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Access to water the
symbol of growth. |
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| The Board is of
the opinion that the Group currently
complies with all significant requirements
of the Code of Corporate Practices
and Conduct, as advocated in the King
II Report on Corporate Governance
for South Africa 2002 and the JSE
Limited (JSE) Listings Requirements. |
| |
| Directors
and executive management |
The Board is a
unitary Board whose primary responsibilities
include: giving strategic direction
to AFGRI, identifying key risk areas
and key performance indicators for
the Group’s business, monitoring
investment decisions, considering
significant financial matters, reviewing
the performance of executive management
against business plans, budgets and
industry standards. The Board retains
full and effective control over the
Group and has unrestricted access
to all company records.
Managerial levels of authority have
been established for capital expenditure
projects and the acquisition and disposal
of assets. However, decisions of a
material nature are taken by the Board.
The Board is chaired by a non-executive
director, Mr PF Erasmus and consists
of three executive directors and 10
non-executive directors. Details of
the directors in office on 16 May
2007, and their attendance at Board
and committee meetings are detailed
below.
Board meetings are held at least quarterly,
with additional meetings called where
circumstances necessitate. Non-executive
directors do not meet without the
chairman. Effective chairmanship and
a formal agenda ensure that all issues
requiring attention are raised, proceedings
are conducted efficiently and all
appropriate matters are addressed.
All relevant information is supplied
to directors timeously.
Directors have unlimited access to
the Group company secretary, who acts
as an adviser to the Board and its
sub-committees on issues including
compliance with Group rules and procedures,
with statutory regulations, with the
JSE Listings Requirements and with
the King II Code of Corporate Governance.
Furthermore, the advice of independent
professionals may be obtained by any
Board member in appropriate circumstances,
at the expense of the company. The
name and address of the company secretary
are in administration. |
| |
| Board
sub-committees |
| Specific responsibilities
have been delegated to Board committees
with defined terms of reference. The
current Board committees are: |
| |
| Remuneration
Committee |
| Members: |
| PF
Erasmus (Chairman) |
| DD
de Beer |
| GAL
Ebedes |
| JJ
Ferreira |
| MM
Moloele |
|
| |
| The Remuneration
Committee consists of five non-executive
directors and is chaired by a non-executive
director of the Group. The committee
met twice during the financial year.
Refer to remuneration
report for further details. |
| |
| Audit
and Risk Management Committee |
| Members: |
| DD
de Beer (Chairman) |
| JJ
Claassen |
| KL
Thoka |
| FJ
van der Merwe |
|
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| This committee,
with a non-executive chairman, consists
of four non-executive directors and
meets at least twice a year with management
and the external and internal auditors. |
| |
| Audit |
The Audit Committee
reviews the effectiveness of the risk
management process and internal control
in the Group with reference to the
findings of both the internal and
external auditors and the external
and internal risk management audits.
Other areas covered include the review
of important accounting issues, including
specific disclosures in the financial
statements and a review of the major
audit recommendations.
The internal and external auditors
have direct access to the Audit Committee. |
| |
| Risk
management |
| Risk management
policy |
| Risk management
is an integral part of management’s
functions within the Group and includes
the management of operational and
business risks. The establishment
of a more formalised enterprise-wide
risk management process was initiated
during the 2006 financial year with
the following principal objectives: |
| • |
providing
the Board of Directors with
assurance that significant business
risks are systematically identified,
assessed and reduced to acceptable
levels in order to yield a return
equal to the risk; and |
| • |
making risk
identification and risk management
an integral part of the daily
activities of everyone in the
organisation. |
|
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| Substantial progress
has been made to date in achieving
the above objectives. There are still
certain components of the process
which need to be further developed
and embedded and programmes are in
place to address these. AFGRI’s
enterprise-wide risk management process
is guided by the following key principles: |
| • |
a clear assignment
of responsibilities and accountability; |
| • |
a common
enterprise-wide risk management
methodology and process; |
| • |
the identification
of uncertain future events that
may influence the achievement
of business plans and strategic
objectives; and |
| • |
integration
of risk management activities
within the Group and across
its value chains. |
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| Implementation
of the risk management policy |
| Executive management
is accountable for the process of
risk management and for establishing
appropriate risk and control policies.
The implementation of the risk management
framework is the responsibility of
everyone in the Group. |
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| Risk management
process |
Supporting the
risk management policy is the enterprise-wide
risk management (ERM) strategy. This
strategy embeds risk management processes
into all the critical business systems,
allowing the Group to adopt a precautionary
approach to business management. When
critical decisions are being made,
managers are required to look beyond
the obvious risks and recognise all
sources of uncertainty, including
issues related to health, safety,
environment and community.
