSA).

While no limitations are imposed by the board charter, or otherwise, on the number of other appointments directors can have, approval must be obtained from the chairman prior to accepting commitments that may affect the time directors can devote to PPC.

Board composition

The nominations committee annually evaluates whether the board’s size, diversity and demographics make it effective. A number of studies have shown that the composition of the board can have a significant impact on company performance. Early studies on board composition focused on factors such as directors’ independence, with the impact of cognitive diversity in decision-making only gaining recognition more recently. The latest studies have focused on diversity.

The board has made notable progress on transformation and compliance with the King III code as shown below.

BALANCE BETWEEN EXECUTIVE DIRECTORS AND NON-EXECUTIVE DIRECTORS

Balance between executive

RACIAL BALANCE

Racial balance

GENDER BALANCE

Gender balance

NON-EXECUTIVE AND INDEPENDENT NON-EXECUTIVE DIRECTORS

Non-exuecutive directors

In support of gender diversity, the board has adopted the following policy statement:

“The PPC board recognises the benefits of having a gender-diverse board and sees increasing diversity at board level as a competitive advantage. Gender diversity will be considered in determining the optimum composition of the board and, when possible, should be balanced appropriately. All board appointments are made on merit, in the context of the skills, experience, independence and knowledge the board requires to be effective.”

The nominations committee discusses and agrees annual objectives for achieving gender diversity on the board and recommends these to the board for adoption. At the date of adopting this policy statement, the board aimed to ensure that at least 30% of the board comprised women and for that percentage to exceed 35% by the end of 2018.

Key roles in the board

Key roles in the corporate governance of PPC lie mainly in the responsibilities of three functionaries:

  • The chairman: Peter Nelson

The role of the chairman is set out in the board charter:

  • Lead the board, not the company
  • Safeguard the integrity of corporate governance processes and actions as determined collectively by the board
  • Be the link between the board and management, particularly the CEO
  • Be the main link between the board and shareholders, and the public at large

  • The CEO: Darryll Castle

The role of the CEO is determined by the board, formalised in the board charter and managed through his annual scorecard:

  • The CEO leads the company and management team. He is responsible for the day-to-day operations of PPC and is its principal spokesperson, while the chairman is the leader of the board

  • The company secretary: Jaco Snyman

The role of the company secretary is largely determined in section 88 the Companies Act 2008 (the Act):

  • Guiding PPC’s directors collectively and individually on their duties, responsibilities and powers
  • Making directors aware of any law relevant to or affecting the company
  • Reporting to the board any failure by the company or a director to comply with the memorandum of incorporation, rules of the company or the Act
  • Ensuring minutes of all shareholders’ meetings, board meetings and the meetings of any committees of the directors, or of the company’s audit committee, are properly recorded
  • Certifying in the annual financial statements whether PPC has filed required returns and notices in terms of the Act, and that these appear to be true, correct and up to date
  • Ensuring a copy of PPC’s annual financial statements is sent to every person entitled to it

The group company secretary provides directors with guidance on discharging their responsibilities. He is a central source of information and advice to the board and in the company, on ethics and good governance. He also ensures the proceedings and affairs of the board, its committees, the company and, where appropriate, owners of securities in the company are properly administered under pertinent laws. Details of his qualifications and experience are on page 27.

The group company secretary is responsible for compliance with the rules and Listings Requirements of the JSE and the Zimbabwe Stock Exchange on which PPC’s securities are listed and administers the statutory requirements of the company and its subsidiaries in South Africa.

The company secretary is satisfied that he is able to effectively perform the role as gatekeeper of good governance in PPC and fulfil his responsibilities as company secretary.

The board evaluated the company secretary’s performance as part of its annual evaluation and the outcome was very positive.

Key responsibilities of the board

Strategic planning

As a key performance area of the board, group strategy is mapped by the board in consultation with PPC’s executive committee (exco). The board appreciates the fact that strategy, risk, performance and sustainability are inseparable and annually reviews the strategy. The group strategy is detailed on page 6.

Internal control

Reporting in PPC is structured so that key issues are escalated through the management team and ultimately to the board, if appropriate.

