TERMS OF REFERENCE
AUDIT COMMITTEE
Membership
- The committee shall comprise not less than three independent non-executive directors of the company
- The board shall appoint one of the members as the chairman
- The quorum for meetings shall be two members
- At least one member of the audit committee shall have recent and relevant financial experience.
Attendance at meetings
Senior members of management, including but not limited to the group chief executive, the chief financial officer and the head of internal audit, will be expected to attend audit committee meetings at the invitation of the committee.
The audit committee shall meet separately with the external and internal auditors at least twice per year without members of executive management being present.
Frequency of meetings
Meetings will be held not less than four times per year.
Members of the committee, the external auditor and the internal auditor may request a non-scheduled meeting if they consider that one is necessary. The chairman of the audit committee will determine if such a meeting should be convened.
Authority
The audit committee is authorised by the board to:
- investigate any activity within its terms of reference
- seek any information that it requires from any employee of the company
- obtain outside legal or professional advice at the company’s expense.
Duties
The duties of the committee shall be:
To review the actions and judgements of management in relation to the company’s financial statements, operating and financial reviews, interim reports, preliminary announcements and related formal statements before submission to and approval by the board, and before clearance by the auditors. Particular attention should be given to:
- critical accounting policies and practices and any changes thereto
- decisions requiring a significant element of judgement
- the extent to which the financial statements are affected by unusual transactions in the year and how they are to be disclosed
- the clarity of disclosures
- significant adjustments resulting from the audit
- the going concern assumption
- compliance with accounting standards
- compliance with stock exchange and other legal requirements
- to consider other topics as defined by the board.
To review the company’s procedures for detecting fraud and whistle blowing and ensure that arrangements are in place by which staff may, in confidence, raise concerns about possible improprieties in matters of financial reporting, financial control or any other matters.
To review management’s and the internal auditor’s reports on the effectiveness of the systems for internal financial control and financial reporting.
To monitor the integrity of the company’s internal financial controls.
To review the statement in the annual report and financial statements on the company’s internal controls.
To review the internal audit programme and ensure that the internal audit function is adequately resourced and has appropriate standing in the group.
To ensure that the internal auditor has direct access to the board chairman and the audit committee and is accountable to the audit committee.
To receive reports on the results of the internal auditor’s work on a periodic basis.
To review and monitor management’s responsiveness to the internal auditors findings and recommendations.
To monitor and assess the role and effectiveness of the internal audit function in the overall context of the company’s risk management system, ensuring the alignment of the work done by internal audit with the group risks.
To appoint, dismiss and determine the remuneration of the head of internal audit.
To oversee the company’s relationship with the external auditor.
To consider and make recommendations on the appointment, reappointment and removal of the external auditor. Before recommending the appointment of the external auditor, the audit committee must satisfy itself of the independence of the auditor.
To approve the terms of engagement and the remuneration to be paid to the external auditor in respect of audit services provided.
To assess the qualification, expertise and resources, effectiveness and independence of the external auditors annually. Steps to consider include:
- seeking assurance that the auditors and their staff have no family, financial, employment, investment or business relationship with the company (other than in the normal course of business)
- seeking from the audit firm, on an annual basis, information about policies and processes for maintaining independence and monitoring compliance with relevant requirements, including current requirements regarding the rotation of audit partners and staff
- monitoring the external audit firm’s compliance with applicable ethical guidance relating to the rotation of audit partners, the level of fees that the company pays in proportion to the overall fee income of the firm, office and partner and other regulatory requirements
- agreeing with the board and monitoring the company’s policy for the employment of former employees of the external auditor.
To discuss with the external auditor, before the audit commences, the nature and scope of the audit and to ensure that co-ordination synergies are created with the internal audit.
To review with the external auditor, the findings of its work, including any major issues that arose during the course of the audit and have subsequently been resolved and those issues that have been left unresolved; key accounting and audit judgements; levels of errors identified during the audit, obtaining explanations from management and, where necessary, the external auditors, as to why certain errors might remain unadjusted.
To review the audit representation letters before consideration by the board, giving particular consideration to matters that relate to non-standard issues.
To assess, at the end of the audit cycle, the effectiveness of the audit process by reviewing whether the auditor has met the agreed audit plan and understanding the reasons for any changes, including changes in perceived audit risks and the work undertaken by the external auditors to address those risks:
- consideration of the robustness and perceptiveness of the auditors in their handling of the key accounting and audit judgements identified and in responding to questions from the audit committee, and in their commentary, where appropriate, on the systems of internal control
- obtaining feedback about the conduct of the audit from key people involved
To review and monitor the content of the external auditor’s management letter, in order to assess whether it is based on a good understanding of the company’s business and establish whether recommendations have been acted upon and, if not, the reasons why they have not been acted upon.