ERM requires management to understand
the risks associated with the activities
under their control and manage them
accordingly, and this acts to stimulate
and reinforce accountability. The
context of all the risk management
activities is always the achievement
of the business plan and strategic
objectives. |
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| The Group adopts the
following approach to risk management: |
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Each division and subsidiary
has gone through an objective process of
business risk assessment during the year
under review, facilitated by group risk
management and external consultants. These
risk assessments have highlighted where
further control action is required, and
that this is now being undertaken.
The management of operational risk covers
many diverse dimensions such as security,
health and safety, risk control organisation,
emergency planning, vehicle fleet, fire
and loss controls. Comprehensive programmes
are in place to identify and evaluate operational
risks, implement process improvements and
monitor the status of key risks. The Board
of Directors has appointed internal and
external consultants to audit these programmes.
The most significant risks
currently faced by the Group are: |
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| • |
Commodity trading |
| • |
Accounts receivable |
| • |
Information and network
technology |
| • |
Self insurance |
| • |
Finance debtors and inventory
structures |
| • |
Electronic funds transfers |
| • |
Specific inventory items |
| • |
Foreign operations |
| • |
Weather |
|
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| These risks are controlled
and managed by external and internal insurance
programmes, Group policies limiting exposure in
specific areas, Group treasury, specific management
focus and structures such as the marketing, procurement,
hedging and credit policies developed at Group
level. |
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| Reporting of the effectiveness
of risk management |
During 2005/6 a risk management
system was implemented to capture risk information,
assign risks, controls and actions to accountable
managers to enable management to track and report
progress on all risk control activity more effectively.
All divisions and subsidiaries report on the effectiveness
of their risk management processes, in a generic
dashboard format, to group risk management, the
Pillar ERM committees and the Pillar audit and
risk committees that in turn report to the Board
of Directors via a bottom-up process. |
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| Responsibility of
the Board |
| The Board of directors is responsible
for governing risk management processes and the
quality of internal control systems in the Group
in accordance with corporate governance best practice.
The Board is supported in these tasks by the committees
of the Board and their sub-committees and risk
management functions. Levels of the risk management
governance structures for the Group are: |
| • |
Audit and Risk Committee
of AFGRI and specific sub-committees |
| • |
Audit and Risk Committees
of each division |
| • |
Enterprise-wide Risk
Management Committee for each division |
| • |
Risk Management Committees
of divisions and subsidiaries. |
|
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| Having evaluated the process
of risk management, the Board is of the opinion
that an adequate and effective system of internal
control is in place to provide reasonable assurance
that significant risks have been mitigated to
an acceptable level. |
| |
| Acquisitions Committee |
| Members: |
| PF Erasmus (Chairman) |
| CA Apsey |
| GAL Ebedes |
| MM Moloele |
| FJ van der Merwe |
|
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| The committee comprises five
non-executive directors. The purpose of this committee
is to support the Board in their responsibilities
on acquisitions and capital expenditure. |
| |
| Directors’
Nomination Committee |
| Members: |
| PF Erasmus (Chairman) |
| GAL Ebedes |
| DD de Beer |
| JJ Ferreira |
| MM Moloele |
|
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| The main responsibilities of
the committee are to review the membership of
the Board and the performance of executive directors
on an annual basis, having regard to the current
and future needs of the company, and to make recommendations
on Board composition and appointments. Such appointments
are formal and transparent and a matter for the
Board as a whole. |
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| Share Dealing
Committee |
| Members: |
| PF Erasmus (Chairman) |
| JD Wright |
| I de W Goosen |
|
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| In terms of the JSE Listings
Requirements, a Share Dealing Committee was constituted
to approve share dealings and trades undertaken
by the company’s directors and officers.
Records of the requests and approvals are held
with the company secretary. |
| |
| Management reporting |
There are comprehensive management
reporting disciplines in place, which include
the preparation of annual budgets by all operating
units. The ExCo (executive directors) approves
individual operational budgets, while the Group
budget is reviewed by the Board of directors of
the company. Monthly results and the financial
status of operating units are reported against
approved budgets and compared to prior year results.
Profit projections and cash flow forecasts are
updated monthly, while working capital and borrowing
levels are monitored on an ongoing basis. |
| |
| Internal control |
The Group maintains internal
controls and systems designed to provide reasonable
assurance as to the integrity and reliability
of the financial statements and to adequately
safeguard, verify and maintain accountability
for its assets. Such controls are based on established
policies and procedures and are implemented by
trained personnel with an appropriate segregation
of duties. The Group has outsourced its internal
audit function. This internal audit function operates
under the direction of the Group Audit Committee,
which approves the scope of the work to be performed.