The board has delegated to the audit committee responsibility for thoroughly reviewing the effectiveness of PPC’s system of governance, risk management and internal controls. After completing these reviews, the committee reports on its findings so that the board can take a view on this matter. The risk management process has been regularly reviewed in recent years, resulting in several refinements. The report on risk and controls appears on page 84.

Delegation

The board delegates certain functions to committees and management, without abdicating its own responsibilities. Delegation is formal and involves:

  • Approved and documented terms of reference for each committee of the board
  • Terms of reference are reviewed once a year
  • The committees are appropriately constituted with due regard to the skills required
  • The board has a framework for delegating authority to management

Board performance

The code requires annual board performance evaluations by the chairman or an independent service provider, with results used to identify training needs for directors. This year, the nominations committee appointed the IoDSA to conduct the annual evaluation: an independently facilitated self-appraisal process evaluated the views of individual directors on the performance of the board as a whole (as contained in this report), respective board committees and the chairman. The key issues raised are receiving attention.

It should be noted that 88% of the areas tested were rated from satisfactory to meeting best practice, while only 12% were deemed as needing some improvement. The board is taking the necessary steps to address these issues.

The following table summarises the attendance at scheduled meetings by board members over the period 1 April 2016 to 6 June 2017 (when the board approved the annual financial statements).

Board members   Board     AGM     Audit     Investment     Nomco     Remco   Risk and compliance     SET     Attendance  
Castle 6/6   1/1                   3/3       10/10  
Dakile-Hlongwane 6/6   1/1                       2/2   9/9  
Gobodo** 1/1     1/1                       2/2  
Goldin 6/6   1/1   2/2   4/4       2/2           15/15  
Leaf-Wright 6/6   1/1       4/4           3/3   2/2   16/16  
Mboweni 5/6   0/1           2/2           2/2   9/11  
Mhlarhi 5/6   1/1       3/4       2/2           11/13  
Modise* 3/4   1/1   1/1               1/1       6/7  
Moyo 6/6   1/1   5/5       2/2   2/2           16/16  
Naude 6/6   1/1       4/4       2/2   3/3       16/16  
Nelson 6/6   1/1       4/4   2/2   2/2           15/15  
Ramano*** 6/6   1/1                           7/7  
Ross 6/6   1/1   5/5   4/4           3/3       19/19  
* Ms Modise retired by rotation on 31 October 2016.
** Ms Gobodo joined the board from 8 February 2017 and appointed to risk and compliance committee on 6 June 2017.
*** Ms Ramano joined the SET committee from 6 June 2017.

Board committees

The board has six standing committees through which it operates. Committees play an important role in enhancing good corporate governance, improving internal controls and thus the sustainable performance of the company.


Directors   Audit     Investment     Nomco     Remco    Risk and
compliance
    SET   Participation  
Dakile-Hlongwane                     X   1  
Gobodo X                       1  
Goldin X   X       X           3  
Leaf-Wright     X           XX   X   3  
Mboweni         X           XX   2  
Mhlarhi     X       X           2  
Moyo X       X   XX           3  
Naude     XX       X   X       3  
Nelson* (chair)     X   XX   X           3  
Ross (lead independent) XX   X           X       3  
Castle (CEO)                 X       1  
Average participation 4   6   3   5   4   3   2,4  
XX – chair.
X – member.

In the interests of free information flow and good oversight, full or summary minutes of all committee meetings are included in packs for board meetings. In addition, each chairperson is required to present an annual report on the activities of that committee at the board’s meeting in June 2017.

Based on these reports and the minutes of committees, their performance and conformance to their terms of reference are annually evaluated by the board.

At its meeting on 6 June 2017, the board concluded that all committees had executed their responsibilities within the scope of their respective terms of reference in the review period.

