Our approach to governance

BOARD STATISTICS
as at 31 December 2015
     
56% of our Board members are women, all of whom are black   78% of our Board members are non-executive directors who do not receive share options or incentives
78% of our Board members are black   71% of our non-executive Board members are independent

Merafe understands that a sound and robust approach to corporate governance standards throughout our organisation requires a focus on performance as well as conformance. We also recognise that strategy, performance, sustainability and risk are inseparable. We establish clear lines of accountability from Board level down.

GOVERNANCE STRUCTURE

Governance Structure

We are committed to transparency and accountability, which is essential if Merafe is to thrive and succeed in the short, medium and long term.

To ensure that we consistently practise effective corporate governance throughout the Company, our Board materially applies the principles of King III. It also instils in our management team the need to achieve the best results in the most responsible way possible. In terms of the King III principles the Board must consider the concerns and priorities of its wider stakeholder environment in its strategic guidance and decision-making processes.

The Board’s corporate governance role

Our Board charter commits the Board to ensuring our Company is a responsible corporate citizen. Good governance is about strong leadership. It is the role of the Merafe Board to direct, govern and be in effective control of the Company. The fact that our Company has been acknowledged as a responsible corporate citizen is testament to the sound leadership of our Board.


The Board’s charter and our Company’s Code of Ethics define the roles, responsibilities and behaviours of the Board in ensuring a successful, ethical and sustainable business. The Board is required to make decisions on matters of a material and significant nature, including our Company’s financial and operating results, major acquisitions and disposals, considerable capital expenditure and the strategic direction of our business.

Not only does the Board direct the development of our Company strategy, but its members are responsible for assessing the short-term and long-term impacts of our strategy on all our stakeholders.

We review our strategic plans annually. They are then presented to the Board for approval. Accountability rests with our Board for ensuring our financial and legislative compliance, as well as the timeous identification and management of risk and opportunity.

The Board performs an annual evaluation of its performance in terms of economic, environmental and social performance. It also evaluates the performance of its committees.

Dealing in securities

We have a policy to guide directors and designated employees on dealing in the Company’s securities. The JSE Listings Requirements specifically prohibit directors or senior employees from buying or selling a Company’s shares during a closed period.

Board expertise

It is imperative that our Board has the appropriate balance of skills and experience within its ranks to fulfil its mandate. The members of our Board have a wide range of skills, including financial, technical and commercial expertise, which they use to guide the decision-making of our Board.

The structure and roles and responsibilities of the Merafe Board and committees
  Board and Board
committees
Roles and responsibilities Members invitees   Attendance  
          Board
meetings
  Special
meeting
 
  Merafe
Board
The Chairperson is responsible for ensuring that:
the Board provides effective leadership
the Board maintains ethical standards
Merafe develops and implements strategies aimed at achieving its sustainability
the Board and its committees are effective

The Board is responsible for:
governance of the Merafe Group on behalf of its shareholders
its own governance
strategy, strategic decision-making and risk tolerance
assessment of performance
engaging with stakeholders
Merafe’s approach to its social responsibility, safety, health, the environment, ethics and risk
information technology governance


Key issues in 2015 included:
Safety, Merafe strategy and restructuring at head office, RBH sale of shares, stakeholder engagement, sustainability, Venture performance and sustainability, IT governance and risk management, approval of annual financial statements and integrated report, approval of interim results and considering the payment of dividends: Board and committee effectiveness review; review and approval of various charters, policies and mandates; and committees’ terms of reference

Chris Molefe
(Chairperson)
  4/4   1/1  
Belese Majova   4/4   1/1  
Zed van der Walt   4/4   1/1  
Abiel Mngomezulu   3/4   1/1  
Mpho Mosweu   3/4   1/1  
Karabo Nondumo   4/4   0/1  
Steve Phiri+   1/1    
Meryl Mamathuba+   0/1    
Zanele Matlala (CEO)   4/4   1/1  
Bruce McBride   1/1    
Jurg Zaayman*   4/4    
Kajal Bissessor   4/4   1/1  
Shaun Blankfield   3/3    
Brian Harvey+   0/1    
        Committee meetings
  Audit
and Risk
Committee
All members of this committee are independent non-executive directors (as required
by the Companies Act).

