The directors subscribe to the principles incorporated in the Code of Corporate Practices and Conduct as set out in the King II Report on Corporate Governance (King Report) and comply therewith. The directors have recognised the need to conduct the enterprise with integrity and in accordance with generally accepted corporate practices.
The board of directors is appointed by the shareholders.
The board is responsible for the adoption of strategic plans, monitoring of operational performance and management, determination of policy and processes to ensure the integrity of the company’s risk management and internal controls, communications policy, and director selection, orientation and evaluation. These responsibilities are set out in the approved board charter. To adequately fulfil their responsibilities, directors have unrestricted access to timely financial information, all company information, records, documents, property, management and the company secretary. Directors are provided with guidelines regarding their duties and responsibilities as directors and a formal orientation programme has been established to familiarise incoming directors with information about the company’s business, competitive position and strategic plans and objectives.
The board meets at least four times a year and additional meetings are held when non–scheduled matters arise. At all board meetings, directors declare their interests in contracts where applicable.
The corporate board comprises two executives and seven non–executive directors, including the chairman and chief executive officer. The roles of the chairman (as a non-executive director) and the chief executive officer do not vest in the same person. Major responsibilities of the board include nomination of the chairman and chief executive officer and other board members, and agreement of the top management structures and management succession. The corporate board is responsible to shareholders, but it proceeds mindful of the interests of the group’s staff, customers, suppliers and the communities in which the group pursues its business. The names of the executive and non–executive directors are set out below.
| Name | Position | Independent | Executive | Transformation committee |
Audit and risk committee |
Human resources / renumeration committee |
| NON-EXECUTIVE | ||||||
| C E Daun | 
Chairman |
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| M J Jooste |
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| J B Magwaza | |
Chairman |
Chairman |
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| I N Mkhari | |
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| F Möller | ||||||
| S H Nomvete | |
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| R D Radford ** | ||||||
| D M van der Merwe * | ||||||
| EXECUTIVE | ||||||
| P C T Schouten | CEO |
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| J P Haveman* | CFO |
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The attendance of the directors and officers at board meetings and sub–committee meetings for the year was as follows:
| Name | Board | Audit and risk committee | Human resources / renumeration committee |
Transformation committee |
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| Possible | Attended | Possible | Attended | Possible | Attended | Possible | Attended | |
| C E Daun | 4 | 4 | ||||||
| J P Haveman | – | – | 3 | 3# | ||||
| M J Jooste | 4 | 4 | 3 | 3 | – | – | ||
| J B Magwaza | 4 | 3 | 3 | 3 | 1 | 1 | ||
| I N Mkhari | 4 | 4 | 3 | 3 | 1 | 1 | ||
| F Möller | 4 | 3 | ||||||
| S H Nomvete | 4 | 3 | 3 | 2 | ||||
| R D Radford | 3 | 2 | 2 | 1 | ||||
| P C T Schouten | 4 | 4 | 3 | 3 | 1 | 1 | 1 | 1 |
| D M van der Merwe | – | – | ||||||
| J H N van der Merwe * | – | – | ||||||
| D Konar * | – | – | ||||||
The audit and risk committee comprises an independent, non–executive director, the CEO, the CFO and two additional members, Len Konar (chairman) and Jan van der Merwe. Its principal functions are to review the annual financial statements and accounting policies, consider the effectiveness of risk management and internal controls over management information and other systems of internal control, approve the reported interim financial information and ensure the effectiveness of the internal audit function and to discuss the auditors’ findings and recommendations. The audit committee makes a recommendation annually on the appointment of the external auditors by the shareholders, and the internal auditors by the board.
The committee operates within defined terms of reference and authority granted to it by the board and meets at least twice a year when the external auditors and internal auditors are invited to attend. The external and internal auditors have unrestricted access to this committee and the members of the committee are considered to have sufficient financial skills and knowledge to carry out their duties and responsibilities.
The audit and risk committee ensures that there is appropriate independence relating to non-audit services provided by the external auditors. A detailed policy in this regard to determine an appropriate level of consulting fees versus external audit remuneration is under consideration. This policy will be reviewed on an annual basis.
The transformation committee was established during 2005. It is a formally appointed advisory committee of the board. The board recognises that social and transformation issues as well as reinvestment in employees and communities are critical for the long-term sustainability of the group. The committee is tasked to develop and monitor employment equity, diversity management, Black economic empowerment (including gender equity), and social investment programmes.
This committee operates within defined terms of reference and comprises two independent non non-executives and one executive director.
This committee performs the functions as envisaged in the guidelines set out in the King Report. The remuneration committee comprises three non-executive directors, two of whom are independent, and the CEO.
The committee operates within defined terms of reference and authority granted to it by the board and meets at least twice a year.
The committee is responsible for making recommendations to the board on the company’s framework of executive remuneration and to determine specific remuneration packages for certain senior managers of the group and recommend to the board the packages for each of the executive directors. The committee is also responsible for the group’s remuneration policies and the awarding of bonuses.
Directors and officers of the group who have access to unpublished price-sensitive information are prohibited from dealing in the shares of the company during defined restricted periods, including periods prior to the announcement of interim and final financial results.
