This Remuneration Report is in accordance with King IV. A glossary of terms used in this report is contained in our online Integrated Annual Report of 2023 which is on our website. If unable to access the online report please note the following key references used: "Policy" means the remuneration policy of the Company; the "Company" or "Merafe" means Merafe Resources Limited and its subsidiaries; the "Committee" means the Remuneration and Nomination Committee of the Company; the "Board" means the board of directors of the Company; "executive directors" and "non-executive directors" means executive and/or non-executive directors of the Company; the "CEO" means the Chief Executive Officer of the Company; and "FD" means the Financial Director of the Company.
The annual general meeting of the Company for the financial year ended 31 December 2022 was held on 17 May 2023 and the requisite ordinary resolutions of a non-binding advisory nature endorsing the Policy and the remuneration implementation report were passed by the requisite majority of shareholders, as a result no engagement with dissenting shareholders was required. The Policy resolution (Ordinary Resolution 6.1) was passed by a 98.41% majority, with 76.40% of the Company's shares being voted. The implementation report resolution (Ordinary Resolution 6.2) was passed by a 98.41% majority, with 76.40% of the Company's shares being voted. The special resolutions to approve the non-executive remuneration was passed by the required majority (all above 99% and includes remuneration for the Board Committees).
The Company continues to engage on the Remuneration Report and the Policy with its stakeholders.
The Company's guiding philosophy is to employ high-calibre, high-performing employees who subscribe to the values and culture of our Company. We recognise that our employees are integral to the achievement of our corporate objectives and they are accordingly remunerated for their contribution and the value they deliver.
Our Company is committed to fair, responsible and transparent remuneration across the business in respect of all employees on all levels. Both the fixed and variable elements of remuneration aim to support Company performance and value creation in the short-, medium- and long-term, as well as to support the achievement of strategic objectives within the Company's risk appetite.
This Policy is applicable to all employees of the Company.
Our remuneration strategy and policy are reviewed at least annually by the Committee to ensure that they are appropriate and relevant in the support of sustainable business performance and in promoting an ethical culture and responsible corporate citizenship.
Our remuneration strategy is designed to be aligned with our business strategy and the execution thereof to promote positive outcomes. Since we strive to attract, retain, motivate and reward employees for executing our business strategy, their remuneration must clearly be market-related and independent third parties are used by the Committee for the purpose of benchmarking to the appropriate segment. The general principle of our remuneration strategy is to structure executive and employee remuneration to include:
The remuneration strategy and policy are communicated to all employees during the year, together with our expectations around their contribution to the success of our organisation.
The key principles of the policy are that:
Responsibility for the reward strategy rests with the Board who in turn appoint the Committee. The Committee comprises at least three members, the majority of whom are independent non‑executive directors and is governed by formal terms of reference.
The terms of reference clearly deal with, inter alia, matters such as:
The primary role of the Committee is to ensure that the Company's directors and senior executives are fairly rewarded for their individual contributions to the Company's overall performance. The Committee also aims to ensure that remuneration is appropriate to attract, retain and motivate the right calibre of directors and senior executives who will strive to achieve the overall goals of the Company. The Committee must demonstrate to all stakeholders that the remuneration of senior executives is set by a committee of Board members who:
The Committee is responsible for making recommendations to the Board on the remuneration policy for directors and, to the extent that it deems necessary, makes comparisons between remuneration packages currently available to the Company's own executive directors and those available to directors of other companies of a similar size in the comparable industry. Comparisons are also made with other companies in South Africa and, if relevant, internationally.
The Committee also takes into account a number of principles, being, inter alia:
The Board approves a policy that articulates and gives effect to its direction on fair, responsible and transparent remuneration.
The Policy for the remuneration of executive directors and other senior management is set by taking appropriate account of remuneration and employment conditions of the industry, the Venture and the Company's specific circumstances.
The Policy is governed by the Committee which regularly reviews the Policy to ensure that it is relevant and supports the Company strategy. To this end, see key principles under remuneration policy of this report.
Target reward mix for Chief Executive Officer
Executive pay mix is defined as the balance targeted between the major components of executive remuneration, namely:
Target reward mix for Financial Director
The Company's targeted pay mix aims to align the incentives of employees with the interests of shareholders. It is recognised that, through acquisitions and business combinations over time, there will always be some deviation from the targeted pay mix structure across the Company. However, the balance between TCtC, STI and LTI for executive directors is shown for illustrative purposes in the schematic above, at various performance levels.
