Corporate Governance

20368

Valli Moosa

 

  Corporate governance encompasses the concept of sound business practice, which is inextricably linked to the Group’s management systems, structures, policies and culture of governance, and ensures that the Group acts towards all stakeholders in a responsible and transparent manner from an economic, social and environmental perspective.

 

PRINCIPLES OF CORPORATE GOVERNANCE AND STRUCTURES

The board reaffirms its commitment to sound governance. It ensures that the Group’s business is conducted in accordance with the highest standards of corporate governance, using risk management and control in accordance with local and internationally accepted corporate practice. These standards are well embedded in the Group’s system of internal controls, which have been implemented to comply with King III recommendations and the governance requirements of the Companies Act, 2008.


BOARD STRUCTURES

BOARD STRUCTURES

The board meets at least quarterly and is responsible to shareholders for setting direction through strategic objectives and key policies, and monitoring implementation through structured reporting systems.

The Company has a unitary board structure, comprising two executive directors and 10 non-executive directors (six of whom are independent non-executives as defined by King III).

The non-executive directors are drawn from diverse backgrounds and bring a wide range of experience, insight and professional skills to the board to ensure effective leadership of the Company. Generally non-executive directors have no fixed term of appointment but, in terms of the memorandum of incorporation, retire by rotation every three years and, if available, are considered for reappointment at the annual general meeting. Directors appointed to fill a vacancy on the board during the year, retire at the next annual general meeting of the Company, enabling shareholders the opportunity to confirm their appointment.

The board follows a formal and transparent process when appointing new directors. The Nominations Committee considers director succession planning and makes appropriate recommendations to the board. It evaluates skills, knowledge and experience required to implement Group strategy.

During the year under review, Cynthia Carroll served as chairman of the board as well as chief executive of Anglo American plc. The board is cognisant of the preference stated by King III for the chairman to be independent. However, the board is aware that the Code contemplates the appointment of a non-independent chairman, requiring that, in those circumstances, a lead independent non-executive director should be nominated. In the case of Amplats, Valli Moosa serves as independent deputy chairman and lead independent non-executive director, supported by five other independent non-executive directors, which provide a robust board structure to ensure good governance. Mrs Carroll subsequently announced in October 2012 that she will be stepping down from Anglo American plc as well as director and chairman of Amplats with effect from 26 April 2013.

The role of the chairman and CEO are separate. To ensure further clarity of roles, the board has adopted a Statement of Division of Responsibilities among the chairman, the lead independent non-executive director and the chief executive, which clearly sets out the responsibilities of each individual’s role. This is available on the Company’s website. This allows for a clear balance of power and authority at board of directors’ level to ensure that no one director has unfettered powers of decision-making.

The chairman is responsible for leading the board and its effectiveness. The deputy chairman and lead independent non-executive director, is available to shareholders, acts as a sounding board and confidant of the chairman and is available as an intermediary for the other directors, if necessary. The chief executive is responsible for the execution of strategy and the day-to-day business of the Company, supported by the Executive Committee (Exco) and the Operations Committee (Opsco), both of which he chairs. The functions and membership of the Exco and Opsco are set out on page 165.

If a director becomes aware that he or she has a direct or indirect interest which may be construed as being in conflict with the business of the Company he or she should notify the board at the next board meeting or submit a written declaration of interests. Directors have a continuing obligation to update their declarations of interests and recuse themselves from any discussion or decisions taken by the board should they be in conflict.

The board has a charter setting out its mission, role, duties and responsibilities, and, in particular, the following:

  • Directors’ fiduciary responsibilities
  • Leadership of the board
  • Induction of new directors
  • Evaluation of directors
  • Matters reserved for the board
  • Relationship between staff and external advisers
  • Unrestricted access to Company records
  • Board meetings and procedures
  • Executive succession planning

The board and management continually review and enhance the systems of control and governance to ensure that the Group’s business is managed ethically and within prudent risk parameters, in line with internationally accepted standards of best practice. The Governance Committee, from time to time, monitors and deliberates on changes to the legislative and statutory environment, new business policies and matters of compliance. This ensures that the board is kept apprised of new developments, and monitors and supports governance and sound business practice in the organisation.