The committee:
monitors the adequacy of financial controls and reporting; reviews the audit plans of the external auditors and adherence to these plans; considers and determines the principles for approving the use of the external auditors for non-audit services; ensures that financial reporting complies with IFRS, the Companies Act and tax legislation; reviews and makes recommendations on all financial matters
oversees Merafe’s integrated reporting as well as the assurance function
assists the Board in the identification of all material risk and sustainability issues to which the Company is exposed. It ensures that the requisite risk management culture, policies, practices, systems and resources are in place and are functioning effectively


Key issues in 2015 included:
Review work of external auditors, assess independence of external auditors, review risk register, monitor compliance with statutory requirements, assess adequacy of internal controls and compliance, funding, RBH sale of shares, sale of Horizon mine, monitor and consider all tax returns and matters related to SARS, risk management workshop, oversee forex and interest rate hedging policies: IT governance implementation, approved formal tax strategy and policy document, reviewed and approved integrated annual report and assurance process, recommend annual financial statements and reviewed interim results; integrated report for approval by Board, assessment of CFO, committee self assessment and review terms of reference, formalisation of an internal audit function.

Karabo Nondumo
(Chairperson)
  4/4  
Abiel Mngomezulu   3/4  
Zed van der Walt   4/4  
Belese Majova   4/4  
Zanele Matlala*   4/4  
Kajal Bissessor*   4/4  
Bruce McBride*+   1/1  
Chris Molefe*   4/4  
Jurg Zaayman*   4/4  
           
           
           
           
           
           
           
           
* Invitee
+ Resigned on dates as set out in the Directorate section of this report

  Board and Board
committees
Roles and responsibilities Members/invitees   Attendance  
          Committee
meetings
 
  Remuneration and Nominations Committee The committee:
makes recommendations to the Board for its consideration and final approval regarding remuneration strategy and policy
assists the Board in ensuring that directors and executives are remunerated fairly and responsibly
ensures the disclosure of directors and other executive remuneration is accurate, complete and transparent
assists the Board with ensuring that remuneration policies are adopted that promote the achievement of strategic business objectives and encourage individual performance and monitoring remuneration policies
makes recommendations on non-executive directors’ fees
develops policy around the appointment of directors, investigates potential Board members for necessary skills and competence and makes appropriate recommendations to the Board


Key issues in 2015 included:
Considered make-up/membership of all committees, recommended approval of remuneration policy to Board, approved CEO’s (individual) and business performance KPIs, approved talent management programme, evaluated Exco’s individual and business performance against objectives, reviewed executive contracts in line with internal audit recommendations, review of Remuneration Policy and approval of the Board Gender Diversity Policy.

Zed van der Walt1   4/4  
Chris Molefe2   4/4  
Shaun Blankfield   2/2  
Zanele Matlala*   4/4  
Kajal Bissessor*   4/4  
       
       
Note:  
1. Chairperson of Remuneration Committee
2. Chairperson of Nomination Committee
 
See 3.84(d) in Our approach to governance of this report  
       
       
       
       
       
       
       
       
  Social,
Ethics and
Transformation
Committee
The roles, responsibilities and key issues for the Social, Ethics and Transformation Committee are set out in the Social, Ethics and Transformation Committee report in the
Our approach to governance
.


Key issues in 2015
The key issues are set out in the Social, Ethics and Transformation Committee report in the Our approach to governance.