Merafe aims to establish and maintain an integrated pay line with pay levels that ensure that it is able to remain competitive, while managing costs.
Executive remuneration in respect of guaranteed pay is expressed in terms of TCtC.
An employee's TCtC consists of the following elements:
Salaries are reviewed annually and are targeted at the median to 25th percentile of the relevant market. The Company conducts benchmarking exercises at least every second year against the top management reward surveys conducted by the large consultancies. The benchmark used is the median to 25th percentile of the total guaranteed cost of employment for similar positions in similarly-sized listed companies.
The Committee has regard principally to companies in the South African market, which are of similar size, complexity and scope to the Company. The Committee also takes into account business performance, salary practices prevailing for other employees in the Company and, when setting individual salaries, the individual's performance and experience in the role.
Although salaries are reviewed annually, the Board reserves the right not to grant increases should circumstances so dictate. In addition, benefits offered are also reviewed on an annual basis to ensure that employees' needs are addressed fairly, and that schemes are cost effective, well governed and competitive.
Merafe's annual incentives are aimed at rewarding a combination of both business and individual performance in order to support a Company-wide performance culture. The incentive pool is determined as a percentage of net profit after tax and the scheme is therefore self-funding. Financial and non-financial criteria as well as individual performance determine the distribution of the pool to individuals.
Incentive awards are at the discretion of the Board after due consideration of Company and individual performance.
The Committee follows a less mechanistic approach in determining the bonus awards in order to reward outstanding performance more appropriately and to ensure that undue windfalls are mediated.
As indicated above, the incentive scheme performance measures are assessed by the Committee and these measures are determined by taking into account the Company's financial and non-financial criteria as well as individual performance.
All STI awards are based on performance against, inter alia, the following measures:
Targets are set by the Board on an annual basis as determined by Company strategy, business plan and operating conditions. Targets are set to ensure that performance is measured appropriately in accordance with a five-point rating scale. In addition, the Board will apply appropriate weights to measures in order to focus behaviour and performance, related to the strategic focus for the performance period.
Although measures and targets are determined at the start of the performance period, the Board may revise these measures and targets should prevailing business conditions indicate this to be necessary or in response to any other changes in the operating environment. All such changes, which represent the discretionary aspect of the policy, will be disclosed on an annual basis.
As indicated above, individual performance is primarily assessed from a predetermined criteria of key performance areas or value drivers.
The selection of these is informed by the Company's business plan. These metrics are assessed against a five-point scale as follows:
Rating | Description | Definition |
1 |
Poor |
Indicates poor performance. All or most threshold targets not met. |
2 |
Needs improvement |
Performance against target is fair, however, performance against key measures is below threshold or target. |
3 |
Satisfactory |
Performance on target in respect of most or all measures. |
4 |
Good |
Performance exceeds target on most or all measures. Has reached stretched target on a number of key measures. |
5 |
Outstanding/ excellent |
Significant outperformance. All stretched targets met or exceeded. |
The total STI pool available is capped at 3% of net profit after tax. No incentives are payable where the net profit after tax in any financial year is less than R139 million. These parameters are reviewed by the Board on an annual basis for relevance and appropriateness.
In addition, the percentage for STI is capped for the various categories of employees as set out below:
Position | Maximum % of TCtC |
Chief Executive Officer | 100 |
Financial Director | 80 |
Senior management | 60 |
Management | 50 |
Administrative staff | 30 |
The total pool for incentives that become available for distribution will not be exceeded at any time.
STI potential is benchmarked between the median and 75th percentile of the relevant market, which is deemed appropriate when considered along with the guaranteed pay benchmarked at between the median and 25th percentile of the market.
The final incentive calculation is undertaken by aggregating the incentive claims of all participants and comparing this to the pool derived from Company performance.
The purpose of the share incentive scheme is to serve as an incentive and reward to employees of the Company and its subsidiaries for services rendered and to be rendered, aimed at promoting the continued growth of the Company by giving employees an opportunity to acquire shares in the Company and serve as a retention mechanism for employees whose services are regarded by the Company to be crucial to the future growth and sustainability of the Company's business.