The following changes to the board occurred during the year under review: the resignations of Godfrey Gomwe, Albertinah Kekana as independent non-executive director and the leaving of Neville Nicolau as chief executive of the Company, and the appointments of Christopher Griffith as chief executive on 1 September 2012, Khanyisile Kweyama as non-executive director on 15 October 2012 and John Vice as an additional independent non-executive director on 30 November 2012.

The board charter terms of reference of the board committees, the roles and responsibilities of the directors, as well as the Company’s Business Integrity Policy for directors and employees, are detailed and updated as necessary and are available on the Company’s website.

Evaluation of the performance of all board members and members of subcommittees is formally conducted annually. This evaluation process was conducted internally during 2012, and it assessed the board of directors and subcommittees based on a self-evaluation process and specific questions and criteria. Each director is encouraged to focus on his or her personal perception of the board as a whole, and the performance of board committees, the chief executive and the finance director.

A comprehensive report and feedback on board and committee effectiveness are delivered on the results of the assessments to assist them in becoming more effective.

A formal induction process for directors is in place. Upon appointment directors are provided with recent board and committee documentation, information on legal and governance obligations, the Company’s memorandum of incorporation and recent reports. Guidance is provided on dealing in shares, the King III Code and the Companies Act, 2008. Directors are entitled to seek independent legal advice at the cost of the Company. Educational visits are arranged to underground and opencast mines, the processing operations, projects and joint ventures. Meetings are arranged between new directors and members of Exco to explain their areas of responsibility and to develop a full understanding of the complex business and operations which constitute Amplats.

Except for the chairman, who receives a single inclusive fee, the board and board subcommittee chairmen and members are paid a flat fee per annum, as recommended by Exco, noted by the Remuneration Committee and recommended by the board of directors to shareholders for approval. This fee encompasses the responsibility of ensuring that each committee attains its core objectives in line with each committee’s terms of reference. Company executives are evaluated – and remunerated and rewarded – based on targets, key performance indicators and corporate objective weightings that include safety and sustainable development criteria. See page 172 for the detailed remuneration report.

KING III

Amplats applied the King III principles (the Code) for the period under review. In order to determine the extent of compliance with the Code, management commissioned an independent review in the third quarter 2012, which was undertaken by PricewaterhouseCoopers. The results of the review indicated substantial compliance with the Code, however, the appointment of a compliance officer and the formulation of risk appetite and tolerance levels were areas that required attention. Management continues to make firm progress in resolving these items and the intention is to finalise these issues before the second quarter of 2013.

THE BOARD


 

THE BOARD

The board is responsible to shareholders for setting economic, social and environmental direction through strategic objectives and key policies, and monitors implementation through structured reporting systems. From 1 January 2012 to the date of this report on 1 February 2013, the board comprised:

table4

COMMITTEES OF THE BOARD

The board has established a number of standing committees, which are ultimately accountable to it. These committees assist the board by focusing on specialist areas. The board committees meet independently and provide feedback to the main board through their chairman. The roles and representation of these subcommittees are listed in the table on page 165.

table5

In addition to the abovementioned committees of the board, several operating committees function within the Group. The Executive Committee (Exco) comprises directors of wholly owned subsidiary company Anglo Platinum Management Services Proprietary Limited, the provider of the major portion of financial, technical and administrative advisory services to the Company. Members of the Exco are detailed on pages 158 to 159 of this report and Exco usually meets on a weekly basis. The Operations Committee (Opsco) is chaired by the CEO and is constituted of the heads of all departments. Opsco meets on a monthly basis to review the operating performance of the Company.

Board committees

 

 

 

Role

Members

Executive Committee

Recommends policies and strategies; monitors implementation; deals with all executive management business; responsible for all strategic matters not expressly reserved for the board.

Chris Griffith*, Neville Nicolau5, Pieter Louw, Ben Magara
Mary-Jane Morifi, July Ndlovu, Bongani Nqwababa
Vishnu Pillay, Khanyisile Kweyama1, Andrew Hinkly

Operations Committee

Responsible for all operational matters; co-ordinates, manages and monitors resources; regularly reviews risk to achieve the Group’s aims.