To develop and recommend to the board the company’s policy in relation to the provision of non-audit services by the auditor and ensure that the provision of such services does not impair the external auditor’s independence or objectivity. In doing so the audit committee should:
- consider whether the skills and experience of the audit firm make it a suitable supplier of the non-audit services
- consider whether there are safeguards in place to ensure that there is no threat to objectivity and independence in the conduct of the audit resulting from the provision of such services by the external auditor
- consider the nature of the non-audit services, the related fee levels, and the fee levels individually and in aggregate relative to the audit fee
- consider the criteria that govern the compensation of the individuals performing the audit
- set and apply a formal policy specifying the types of non-audit work from which the external auditors are excluded
- to formally pre-approve the contract for any non-audit services to be provided by the auditor.
Reporting
The secretary shall circulate the minutes of meetings of the committee to all members of the board.
The audit committee shall annually review its terms of reference and its own effectiveness and recommend any necessary changes to the board.
The audit committee shall prepare a report on its role and responsibilities and the actions it has taken to discharge those responsibilities for inclusion in the annual report and financial statements. Such a report should specifically include:
- a summary of the role of the audit committee
- the names and qualifications of all members of the audit committee during the period
- the number of audit committee meetings and attendance by each member
- the way the audit committee has discharged its responsibilities and performed its duties.
Where disagreements between the audit committee and the board cannot be resolved, the audit committee shall report such an issue to the shareholders as part of the report on its activities in the company’s annual report. If the board does not accept the audit committee’s recommendation regarding the appointment, reappointment and removal of the external auditor, the audit committee shall include a statement explaining its recommendation and reasons why the board has taken a different stance in the annual report.
The audit committee chairman is required to attend the annual general meeting and will be required to answer any questions relating to the audit committees’ areas of responsibility.
REMUNERATION COMMITTEE
Membership
- All members of the committee shall be non-executive directors of the company
- The chairman of the committee shall be an independent non-executive director
- The committee shall comprise not less than three members; a quorum shall be two members.
Attendance at meetings
The group chief executive will normally attend meetings by invitation and other directors, or other persons as appropriate, may attend specific meetings at the invitation of the committee.
Frequency of meetings
Meetings will be held not less than twice per year.
Any member of the committee may request a non-scheduled meeting if they consider it necessary. The chairman of the remuneration committee will determine if such a meeting will be convened.
Authority
The remuneration committee is authorised by the board to:
- investigate any activity within its terms of reference
- seek any information that it requires from any employee of the company
- obtain outside legal or professional advice, at the company’s expense.
Responsibilities
To review and assess the group’s remuneration policies, including performance bonuses, long-term incentives and service contracts, to ensure that such policies are in alignment with the group’s strategy and performance.
To approve the remuneration of executive directors and senior management.
- Participation in long-term incentive schemes
To determine the participation, and participation levels, in the group’s long-term incentive schemes.
To propose fees for non-executive directors, which are then tabled for shareholder approval at the annual general meeting.
Reporting
- The secretary shall circulate the minutes of meetings of the committee to all members of the board.
- The remuneration committee shall annually review its terms of reference and its own effectiveness and recommend any necessary changes to the board.
- The remuneration committee chairman is required to attend the annual general meeting and will be required to answer any questions relating to the remuneration committees’ areas of responsibility.
RISK COMMITTEE
Membership
- The committee shall include at least three non-executive directors of the company, the group chief executive and the chief financial officer
- A quorum shall be three members
- The chairman of the committee shall be an independent non-executive director.
Attendance at meetings
Other non-executive directors, or other persons as appropriate, may attend meetings at the invitation of the committee.
Frequency of meetings
Meetings will be held not less than three times per year.
Any member of the committee may request a non-scheduled meeting if they consider it necessary. The chairman of the risk committee will determine if such a meeting will be convened.
Authority
The risk committee is authorised by the board to:
- investigate any activity within its terms of reference
- seek any information that it requires from any employee of the company
- obtain outside legal or professional advice, at the company’s expense
Duties
The duties of the committee shall be:
To review the risk management processes in place in the organisation and to provide the assurance to the board that such processes are effective in the management of the group’s risks.
- Assurances from management
Through appropriate processes to gain the assurances from management that:
- an effective and embedded risk management process is in place throughout the group
- effective actions have been or are being implemented to address the significant identified risks
- all new business opportunities have been considered from a risk perspective
- risk management is integrated with the strategic and business planning processes
- emerging risks are identified timeously and that appropriate evaluation of these risks is undertaken.
To ensure that the group’s insurance cover is adequate and appropriate, relative to the insurable risks.
To obtain assurances from the audit committee that the work of internal audit is fully aligned with the risk management processes.
Reporting
- The secretary shall circulate the minutes of meetings of the committee to all members of the board.
- The chairman of the risk committee shall report verbally to the board on all relevant matters relating to the activities of the risk committee.
- The risk committee shall annually review its terms of reference and its own effectiveness and recommend any necessary changes to the board.