About the audit committee
Membership   Status     Qualifications  
Gobodo Independent   CA(SA)  
Goldin Independent   BCom (Hons), MBA  
Moyo Independent   CA(SA), CA(Z), RPA(Z), MCSZ  
Ross (chair) Independent   CA(SA)  

Meeting date   Attendance     Focus of the meeting  
3 June 2016 All present   Internal audit plan for 2017 and final results for 2016  
7 November 2016 All present   External audit plan and interim results  
7 March 2017 All present   Internal audit plan 2018 and review of year-end issues for 2017  
29 May 2017 All present   Review of the financial results 2017  
6 June 2017 All present   Approval of the financials for 2017  

All members are independent, as required by the code and the Act. The committee may obtain, at PPC’s expense, independent professional advice on any matters covered by its terms of reference.

Tim Ross has been elected to chair the committee since 2009. He is a member of the South African Institute of Chartered Accountants.

Members of the executive team, including the CFO, attend committee meetings by invitation. Similarly, external and internal auditors attend meetings by invitation and have no voting rights. The chairperson reports to the board on the committee’s activities and recommendations. The chief audit executive reports functionally to the chairperson of the committee and administratively to the CEO. The latest minutes of committee meetings are included in board packs.

The audit committee has formal terms of reference approved by the board, and has executed its duties in the past financial year in line with these terms of reference. Its terms of reference include the following responsibilities:

Financial information

The committee reviews the annual financial statements, interim and preliminary announcements, accompanying reports to shareholders and any other announcements on PPC’s results or other financial information to be made public, prior to submission and approval by the board.

Integrated reporting

The committee oversees integrated reporting, particularly:

  • All factors and risks that may affect the integrity of the integrated report, including factors that may predispose management to present a misleading picture, significant judgements and reporting decisions, monitoring or enforcement actions by a regulatory body, any evidence that brings into question prior published information, forward-looking statements or information
  • Reviews the annual financial statements, interim reports, preliminary or provisional result announcements, summarised integrated information, any other intended release of price-sensitive information and prospectuses, trading statements and similar documents
  • Comments in the annual financial statements on those statements, accounting practices and effectiveness of internal financial controls
  • Reviews disclosure of sustainability issues in the integrated report to ensure this is reliable and does not conflict with financial information
  • Recommends to the board whether or not to engage an external assurance provider on material sustainability issues
  • Reviews the content of summarised information for providing a balanced view
  • Engages the external auditors to provide assurance on summarised financial information
  • Prepares a report for inclusion in the integrated report and annual financial statements for the financial year (page 82):
    • Describing how it carried out its functions
    • Stating whether it is satisfied that the auditor was independent of the company
    • Commenting in any way it considers appropriate on the financial statements, accounting practices and internal financial control of PPC
  • Recommends the integrated report for approval by the board

Internal audit

The committee is responsible for overseeing the internal audit function, in particular:

  • The appointment, performance assessment and/or dismissal of the chief audit executive
  • Reviewing the internal audit charter
  • The appointment, performance assessment and/or dismissal of any outsourced/ company’s internal audit service provider
  • Approving the internal audit plan and any significant changes, and satisfying itself that this plan will effectively address critical risk areas of the business
  • Ensuring the internal audit function is subject to an independent quality review, as it deems appropriate
  • Reviewing internal audit’s compliance with its charter as approved by the committee and considering whether the internal audit function has the necessary resources, budget and standing in PPC to discharge its functions

Risk management

The committee is an integral component of the risk management process. Specifically, its mandate includes risk oversight responsibilities for:

  • Financial risk
  • Financial reporting risks
  • Internal financial controls
  • Fraud risks, as these relate to financial reporting
  • IT governance and risks, as these relate to financial reporting

External audit

The committee is responsible for recommending the appointment of the external auditor and overseeing the external audit process. In this regard, it must:

  • Nominate an independent external auditor for appointment by shareholders
  • Determine the fees to be paid and terms of engagement of the auditor
  • Ensure the appointment of the auditor complies with the Act and other relevant legislation
  • Monitor and report on the independence of the external auditor in the annual financial statements
  • Approve a policy for non-audit services provided by the external auditor
  • Pre-approve contracts for non-audit services to be rendered by the external auditor
  • Ensure there is a process for the committee to be informed of any reportable irregularities (as noted in the Auditing Profession Act 2005) identified and reported by the external auditor
  • Review the quality and effectiveness of the external audit process

Chief financial officer (CFO)

The committee must annually consider and satisfy itself of the appropriateness of the expertise and experience of the CFO, and confirm this to shareholders in its annual report.

