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