CASE STUDY

Namib Poultry

The IDC – long considered a partner in local and regional development – funded this project, the first commercial integrated poultry business in Namibia.

Corporate governance

Introduction

Good corporate governance is integral to good performance. IDC strives to fulfil its mandate in a manner that is consistent with best practices and with continuous regard to the principles of accountability, transparency, fairness and responsibility.

In order to ensure that effective governance and the highest possible standard of ethics are maintained at all times, particular attention is given to compliance with the Corporation’s enabling act, the Industrial Development Corporation Act 22 of 1940 (IDC Act), as well as the Public Finance Management Act 1 of 1999 (PFMA), the Treasury Regulations and the principles of good corporate governance as contained in the King Report on Corporate Governance (King III).

The IDC endorses King III and, during the reporting period, has endeavoured to adhere to the recommendations thereof as far as possible. A table setting out IDC’s compliance with King III appears here.


Key governance enhancements

n 2012, the Corporation undertook to focus on certain areas relating to King III and the Companies Act 71 of 2008 (the Companies Act). Below is a summary of the key enhancements that were achieved during 2012:
Gift Policy The Policy reduces the potential for corruption by setting out a procedure to be followed when giving or accepting gifts
The Code of Ethics and
Business Conduct
The Code of Ethics has been revised and partly adopted by the Board, and further work is still being done in this regard. In the interim, the Board has adopted an ethics statement which embodies the Corporation’s values and practices with regard to ethical standards and behaviours
Subsidiary Governance
Framework
The framework was introduced to provide guidance to subsidiaries and investee companies on governance issues
Guideline on Conflicts of Interest The guideline was introduced in line with section 75 of the Companies Act
Delegation of Authority In line with King III, a revised delegation of authority was approved and implemented during the year under review

Investee and subsidiary companies

During the reporting period a process was implemented to ensure that not only the IDC, but also its subsidiaries and investee companies apply acceptable corporate governance practices. As mentioned above, steps that have been taken include the implementation of a governance framework to IDC clients in different provinces throughout South Africa.

The approach that is followed is that the application of good corporate governance principles by IDC subsidiaries should be monitored by IDC in its capacity as shareholder, while in the case of investee companies that are not subsidiaries, IDC plays a supportive role by promoting and encouraging sound corporate governance. Corporate governance assessments and the provision of corporate governance training are undertaken on a regular basis to ensure alignment with IDC’s approach of promoting sound corporate governance. During the reporting period, training and assessments have commenced in the provinces of Mpumalanga and North West. These assessments have indicated that there is a need, especially as far as small enterprises are concerned, for further training and business support.

Board of directors

The IDC Board holds absolute responsibility for the performance of the Corporation while retaining full and effective control. It provides strategic direction to the Corporation.

The Board’s composition reflects the need for the wide range of skills, knowledge and expertise that is required to meet the Corporation’s strategic objectives. The size of the Board is dictated by the IDC Act, which permits a minimum of five and a maximum of 15 directors to be appointed by the shareholder. A unitary board structure is applied, with the majority being non-executive directors. As at 31 March 2013, the Board comprised one executive and 13 non-executive members and a gender composition of six female and eight male directors. The Chairperson of the IDC Board is an independent non-executive director, in line with the recommendations of King III, and the positions of Chairperson and Chief Executive Officer are separately held to ensure a clear division of duties.

All non-executive directors are appointed for a period of three years.

The non-executive directors do not draw any remuneration from IDC other than for Board fees.

The Board is responsible to the shareholder for setting and formulating economic, social and environmental direction through strategic objectives and key policies, major plans of action, its risk policy, annual budgets and business plans. It ensures that the shareholder’s performance objectives are achieved through the implementation of structured reporting systems which are used to monitor performance.

New members go through an effective induction and the Board undergoes an evaluation process every two years in line with the recommendations of King III. The last Board evaluation took place at the end of the 2011 financial year.

Due to the fact that a new Board was appointed during the reporting period, the next Board evaluation will take place before the 2014 year-end.

The Board meets quarterly and Board members attended the following meetings during the reporting period:
Name of director 19 April 2012 (Sp. Board)  26 June 2012 28 August  
2012
05 September 2012 (Sp. Board)  26 October 2012 27 November 2012 26 February 2013
MW Hlahla*
MG Qhena
LI Bethlehem
LL Dhlamini
SK Mapetla
LR Pitot
NE Zalk s s s
PM Mthethwa
JA Copelyn
BA Dames
RM Godsell
BA Mabuza
SM Magwentshu-Rensburg
ZJ Vavi
* Chairman Present Apologies n Via Telecon s Mr Zalk has been on sabbatical leave since the October 2012 meeting  

Board charter

The Board has a charter which is regularly reviewed. The Board Charter sets out the Board’s responsibilities which include the adoption of strategic plans, developing a clear definition of materiality, monitoring of operational performance and management, determination of policy processes to ensure the integrity of the Corporation’s risk management and internal controls, communication policy, and director selection, orientation and evaluation. The Board Charter is supported by the IDC Act and Regulations.