Belese Majova
(Chairperson)
  3/3  
Chris Molefe   3/3  
Mpho Mosweu   1/2  
Meryl Mamathuba+   0/1  
Zanele Matlala   3/3  
Kajal Bissessor   3/3  
Jurg Zaayman   2/3  
Bruce McBride+   1/1  
* Invitee
+ Resigned on dates as set out in the Directorate section of this report

The structure and roles and responsibilities of the Merafe Board and committees
  Management structure Roles and responsibilities   Members
 

Executive Committee of the Venture

The Executive Committee consists of the heads of all the Venture’s divisions and the MD of the Venture. The committee meets at least once a month, recommends policies and strategies; is responsible for the implementation of strategy and carrying out the Board’s mandates and directives. It deals with all executive management business and is responsible for all material matters that are not the responsibility of the Board. It also assists with the execution of Merafe’s compliance and disclosure obligations.

  Merafe is represented by Zanele Matlala, Kajal Bissessor and Jurg Zaayman.
 

The joint Board of the Venture

The joint Board meets quarterly with the aim of ensuring proper governance of the activities of the Venture. Members of Merafe’s management team also attend and participate in the Venture’s monthly Exco and Sustainable Development meetings and quarterly Audit Committee and Treasury meetings.

 

Three representatives from Glencore and three representatives from Merafe. The Merafe General Manager Chrome attends as an invitee.
Currently, Glencore appoints the Chairperson of the joint Board

* Invitee
+ Resigned on dates as set out in the Directorate section of this report
See our website for our Board charter, Code of Ethics and the Board Gender Diversity Policy.
See the annual financial statements, which form part of our online integrated report for 2015 for the Audit and Risk Committee’s report.
For a more detailed overview of the responsibilities of the Board and the committees, see the terms of reference of the Board and committees on our website, which form part of our online integrated report for 2015.


Merafe complies with King III. See the Merafe King III Compliance Index and table setting out our performance in terms of King III, as well as for a full analysis of our corporate governance compliance. In our 2014 integrated annual report we identified certain issues with which we partially complied and noted that we would be focusing on these issues in 2015. Our progress in 2015 is set out below.

Our progress with governance matters in 2015 where we had not as yet fully applied King III
  Oversight of internal audit
 

PricewaterhouseCoopers (PwC) were previously Merafe’s internal auditors. The scope of their appointment included: preparing an internal audit plan and an internal audit charter; reviewing IT governance, legal and compliance and all matters relating to tax.

PwC provided the Audit and Risk Committee with a report of the findings of their review of IT governance, legal and compliance and tax matters, which included recommended changes. All the changes and amendments recommended by PwC were completed by year end except for certain human resource policies and the procurement policy, which were being revised. In 2014 this was completed.

Following PwC’s compliance review Merafe furnished the Venture with a checklist of the legislation and compliance that is the Venture’s responsibility and we sought and received confirmation that this compliance is taking place.

In 2015, the Audit and Risk Committee and the Board considered the scope and extent of internal audit at Merafe head office (as opposed to the Venture) and whether it is necessary considering the structure and nature of the business. The decision was made to appoint internal auditors from April 2016.


Reporting in terms of Section 3.84 of the JSE Listings Requirements on Board governance processes
  Requirement Principle   Merafe’s approach and compliance
  3.84(a)

There must be a policy detailing the procedures for the appointment to the Board.

Appointments must be formal and transparent and a matter for the Board as a whole, assisted where appropriate by a nomination committee.

If a nomination committee is appointed, such committee must only constitute non-executive directors and the majority must be independent. The committee must be chaired by the Chairperson of the Board.

 

Merafe’s directors are appointed by means of a transparent and formal procedure, governed by the mandate and terms of reference of our Remuneration and Nomination Committee and the Board charter. The Board charter and the terms of reference of all our committees are available on our website at www.meraferesources.co.za, and the Remuneration and Nomination Committee’s terms of reference are summarised in this report. All members of our Nomination Committee are independent non-executive directors. The committee is chaired by an independent non-executive director who is Chairperson of the Board. We comply with the definitions of non-executive director and independent director in terms of paragraph 3.84(f)(ii). All non-HDSA appointments are first ratified by the Social, Ethics and Transformation Committee.

