INTRODUCTION

As corporate governance and sustainability are essential for DigiCore’s stakeholders, the board of directors aspires to conduct the group’s business with  responsibility, accountability, fairness and transparency and strives to be a good corporate citizen.

The directors agree with the spirit and principles of corporate governance set out in the King Report on Governance in South Africa (2009) (King III) (refer to table below for compliance assessment). The board is committed to applying appropriate corporate governance policies and practices in each company in the group.

The group maintains a listing on the JSE Limited which mandates certain disclosure requirements on corporate governance and DigiCore complies in all material aspects to the regulations and codes of the exchange.

Improvements during the past year and plans for the year ahead 

A board charter which formalises its processes and procedures was adopted during the year under review.

The mix of executive versus non-executive board members was improved with the appointments of Mr Gerhard Pretorius (former Reunert CEO) as an independent non-executive director and Advocate Jacob Wiese as a non-executive director.

The impact of the new Companies Act (No 71 of 2008) was assessed and the required compliance is being pursued as appropriate. A training session on the implications of the new act was held for the board in April 2011.

Composition of the board

The board comprises six executive and eight non-executive directors, which ensures a balance of power and authority so that no one director has unfettered powers of decision-making. The majority of the non-executive directors are independent.

Operation of the board

The board collectively determines the major policies and strategic direction of the group and retains full and effective control of the group. The implementation of these strategies is delegated to the executive committee, which oversees part of the day-to-day running of the group, and is monitored by the board.

The board has also delegated some duties to sub-committees that report to the board regularly.

Non-executive directors ensure the group’s interests are served by bringing impartial views that are separate from management.

The functions of the chairperson and chief executive officer are separate, with segregated duties. The chairperson is a non-executive director and is assisted by a lead independent director. The chairman provides guidance to the board as a whole and ensures the board is efficient, focused and operates as a unit. He acts as facilitator at board meetings to ensure a flow of opinions and leads discussions to optimal outcomes in the interests of good governance. The appraisal of the chief executive officer’s performance has been delegated to the remuneration committee.

The company secretary is responsible for guiding the board on discharging its responsibilities in terms of the legislative and regulatory requirements of the relevant jurisdictions. 

The directors have unlimited access to the advice and services of the company secretary. The company secretary plays an active role in the company’s corporate governance and business ethics processes, and ensures that, in accordance with pertinent laws, the proceedings and affairs of the board, the company itself and, where appropriate, shareholders are properly administered. The directors may also seek professional advice with any related cost borne by the company. 

Board appointment and evaluation

The nomination of new directors is discussed between non-executive directors and the CEO before the candidate is put forward to the board. A resume is circulated to the board to consider the suitability of the nominee and the board, as a whole, appoints the director. Newly appointed directors must resign and stand for election at the first annual general meeting following their appointment. New appointments to the board are therefore done in a formal and transparent manner.

Non-executive directors do not hold service contracts with the company.

New directors are inducted in an orientation programme to understand the group’s operations and the business environment in which it operates.

Training on fiduciary duties and responsibilities is left up to the individual director, but any relevant changes in legislation or regulations are brought to each director’s attention. Directors are encouraged to become members of professional bodies to gain knowledge and interact with peers.

All executive directors are members of the Institute of Directors. Directors resign every three years by rotation and are re-elected by shareholders at the annual general meeting to facilitate board continuity.

Meetings and attendance

The board meets five times or more a year. Board packs, including an agenda, are distributed prior to the meeting and include relevant information so that directors can be prepared and make informed decisions. Directors may add items to the agenda.

Directors are encouraged to attend all meetings and a schedule is circulated on proposed dates at beginning of the year. The number of meetings held and attendance by each director since the last annual report are detailed on the right.

Certain duties of the board have been delegated to sub-committees to give more detailed attention to specific areas and to better channel the board’s expertise.

Audit and risk committee

Under its chairman, Professor Ben Marx, the committee successfully completed its duties and added significant value to the group. The charter of the audit and risk committee was amended in line with changes in the Companies Act and was adopted by the board of directors. A self-assessment concluded that the committee was successful in discharging its duties.