Chris Griffith*, Neville Nicolau5, Pieter Louw, Ben Magara
Kenny Mokoka, Mary-Jane Morifi, July Ndlovu, Bongani Nqwababa Dean Pelser, Vishnu Pillay, Barrie van der Merwe10, Clive Govender
Simon Kruger, Ted Muhajir7, Archie Myezwa, Gordon Smith Kgapu Mphahlele, Andrew Hinkly, Martin Poggiolini13

Audit Committee

Monitors adequacy of financial controls and reporting; reviews audit plans and adherence to these by external and internal auditors; ascertains the reliability of the audit; ensures financial reporting complies with IFRS and the Companies Act; reviews and makes recommendations on all financial matters; recommends auditors to the board; monitors the Company’s appetite for risk and concomitant controls.

Richard Dunne*, Sonja Sebotsa12, Valli Moosa, John Vice9
Albertinah Kekana2

Governance Committee

Reviews quality of corporate governance and makes recommendations to the board; advises directors and management on the Companies Act, JSE Listings Requirements, King III Code and other governing legislation.

Valli Moosa*, Richard Dunne, Godfrey Gomwe1, Bongani Khumalo
Wendy Lucas-Bull, Albertinah Kekana2, Khanyisile Kweyama4 
Sonja Sebotsa12, Tom Wixley3

Nomination Committee

Considers suitable nominations for appointments to the board and succession planning, and makes appropriate recommendations based on qualifications and experience.

Cynthia Carroll*, Richard Dunne, Valli Moosa, Tom Wixley³

Remuneration Committee

Establishes the overall principles of remuneration and determines the remuneration of executive directors and executive heads; considers, reviews and approves Group policy on executive remuneration and communicates this to the stakeholders in the annual report.

Wendy Lucas-Bull*, Tom Wixley*³, Richard Dunne, Brian Beamish8

Safety & Sustainable Development Committee

Develops framework, policies and guidelines for S&SD management, and ensures implementation; monitors Group compliance with relevant legislation. Evaluates material sustainable development impacts in light of the precautionary principle and advises the board accordingly. It has a reporting line into the SE&T and Audit committees and directly into the board.

Dorian Emmett*, Brian Beamish, Richard Dunne, Bongani Khumalo
Lorato Mogaki11, Pieter Louw, Wendy Lucas-Bull, Ben Magara
Valli Moosa, Mary-Jane Morifi, July Ndlovu, Neville Nicolau5 
Chris Griffith6, Vishnu Pillay

Social, Ethics & Transformation Committee

Monitors and develops the Company’s compliance with the Companies Act, 2008, and goals with respect to the 10 principles set out in the UN Global Compact Principles as well as the OECD recommendations on corruption, the Employment Equity Act, the Broad-based Black Economic Empowerment Act, good corporate citizenship, labour and employment.

Wendy Lucas-Bull*, Richard Dunne, Dorian Emmett
Khanyisile Kweyama, Bongani Khumalo, Lorato Mogaki14
Valli Moosa, Sonja Sebotsa12

* Chairman

1 Resigned 15 October 2012. 6 Appointed 1 September 2012. 11 Appointed 29 October 2012.

Acting

2 Resigned 25 September 2012. 7 Resigned 10 December 2012. 12 Resigned 1 February 2013.

 

3 Retired 30 March 2012. 8 Appointed 25 April 2012. 13 Appointed 1 January 2013.

 

4 Appointed 15 October 2012. 9 Appointed 30 November 2012. 14 Appointed 30 October 2012.

 

5 Left 19 July 2012. 10 Resigned 31 December 2012.

 

KEY GOVERNANCE POLICIES


Key governance policies

A number of governance policies are enforced within Amplats and its subsidiary companies. These comprise, but are not confined to, the declaration of business interests, the declaration of gifts, gratuities and hospitality, anti-insider trading, confidentiality, anti-competitive behaviour, authority limits and various other general operational policies and procedures.

Business principles and business integrity code

Ethics are practised at Amplats by promoting leadership and inculcating a culture of integrity; by the observance of directors’ fiduciary duties and responsibilities; by avoiding conflicts of interest and acting in the best interests of the organisation; by encouraging whistle-blowing; and by promoting the values and principles set out in our codes of conduct.

During 2012, Group-wide training was continued to ensure that employees and suppliers were made aware of the requirements of the business integrity code and how they are expected to conduct themselves.

