Governance for a sustainable business


Key material issues

The Group’s entrepreneurial spirit is evidenced by its rapid growth. This has been achieved by exploring new opportunities and taking calculated risks. Risk and opportunity are two ends of the same spectrum. In order to proactively respond to change and achieve growth, there is a strategic need to explore new opportunities and directions, while managing the attendant risks. The ability to maintain Bidvest’s distinctive culture of entrepreneurship and innovation, while simultaneously enhancing accountability and solid integrated performance, is critical to the Group’s future prosperity.

The board is responsible for the total process of risk management. It sets the risk strategy, which is based on the need to identify, assess, manage and monitor all known forms of risk across the Group. Management is accountable through divisional risk committee delegations, for designing, implementing and monitoring the processes of risk management and integrating them into the day-to-day activities of the businesses. Managing risk is an integral part of generating sustainable shareholder value and increased stakeholder interest.

Bidvest’s decentralised structure forms the basis of the Group’s business continuity plan with each of the operations being self-sufficient with regard to disaster recovery and management succession plans. The individual business units are sufficiently sized and independent of each other to eliminate Group-wide disaster risk. This decentralised risk-management approach delivers an effective, robust and integrated risk model.

Another fundamental risk-management mechanism is the diversified Bidvest business model, making entrepreneurial managers accountable for all aspects of performance and delivery.

Our 2013 key material issues are derived from the ongoing risk assessment conducted by the Group and divisional executives throughout the financial year. Issues are considered material when they may have a significant impact on the long-term sustainability of the Group or divisions. While other key issues are identified in the process, the table below shows only those that are considered material.

These issues are aligned with the focus areas of our chairperson and chief executive (see pages 16 and 17) and are further expanded upon in the operational reports.

Summary of key material issues

Material issue Commentary Risks and opportunities  
Remaining competitive and relevant Critical to the success of the Group is the ability of management to ensure their businesses remain relevant in rapidly evolving environments. Management need to be able to anticipate the impact of market change and respond timeously.  
Increasingly complex business environment Globally, legislative developments increasingly create a more complex environment within which Bidvest must participate. Internationally, legislation within the competition, corruption and privacy domain are currently areas of focus. Businesses are proactively addressing these changing requirements in their individual environments throughout the Group. This remains a core challenge and key focus and management is monitoring this progress through the divisional risk committees on an ongoing basis.  
Threat of small talent pool and limited skilled resources Continued efforts to identify, train and retain key talent within the business, as well as attracting external skilled resources are priority for management. In South Africa, B-BBEE regulation elevates this talent management risk even further due to small talent pool. Successful career planning and promotion is already evident, as well as success stories of new management teams driving stronger performance. Management continue to be on the lookout for talent and identify skills from within the business to grow into new roles for the future.  
Fostering positive long-term relationships with key suppliers and customers This remains a cornerstone of the way Bidvest does business. This continues to be recognised as Bidvest’s strength. Management is constantly challenged on its ability to manage and grow these relationships.  
Cost-effective IT systems and support structures Bidvest has adapted its IT governance framework in order to support the effective and efficient management of information resources (eg people, technology and information) to facilitate the achievement of the organisation’s objectives. IT implementations are one of the highest potential risk processes undertaken by a business. Management remains closely involved and is increasingly supported by internal audit involvement with risk and audit committee’s oversight ensuring adherence to Group IT frameworks and guidelines.  

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.

Bidvest prizes simplicity. Better focus makes it easier to manage your business which is the key ingredient in understanding governance. Within each division of Bidvest there exists a subdivision level. Bidvest South Africa has 10 divisional CEs, each running substantial businesses, supported by their respective FDs. Within Bidvest Foodservice globally there are CEs 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, Group risk committee and Group social and ethics committee. Each of these divisional committees addresses a pre-agreed agenda and collates and reports back into the centre to ensure adequate focus throughout the Group.

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 independent 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 annually reviews the code of ethics and ensures continued alignment of this code with the Bidvest values. 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 noncompliance 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 Limited 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 continues to update and monitor the gap analysis determining 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. In line with Bidvest’s decentralised structure divisional management have established additional policies and procedures as are specific 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.

Regulatory compliance

Bidvest recognises that its risk of non-compliance stems from a weakness within the practical impact of implementation of the legislation on their business. Each company is required to identify key material areas of legislation that govern their environment. Each business is required to implement practical steps to ensure compliance within their environment and report this progress through divisional risk committees.