The focus of risk management in KAP is on identifying, assessing, mitigating, managing and monitoring all known forms of risk across the group. Management is involved in a continuous process of developing and enhancing its comprehensive systems for risk identification and control. The risks to the business encompass such areas as world product prices, exchange rates, political and economic factors, legislation and national regulations, interest rates, people skills, and general operational and financial risks. The major risks are the subject of the ongoing attention of the board of directors and are given particular consideration in the annual strategic plan approved by the board. A strategic risk assessment is carried out on an annual basis.
The management of operational risk is a line function, conducted in compliance with a comprehensive set of group policies and standards to cover all aspects of operational risk control. Performance is measured on a regular basis by means of both self–assessments and audits by independent consultants. In addition, the group promotes ongoing commitment to risk management and control by participating in externally organised risk management and safety systems.
Insurance cover on assets is based upon current replacement values. All risks are adequately covered, except where the premium cost is excessive in relation to the probability and extent of loss.
The underlying philosophy of the group’s environmental policy is the adoption of protective strategies to manage and control the impact of KAP’s operations upon the environment, at the same time as safeguarding its extensive assets and human resources.
For more information, please refer to the Sustainability Report.
The board of directors is responsible for the group’s systems of internal control. To fulfil its responsibilities, management maintains accounting records and has developed, and continues to maintain, appropriate systems of internal control. The directors report that the group’s internal controls and systems are designed to provide reasonable, and not absolute assurance, as to the integrity and reliability of the annual financial statements and to safeguard, verify and maintain accountability of its assets and to detect and minimise significant fraud, potential liability, loss and material misstatement while complying with applicable laws and regulations.
The group has implemented a system of control self-assessment across all group companies. Local management is required to complete and submit control self–assessment programmes bi-annually. Local management is monitored against internal control norms in other group companies and action is taken when ratings are considered to be inadequate.
It must be recognised that systems of internal control can provide only reasonable, and not absolute assurance. In that context, none of the above reviews indicated that the systems of internal control were not appropriate or unsatisfactory. Furthermore, no material loss, exposure or misstatement arising from a material breakdown in the functioning of the systems has been reported to the directors in respect of the year under review.
Nothing came to the attention of the directors or arose out of the internal control self–assessment process or year-end external audits to indicate that any material breakdown in the functioning of the group’s internal controls, procedures and systems had occurred during the course of the year.
Internal audit is an independent appraisal function, which examines and evaluates the activities and the appropriateness of the systems of internal control, risk management and governance processes. This function has been outsourced to specialist external service providers (KPMG).
Internal audit reports to the audit and risk committee and to the executive directors on day-to-day matters. Audit plans are presented in advance to the audit and risk committee and are based on an assessment of risk areas. Internal audit attend and present their findings to the audit and risk committee. A number of internal audits were conducted during the year under review, and an internal audit plan has been approved whereby all material risk areas within the group will be reviewed over a 3-year period.
The objective of internal audit is to assist the board in the effective discharge of its responsibilities.
PSG Capital Limited acts as sponsor for the group, providing advice on the interpretation and compliance with the listing requirements of the JSE Limited (JSE) and reviewing notices required in terms of the company’s articles of association and the JSE’s rules and regulations.
The group does not engage in or accept or condone engagement in any illegal acts in the conduct of its business.
Management reporting disciplines include the preparation of annual budgets by operating entities. Monthly results and the financial status of operating entities are reported against the approved budgets. Profit and balance sheet projections are reviewed regularly, while working capital and borrowing levels are monitored on an ongoing basis.
The
annual financial statements and group annual financial statements have been prepared on the going concern basis since the directors have every reason to believe that the company and group have adequate resources in place to continue in operation for the foreseeable future.
The group will continue to have its operating decisions made at the appropriate levels of its diverse business. Participative management lies at the heart of this strategy, which relies on the building of employee partnerships at every level to foster mutual trust and to encourage people to always think about how they can improve themselves and their operations. The group strives to liberate the initiative and energies of its people, because they are the ones who make the difference to the performance of the group.
The group is committed to the principles of Black economic empowerment.
All directors have access to the advice and services of the Company Secretary and are entitled and authorised to seek independent and professional advice about affairs of the group at the group’s expense. The Company Secretary is responsible for the duties set out in Section 268G of the Companies Act. The certificate required to be signed in terms of subsection (d) appears under the Company Secretary Certificate.
The group code of ethics framework commits the group to the highest standards of integrity, behaviour and ethics when dealing with all stakeholders, including directors, management, employees, customers, suppliers, competitors, investors, shareholders and society at large. Directors and staff are expected to observe their ethical obligations to ensure all business is conducted through fair commercial competitive practices. Senior executives are required to exercise due care when delegating authority to subordinates.
Employees are required to maintain the highest ethical standards in ensuring that business practices are conducted in a manner, which in all reasonable circumstances, is above reproach.
KAP’s investor relations programme includes communications with shareholders through interim and annual reports, meetings and presentations.
Human capital investment is a key strategy for the group to ensure it attracts and retains competent staff to achieve business plan objectives. The industrial relations structures of all group companies are well developed to promote effective employee relations and identify and resolve areas of potential conflict.
Initiatives implemented throughout the group are:
All our companies prohibit child-, forced- or compulsory labour. All employees join the companies on a voluntary basis, and enter into open-ended, fixed-duration or temporary contracts in accordance with applicable legislation.
Remuneration
KAP recognises that one of our competitive sources of value is our people and, in order to meet our corporate goals and business objectives, we believe that our reward policies and objectives must:
