The Bidvest Group Limited ANNUAL INTEGRATED REPORT 2012
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Governance for a sustainable business

Bidvest’s entrepreneurial flair has been a driving force that has fostered growth in a variety of sectors, creating the Group as we know it. Diversity and multiple options have however impacted the overall sense of direction. Sturdy size demands sturdy structures which form the very backbone of governance as a whole. Clear vision about the way forward has become essential.

An appropriate structure that can capture the talent and unleash the energy needed for continued growth without becoming unwieldy or unfocused is the core rationale behind the structure of Bidvest into Bidvest South Africa (including the 10 divisions) and Bidvest Foodservice (locally and globally), Bidvest Namibia and Bidvest Corporate.

Bidvest prizes simplicity. Better focus makes it easier to manage your business which is the key ingredient in understanding governance. This decentralised structure also allows us to address challenges such as succession planning.

Within each division of Bidvest there exists a sub-division level. Bidvest South Africa has 10 divisional CEs each running substantial businesses, supported by their respective financial directors. Within Bidvest Foodservice globally there are MDs and FDs appointed to run and manage geographically grouped businesses, so too within Bidvest Namibia. Each division within this overall structure has a divisionally central assurance team. Oversight of each division is achieved through a federal corporate governance structure consisting of quarterly divisional audit committees (independently chaired) and quarterly divisional risk committees, reporting in to the quarterly Group audit committee, risk committee and social and ethics committee. Each of these divisional committees collates and reports back into the centre to ensure adequate focus throughout the Group.

Ethical leadership and corporate citizenship

At Bidvest, corporate governance is a way of life rather than a set of rules. Stakeholders can only derive full, sustained value from a business founded on honesty, integrity, accountability and transparency. Bidvest is committed to applying good corporate governance principles in a manner that complements its entrepreneurial flair.

Bidvest believes in empowering people, building relationships and improving lives. Entrepreneurship, incentivisation, decentralised management and communication are the keys to delivering excellence and innovation in all our business dealings.

Our commitment to building and sustaining an ethical organisational culture is entrenched in our vision, mission, strategies and operations. While the Board has ultimate responsibility for the company’s ethics performance, executive management is responsible for setting up a well-designed and properly implemented ethics management process.

On the wave of change that was brought about in the restructuring of the Group was a renewed commitment to the areas of governance, risk and compliance within the Group. The restructure provided resources for Bidvest Group to provide guidance and set parameters within the divisions. This change process continues to positively impact the Group, allowing the decentralised management teams to embrace Group requirements and embed these requirements into their DNA.

A governance, risk and compliance framework continues to form the basis for how Bidvest manages the challenge of good governance in a decentralised environment. The framework shows the integration of four basic pillars, being governance, internal audit, risk management and regulatory compliance, driven by Group and divisional strategy, in compliance with legislated requirements and reported through the established structures.

Code of ethics

A prime duty of the board, its committees, directors, officers of the Group and managers is to ensure our code of conduct is honoured. In March 2012 the board reviewed the code of ethics and aligned this code with the Bidvest values as listed here. The code demands highest standards of integrity, ethics and behaviour in all conduct and dealings; non-discriminatory employment and promotion practices; supporting employees through training and development to reach their full potential; and proactive engagement on environmental, social and sustainability matters.

As an outward measure of support and protection of this code and the Bidvest values, the board continues to support the process of confidential reporting (whistle-blowing) of fraud, theft, breach of ethics and other risks. This is an outsourced independent and confidential system for stakeholders to report unethical, dishonest or improper behaviour, including non-compliance with company policies, as well as corruption and fraud. All reported incidents are investigated by management and, where appropriate, action is taken. In line with legislation, our well-communicated commitment not to victimise whistle blowers ensures transparency and promotes ethical conduct and the identity of whistle blowers is protected by the service provider.

Corporate governance compliance

The Bidvest Group is fully committed to the four values underpinning corporate governance – responsibility, accountability, fairness and transparency. The Group is committed to implementing the principles in King III and the best practice recommendations of the report. The board initiated a gap analysis to determine the extent to which Bidvest has applied the principles and recommended practices in King III. This analysis identified the actions taken to ensure application of the governance principles and those principles which will require ongoing attention and action. The analysis also identified areas of improvement or ways in which our governance practices could be enhanced.

The Group corporate governance manual lists the charters, codes, policies and documents which have to be formulated by divisional governing bodies. These are categorised into matters the Group deems as mandatory, recommended or optional. In line with Bidvest’s decentralised structure divisional management will establish additional policies and procedures as are applicable to their governing structures.

