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Corporate governance

The King II Corporate Governance Report

The company is committed to the promotion of good corporate governance as set out in the King Code. The company intends to continue to comply with the codes of corporate practices and conduct set out in the report and to adhere to this insofar as it is possible given the constraints of the business of the company.

The Board will evaluate the new King III Code, endeavour to address the new recommendations and will, in future, report in accordance with this code or provide explanations regarding areas of non-compliance given our constraints.

Board of directors

Composition of the Board

The board is currently made up of five directors of which three are independent non-executives (two of whom are independent). The positions of chairman of the Board and that of chief executive officer are separate, with the chairman being non-executive.

A financial director has been appointed in terms of the requirements of the JSE. The directors bring a wide range of diverse experience and insight to the Board. The non-executive chairman oversees the Board•s functioning, and the chief executive officer leads the executive team and attends to the day-to-day functions of the business.

Role and function of the Board

The Board is responsible for the effective management and control of the company and participates in the determination of the strategic direction and policy of the company, discussions regarding acquisitions and disposals, approval of major capital expenditure, diverse financial and administrative activities and any other matters that may materially impact upon the business of the company.

The Board meets at least quarterly, with additional meetings convened when necessary.

Independence of the Board

A balance between non-executive and executive directors is maintained in order to provide a measure of independence to the Board. In addition, all Board committees are chaired by non-executive directors who have no service contracts with the company, and whose fees are not dependent upon the financial performance of the company.

All directors have access to the services of the company secretary and are entitled to seek independent professional advice regarding the affairs of the company at the company•s expense with the prior approval of the Board of directors.

Appointments and re-election of the Board

Directors are subject to retirement by rotation and re-election by shareholders in accordance with the Articles of Association of the company. The company has in place a formal process for any additional appointments to the Board. The Board as a whole, acting under the advice of the Remuneration and Nominations Committee, considers and decides (in a transparent and formal manner) on any additional appointments to the Board (which appointees retire and are subject to re-election at the next AGM).

Chairman

The chairman acts in accordance with the King Code requirements and oversees the following:

• ensuring that the composition of the board is balanced;
• acting objectively in his conduct towards the company;
• ensuring that all board members are as fully informed as possible on any issue on which a decision is to be made; and
• ensuring that non-executive directors contribute to making business decisions as and when required.

Division of responsibility

The position of chairman and chief executive officer are separate and there is a clear line between these roles. The Board is chaired by a

non-executive chairman. The chairman provides leadership of the Board and is primarily responsible for ensuring effective corporate governance.

The chief executive officer is responsible for devising, formulating, implementing and maintaining the strategic direction of the company and attends to day-to-day matters of the group while supervising all operations.

The non-executive directors, including the independent non-executive directors, provide input into the decision-making process of strategic matters and all have the integrity necessary to provide balance in Board discussions.

Internal, financial and operating controls

The Board has ultimate responsibility for the internal, financial and operating systems of the company and for monitoring their effectiveness. These systems are designed to provide reasonable assurance against material misstatement and loss.

The systems, which are monitored by the Audit and Risk Committee on an ongoing basis in order to adapt to changing business circumstances, are designed to provide reasonable safeguards regarding:

• unauthorised disposal or use of company assets;
• compliance with relevant legislation and regulations; and
• the maintenance of proper accounting records.

The external audit functions provide the Board with monitoring systems for the identification and management of risk.

Additional governance issues

Company secretary

The company secretary is required to provide the members of the Board with guidance and advice regarding their responsibilities, duties and powers, and to ensure that the Board is aware of legislation relevant to or affecting the

affairs of the company. The company secretary is also responsible for minuting meetings of the Board, committees of the Board and shareholders of the company.

Code of ethics

The Board subscribes to the highest level of professionalism and integrity in conducting its business and dealings with all its stakeholders.

In adhering to its code of ethics, the Board is guided by the following broad principles:

• business should operate and compete in accordance with the principles of free enterprise;
• free enterprise will be constrained by the observance of relevant legislation and generally accepted principles regarding ethical behaviour in business;
• ethical behaviour is predicated on the concept of utmost good faith and characterised by integrity, reliability and commitment to avoid harm;
• business activities will benefit all participants through a fair exchange of value or satisfaction of need; and
• equivalent standards of ethical behaviour are expected from individuals and companies with whom business is conducted.

Communication with stakeholders

A policy of effective communication and engagement with all stakeholders in the affairs of the company is adhered to and the company seeks to provide a secure, healthy and participative social and working environment for its staff and associates.

Committees of the Board

The following committees are responsible for assisting the Board in executing its responsibilities. Each committee operates under terms of reference and acts under the authority of the Board.

The committees are:

• Audit and Risk Committee;
• Remuneration and Nominations Committee; and
• Sustainability and Executive Committee.

Audit and Risk Committee

The Audit and Risk Committee is responsible for monitoring the adequacy of the company’s financial controls, accounting policies, financial reporting and risk management procedures and internal control systems. The committee sets the principles and approves the use of the external auditors for any non-audit services. The committee will furthermore report to stakeholders in annual reports on the manner in which it has executed its responsibilities during the year, including on its assessment of the expertise and experience of the financial director. Operating within its written terms of reference, the committee meets at least three times during the year and provides a mechanism by which the external auditors can report to the Board of directors. In addition to its scheduled meetings, the Audit and Risk Committee may convene special meetings.

The Board requires Audit and Risk Committee members to have the appropriate knowledge and experience to be able to discharge their duties effectively. The Audit and Risk Committee, besides being an essential part of the corporate governance system, plays a key role in monitoring the effectiveness of the company’s internal control systems.

During the financial year, the committee was chaired by Mr Roy Traviss, an independent non-executive director. Mr Neville Cornish, a non-executive director, and Mr Uli Schäckermann, an independent non-executive director, also served on the committee.

In accordance with the provisions of section 269A(3) of the Companies Act, the Audit Committee of the Board comprises at least two members and consists only of non-executive directors of the company.

Remuneration and Nominations Committee

The committee comprises non-executive directors, and considers and assesses the remuneration of the directors and other senior officials, in accordance with the company•s remuneration policy, for ultimate approval by the Board and/or shareholders at the AGM, as applicable. The committee operates within its written terms of reference as approved by the Board.

Independent external studies and comparisons are used to ensure that executive remuneration is linked to both individual and company performance, and supported by suitable incentives. The company•s remuneration philosophy aims to provide market-related remuneration and incentives for executive directors, who are full-time employees of the group.

The committee also fulfils the role of a nominations committee in terms of which it identifies and recommends the appointment of new directors. The committee works alongside

the chief executive officer in this regard. It also satisfies itself that adequate succession plans are in place for the Board and senior management. The committee will also review the performance of non-executive directors to ensure that they devote sufficient time to their duties.

The committee is chaired by Mr Uli Schäckermann, an independent non-executive director, and further comprises Mr Neville Cornish, a non-executive director, and Mr Roy Traviss, an independent non-executive director.

The Sustainability and Executive Committee

The Sustainability and Executive Committee, consisting of the executive directors, attends to day-to-day management, including technical evaluation and development of the company•s project areas, and is chaired by the chief executive officer.

Audit, Remuneration and Board meetings

Details of attendance at Board and committee meetings during the financial year are set out below (the number in brackets reflects the total number of meetings held during the tenure of the director).