  3.84(b)

There must be a policy evidencing a clear balance of power and authority at Board level to ensure that no one director has unfettered powers.

 

Our Board charter clearly demonstrates that there is a clear balance of power and authority at Board level and that no one director has unfettered powers.

  3.84(c)

Issuers must have a CEO and a Chairperson and these positions must not be held by the same person.

The Chairperson must either be an independent director or the issuer must appoint a lead independent director as defined in the King Code.

 

The CEO and Chairperson positions in Merafe are held by different people and Merafe’s Chairperson is an independent non-executive director as defined in King III. We would refer you to the Directorate section and Our approach to governance of this report.

Chris Molefe has chaired the Merafe Board since May 2003. In accordance with Chapter 2 of King III the Board conducted an in-depth review of both his performance and independence. It concluded that his independence has not been affected or impaired by his length of service and that Merafe would continue to benefit from his performance as Chairperson if he were to continue in this role.

  3.84(d)

Issuers must appoint an audit committee in compliance with the King Code.

Issuers must appoint a remuneration committee in compliance with the King Code.

here appropriate, issuers must appoint a risk and nomination committee.

The composition of such committees, a brief description of their mandates, the number of meetings held and any other relevant information must be disclosed in the annual report.

 

Merafe has combined its Audit and Risk Committee. Its membership is set out in Our approach to governance of this report. The committee currently has three members, all of whom are independent non-executive directors, as set out in the King Code. The Chairperson of the Board is invited to attend committee meetings.

As previously indicated Merafe has appointed a combined Remuneration and Nomination Committee. The committee has five members, four of whom are independent non-executive directors. The Chairperson of the Board is a member of the Remuneration Committee, but is Chairperson of the Nomination Committee. As already explained, Merafe has a combined Audit and Risk Committee and a combined Remuneration and Nomination Committee. The composition of the Committees, the mandates, activities and meetings held are set out in Our approach to governance of this integrated annual report.

During 2015, our Chief Executive Officer and Financial Director were permanent invitees to the Audit and Risk Committee.

  3.84(e)

Brief CV of each director standing for election or re-election must accompany relevant notice of meeting.

 

Brief curricula vitae of our directors are to be found in the Directorate section of this report.

  3.84(f)

Capacity of directors in relation to executive, non-executive and independent must be categorised and disclosed in the relevant documentation.

 

The curricula vitae mentioned at 3.84(e) also contain information as to whether a director is independent, non-executive or executive. The composition of our committees is in accordance with the requirements of the Companies Act and King III.

  3.84(g)

Issuers must have a full time executive financial director.

 

Merafe has a fulI time Financial Director who does not hold any other position, nor does she have any other commitments that could be considered as full or part time employment.

  3.84(h)

The audit committee must consider on an annual basis, and satisfy itself of the appropriateness of the expertise and experience of the financial director and report thereon in the annual report.

 

Our Audit and Risk Committee annually considers and satisfies itself of the appropriateness of the expertise and experience of the Financial Director and has reported in its Audit and Risk Committee report that it is satisfied with the appropriateness of the expertise and experience of the Financial Director.

  3.84(i)

The provision deals with the competence, qualifications and experience of the Company Secretary and the Board of Directors’ responsibility in relation thereto.

 

The Remuneration and Nomination Committee as well as the Board assessed the competence, qualifications and experience of the Company Secretary (CorpStat Governance Services, represented by William Somerville and Elise Waldeck) against various criteria and a rating scale, and has agreed that the firm is sufficiently qualified, competent and experienced to hold the position of Company Secretary. The Board made their assessment in a closed Board meeting.

  3.84(j)

The provision deals with the arm’s length relationship between the Board of Directors and the Company Secretary and the Board of Directors’ responsibility in relation thereto.

 

The Company Secretary fulfils no executive management function and is not a director and provides services on an outsourced basis. Accordingly, the Board is satisfied that the Company Secretary maintains an arm’s length relationship with the executive team, the Board and the individual directors.


Stakeholder relationships
Management proactively deals with stakeholder relationships

We believe there will always be room for improvement in stakeholder relationships, however, our management team continually strives to improve the effectiveness of its stakeholder engagement.

An appropriate balance between stakeholder groupings

While we believe that we are reasonably well engaged with all our stakeholder groups, in our opinion this issue will also remain one that needs to be monitored for potential areas where there is room for improvement.

Equitable treatment of stakeholders 

We believe we are doing our best to treat our stakeholders fairly. Again, this is an area we will continue to monitor to find areas where we can improve

Timeous and effective dispute resolution

We have never had to resort to dispute resolution, however, we have various dispute resolution mechanisms in place, including an arbitration clause, in our agreement with GlencoreXstrata regarding the Venture.

Board balance and independence
The majority of our non-executive directors are independent
Our non-executive directors do not receive share options or incentives
There is a clear  separation of responsibilities between the Chairman and the CEO
The Chairman of our board is independent and without conflicts of interest


While the board acts as the custodian of corporate governance within our organisation, a clear allocation of responsibilities among our directors ensures a balance of power and authority. As recommended by the Code, no independent non-executive director has been with the company for longer than 10 years and there are no fixed-term contracts with directors.

The structure of the Merafe board is closely aligned with the recommendations of King III.

The independence of these directors is assessed annually. The Chairman of the board is an independent non-executive director. In terms of King III the Chairman is elected annually. As the Chairman is an independent non-executive director there is no need for the board to appoint a lead independent director at this point in time.

The definition of an independent non-executive director in King III
An independent director is a non-executive director who:

- is not a representative of a major shareholder who can control or significanfly influence management or the board
- does not have a material direct or indirect interest in the company/ group which:
- is greater than 5% of the group's total number of shares in issue
- is less than 5% of the group's total number of shares in issue, but is material to his/her personal wealth
- .has not been employed by the group or appointed as designated auditor or partner in the group's external audit firm, or senior legal adviser in thaprevious three financial years
- is not related (immediate family) to someone who has been employed by the group in an executive capacity in the previous three financial years
- is not a professional adviser to the group or relationship that could conflict, such as being a director of a material customer of or supplier to the company does not receive remuneration based on the company,s performance.


Company Secretary
Our Company Secretary is responsible for administering the proceedings and affairs of the directorate, the company and, where appropriate, owners of securities in the company, in accordance with the relevant laws. The Company Secretary is available to assist all our directors with advice on their responsibilities, their professional development and any other relevant assistance they may require.

The board has assessed the competence, qualifications and experience of the Company Secretary, as required in terms of section 3.84 of the JSE Listings Requirements and has agreed that she is sufficiently qualified, competent and experienced to hold the position of Company Secretary. The board made their assessment during a closed session board meeting. The Company Secretary fulfils no executive management function and is not a director. Therefore, the board is satisfied that the Company Secretary maintained an arm’s length relationship with the executive team, the board and individual directors in terms of section 3.84 of the JSE Listings Requirements.

Independent advice
Our non-executive directors can, if necessary, obtain independent professional advice at the company’s expense.

Board

Board induction and training
All newly-appointed directors receive both formal and informal training related to the company and their fiduciary responsibility as directors. Ongoing directorate training has focused on ensuring a proper understanding of the revisions to the Code of Practice in King III and the new Companies Act. Board members attended training sessions and visited the operations of the Venture. They also participated in strategic workshops which led to the approval by the board of the company strategy.

Retirement and appointment of directors
To ensure that our board keeps pace with the dynamic business environment within which it operates while maintaining a level of continuity within the directorate, the retirement of directors, who are appointed at the Annual General Meeting, is staggered on a rotation basis.

