CORPORATE OVERVIEW

CORPORATE GOVERNANCE

Vukile, incorporated under the provisions of the Companies Act, maintains a primary listing of its linked shares on the JSE and a secondary listing on the NSX. The board considers corporate governance a priority and the application of sound corporate governance structures, policies and practices as paramount to the success of a sustainable business for the benefit of all Vukile stakeholders.

Board committees

  • Audit and risk committee

    Committee Members

    The report by the audit and risk committee (AR committee) is set out on pages 28 and 29 of the integrated annual report. The committee’s terms of reference can be viewed here.

    • Nigel Payne (Chairman)
    • Steve Booysen
    • Peter Moyanga

    Internal control

    It is the board’s responsibility to oversee the group’s system of internal control and to keep its effectiveness under review. The system is designed to provide reasonable assurance against material misstatement and loss. The system of internal financial control is designed to provide assurances on the maintenance of proper accounting records and the reliability of financial information used within the business and for publication. The internal control system includes a reasonable division of responsibility and the implementation of policies and procedures which are communicated throughout the group.

    Internal audit

    The group operates on an outsourced internal audit model, currently outsourced to Deloitte. Internal audit is responsible for assisting the board and management in maintaining an effective internal control environment by evaluating those controls continually to determine whether they are adequately designed and operating efficiently and effectively and to recommend improvements.

    External audit

    Grant Thornton are the external auditors of Vukile and its subsidiaries, including the Namibian subsidiaries. The independence of the external auditors is recognised and annually reviewed by the AR committee.

    The external auditors attend all AR committee meetings and have unrestricted access to the chairman of the AR committee.

    Risk management review

    Our approach

    The group has documented its approach to risk management in a formal policy. The strategic intent of our risk management policy is to create an environment in which risk management is applied at a consistently high level across the group, enabling management to take informed decisions, achieve business objectives and maximise returns for linked shareholders.

    Key risks

    Risk description Risk action/treatment
    Inability to refinance major debt exposures on acceptable terms and conditions.
    • Diversified sources of funding across five banking institutions as well as access to debt capital markets through the Domestic Medium Term Note Programme.
    Potential high inflation environment resulting in increased interest rates
    • Conservative hedging policy with 88.0% of all debt currently hedged.
    • Averaged tenure of interest rate hedges equals 3.0 years.
    Vacancy levels – oversupply especially in the office sector
    • Significant improvement in the quality of the portfolio over the past three years.
    • Ensuring that products stay abreast with the market and that asking rentals are market related.
    • Strong relationship with third-party brokers.
    • Leasing incentives for tenants and brokers.
    • Property managers to stay close to tenants in order to understand changing needs.
    • BEE certification – imminent.
    Inconsistent supply of critical services (electricity, water, municipal services: refuse, property transfer, legal services)
    • Diversification across nodes.
    • Installing generators for emergency power.
    • Installing water tanks where necessary.
    Political risk and social disturbances (labour unrest) linked to retail property development in areas where the group has properties
    • SASRIA insurance cover of R1.5 billion.
    • Fostering good relationships with the communities.
    Impact of the new National Treasury/DPW policy for lease renewals, resulting in shorter term leases/exit clauses being exercised.
    • Continual liaison with DPW and the SAPOA transformation committee.
    • Our exposure to this sector is currently at 9.8% and, in terms of board policy, will not exceed 15% of total investment properties.
  • Property and investment committee

    Committee Members

    • Mervyn Serebro ( Chairman)
    • Nigel Payne
    • Peter Moyanga
    • Hatla Ntene

    The property and investment committee is an important element of the board’s system to drive its growth strategy through acquisitions, redevelopments and refurbishments. The committee comprises two executive directors and four independent non-executive directors.

  • Social Ethics and Human Resources

    Board Members

    • Steve Booysen (Chairman)
    • Anton Botha
    • Renosi Mokate

    Social, ethics and human resources committee

    The report by the social, ethics and human resources (SEHRC committee) is set out on pages 30 to 32 of this integrated annual report.

    The committee’s terms of reference can be viewed at www.vukile.co.za/governance/termsofreference/sehrcommittee .

    Social, ethics and human resources committee report

    The committee is constituted with a dual mandate. The statutory duties of the committee are discharged in terms of sections 72 (4) and (5) of the Companies Act, 2008, read with regulation 43 of the Companies Regulations 2011, which states that all listed companies must establish a social and ethics committee.

    In addition to its statutory duties, the committee is responsible for the strategic human resources issues of the group, including remuneration.

    Terms of reference

    The committee has adopted a combined formal terms of reference which have been approved by the board and will be reviewed on a periodic basis.