We confirm that the Group applies the King III governance principles and continues to further entrench and strengthen recommended practices throughout our governance structures, processes and procedures. The Group has taken the necessary steps to put in place a plan to meet these requirements. Rollout within the Group is at various stages of maturity, but continues to progress well against the plan.

King III principle   Status update   Areas of focus  
1. Ethical leadership and corporate citizenship
  • King III principles have been successfully fully applied within ethical leadership and corporate citizenship
  • Code of ethics has been reviewed and updated in compliance with the requirements of the Companies Act
  • Ethics and fraud hotline is operational, managed by an independent third party supporting the values and principles stated in code of ethics
  • Bidvest board has recently approved and distributed the updated code of ethics
  • The fraud and ethics hotline marketing continues to raise awareness of this tool. The content of this tool reported to the social and ethics committee quarterly
2. Boards and directors
  • King III principles have been successfully applied with regards to the board composition, board role and duties, and the fiduciary duties of the board
  • Principles relating to performance assessments have been applied and continue to develop as more stringent performance measuring processes are adopted
  • Remuneration policy has been approved and adopted, with King III principles being applied
  • Bidvest has recently reviewed the composition of the board, and appointed four new members of the board. A process is currently under way to equip them with the required knowledge, understanding and background regarding the Bidvest Group
  • During the year the board appointed a lead independent director (DDB Band)
3. Audit committees
  • King III principles have been successfully fully applied with regards to audit committees
  • The board has nominated two new audit committee members, with effect from
    August 25 2012, pending AGM approval
4. The governance of risk  
  • King III principles have been successfully applied with regards to the governance of risk
  • Policies and charters have been adopted. Management takes direct ownership and responsibility for determining, managing, mitigating and reporting risk to the Group risk committee
  • Each division is required to assess the materiality of the risks identified in their division, and summarise management’s activities in managing, mitigating and monitoring each of these key risks on an ongoing basis
5. The governance of information technology  
  • King III principles have been applied
  • An IT governance framework has been adopted, with best practice principles as the basis of the framework
  • The decentralised, bottom-up approach is adopted, with each management team reviewing its IT governance principles and policies against the Group framework
  • Bidvest has determined the minimum standards each division has to implement within their IT environments
  • New appointments within the Bidvest South Africa team has significantly increased IT resource and skill set
6. Compliance with laws, rules, codes and standards 
  • King III principles have been applied
  • The social and ethics committee have regulatory compliance as a standard agenda item, with each management team identifying the regulatory universe the specific entity operates within
  • Group identifies global updates relevant to the whole Group and supports an education process and support role of addressing these requirements
  • Bidvest has invested in an online training environment to ensure that all key management team members have the required training and working knowledge of recent legislation identified by Group as a key risk area
  • Each management team has been requested to identify key members of their team who would need to be annually accredited in these laws
  • This is an ongoing process that as legislation develops so too will the supporting training and accreditation requirements
7. Internal audit
  • King III principles have been successfully applied with regards to internal audit
  • Internal audit supports the audit committee in advising on the current state of internal control, internal financial control and risk management
  • Internal audit adopts a risk-based audit approach, with exposure to the risk management process throughout the Group
  • Group audit committee has requested that quarterly all internal audit teams provide an opinion regarding the state of risk management, internal control and internal financial control within each business that is included in their scope of review. This is an ongoing process of assessment, reporting and monitoring throughout the Group
8. Governing stakeholder relationships
  • King III principles have been applied with regards to stakeholder relationships
  • Management teams are required to identify key stakeholder groups and report to social and ethics committee the communication processes in place to monitor and strengthen these relationships
  • These are reported in the integrated annual report
  • For the integrated reporting exercise Bidvest is in the process of gathering this data divisionally and accumulating it to reflect the combined Group stakeholder engagement activities
  • There are currently pockets of excellence both divisionally and across the spread of stakeholders. Where weaknesses have been identified, the Group is assisting to put in place workshops, plans and reporting mechanisms to ensure these are addressed
9. Integrated reporting and disclosure  
  • King III principles have been successfully applied with regards to the reporting process
  • Bidvest has been acknowledged for their successful reporting in the past
  • Successful use has been made of various mediums to produce transparent reporting
  • Bidvest has previously prepared an annual report, including the integrated sustainability report (reported against GRI requirements). The current year reporting is focused on being a fully integrated single report, in line with the recommendations of the Integrated Reporting Committee of South Africa

Regulatory compliance

Bidvest recognises that its greatest risk of non-compliance stems from a weakness within the practical impact of the legislation on their business. Each company is required to identify legislation. Bidvest is listed on the JSE Limited and as such annually confirms that the Company complies with the Listings Requirements.