Company Secretary

The Company Secretary plays a pivotal role in the corporate governance of the Corporation. The Company Secretary is responsible to the Board for, inter alia, ensuring adherence to good corporate governance principles, and compliance with procedures and applicable statutes and regulations. It is the Company Secretary’s responsibility to ensure that the Board Charter and Terms of Reference of the various Board and Exco committees are drawn in line with legal requirements and that they are adhered to, as are ethics and the management of conflict within the Board and the Corporation.

To enable the Board to function effectively, all directors have full and timely access to information that may be relevant to the proper discharge of their duties. This includes information such as corporate announcements, investor communications, items for Board meetings and other developments which may affect the Corporation and its operations. The Company Secretary is not a director of the Corporation and maintains an arm’s length relationship with the Board as she acts independently from it. In line with good governance practice, the appointment and removal of the Company Secretary is a matter for the Board.

Ethics and managing directors’ conflicts of interest

A Code of Ethics and Business Conduct is in place which sets out the Corporation’s standards of integrity, values and ethics in dealings with suppliers, customers, business partners, stakeholders, government and society at large. Every employee is expected to subscribe to the Code, which requires all to act with honesty and integrity in all dealings with stakeholders.

Potential conflicts of interest are effectively managed in that Board, subsidiary directors and executive management are required to disclose any potential conflicts at regular meetings and as and when necessary, to the Company Secretary. This is done in line with the guidance provided by section 75(4) of the Companies Act 71, of 2008 and in line with IDC Guidelines on Conflict of Interest. Such declarations occur at each and every Board meeting, including meetings of the Board Committees responsible to consider transactions. This is done to ensure that directors are free of any conflicts between the obligations they have to the company and their private interests, and if any conflict exists, that it is declared accordingly.

Furthermore, where there is a Board member who is conflicted in a transaction, such transaction will be submitted to Governance and Ethics Committee for deliberation and thereafter to the Board for final decision.

As part of promoting ethical behaviour, the IDC has a Gifts Policy in terms of which all employees are required to declare all gifts received from clients. Gifts with a value of R500 and above can only be retained by the recipient with the permission of his/her departmental head. Should the recipient be a departmental head, permission must be obtained from the relevant divisional executive, and divisional executives must, on the same basis, obtain the necessary permission from the Chief Executive Officer. During the reporting period, 120 employees declared gifts, 40 of which were above R500. The chart below provides a breakdown of the kinds of gifts that have been received.

Delegation of authority

While the Board has the authority to delegate powers to executive management and Board Committees, it remains accountable to the shareholder. A Delegation of Authority is in place, which is updated on a regular basis.

As depicted in the diagram below, specific powers and authority have been delegated to the Board and Executive Committees, each of which has a clearly defined mandate which is spelt out in written Terms of Reference. The management of day-to-day operations is delegated by the Board to the Chief Executive Officer (CEO)/Managing Director, who is assisted by the Executive Management Committee (Exco) and its subcommittees.

Board Committees

The Board has established five standing committees, being the Investment Committee, Human Capital and Nominations Committee, Audit Committee, Risk and Sustainability Committee, and Governance and Ethics Committee, all of which are ultimately accountable to the Board.

All Terms of Reference of the committees were approved by the Board.

These committees are discussed in greater detail below.

Board Investment Committee (BIC)

The purpose of the BIC is to act on behalf of the Board by considering transactions mandated to it by the Board which would, prior to the creation of the committee, vest with the Board. The BIC considers transactions where IDC transaction exposure is above R250 million and/or the counterparty exposure is between R1 billion and R7 billion. The BIC considers transactions where the sector, transaction and/or regional limit, or the counterparty limit is breached, and it makes recommendations to the Board.

Coega Dairy Holdings

The IDC has identified increased competition in the dairy value chain and import substitution in the cheese industry as key sector development goals. We also singled out the need for increased farmer (and specifically B-BBEE) participation in dairy value-adding initiatives.

Windtown Lagoon Resort 

The newly built Windtown Lagoon Resort and Spa reflects the IDC’s focus to funding community-based projects that have potential to create employment opportunities in far-flung regions.


APPROVALS
R13.1 billion
DISBURSEMENTS
R16.0 billion
JOBS FACILITATED
18 922
JOBS SAVED
3 950
© The IDC 2013. All rights not expressly allowed are reserved. P.O. Box 784055, Sandton, 2146, South Africa