Financial function

The committee reviews the expertise, resources and experience of PPC’s finance function, and discloses results in the integrated report and to shareholders.

Internal controls

The chief audit executive has completed a report to the board on the effectiveness of controls and risk management, which was tabled at the board meeting on 6 June 2017. In this report, he concluded that, based on the processes and assurance obtained, internal audit was of the view that material internal financial controls were effective.

IT governance

In recent years, PPC has made appropriate investments to ensure its information technology (IT) systems and governance processes comply with the recommendations of King III.

The committee reported on its activities for the review period at the board meeting on 6 June 2017.

About the investment committee
Membership   Status  
Goldin Independent  
Leaf-Wright Independent  
Mhlarhi Non-executive  
Naude (chair) Independent  
Nelson Independent  
Ross Independent  

Meeting date   Attendance     Focus  
26 August 2016 All present   Investment reviews and annual work plan  
3 November 2016 All present   Investment reviews  
20 February 2017 Mhlari apology   Investment reviews  
22 May 2017 All present   Investment reviews  

The committee performs all functions necessary to fulfil the role stated in its terms of reference, including:

Strategic investments (to enhance long-term sustainable income)

  • Consider prospective acquisitions for their ability to enhance long-term sustainable income of the group
  • Evaluate the merits of investment proposals within strategic guidelines, potential financial returns and risk
  • Monitor the performance of assets in the strategic investment portfolio, relative to original business plan
  • Consider proposed divestments from identified investments and terms of divestment transactions

Strategic alliances (to position PPC strategically for future markets/benefits)

  • Consider prospective strategic alliances
  • Evaluate the merits of alliance proposals to consider potential benefits from the proposed positioning relative to imposed risks (especially reputation risk)
  • Monitor the performance of strategic alliances relative to original objectives
  • Consider exiting strategic alliances and associated conditions for divestment

Operational investments (business unit growth objectives)

  • Consider investment decisions “above threshold” levels
  • Consider and evaluate the merits of investment proposals, their impact on operational strategy and the likelihood of achieving the targeted return from that investment
  • Monitor the performance of the group relative to the investment objectives of management
  • Consider proposed divestments of assets in the operational portfolio, terms of divestment transactions and exit strategies

Other initiatives (improve efficiencies in a cost-effective way)

  • Consider initiatives with a total cost “above threshold”. Total cost includes all cost elements and is calculated over the project lifespan
  • Consider the strategic impact of proposed initiatives
  • Evaluate the financial merits of each initiative’s business case

The committee reported on its activities for the review period at the board meeting on 6 June 2017. At this meeting, the board confirmed that the committee had complied with its terms of reference.

About the nominations committee
Membership   Status  
Mboweni Independent  
Moyo Independent  
Nelson (chair) Independent  

Meeting date   Attendance     Focus  
14 October 2016 All present   Board and committee composition and succession  
22 May 2017 All present   Board and committee composition and succession  

Mr Nelson was appointed chairman of the committee after his appointment as interim chairman.

The committee may obtain, at PPC’s expense, independent professional advice on any matters covered by its terms of reference.

The committee normally asks the CEO to attend its meetings, but he has no voting rights.

The committee has its own terms of reference, approved by the board, which are reviewed annually. The chairperson reports to the board on activities and recommendations made by the committee and the latest minutes of meetings are included in board packs.

The committee performs all the functions necessary to fulfil its role as stated in its terms of reference, including:

  • Ensuring the establishment of a formal process for appointing directors, including:
    • Identifying suitable members for the board
    • Performing reference and background checks of candidates prior to nomination
    • Formalising the appointment of directors through an agreement between the company and the director
  • Overseeing the development of a formal induction programme for new directors
  • Ensuring inexperienced directors are developed through a mentorship programme
  • Overseeing the development and implementation of continuing professional development programmes for directors
  • Ensuring directors receive regular briefings on changes in risks, laws and the environment in which PPC operates
  • Considering the performance of directors and taking steps to remove directors who do not make an appropriate contribution
  • Finding and recommending to the board a replacement for the CEO when necessary
  • Ensuring formal succession plans for the board, CEO and senior management appointments are developed and implemented
  • Providing input on senior management appointments as proposed by the CEO

The committee reported on its activities for the review period at the board meeting on 6 June 2017. At this meeting, the board confirmed that the committee had complied with its terms of reference.