Authority policy manual

Amplats has a detailed Authority Policy Manual in place, which is updated on a regular basis. Its objectives are to delegate transactional and contractual authority from the board to Amplats staff and officials at various levels. This provides effective and practical directives and guidelines for minimising or eliminating the Company’s possible exposure to risk emanating from the unauthorised actions of its officials.

It also ensures that Amplats staff and officials fully understand demarcated authorisation limits, and strictly adhere to them.

In addition, all directors, prescribed officers and key personnel attended training on the Companies Act, 2008.

Systems, compliance and enforcement

Compliance with and enforcement of the Companies Act, 2008, JSE Listings Requirements, legislation governing the mining industry and the Company’s governance policies are monitored and tracked through internal monitoring and reporting systems, reviews, and internal and external audits.

No requests for information were lodged with the Company in terms of the Promotion of Access to Information Act, 2000, in 2012.

GOVERNANCE AND OUR JOINT-VENTURE PARTNERS


GOVERNANCE AND OUR JOINT-VENTURE PARTNERS

Non-managed joint ventures and associates are governed by monthly steering and management committee meetings and quarterly joint-venture Executive Committee meetings at which Amplats has representation. The agreements make provision for the management committees to constitute subcommittees to monitor areas such as employment equity, resource management, planning, production, safety, health, environment, audit, social development, community engagement and remuneration. The joint-venture governance process is included in the Sustainable Development Report.

COMPANY SECRETARY

In terms of section 3.84(i) of the JSE Listings Requirements the board must consider and satisfy itself, on an annual basis, on the competence, qualifications and experience of the company secretary.

Prior to the appointment of both Sarita Martin as company secretary and then Kevin Lester as acting company secretary, the board satisfied itself of this requirement.

 

GOVERNANCE OF RISK


GOVERNANCE OF RISK

Risk-management process

The board of directors of Amplats has specific responsibility over risk management in the Group. The board has delegated this function to the Audit Committee, which regularly reviews significant risks and also the mitigating strategies designed to manage these risks. The Audit Committee subsequently reports to the board on material changes in the Group’s risk profile. The risk-management process is facilitated by Anglo American Business Assurance Services (ABAS). However, overall accountability and responsibility for risk management rest with Amplats’ board of directors, senior management team and other officers.

The Group’s integrated risk management (IRM) methodology is based on ISO 31000 and is performed at four main levels:

  • The strategic level (markets and the global economy)
  • The organisational level (entities)
  • The operational level (safe, profitable platinum)
  • The technical level
table6

The diagram above illustrates the overall risk-management process undertaken at each level of the Group. The framework presented in the opposite table provides an overview of the levels at which risk assessments take place, culminating in the Executive Risk Summary at Group level.

Considerations of risk appetite and risk tolerance are inherent in all business decisions within Amplats. Senior management has, however, initiated a process to formally define risk appetite and tolerance levels for the Group. A proposal is under development and will be submitted to Amplats’ board of directors in 2013.  Risk appetite and tolerance

Once approved, a formal risk appetite and tolerance statement will be included in the Group’s risk management framework.

Assurance on the risk-management process

Assurance on the Group’s risk-management process is ongoing. 
It is obtained primarily through the following:

  • Risk-based internal audits. This entails incorporating identified risks into the individual audits that form part of the annual internal audit coverage plan.
  • Risk registers and associated action plans. These are maintained at each operation by dedicated risk co-ordinators who use Cura management software to facilitate ownership of, and accountability for, risk management at an operational level.
  • The annual review conducted by ABAS on the risk-management processes in the Group.

 

Amplats’ key risks and their mitigation strategies

Potential root cause of risks

 

Potential consequences

Current mitigating strategies

1. Global economic conditions

Continuation of global financial market uncertainty.

  • Unanticipated global market changes.
  • Demand growth that is below industry expectations.
 
  • Inadequate scenario plans.
  • Suboptimal response to global shifts.
  • Liquidity at risk.
  • Underinvestment and loss of long-term
    opportunity.
  • Alignment of the business with expectations of long-term demand for products – successful implementation of the portfolio review.
  • Ongoing monitoring of portfolio and organisational design to ensure continued sustainability and competitiveness.

2. Market concerns regarding security of PGM supply

Events/developments that could result in supply uncertainty for platinum group metals (PGMs).