Statutory compliance
Compliance remains a core focus of the board, which is ultimately responsible for ensuring that the Group identifies and complies with applicable laws. The board has noted the following significant legislative developments during the year under review in jurisdictions in which the Group operates:
  • the South African Companies Act
  • the South African Consumer Protection Act
  • the South African Competitions Act
  • the South African Protection of Personal Information Bil
  • the UK Bribery Act.

The board has appointed a social and ethics committee. The board has placed the compliance of these Group-wide acts as well as industry and regional acts on the agenda of the Group risk and social and ethics committees where exposures have been identified and compliance is monitored.

During the year under review the Group did not receive any requests for access to information in terms of the Promotion of Access to Information Act.

Board role and function

Executive directors implement strategies and operational decisions. Non-executive directors provide an independent perspective and complement the skills and experience of executive directors. They objectively assess strategy, budgets, performance, resources, transformation, diversity, employment equity and standards of conduct. They also contribute to strategy formulation and decision making.

Collectively, the board believes the current mix of knowledge, skill and experience meets the requirements to lead Bidvest effectively.

The board functions in accordance with the requirements of King III and within the context of the Companies Act, the Listings Requirements of the JSE Limited and other applicable laws, rules and codes of governance.

The main responsibilities of the board, as set out in the board charter, are:
  • managing its relationship with management, the shareholders and other stakeholders of the Company along sound corporate governance principles, while providing effective leadership on an ethical foundation
  • to contribute and approve the Group strategy, while aligning the strategy with the Group risks and business plans as assessed by management
  • appointing the independent, non-executive chairman and chief executive and maintaining a succession plan
  • appointing directors, subject to election, and evaluating performance of the directors
  • to ensure overall governance structure and policies ensure the integrity of the Group’s management of risk, internal financial control and internal control.

The board charter, which is reviewed annually expresses the board’s commitment to meeting the above responsibilities. While retaining overall accountability the Group has spread the burden of responsibility down into the divisional structures where divisional committees exist that are able to focus on the needs and strategies within the division itself. Each division has its own audit committee and risk committee operating under the delegated authority of the Group committees. This is consolidated and reported to a Group level where the board is able to focus on the high risk and high impact areas.

Board and board committees’ performance assessment

Annually, the performance of the board as a whole and the board committees individually is appraised. In line with King III the evaluations were done by an external service provider.

The recent performance assessment indicated that the board and the board committees are functioning effectively and efficiently. No major issues were raised.

Independence of non-executive directors

The board comprises a majority of independent non-executive directors. The board considered the issue of independence of directors, evaluating the rationale and meaning of the requirements of independence according to King III. An assessment, considering the salient factors and unique circumstances of each director, was performed for each non-executive director. Furthermore, the independence of non-executives who have served on the board for longer than nine years was assessed. The board is satisfied that 11 of the 16 non-executive directors are independent.

Mr MC Ramaphosa, chairman of the board, is not regarded as independent in view of his participation, either directly or indirectly, in the Dinatla black ownership transaction. As such Mr DDB Band has been appointed as the lead independent director for the board, thus ensuring compliance with King III requirements.

Conflict of interest

The board recognises the importance of acting in the best interest of the Company and protecting the legitimate interests and expectations of its stakeholders. The board consistently applies the provisions of the Companies Act in disclosing or avoiding conflicts of interest. Directors are required to declare their interests annually.

Statutory powers

Section 66(1) of the Companies Act provides that the business and affairs of a company must be managed by or under the direction of its board general powers of the directors are set out in the Company’s memorandum of incorporation.

Insider trading

No employee, his/her nominee or members of his/her immediate family may deal directly or indirectly, at any time, in the securities of the Company on the basis of unpublished price-sensitive information. No director or officer may deal in the securities of the Company during the embargo period determined by the board.

Company secretary

Mr CA Brighten is the Group company secretary, duly appointed by the board in accordance with the Companies Act. The company secretary and his team (the “Secretariat”) are trusted advisers to the board on compliance and governance matters. The Secretariat aims to provide guidance to directors as individuals and as a collective, with particular emphasis on supporting the non-executive directors. The Secretariat is a key element in the implementation of corporate strategies, by ensuring that the board’s decisions and instructions are properly carried out and communicated. Further to this, they are available to provide a central source of guidance and advice within the Company on matters of business ethics and good governance. The Secretariat also aims to provide the highest standard of compliance with the statutory and regulatory requirements within its remit and ensures that due regard is paid to the interests of shareholders.