The share incentive scheme further seeks to align employee interests with those of shareholders and to support a culture of ownership, with a focus on Company performance and sustainable growth.
Long-term incentives, in the form of a share incentive scheme, have been in existence in the Company since 1999. The current share scheme was approved by the Company shareholders on 13 April 2010, under which both share options and share grants may be issued.
All employees of the Company are eligible for share allocations in respect of the share incentive scheme rules, subject to Board approval and the prevailing implementation policy.
Under the rules of the share incentive plan, the following shares may be offered:
Generally, share options vest one-third per year on the third, fourth and fifth anniversaries and are settled by physical delivery of shares against receipt of payment of the option price. The options lapse after seven years if not exercised, while employed within the Group.
Share grants are granted by the Board on the recommendation of the Committee. They vest one-third per year on the third, fourth and fifth anniversaries and are settled by physical delivery of shares. Alternatively, the Company has the right to settle in cash the value of shares granted.
Equity settlement will take the form of repurchasing of shares on the open market for the benefit of the employee whose shares have vested. The Company reserves the right to issue new shares for purposes of settlement.
In the event of an employee leaving the Group for a reason approved by the directors, such as retirement or disability (no fault terminations), all performance shares granted will vest, subject to the application of performance conditions. No pro-rating of shares will apply. All approved terminations will be disclosed on an annual basis.
In the event of the death of an employee, all performance shares allocated will vest with no performance conditions or pro-rating applied.
In the event of either a no-fault termination or an employee's death, the employee or his/her estate has 12 and 24 months respectively to exercise share options granted to that employee. In the event of retirement at the earliest date allowed by the retirement fund, the employee will have one year to exercise their share options allocated.
In the event of voluntary termination (i.e. resignation) or a fault termination (i.e. those who leave as a result of resignation, dismissal or poor performance), any right to any shares and all allocations will lapse immediately upon termination. No further claims may be laid to such lapsed shares, whether full value or shares options.
In the event of a change in contract of employment, e.g. lateral moves or promotions, the participant will remain entitled to previous share allocations, subject to vesting periods, vesting schedules and prevailing performance conditions and criteria as set out during the initial share allocation.
In the event of a reconstruction or takeover, share allocations will vest on a pro-rata basis subject to the Committee evaluating the applicable performance conditions and determining the number of shares per participant.
In 2018, the Committee revised the allocation policy for more share grants to be subject to performance conditions as opposed to retention shares as illustrated below:
Targeted offer value % of TCtC |
Balance performance/ retention |
|
Chief Executive Officer | 60 | 100/0 |
Financial Director | 45 | 100/0 |
Senior management | 40 | 100/0 |
Management | 35 | 100/0 |
Administration | 25 | 100/0 |
Since 2018, all share allocations are performance-based. In order to balance back to the reward mix and expected outcomes, the targeted value of the share allocation as a percentage of TCtC was increased as per the table above.
The performance conditions for all existing performance-oriented share grants will remain in place, but future grants will be governed by two metrics:
(1) comparison of Merafe's Total Shareholder Return (TSR) over a three-year period with that of a selection of JSE-listed, small cap mining and resources companies; and
(2) growth in headline earnings per share (CPI + a specified percentage as determined by the Board) over a three-year period. The two measures will weigh 50/50 or as determined by the Board from time to time. Measures will be applied per performance share allocation and will remain in force for the duration of the performance period. Performance measures and targets are approved for and applicable to a specific performance period. No retesting of performance conditions is allowed.
The Committee will assess performance against target once the applicable performance period is completed and approve the vesting of performance shares to the extent that targets are met.
Company | Ticker |
Thungela Resources Limited | TGA |
Harmony Gold Mining Limited | HAR |
Pan African Resources plc | PAN |
Merafe Resources Limited | MRF |
Tharisa plc | THA |
MC Mining Limited | MCZ |
DRDGOLD Limited | DRD |
Wesizwe Platinum Limited | WEZ |
Hulamin Limited | HLM |
ArcelorMittal Limited | ACL |
Northam Platinum Holdings Limited | NPH |
Salungano Group | SLG |
Assuming that a group of 12 (11 + Merafe) companies are adopted as the comparator group of companies, vesting of the performance-based share grants will be in accordance with the following policy:
The table below provides details of the revised vesting schedule for performance shares subject to the TSR measure:
Merafe TSR position/ranking relative to peers | Vesting quantity % of allocation* |
Position 1-4 | 100 |
Position 5 | 66.6 |
Position 6 | 33.3 |
Position 7 and lower | 0 |
Assuming that the performance targets below are set by the Board as illustrated in the table below, vesting of the performance-based share grants will be in accordance with the following policy:
HEPS target | Vesting quantity % of allocation* proposed |
On target CPI + 2% | 100% |
Threshold CPI + 1% | 50% |
Below threshold | 0% |
The following principles will govern the LTI offer policy:
Contracts of employment
Senior and executive management are subject to the Company's standard terms and conditions of employment where notice periods are between three and six months. In line with the recommendations set out in King IV, Company policy prevents any senior or executive manager from being compensated for loss of office.
In the event of a change of control of the Company (as defined in the Companies Act) where the Company no longer requires an executive to fulfil their specific role post the change of control, the Company shall pay to the executive 12 months' remuneration on the last day of the notice period and after completion of handover of duties, for existing executives as at 2019. From 2020 onwards, all newly appointed executives will have their termination payments aligned to their contractual notice period.
Retention measures
The Committee reserves the right to apply retention measures should circumstances indicate. Retention measures may include cash or equity awards and will be appropriately disclosed on an annual basis.
Malus and clawback
Any remuneration previously paid to executive directors, that is subsequently found to have been as a result of criminal or otherwise illegal activities, must be repaid to the Company.
In the event of a restatement of the Company's results (other than a restatement caused by a change in accounting policy, standards or interpretation), which results in lower performance‑based remuneration had it been calculated on the restated results, the Committee shall review such performance-based remuneration, determine the amount to be recovered from the executive and take steps to recover the amount.
The Board reserves the right to cancel any share allocation for all or individual participants if during the vesting period there is evidence of serious underperformance or misrepresentation of information, e.g. gross negligence, overstatement of performance, unnecessary risk taking, poor governance or non-compliance.
Non-executive directors' fees
The remuneration of non-executive directors is provided in the context of good governance, and is primarily based upon a methodology which takes into account expertise, contribution by the director and meeting attendance.
Standard duties of non-executive directors include preparation for and attendance at Board meetings, annual general meetings and results presentations. If required, the directors may be requested to perform work outside of their standard duties and for this they will be remunerated based upon the time spent and their level of expertise. Non-executive directors' pay is aimed at aligning with remuneration principles applicable to executive pay.
Independent benchmarks are conducted at least every second year to inform the levels of remuneration for non-executive directors and the intent is to target remuneration between the lower quartile (25th percentile) to the median quartile (50th percentile) of listed companies of similar size (comparator or peer group), in order to ensure that appropriately qualified and experienced directors are appointed.
Non-executive directors' fees are tabled for approval by the shareholders of the Company on an annual basis. The fees paid to non-executive directors for different roles such as chairperson may vary from the fees paid to other non-executive directors. Fees are split between a retainer (60%) and per meeting fee (40%), which is aligned with industry practice.
Non-executive directors do not participate in any share-based incentive scheme or any other incentive scheme that the Company may implement to avoid any potential conflict of interest.
Review
This policy was approved by the Company in March 2023 and will be reviewed annually against current legislation and practice for approval by shareholders during the annual general meeting.
In the event that either the remuneration policy or the implementation report, or both, are voted against by 25% or more of the votes exercised at the annual general meeting, Merafe undertakes to engage with dissenting shareholders to understand their concerns.
The implementation of the Policy approved by shareholders at the annual general meeting in May 2023 is set out below:
2023 R'000 |
2022 R'000 |
|
ZJ Matlala | ||
Salary | 5 730 | 5 573 |
Bonus | 5 899 | 5 231 |
Fringe benefits | 289 | 267 |
Provident contributions | 851 | 761 |
Share grants vested | 6 169 | 1 473 |
Total | 18 938 | 13 305 |
2023 R'000 |
2022 R'000 |
|
D Chocho | ||
Salary | 3 537 | 3 369 |
Bonus | 3 192 | 2 550 |
Fringe benefits | 289 | 269 |
Provident contributions | 399 | 389 |
Share grants vested | 2 642 | 462 |
Total | 10 059 | 7 039 |
The executive directors were assessed by the Committee according to the table set out below which was then used as a basis for awarding bonuses for 2023:
Key factors | Key measurement items |
Profitability | EBITDA compared to budget and previous year |
Growth of business | Grow assets and revenue |
Cost management | Effective cost management at Venture's and Merafe level |
Sustainability | B-BBEE rating to amended scorecard, corporate social investment, environmental incidents |
Safety | Total recordable injury frequency rate, fatalities |
Stakeholder engagement | Stakeholder engagement programme including interactions with SARS, partners, shareholders, employees, etc. |
Talent management | Succession planning, managing employees, training, mentoring |
Reporting | Interim and annual reporting |
As per the Policy, the Committee applied a less mechanistic and more holistic approach, which has resulted in the following bonus allocation:
2023 % allocation of cost to Company |
2022 % allocation of cost to Company |
|
Chief Executive Officer | 81 | 81 |
---|---|---|
Financial Director | 65 | 65 |
As at 31 December 2023, the directors of the Company are beneficially interested (directly and indirectly) in 3 553 565 (31 December 2022: 3 553 565) shares in the Company. During the financial year no material contracts were entered into in which directors and prescribed officers of the Company had an interest and which significantly affected the Group.
Executive directors of the Company and their immediate families control 0.14% (31 December 2022: 0.14%) of the voting shares of the Company. In addition to their salaries, the Company also contributes to a provident fund (defined contribution plan) and medical aid fund on their behalf. Executive directors also participate in the Company's share incentive schemes.
2023 Number of Shares | 2022 Number of Shares | |||
Direct | Indirect | Direct | Indirect | |
Z Matlala | 2 945 000 | – | 2 945 000 | – |
---|---|---|---|---|
D Chocho | 608 565 | 608 565 | ||
Total | 3 553 565 | – | 3 553 565 | – |
No additional directors' interests have been noted post 31 December 2023 until the date of approval of this report, being 15 March 2024.
Long-term incentives – 2023
The award of long-term incentives for 2023 under the Company's share option and grant schemes are set out below:
The following share grants relating to executive directors were outstanding at 31 December 2023:
Vesting date | Z Matlala: Number of Shares |
D Chocho: Number of Shares |
1 April 2024 | 781 971 | 337 500 |
1 April 2024 | 3 904 903 | 1 685 363 |
1 April 2024 | 1 618 480 | 698 538 |
1 April 2025 | 3 904 903 | 1 685 363 |
1 April 2025 | 1 618 480 | 698 538 |
1 April 2025 | 709 641 | 324 299 |
1 April 2026 | 1 618 480 | 698 538 |
1 April 2026 | 709 641 | 324 299 |
1 April 2026 | 1 006 647 | 460 027 |
1 April 2027 | 709 641 | 324 299 |
1 April 2027 | 1 006 647 | 460 027 |
1 April 2028 | 1 006 647 | 460 027 |
18 596 081 | 8 156 818 |
The performance conditions of this report.