- The risk committee shall prepare a report on its role and responsibilities and the actions it has taken to discharge those responsibilities for inclusion in the annual report. Such a report should specifically include:
- the process in place to identify and manage risk
- the significant identified risks
- the names of all members of the risk committee during the period
- the number of risk committee meetings and attendance by each member
- the way the risk committee has discharged its responsibilities and performed its duties.
- The risk committee chairman is required to attend the annual general meeting and will be required to answer any questions relating to the risk committees’ area of responsibilities.
GOVERNANCE COMMITTEE
Membership
- The committee shall include at least one non-executive director, the group chief executive and the chief financial officer
- The board shall appoint the chairman of the committee.
Attendance at meetings
Other directors, or other persons as appropriate, may attend specific meetings at the invitation of the committee.
Frequency of meetings
Meetings will be held not less than once per year.
Any member of the committee may request a non-scheduled meeting if they consider it necessary. The chairman of the governance committee will determine if such a meeting will be convened.
Authority
The governance committee is authorised by the board to:
- carry out any activity within its terms of reference
- seek any information that it requires from any employee of the company
- obtain outside legal or professional advice, at the company’s expense.
Responsibilities
In broad terms the responsibilities of this committee are to monitor compliance with King ll and other regulatory requirements and recommend best governance practices to be incorporated into the business. More specifically these responsibilities are:
To ensure that formalised governance structures and processes are in place within the operation of the board and the company.
To enhance the level of governance at board and company level.
- Identify areas of non-compliance
To identify those areas of governance which fall short of acceptable levels and to address these issues.
To ensure ongoing compliance with good governance principles.
Reporting
- The secretary shall circulate the minutes of meetings of the committee to all members of the board.
- The governance committee shall annually review its terms of reference and its own effectiveness and recommend any necessary changes to the board.
- The governance committee chairman is required to attend the annual general meeting and will be required to answer any questions relating to the governance committees’ activities and its responsibilities.
TRANSFORMATION COMMITTEE
Membership
- All members of the committee shall be non-executive directors of the company
- The chairman of the committee shall be an independent non-executive director
- The committee shall comprise at least three members; a quorum shall be two non-executive directors.
- The group chief executive officer will, by reason of his position, also be a member of this committee.
Attendance at meetings
Senior members of management, as appropriate, including representatives of the business units, shall also attend the meetings by invitation.
Frequency of meetings
Meetings will be held not less than twice per year.
Any member of the committee may request a non-scheduled meeting if they consider it necessary. The chairman of the transformation committee will determine if such a meeting will be convened.
Authority
The transformation committee is authorised by the board to
- investigate any activity within its terms of reference
- seek any information that it requires from any employee of the company
- obtain outside legal or professional advice, at the company’s expense.
Duties
The duties of the committee shall be:
- Monitoring empowerment progress
To monitor progress across all areas of strategic empowerment, including management control, employment equity, skills development, preferential procurement, enterprise development and socio-economic development.
However, the board has reserved for itself the aspect of ownership and the transformation committee is not mandated to involve itself in matters relating to BEE ownership initiatives.
Specifically included in the duties of the transformation committee are:
- to ensure that management has set appropriate short and long-term targets
- to ensure that progress towards meeting the targets is measured
- to keep abreast of all changes to the application and interpretation of the charters and codes including any industry specific charters.
Reporting
- The secretary shall circulate the minutes of meetings of the committee to all members of the board.
- The transformation committee shall annually review its terms of reference and its own effectiveness and recommend to the board any necessary changes.
- The transformation committee chairman is required to attend the annual general meeting and will be required to answer any questions relating to the transformation committees’ activities and responsibilities.
NOMINATIONS COMMITTEE
Membership
The committee shall comprise at least three independent non-executive directors.
Attendance at meetings
The group chief executive will normally attend meetings by invitation and other directors, or other persons as appropriate, may attend specific meetings at the invitation of the committee.
Frequency of meetings
Meetings will be held not less than twice per year.
Any member of the committee may request a non-scheduled meeting if they consider it necessary. The chairman of the nominations committee will determine if such a meeting will be convened.
Authority
The nominations committee is authorised by the board to:
- carry out any activity within its terms of reference
- seek any information that it requires from any employee of the company
- obtain outside legal or professional advice, at the company’s expense.
Responsibilities
To regularly review the board and board committees’ structure, size and composition. This includes the balance between executive and non-executive directors and independent and non-independent directors on the board. The nominations committee must, where deemed necessary and appropriate, make recommendations to the board relating to the structure, size and composition of the board and the board committees having regard to gender and diversity.
To identify and nominate candidates for appointment to the board as well as identifying candidates to fill vacancies on the board as they arise.
- Succession plans for senior management
To review succession plans for senior management.
To ensure that evaluations of the board and its component parts are held on a regular and formalised basis.
Reporting
- The secretary shall circulate the minutes of meetings of the committee to all members of the board.
- The nominations committee shall annually review its terms of reference and its own effectiveness and recommend to the board any necessary changes.
The nominations committee chairman is required to attend the annual general meeting and will be required to answer any questions relating to the nominations committees’ activities and its responsibilities.