Significant findings are reported to both executive
management and the Audit Committee. Corrective
action is taken to address internal control deficiencies
identified in the execution of the work.
PricewaterhouseCoopers Inc acts as external auditors
and KPMG as internal auditors.
Nothing has come to the attention of the directors
or the auditors that indicates material breakdowns
in the functioning of the Group’s key internal
controls and systems during the year under review.
The Group has comprehensive risk and loss control
procedures in place, which form an integral part
of a sophisticated self-insurance programme. The
layered structure of the programme allows the
Group to obtain highly competitive rates while
protecting other companies from major losses through
appropriate local and offshore re-insurance. |
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| Going concern |
The annual financial statements
set out in this annual report have been prepared
in accordance with International Financial Reporting
Standards. They are based on appropriate accounting
policies that have been consistently applied.
Having reviewed AFGRI’s financial projections,
the directors believe that the Group will continue
as a going concern in the year ahead. |
| |
| Communication
to stakeholders |
AFGRI is committed to a process
of continuing dialogue with its investors. AFGRI
is pro-active in the distribution of information
to relevant parties through the JSE SENS communications
system, printed and electronic media releases
and the statutory publication of its financial
results. All stakeholders are communicated with
on a regular basis.
The Board encourages all shareholders to attend
shareholders’ meetings as this is the ideal
opportunity to voice their opinions.
The Group is committed to transparency. |
| |
| Employee participation |
AFGRI employs a variety of
participative structures to deal with issues that
affect employees directly and materially. These
include structures to drive productivity improvements,
safety committees and other participative forums.
The Group is committed to creating a working environment
in which employees are encouraged to become involved
in its affairs and to obtain a sound understanding
of its activities. This is achieved through employee
forums operating throughout the Group, and the
regular publication of internal communiqués. |
| |
| Code of ethics |
AFGRI subscribes to an independently
managed ethics and fraud hotline service to facilitate
the reporting of possible fraudulent, corrupt
and unethical behaviour in the Group. The hotline
is available 24 hours a day, seven days a week,
365 days a year, for the use by the Group’s
employees and third parties. All incidents involving
potentially fraudulent activities are investigated
and corrective action is taken. Procedures are
adapted when deemed prudent to prevent further
incidence of unethical behaviour.
A code of ethics has been adopted which requires
all employees to participate in the Group’s
commitment to high moral, ethical and legal standards.
This code controls the Group’s responsibilities
towards shareholders, customers, suppliers and
the broad community, as well as the personal actions
of directors, management and other employees.
The Group maintains a closed period of one month
prior to the financial year and/or half year until
the public release of these results, during which
period no executive director or employee may,
directly or indirectly, trade in the shares of
AFGRI Limited. However, employees with contracts
awarded in terms of the AFGRI Share Incentive
Scheme, may trade these shares during the closed
period, if authorised to this effect by the managing
director. The closed period for non-executive
directors starts from year end and/or half year
until the results have been released publicly.
Additional periods may be declared “closed”
from time to time if circumstances warrant this
action. |
| |
| Disclosure |
| The annual report deals adequately
with disclosures pertaining to the annual financial
statements, auditors’ responsibilities,
accounting records, internal control, risk management,
accounting policies, adherence to accounting standards,
going concern issues and adherence to codes of
governance and the JSE Listings Requirements. |
| |
| Attendance
at Board and committee meetings |
| |
| Board
member |
Board
meetings |
Audit
& Risk Committee |
Credit
Committee |
Remuneration
Committee |
| Number
of meetings |
4 |
2 |
5 |
2 |
| CA Apsey |
4 |
|
|
|
| JJ Claassen |
4 |
2 |
|
|
| DD de Beer |
4 |
2 |
4 |
2 |
| GAL Ebedes |
4 |
|
|
1 |
| PF Erasmus |
4 |
|
5 |
2 |
| JJ Ferreira |
4 |
|
|
2 |
| I de W Goosen |
4 |
|
5 |
|
| JPR Mbau |
2 |
|
|
|
| MM Moloele |
4 |
|
|
1 |
| DM Sewela |
4 |
|
|
|
| KL Thoka |
3 |
2 |
|
|
| FJ van der Merwe |
4 |
2 |
|
|
| JD Wright |
4 |
|
5 |
|
| Total membership |
13 |
4 |
4 |
5 |
|
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| Note: |
| – |
Mr Mbau
was appointed as a director
with effect from 1 January 2007. |
| – |
Mr De
Beer was appointed to the Credit
Committee with effect from 25
July 2006. |
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