The outsourced internal audit function continues to operate under the supervision and control of the committee and successfully conducted its work in accordance with the approved three-year risk-based plan. Risk management remains a priority and regular assessments are carried out, mitigation strategies and action plans formulated and reported on by the responsible executive directors. The top risks facing the organisation, together with mitigation strategies, are reported to the board of directors. 

The whistle-blowing policy is still current and regular reminders are sent to all staff. No incidents of fraud or corruption were reported during the review period.

An IT risk assessment was conducted during the year and plans are under way to address risks identified. This has resulted in a chief information officer appointment, with both the chief technology officer and the chief information officer becoming standing invitees to committee meetings. 

Mr Gerrit Pretorius has joined the committee and replaces Advocate Vusi Khuzwayo who is now chairing the social and ethics committee as required by the Companies Act.

Remuneration committee

The committee currently comprises one executive and two nonexecutive directors. An independent non-executive director chairs the meeting. The CEO is a member of the committee, but is recused when his remuneration is discussed. The committee advises the board on executive remuneration policies and the annual review of remuneration packages, profit share paid and issuing share options to executive directors and senior management.

Social and ethics committee

In line with the Companies Act, a social and ethics committee has been established under chairmanship of Advocate Vusi Khuzwayo and members Nick Vlok and Jacob Wiese. The committee will take over the responsibilities of the transformation committee and will deal with the responsibilities as described by Companies Act regulations.

CONFLICTS OF INTEREST

DigiCore has adopted a formal code to ensure directors are free of conflicts of interest between their obligations to the company and their private interests. Any interests in contracts with the company must be formally disclosed and documented.

INTERNAL CONTROL AND RISK MANAGEMENT

The company has a system of internal controls, based on the group’s policies and guidelines, in all subsidiaries and associates under its control. External auditors consider elements of the internal control systems as part of their audit and communicate deficiencies when identified. The group’s internal controls and systems are designed to provide reasonable assurance on the integrity and reliability of the financial statements; to safeguard, verify and maintain accountability of its assets; and to detect fraud, potential liability, loss and material misstatement, while complying with applicable law and regulations.

Risks are reported in the form of a risk register completed by the managing executive of each business unit. All risks are rated and range from extreme to low, based on an assessment of the likelihood and consequence of the risk. Extreme and highs risks identified are reviewed by the executive committee and a final list of significant risks are reported to the audit and risk committee and ultimately to the board.

The board believes the group has adequate resources to continue its business as a going concern for the year ahead. The financial statements have therefore been prepared on the going-concern basis as detailed in the directors’ report.

CLOSED PERIODS

No director or employee with access to price-sensitive information may trade in company shares between the date of the end of a reporting period and the date of publishing results for that period, or in periods where the company is trading under cautionary announcement.

Procedures have been implemented to prohibit share dealings during closed periods.

CODE OF CONDUCT AND ETHICS

The group is committed to the highest standards of honesty, organisational integrity and ethical behaviour in all its dealings. Its directors and employees are required to maintain the highest ethical standards which, in all reasonable circumstances, are above reproach. Conduct that violates these principles may constitute grounds for disciplinary action or even dismissal.

The group has established a formal code of ethics and business conduct and has communicated the code to all staff and published it on the group website.

Staff members dealing with security matters of customers in the group are regularly required to take polygraph tests.

The new social and ethics committee will assess the effectiveness of the code of conduct and ethics and implement changes in an attempt to continuously improve.

COMPANY SECRETARY

Donald Nieuwoudt has been company secretary since April 2005. He is a qualified chartered accountant (SA) and has extensive experience in the company secretarial and corporate governance arenas. Donald attends regular seminars to keep abreast of changing legislation and requirements and fulfils the requirement of continuing professional education in accordance with the South African Institute of Chartered Accountants.

SPONSOR

The company’s sponsor is PSG Capital.

LEGAL COMPLIANCE

The company secretary and chief financial officer, together with key management, compile a list of all applicable legislation and confirm compliance. Under the guidance of the audit and risk committee, a project aimed at external assurance on legal compliance has been initiated and will be reported on in future.

No fines or non-monetary sanctions have been imposed on the group for non-compliance with any laws or regulations to date.

Labour relations

Wage earners are members of the Metal and Engineering Industries Bargaining Council.

No salaried staff are members of any trade union.