About the remuneration committee
Membership   Status  
Goldin Independent  
Mhlarhi Non-executive  
Moyo (chair) Independent  
Naude Independent  
Nelson Independent  

Meeting date   Attendance     Focus  
5 December 2016 All present   Incentive schemes and annual increases  
15 May 2017 All present   Salary and fee benchmarking and incentives reviews  

All members are non-executive directors. PwC, appointed by the committee, acted as independent remuneration adviser and provided detailed information on market trends and competitively positioning remuneration.

The committee normally asks the CEO to attend its meetings, but he has no voting rights. He does not participate in discussions on his own remuneration, which is set by the committee.

The committee performs all functions necessary to fulfil the role stated in its terms of reference, including:

  • Overseeing the development of a remuneration policy that will promote achieving strategic objectives and encourage individual performance
  • Ensuring this policy is put to a non-binding advisory vote at the annual general meeting of shareholders every year
  • Reviewing the outcomes of implementing the policy against set objectives
  • Ensuring the mix of fixed and variable pay, in cash, shares and other elements, meets PPC’s needs and strategic objectives
  • Satisfying itself on the accuracy of recorded performance measures that govern vesting of incentives
  • Ensuring all benefits, including retirement benefits and other financial arrangements, are justified and correctly valued
  • Considering the results of the performance evaluation of the CEO and other executive directors, both as directors and as executives, in determining remuneration
  • Selecting an appropriate comparative group when comparing remuneration levels
  • Regularly reviewing incentive and retention schemes to ensure an ongoing contribution to shareholder value and that these are administered in terms of the rules
  • Considering the appropriateness of early vesting of share-based schemes at the end of employment
  • Advising on the remuneration of non-executive directors
  • Overseeing preparation of the remuneration report and recommending to the board this be included in the integrated report

PPC’s remuneration policy is annually presented to shareholders to pass a non-binding advisory vote to indicate support. This policy is on page 88 and shareholders will again be requested to pass a non-binding advisory vote at the annual general meeting.

The committee has reviewed group remuneration policies to ensure these are aligned with PPC’s strategy and linked to individual performance.

The committee reported on its activities for the review period at the board meeting on 6 June 2017. At this meeting, the board confirmed that the committee had complied with its terms of reference.

About the risk and compliance committee
Membership   Status  
Leaf-Wright (chair) Independent  
Naude Independent  
Ross Independent  
Castle Executive  

Meeting date   Attendance     Focus  
3 October 2016 All present   First review of risk registers and risk appetite matrix  
20 February 2017 All present   Second review of risk registers and key risk projects  
29 May 2017 All present   Risk register review, combined assurance, risk appetite matrix and insurance programme  

Mr Castle, although an executive director, serves on the committee in line with best-practice recommendations of the code. All other members are non-executive directors.

The committee may obtain, at PPC’s expense, independent professional advice on any matters covered by its terms of reference.

Members of the executive team responsible for risk and compliance management attend meetings by invitation. Similarly, external and internal auditors attend by invitation but have no voting rights. The latest minutes of meetings are included in board packs.

The committee has its own terms of reference, approved by the board and reviewed annually, to assist members to understand their roles and enable them to add value in discharging their duties. Its terms of reference include the responsibility to:

  • Oversee the development and annual review of a policy and plan for risk management to recommend for approval to the board
  • Monitor implementation of this policy and plan via risk management systems and processes
  • Make recommendations to the board on the levels of risk tolerance and appetite, and monitor that risks are managed within these levels as approved by the board
  • Approve PPC’s compliance policy and oversee that this is disseminated through the company
  • Oversee that the risk management plan is disseminated across PPC and integrated in its daily activities
  • Ensure risk assessments are performed continuously
  • Ensure compliance management assessments are regularly performed
  • Ensure frameworks and methodologies are implemented to increase the possibility of anticipating unpredictable risks
  • Ensure management considers and implements appropriate risk responses
  • Ensure continuous risk monitoring by management
  • Liaise closely with the audit committee and other board committees to exchange information relevant to risk
  • Express a formal opinion to the board on the effectiveness of the system and process of risk management
  • Review reporting on risk management and compliance in the integrated report for being timely, comprehensive and relevant

For a more detailed review on risk and compliance, refer to page 84.