Share grant allocations were implemented based on the VWAP of the previous day's trading as follows:
2023 | 2022 | |||||
% allocation of cost to Company |
Number of shares |
Vesting period |
% allocation of cost to Company |
Number of shares |
Vesting period |
|
Chief Executive Officer | 60 | 3 019 940 | 1 April 2026 | 60 | 2 128 923 | 1 April 2025 |
---|---|---|---|---|---|---|
1 April 2027 | 1 April 2026 | |||||
1 April 2028 | 1 April 2027 | |||||
Financial Director | 45 | 1 380 082 | 1 April 2026 | 45 | 972 896 | 1 April 2025 |
1 April 2027 | 1 April 2026 | |||||
1 April 2028 | 1 April 2027 |
The special resolutions to approve the non-executive fees for 2023 at the annual general meeting which were passed by the requisite 75% majority are set out below:
2023 | ||||||
Total fees per annum R |
Retainer 60% R |
Monthly retainer fees R |
Retainer per quarter R |
Fees per attendance 40% R |
Fees per attendance per meeting R |
|
Board Chairperson | 735 528 | 441 317 | 36 776 | 110 329 | 294 211 | 73 553 |
---|---|---|---|---|---|---|
Board Member | 333 719 | 200 231 | 16 686 | 50 058 | 133 488 | 33 372 |
Audit and Risk Committee Chairperson | 240 840 | 144 504 | 12 042 | 36 126 | 96 336 | 24 084 |
Audit and Risk Committee Member | 151 025 | 90 615 | 7 551 | 22 654 | 60 410 | 15 103 |
Remuneration and Nomination Committee Chairperson | 140 601 | 84 360 | 7 030 | 21 090 | 56 241 | 14 060 |
Remuneration and Nomination Committee Member | 85 823 | 51 494 | 4 291 | 12 874 | 34 329 | 8 582 |
Social, Ethics and Transformation Committee Chairperson | 130 186 | 78 113 | 6 509 | 19 528 | 52 075 | 13 019 |
Social, Ethics and Transformation Committee Member | 85 823 | 51 494 | 4 291 | 12 874 | 34 329 | 8 582 |
Directors' fees 2023 R'000 |
Total 2023 R'000 |
Retainer 2023 R'000 |
Attendance 2023 R'000 |
Total 2023 R'000 |
|
Mr A Mngomezulu (Chairperson) | 872 | 872 | 553 | 319 | 872 |
---|---|---|---|---|---|
Ms M Vuso | 517 | 517 | 345 | 172 | 517 |
Mr J Mclaughlan | 460 | 460 | 285 | 176 | 460 |
Mr K Tlale | 485 | 485 | 291 | 194 | 485 |
Ms N Mabusela-Aikhuere | 571 | 571 | 369 | 202 | 571 |
Mr D McGluwa* | 394 | 394 | 252 | 142 | 394 |
Mr D Green** | 411 | 411 | 252 | 159 | 411 |
Total | 3 710 | 3 710 | 2 346 | 1 365 | 3 710 |
* | Paid to IDC |
** | Paid to GOSA |
The 2024 proposed fees, exclusive of VAT, in accordance with the policy are set out below and result in an overall increase of 6.1% from the previous year. This increase and the allocation take into account the previous benchmarking exercise and inflation.
2024 | ||||||
Total fees per annum R |
Retainer 60% R |
Monthly retainer fees R |
Retainer per quarter R |
Fees per attendance 40% R |
Fees per attendance per meeting R |
|
Board Chairperson | 860 568 | 516 341 | 43 028 | 129 085 | 344 227 | 86 057 |
---|---|---|---|---|---|---|
Board Member | 333 718 | 200 231 | 16 686 | 50 058 | 133 487 | 33 372 |
Audit and Risk Committee Chairperson | 244 453 | 146 672 | 12 223 | 36 668 | 97 781 | 24 445 |
Audit and Risk Committee Member | 153 290 | 91 974 | 7 665 | 22 994 | 61 316 | 15 329 |
Remuneration and Nomination Committee Chairperson | 160 504 | 98 703 | 8 225 | 24 676 | 65 802 | 16 450 |
Remuneration and Nomination Committee Member | 100 413 | 60 248 | 5 021 | 15 062 | 40 165 | 10 041 |
Social, Ethics and Transformation Committee Chairperson | 152 319 | 91 391 | 7 616 | 22 848 | 60 928 | 15 232 |
Social, Ethics and Transformation Committee Member | 100 413 | 60 248 | 5 021 | 15 062 | 40 165 | 10 041 |
Key activities for the Committee in 2024 will be, inter alia, the approval of the remuneration and bonuses for executive directors and senior management.
The Committee will also assess fees to be paid to non-executive directors. Focus will be placed on the key principles of King IV and the Company's commitment to these principles and reviewing the remuneration policy. In addition, the Company will, if required, engage with shareholders to discuss issues of mutual concern.
The Board and the Committee are committed to maintaining high standards of corporate governance and to support and apply the principles of good governance advocated by the Institute of Directors South Africa (IoDSA) and King IV.
The Board and the Committee are of the view that the objectives stated in the Policy have been achieved for the period under review. The Board and the Committee are also satisfied that they have fulfilled their responsibilities in accordance with their terms of reference with regard to remuneration within the Company.
Chairperson – Remuneration Committee | 15 March 2024