 

  • Concerns regarding security of tenure.
  • Safety stoppages.
  • Social/labour unrest stoppages.
  • Inability to deliver project pipeline.
  • Longer-term outlook for autocatalyst and 
    fuel-cell demand.
  • Increased demand in the jewellery and industrial markets.
  • Geological scarcity of high-quality PGM reserves.
  • Failure to meet production targets.
 
  • Loss of investor confidence.
  • Loss of customer confidence.
  • Product substitution.
  • Price appreciation.
  • Discuss situation with customers and increase finished inventory levels to target six weeks’ supply.
  • Alignment of the business with expectations of long-term demand for products – successful implementation of the portfolio review.
  • Ongoing monitoring of portfolio and organisational design to ensure continued sustainability and competitiveness.

3. Social unrest

 

Deterioration in the social context of the operations, community protest and blockades. 
Labour stoppages, strike action and violence.

 

  • The key root cause at present is the recent unrest and inter-union rivalry in the platinum sector as well as further potential for social unrest owing to the outcome and associated social implications of the portfolio review.
  • Other longer-term contributing factors as follows:
  • Remote locations − migrant labour
  • High labour requirement
  • High stakeholder expectations that are not being met
  • Overstretched public services
  • Rising cost of living
  • Competition between unions for members
  • Demands for salary increases regardless 
    of the wage agreement
  • High rates of unemployment and poverty
  • Political and economic factors

 

  • Mines become focus of community anger.
  • Disruption to operations.
  • Collapse of bargaining structures.
  • Failure of governance structures at local level.
  • Increased national Government intervention.
  • Violence and injuries/fatalities.
  • Reputational consequences.
  • Increased costs to operate.
  • Stakeholder backlash (Government and NGO sectors).
  • Damage to workforce morale/loss of skills.
  • Operational closures.
  • Countrywide contagion.
  • Credit-rating impacts.
  • Impact on share price and funding.
  • Loss of licence to operate.
  • Inability to implement portfolio review outcomes.
  • Pursue industry initiatives at the Chamber of Mines level.
  • Continue Government engagement.
  • Evaluate outcomes of judicial enquiry into Marikana.
  • Review bargaining model to ensure that it is inclusive of all stakeholders.
  • Media campaign to communicate the benefits that mining has/is delivering to communities and the country.
  • Review Amplats’ strategy, operating model and financial viability. The range of specific actions linked to portfolio review is:
  • Establish and staff a dedicated management centre to gather and analyse information and direct responses to the changing situation.
  • Enhance mechanisms for the ongoing monitoring and analysis of the situation.
  • Identify and manage risks.
  • Ramp up mechanisms related to complaints, grievances and conflict-resolution.

4. Inability to sustain safety performance improvements

Current improvements in safety are eroded.

 

  • Labour-intensive mining methods.
  • Non-adherence to standards.
  • Careless mindset.
  • Ineffective safety management systems.
  • Mining deeper and further.
  • Skills shortages.

 

  • Harm to people.
  • Shutdowns by the Department of Mineral Resources (DMR) impacting production.
  • Reputation damage.
  • Zero Harm in Action Programme.
  • Safety-improvement strategy reaffirmed.
  • Commitment by management evidenced through:
  • Systems
  • Engineered solutions
  • Behaviour
  • Wellness
  • Risks around falls of ground, underground transport, the movement of machinery and mechanised mining are being managed.

5. Employee health impairment

Possible long-term impacts on employee health, with associated liabilities.

 

  • Employee exposure to airborne pollutants (dust, nickel, chloroplatinates, SO2).
  • Noise or other occupational hygiene stressors in the workplace.
  • Ineffective controls.
  • Ineffective health management systems.
  • Exposure to infectious diseases.
  • Cases inherited from other workplaces, e.g. silicosis in the case of ex gold-mine workers.
 
  • Harm to people.
  • DMR action (including stoppages).
  • Increase in sick absenteeism.
  • Possible class action suits in the long term – pending liabilities.
  • Noise and hearing conservation strategy is being rolled out to the mines.
  • The majority of equipment emitting noise greater than 100 dB(A) is rock drills. Further initiatives to silence this equipment are under way.
  • Smelters and refineries are reviewing and updating their respiratory protection programmes. A review of critical personal protective equipment is also in progress.
  • Current engineering controls that involve extraction and dust particle capturing systems are being upgraded.