The committee reported on its activities for the review period at the board meeting on 6 June 2017. At this meeting, the board confirmed that the committee had complied with its terms of reference.

About the social, ethics and transformation committee
Membership   Status  
Dakile-Hlongwane Non-executive  
Leaf-Wright Independent  
Mboweni (chair) Independent  

Meeting date   Attendance     Focus  
20 October 2016 All present   Review of sustainability and transformation  
24 April 2017 All present   Review of sustainability and transformation  

All members of the committee are non-executive directors.

The committee has its own terms of reference, approved by the board and reviewed annually. The chairperson reports to the board on activities and recommendations made by the committee and the latest minutes of meetings are included in board packs.

In line with its terms of reference, the committee’s objectives are to assist the board in monitoring PPC’s activities – against relevant legislation, other legal requirements or prevailing codes of best practice – on:

  • Social and economic development
  • Corporate citizenship
  • Transformation
  • The environment
  • Health and public safety
  • Stakeholder relationships
  • Labour and employment

The committee reported on its activities for the review period at the board meeting on 6 June 2017. At this meeting, the board confirmed that the committee had complied with its terms of reference.

Part 2

Corporate governance compliance

This section discloses compliance with relevant and prescribed corporate governance principles.

Latest developments

As noted on page 70, King IV was officially launched on 1 November 2016. PPC is developing its corporate governance practices to align with best-practice proposals in King IV.

King IV is closely connected to three paradigm shifts in the corporate world:

  • There is now general acceptance that the employment, transformation and provision of financial capital represent only a fraction of an organisation’s activities. Instead, inclusive capitalism considers the employment, transformation and provision of all sources of capital. This new way of thinking, known as inclusive capitalism, has the potential to trigger profound change. As one example, instead of simply providing aid to developing countries, developed-country companies operating in more developing countries should focus on adopting the model of inclusive capitalism in the developing country to create sustainable value
  • The second shift is towards sustainable capitalism. The shift from short-term to long-term thinking reflects the need to create sustainable value. In short, performance in terms of all-inclusive value should be assessed over the longer term. The capital market system must reward long-term decision-making
  • Finally, there has been a further move from siloed reporting to integrated reporting, consistent with the concept of an inclusive, sustainable capital market system. The traditional financial reporting system was a revolutionary development when it was instituted. It has since had to respond to market regulators, standards boards, ever more complex legislation and the regulation of accounting and corporate reporting. It is accepted that, while fully compliant and duly audited financial statements are critical, they are insufficient to discharge the duty of accountability. Similarly, a sustainability report is critical, but insufficient. The reality is that the resources or capitals used by organisations constantly interconnect and interrelate. The organisation’s reporting should reflect this interconnectedness, and indicate how its activities affect, and are affected by, the six capitals it uses and the triple context in which it operates

The board is well aware of these developments and is reviewing its practices to align with them.

Compliance with King III

For the review period, PPC has complied with King III unless indicated otherwise. A complete King III application register is available on www.ppc.co.za/investors/governance/.

We describe how we have applied those principles in this report, notably in the following section, as well as the sections on risk management, IT governance and directors’ remuneration.

Compliance with the governance principles

Paragraph 3.84 of the JSE Listings Requirements stipulates that issuers must comply with specific requirements on corporate governance, without the option of explaining non-compliance. PPC has complied with all mandatory principles to the extent indicated below.