    Membership, meeting attendance and evaluation

    The committee consists of three non-executive directors, all of whom are independent. At 31 March 2014, the committee comprised the following members:

    Directors Period served

    SF Booysen (Chairman) 20 March 2012 – current

    AD Botha 17 May 2004 – current

    SEN Sebotsa 1 January 2014 – current

    Social and ethics statement

       
    Global responsibility protocols
    • The group supports and respects the principles as set out in the UN Global Compact Code, OEDG’s recommendation on the prevention of corruption and the International Labour Organisation’s directive on decent work and working conditions.
    Work environment
    • The group considers its workforce (a total of 35 employees as at 31 March 2014) to be its biggest and most important asset. Human rights and friendly labour practices are embedded in the company’s official values (refer to our value statement on page 12).
    Employment equity, B-BBEE, transformation
    • The group has identified transformation as one of its critical success factors. A significant development in embedding transformation in the business was the conclusion of the Encha empowerment transformation transaction which, inter alia, saw Encha become a significant shareholder in the group and its CEO, Dr Sedise Moseneke, being appointed as an executive director.
    Corporate citizenship, consumer relations, and the group’s impact on the environment, health and public safety
    • The group aims to be a good corporate citizen and to be active in uplifting the communities in which it operates. A report on our community involvement is presented on page 61. The group’s impact on the environment and health and safety are detailed on page 60 of this integrated annual report.
    Record of sponsorship, donations and humanitarian initiatives
    • A register of the sponsorships, donations and humanitarian initiatives is maintained by the company secretary. For the year ended 31 March 2014, the total value of sponsorships, donations and humanitarian initiatives was c.R430 000.

Key stakeholders

A high level of engagement with Vukile’s stakeholders is an integral part of our management system

King III

The board is committed to complying with the Code of Governance Principles as set out in King III. The board further aims to apply the best practice recommendations, as set out in the King Report, in a manner that reflects the stature, market position and size of the group. Other than where an explanation for non-compliance with the principles of King III has been provided, the group has applied all the King III principles.

The board

The board is collectively responsible to the group’s stakeholders for the long-term success of the group and for the overall strategic direction and control of the group. The board exercises this control through the governance framework of the group which includes detailed reporting to the board and its committees, a system of internal controls and a delegation of authority through an approval framework.

The board discharges its responsibilities as contained within its charter. The board charter can be viewed here.

Composition and appointment of directors.

The details of the directors, including their qualifications, experience, expertise and appointment dates appear on pages 24 and 25 of this integrated annual report.

Directors are appointed by the board in a formal and transparent manner, after review and nomination by the nominations committee (NC). All nominated candidates are subject to an interview by the full board.

  • Chairman and independence

    The roles of the chairman and chief executive are separate and the office of the chairman is occupied by an independent non-executive director. The formal delegation of authority framework ensures there is a clear division of responsibilities between the chairman and CEO and those of the board as a whole. All the non-executive directors are also considered to be independent.

    Chief executive

    The board appoints the chief executive (CEO). Mr Laurence Rapp serves as CEO and was appointed on 1 August 2011.

    Compulsory retirement age

    The compulsory retirement age of non-executive directors is 70.

    Rotation of directors

    In line with the provisions of the Memorandum of Incorporation, one third of both non-executive and executive directors are required to retire annually at the company’s AGM and if eligible, be re-elected. In addition to this, the appointment of directors by the board during the year are required to be confirmed at the AGM.

    Information and professional advice

    The directors are entitled to seek independent professional advice at the group’s expense concerning group affairs and have access to any information they may require in discharging their duties as directors. They also have unrestricted access to the services of the company secretary.

  • Board evaluation

    The board assesses its performance and that of its individual directors, as well as their independence, on an ongoing basis. Subsequent to year-end, the company secretary facilitated a self-assessment of the board and committee evaluation, under supervision of the chairman of the board. Matters considered in the evaluation focused on the effectiveness of the board and its committees, including:

    • Composition
    • Performance
    • Role of the chairman
    • Appropriateness of the board charter and committees’ terms of reference
    • Communication and interpersonal relationships
    • Board dynamics and leadership
    • Independence considerations for all directors and specific consideration of directors with terms of service in excess of nine years.

    The outcome of the evaluation has been considered by the board and actions have been agreed to enhance the effectiveness of the board and its committees, including directors’ development needs.

  • Dealing in group securities

    A formal securities dealings policy has been developed and adopted by the board to ensure that directors and employees conduct securities dealings in compliance with the JSE Listings Requirements and the insider trading legislation in terms of the Financial Markets Act.

  • Directors’ declarations and conflict of interests

    Directors’ declarations of interests are tabled and circulated at every board meeting. All directors are encouraged to assess any potential conflict of interest and to bring such circumstances to the attention of the chairman.

  • Company secretary

    The company secretary is responsible for the duties set out in section 88 of the Companies Act and for ensuring compliance with the JSE Listings Requirements. Director induction and training are part of the company secretary’s responsibilities. He is responsible to the board for ensuring the proper administration of board proceedings, including the preparation and circulation of board papers, drafting annual work plans, ensuring that feedback is provided to the board and board committees and preparing and circulating minutes of board and board committee meetings. He provides practical support and guidance to the board and directors on governance and regulatory compliance matters.

    The JSE Listings Requirements require that company boards must consider and satisfy themselves annually regarding the competence, qualifications and experience of the company secretary, and also whether he maintains an arm’s-length relationship with the board.

    The board has evaluated the company secretary and it is satisfied that he is suitably qualified for the role and after considering the company secretary’s relationship with board members individually and with the board as a whole, that he maintains an arm’s-length relationship.