Appointing directors who bring the appropriate skills and expertise to the board – and who are non-executive and independent as suggested by King III – requires careful consideration and selection. The procedures for appointing new directors to the board are formal and transparent and a thorough investigation of the candidates by the Remuneration and Nomination Committee assists the board to make informed appointments in the best interests of our company. The committee not only checks whether the potential board member has ever been disqualified as a director but also assures the board that the requisite skills are in place to enable decisions around business sustainability, governance, strategy and performance, risk and opportunity and standards of conduct.

Human rights
Merafe subscribes to the fundamental tenets of human rights as enshrined in our country’s Constitution and Bill of Rights. Our policies and practices are aligned to ensure that all employees and stakeholders are treated with dignity and in a manner that is culturally appropriate, irrespective of gender, background or race.

The Venture has the grievance processes in place to ensure that any breaches of human rights can be reported, investigated and, where necessary, the appropriate corrective action can be taken. In addition, employees can use the ethics line to report any activities which they believe are not in line with the company’s policies on human rights.

Ensuring the security of our people and our assets is essential. The use of security in challenging environments can bring about risks, which we recognise and deal with by making sure that our security personnel and third parties providing security services are equipped with human rights training. As a whole, we are committed to the United Nations (UN) Universal Declaration of Human Rights and use the UV Guiding Principles on Business and Human Rights as a guide for the development of our group human rights policy and supporting operational standards.

The Venture’s Sustainable Development Standards require its operations to maintain community relations strategies that uphold and promote human rights and respect cultural considerations and heritage. No breaches of human rights were reported by any operations during 2015, nor were there any incidents of the rights of indigenous people being violated.

Ethics
The Merafe Code of Ethics governs the way we do business and the way our directors and employees engage with our stakeholders. The Code, which is binding on our directors and employees and contractors, provides guidelines for behaviour which is above reproach.

The Merafe board is committed to creating a culture where the highest levels of integrity are underpinned by transparent business transactions and robust assurance systems.

The Glencore Corporate Practice framework lays out a clear path for practising our values and achieving our ultimate objective. Our operational and corporate policies are underpinned by our fundamental values and Code of Conduct.

Externally developed principles, charters and initiatives to which Merafe and the Venture subscribe
Merafe is committed to the principles of the revised Mining Charter for the South African mining industry and the Mining Scorecard, established to monitor performance against the Charter, and to meeting the targets set in the Mining Scorecard.

Merafe’s partner in the Venture, Glencore, plays an active role in a number of significant international and national industry organisations and stakeholder groups through membership, funding, provision of expertise and participation in committees and working groups.

Its commitments, through these involvements, are met in the Venture’s operations. They include: the United Nations (UN) Universal Declaration of Human Rights, UN Guiding Principles on Business and Human Rights, the International Council on Mining and Metals (ICMM), the North West Province Air Pollution Control Forum (NAPCOF) and the Ferro Alloys Producers Association (FAPA). NAPCOF and FAPA discuss air quality issues and partner with regulators in setting best practice air quality standards. Their task teams deal with specific air quality issues and also engage with regulators through providing feedback and advice.

The Venture is a member of the Ferro Alloys Producers Association (FAPA), the International Chrome Development Association (ICDA), the North West province Air Pollution Control Forum (NAPCOF) and the South African Mining Development Association (SAMDA).

The Venture’s Sustainable Development structures are aligned to the International Council of Mining and Metals’ (ICMM) Sustainable Development Framework.

For the report of the Chairperson of the Audit and Risk Committee, see Report of the audit and risk committee of the annual financial statements on our online integrated report for 2015 and Directors' report of this report.

See Our approach to governance of this report for details of the members of the Remuneration and Nomination Committee and brief description of the mandates of all our committees and attendance at these committee meetings.