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 placed the compliance of these Group-wide acts as well as industry and regional acts on the agenda of the Group risk committees where exposures have been identified and compliance is monitored. Bidvest is listed on the JSE Limited and as such annually confirms that the company complies with the Listings Requirements. 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.

Internal audit

The purpose, authority and responsibility of the internal audit function are defined in a board-approved charter that is consistent with the Institute of Internal Auditors’ definition of internal auditing, and the principles of King III. A risk-based internal audit methodology has been applied, with input from divisional management and aligned to the organisation’s risk management processes. The risk-based internal audit plans are presented annually to the audit committee for approval. The audit committee considers the objectives and rationale that drives the plan in order to achieve the objectives of internal audit processes.

Internal audit continued to function independently and objectively throughout the Group in the past year. The internal audit manager within each division, as well as at Group level, reports functionally to the chairman of the respective audit committee. Unrestricted access to members of the audit committee and executives of the organisation is available to the internal audit function. In addition, regular separate meetings took place between internal audit and the chairman of the divisional and Group audit committees during the year under review.

Although not reliant on external auditors for any resource support, the internal audit function, in accordance with the Group’s combined assurance model, continues to liaise with the external auditors, and other assurance providers identified, to maximise efficiencies in assurance coverage on key risks.

The effectiveness of the company’s system of internal controls and risk management, as well as the adequacy and availability of skills to address identified risks is assessed by the divisional audit committees and is reported up to the Group audit committee for approval and acceptance.

Based on the work carried out by internal audit during the year under review, controls evaluated were assessed as adequate and effective to provide a reasonable level of assurance that risks are being managed and that Group objectives should be met.

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 chairperson and chief executive and maintaining a succession plan; and
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.

QUICK LINK: Directors’ report
http://www.bidvest.com/ar/bidvest_ar2013/010.php

The board charter, which is reviewed annually expresses the board’s commitment to meeting the above responsibilities. While retaining overall accountability the board 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 board 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.

The board has six Group committees that assist in discharging its responsibilities. These Group committees, listed below, play an important role in enhancing good corporate governance and monitoring and reporting on internal control environments in order to give assurance to the positive performance of the company:

1. Acquisitions committee
2. Audit committee
3. Nominations committee
4. Remuneration committee
5. Risk committee
6. Social and ethics committee

QUICK LINK: Committee reports
http://www.bidvest.com/ar/bidvest_ar2013/011.php

Each board committee acts according to the annually reviewed and board-approved terms of reference. Copies of board charters are available at:

QUICK LINK: Board charters
http://www.bidvest.com/ar/bidvest_ar2013/012.php

Board committees may take independent professional advice at the company’s expense. The committees are subject to annual evaluation by the board on performance and effectiveness. Chairmen of the board committees are required to attend annual general meetings to engage as required with shareholders.

Membership and attendance is detailed in the directors’ report and various subcommittee reports.

QUICK LINK: Directors’ report
http://www.bidvest.com/ar/bidvest_ar2013/013.php

QUICK LINK: Committee reports
http://www.bidvest.com/ar/bidvest_ar2013/014.php

Board and board committees’ performance assessment

Annually, the performance of the board as a whole and the board committees are individually appraised. The newly appointed board will conduct a limited annual board self-assessment review for 2013 with a detailed review scheduled for 2014, allowing the new board members time to settle into their new roles. Internal feedback from the board has indicated that they are satisfied with their new roles and the level of induction received to date. 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.

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 quarterly.

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 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.

External audit

Deloitte & Touche are the Group’s lead auditors and Bidvest South Africa’s divisional auditors, with KPMG auditing the Bidvest Foodservice division. The audit committee has confirmed the continuing independence and objectivity of external auditors.

King III journey

Bidvest remains committed to ensuring compliance with the principles as set out in King III, acknowledging however, that this process is a journey, and requires ongoing monitoring and commitment. The table below sets out a summary of the milestones achieved and the continued areas of focus within the group.