  Paragraph   Required practice     Compliance  
  3.84(a)   There must be a policy detailing procedures for appointment to the board of directors. Such appointments must be formal and transparent and a matter for the board of directors as a whole, assisted where appropriate by a nominations committee. The nominations committee must constitute only non-executive directors, of whom the majority must be independent (as defined in paragraph 3.84(f)(iii)), and should be chaired by the chairman of the board of directors.     The PPC board has appointed a nominations committee duly constituted with a formal mandate that includes the obligation to ensure that “directors are appointed through a formal process”. The committee has a formal policy in place as required.  
  3.84(b)   There must be a policy evidencing a clear balance of power and authority at board of directors’ level, to ensure that no one director has unfettered powers of decision-making.     The board charter specifies the different roles of members to maintain a balance of power. The roles of the chairman and CEO are clearly defined to avoid role confusion. In addition, a guideline is in place that specifies the role of the chairman.  
  3.84(c)   The issuer must have an appointed CEO and a chairman and these positions must not be held by the same person. The chairman must either be an independent director, or the issuer must appoint a lead independent director, in accordance with King.     Currently Mr Castle is the CEO and Mr Nelson the chairman of the board. Mr Ross remains the lead independent director.  
  3.84(d)   All issuers must, in compliance with King, appoint an audit committee and a remuneration committee and, if required, given the nature of the business and composition of the board of directors, a risk and nominations committee. The composition of such committees, a brief description of their mandates, number of meetings and other relevant information must be disclosed in the integrated report.     The board has appointed an audit committee, remuneration committee, nominations committee, investment committee, risk and compliance committee, and social, ethics and transformation committee. Details are disclosed in the corporate governance review.  
  3.84(e)   A brief CV of each director standing for election or re-election at a general meeting or the annual general meeting (which election or re-election may not take place at a meeting contemplated in section 60 of the Act) should accompany the notice of general meeting or annual general meeting.     A brief CV of each director standing for election or re-election appears in the notice of AGM. Please refer to page 55.  
  3.84(f)   The capacity of each director must be categorised as executive, non-executive or independent, using the prescribed guidelines.     The nominations committee annually evaluates the independence of all directors using the prescribed guidelines.  
  3.84(g)   All issuers must have an executive financial director. The JSE may, at its discretion, when requested to do so by the issuer and due to special circumstances, allow the financial director to be employed on a part-time basis only. This request must be accompanied by a detailed motivation by the issuer and the audit committee.     Ms Ramano is the current CFO of PPC and is employed full time.  
  3.84(h)   The audit committee must annually consider and satisfy itself of the appropriateness of the expertise and experience of the financial director. The issuer must confirm this by reporting to shareholders in its integrated report that the audit committee has executed this responsibility.     The audit committee assesses the appropriateness of the expertise and experience of the CFO. Please refer to its report on page 82.  
  3.84(i)   The board of directors must annually consider and satisfy itself on the competence, qualifications and experience of the company secretary. The issuer must confirm this by reporting to shareholders in its integrated report that the board of directors has executed this responsibility. This communication must specifically include details of the steps which the board of directors took to make this annual assessment and provide information that demonstrates the actual competence, qualifications and experience of the company secretary.     The board annually assesses the competence, qualifications and experience of the company secretary. Please refer to the corporate governance report on page 70.  
  3.84(j)   The recommended practice of the King Report on Governance for South Africa highlights, inter alia, that the company secretary should maintain an arm’s length relationship with the board of directors and should ideally not be a director.     The company secretary is not a director of PPC and the board has confirmed that he has maintained an arm’s length relationship with the board. Please refer to the corporate governance report on page 70.  
  3.84(k)   The board of directors or the nominations committee, as the case may be, must have a policy on the promotion of gender diversity at board level. The issuer must confirm this by reporting to shareholders in its annual report on how the board of directors or the nominations committee, as the case may be, have considered and applied the policy of gender diversity in the nomination and appointment of directors. If applicable, the board of directors or the nominations committee must further report progress in respect thereof on agreed voluntary targets.     The board has adopted a policy on promoting gender diversity. Refer to page 71.  

The King committee recommends that this assessment be documented and reported as a register, covering all 75 King III principles with detail on how each principle is applied. This register should be a living document and continually updated.