6. Inability to achieve and sustain cost efficiencies

Inability to sustain the cost efficiencies created through asset optimisation, labour-strength
reduction, overhead reduction, supply-chain efficiency and productivity increases.

  • Driven by significant increases in key costs such as labour, energy and consumables, unit-cost increases have significantly outpaced commodity price rises.
  • Mine depths have increased, head grades have decreased and productivity, while it has improved in recent years, is still low.
  • Failure to comply with laws and regulations within the region.
  • Shortage of key skills.
 
  • Low margins, low returns and possible net losses.
  • Alignment of the business with expectations of long-term demand for products – successful implementation of the portfolio review.
  • Ongoing monitoring of portfolio and organisational design to ensure continued sustainability and competitiveness.

7. Inadequate capital replacement and expansion

Capital replacement and expansion projects cannot adequately sustain the business.

 

  • Inability to adequately motivate capital expenditure.
  • Mine extraction strategies not consistently in place.
  • Inadequate skills applied to capital project studies.
 
  • Capital allocated elsewhere.
  • Capital is obtained but is spent on suboptimal projects.
  • Continued exposure to high-risk, low-margin, capital-intensive operations.
  • Future impact on ounce profile, with associated impact on global supply/demand balance, price forecast and Company valuation.
  • Significant potential impact, on the Amplats business plan, of the failure to deliver capital projects.
  • Alignment of the business with expectations of long-term demand for products – successful implementation of the portfolio review.
  • Capital to be allocated to operations that are best placed to sustain and create employment over the long term.
  • Ongoing monitoring of portfolio and organisational design to ensure continued sustainability and competitiveness.

8. Power-supply constraints

Potential electricity shortages.

 

 

 

  • While Eskom catches up on maintenance backlogs and new-build delays, the South African national grid will remain constrained for at least the next three to five years.
 
  • Risk of 75% compulsory emergency load shedding on new load.
  • Potential disruption to operations and project delays.
  • Energy conservation initiatives in place.
  • Participation in industry user groups.
  • Strengthening of power network infrastructure at specific operations.
  • Timely submissions of power applications to Eskom to ensure availability of power for new operations.
  • Participation in the Eskom demand-reduction programme.

9. Water-supply constraints

Potential water shortages.

  • Slow regional and national infrastructural roll-out.
  • Inherent national supply constraints.
  • Human consumption will get preference over mining.
  • Government delays in processing permit applications.
 
  • The shortfall in national supply and infrastructure impacts current operations, and constrains growth.
  • Reductions in the use of water often increase electricity consumption and vice versa. 
  • Work is going ahead, through a joint forum with local government, to address these constraints.
  • Additional measures and actions include:
  • Water-efficiency initiatives that include the 
    monitoring, control and appropriate use of water.
  • A reduction in potable water consumption at operations through the use of treated effluent 
    as a first choice, followed by raw water.
  • Improved internal recycling.
  • Evaluating the treatment of closed-circuit water.
  • Reviewing compliance with existing water-use licence conditions.
  • Undertaking regular follow-ups with the Department of Water Affairs and Forestry regarding water-use licences.

10. Unfavourable policy changes in South Africa

Changes to Government policy in South Africa impact the business.

  • Socio-economic pressures lead to policy change.
  • Lack of progress in transformation.
  • Frustration of the electorate.
  • Failure to comply with laws and regulations within the region.
  • Recent proposed amendments to the MPRDA.
 
  • Loss of licence to operate.
  • Loss of economic value of assets.
  • Damage to investor confidence and Company ratings.
  • Increased regulatory uncertainty.
  • Continued engagement with Government and participation and input into the legislative processes.
  • Amplats, together with Anglo American and the Chamber of Mines, is providing input to the proposed amendments.

11. Loss of economic value in Zimbabwe

Threat to Zimbabwean assets.

 

 

 

  • Failure to comply with laws and regulations within the region.
 
  • Loss of resources.
  • Impact on longer-term strategy.
  • Concerns regarding supply, with associated impact on investor confidence.
  • Continued engagement with Zimbabwe government 
    and participation and input into the legislative process.