King III principle Status update Areas of focus  
1. Ethical leadership and corporate citizenship
King III principles have been successfully applied within ethical leadership and corporate citizenship.
Ethics and fraud hotline is operational, managed by an independent third party supporting the values and principles stated in code of ethics.
Group social and ethics committee monitors compliance with and adherence to the Code of Ethics and general ethical business practices.
Ethical business practices are a mandatory business practice within Bidvest, and any non-adherence to this policy is encouraged to be reported directly to top management.
The fraud and ethics hotline marketing continues to raise awareness of this tool.
The output and findings of this tool are 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.
The remuneration policy has been approved and adopted, with King III principles being applied.
Bidvest has recently reviewed and made changes to the composition of the board, including appointing a new Chairperson, independent non-executive director Lorato Phalatse.
Bidvest performs an annual independently managed board self assessment process to ensure optimised board performance.
 
3. Audit committees
King III principles have been successfully applied with regards to audit committees.
Bidvest has a Group audit committee structure, that adheres to the requirements of King III good governance principles, and has a divisional audit committee structure which supports the Group committee in the performance of its duties.
 
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 assesses 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 successfully implemented and rolled out through the Group.
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.
The internal audit team has focused significantly on the review and improvement of the IT control environment, with positive results to date.
 
6. Compliance with laws, rules, codes and standards
King III principles have been applied.
The social and ethics committee has regulatory compliance as a standard agenda item, with each management team identifying the regulatory universe within which the specific entity operates.
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.
The Group audit committee requests that 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 the social and ethics committee the communication processes in place to monitor and strengthen these relationships.
Success stories are identified and communicated within the Group, where learnings from these experiences are shared and rolled out to other entities in the Group. The benefit of the diversity and size of the Bidvest Group allows us to learn and support divisions and businesses from within the Group.
 
9. Integrated reporting and disclosure
King III principles have been successfully applied with regards to the reporting process.
Successful use has been made of various mediums to produce transparent reporting.
Bidvest continues to be acknowledged for their successful reporting.
Bidvest has successfully created an annual integrated report, in line with the recommendations of the Integrated Reporting Committee of South Africa and building on this success will strive to improve the reporting in the current year.
 

Transformation

We have come a long way in our transformation journey. Bidvest has progressed steadily over the last 10 years, instilling the principles of transformation as a central component of our culture. What was traditionally an element of our compliance obligations has evolved into a key aspect of our business.

Recently we have experienced challenges relating to inconsistencies in different pieces of B-BBEE legislation and the varying requirements of our customers. These inconsistencies, coupled with a lack of knowledge and understanding of commercial realities by key stakeholders, complicate the task of doing business in some sectors of the economy.

Revised Codes of Good Practice are scheduled to be gazetted before December 2013, though businesses are still unclear about some of the proposed changes.

Our businesses remain committed to transformation and have put in place specific plans to achieve their respective goals.

Employment equity is our biggest challenge. This is a priority and point of focus over the medium to long term and is firmly supported by ongoing investment in training and development.

Bidvest will continue along the path to transformation and will entrench the gains made over the years. B-BBEE is a reality and a prerequisite for commercial success in South Africa. In many ways it is changing the way we do business.

Adapting to the needs of a dynamic business environment is the basis for growth and sustainability. Flexibility like this has always been core competence at Bidvest.

QUICK LINK: BEE information
http://www.bidvest.com/ar/bidvest_ar2013/015.php

Stakeholder engagement

Bidvest is a strong proponent of transparency, best-practice disclosure, consistent communication and equal and timely dissemination of information to all stakeholders. Because Bidvest’s structure is diversified and decentralised, stakeholder engagement happens at a Group, divisional and company level. An operation engages with stakeholders considered important to its operations or that may be significantly impacted by its business activities, which helps identify many of the important commercial and sustainable development issues facing shareholders and Bidvest operations. This process forms a major source of input for the divisional sustainability reports in this annual integrated report as well as the more detailed reports on our website.

The Group’s website contains a range of stakeholder-related information and materials, including an update on the Group’s activities, copies of all presentation materials given to investors and further explanation of matters contained in the annual integrated report. The annual general meeting is normally attended by all directors. Shareholders are encouraged to attend and to engage the company during the meeting.

QUICK LINK: Stakeholder matrix
http://www.bidvest.com/ar/bidvest_ar2013/016.php
 
Registered office South Africa
Bidvest House
18 Crescent Drive
Melrose Arch
Melrose
Johannesburg
2196
South Africa
Website: www.bidvest.com
Telephone: +27 (11) 772 8700
Facsimile: +27 (11) 772 8970
Email: info@bidvest.co.za
 

 

 

 

 

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