Khulani Trading Enterprises’ Application of King III Governance Principles
The Board of Khulani Trading Enterprises, in promoting and supporting the highest standards of business integrity, ethics and corporate governance, and in adopting the King III Code of Governance Principles (“King III”), continues to conduct the business of the Group with prudence, transparency, integrity and accountability.
Khulani Trading Enterprises has developed a Group stakeholder engagement policy and the responsibility for implementing the policy rests with the platform executives, managing directors and the Group communications function.
The principles of this Group policy state that the Group will:
- Comply with relevant laws, and the principles and best practice recommendations in the King Code of Governance Principles (“King III”) stakeholder relationships
- Establish clear accountability for effective stakeholder engagement
- Consider the views and concerns of stakeholders in the Group and its companies’ strategic and operational decision-making
- Integrate stakeholder engagement into the ongoing management activities of the Group and its companies
- Strive to measure and manage the gap between stakeholder perceptions and the performance of the Group and its companies
- Ensure that stakeholders are treated fairly and equitably in line with the Group’s values
- Create a transparent and honest environment for stakeholders to interact with the Group
- Provide complete, timely, relevant, accurate, honest and accessible information to its stakeholders while having regard to legal and strategic considerations
- Proactively communicate with stakeholders and seek their views and feedback using various and appropriate communication channels/mediums
- Promote awareness in Group companies of the importance, value and methodologies for stakeholder consultation and relationship management
- Seek ways to better manage and improve stakeholder engagement procedures and performance.
Our engagement process seeks to ensure that interaction with stakeholders in all our markets is effective and ongoing. Various methods are used across the Group to engage with stakeholders.
These methods, among others, are grouped into the following categories:
- Face-to-face engagement (one-on-one meetings, citizen panel/public meetings, including “town hall” meetings)
- Technological engagement (website, intranet, email and SMS)
- Printed engagement (media releases, newsletters, internal magazines, annual integrated report).
The Group continuously interacts with a diverse group of stakeholders. Our stakeholders are grouped into the following categories:
- Shareholders and investment community
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- Financial institutions
- Khulani Trading Enterprises operating companies
- JV partners/service providers/suppliers/subcontractors
- Special and other interest groups.
Our Group client service centre assists to bridge the knowledge gap between Khulani Trading Enterprises and its stakeholders
The Group continues to embed a morally and ethically sound performance culture within Khulani Trading Enterprises.
Statement of business principles
Our Statement of Business Principles was widely distributed and enforced across the Group, both to existing staff and new recruits. Forums were held to reaffirm its importance as the standard bearer of the moral and ethical culture the Group is striving to embed.
The Group continues to conduct its business within the framework set by the regulatory requirements applicable to its industries in every territory in which it operates. In this, Khulani Trading Enterprises conducts its business in compliance with both the letter and the spirit of the law, Group policies, and its Statement of Business Principles.
Regulatory Compliance Regulatory compliance became a key focus during the previous year, and the Group’s compliance risk laws, codes, regulation, policies, standards and procedures were tested and assured. In adopting a risk-based approach, testing focused on existing and anticipated high-risk regulations in the South African market, which include:
- Occupational Health and Safety Act No. 85 of 1993
- Mine Health and Safety Act No. 29 of 1996
- National Environmental Management Act No. 107 of 1998
- Prevention and Combating of Corrupt Activities Act No. 12 of 2004
- Competition Act No. 89 of 1998
- Competition Act No. 89 of 1998
- Basic Conditions of Employment Act Amendment Bill 2012.
Each operating division is developing and implementing its own risk management strategies that identify and implement the controls required to comply with all applicable laws and regulations.
Monitoring procedures will be intensified in FY2014 with a continued emphasis on the Group’s operations. Areas of non-compliance were identified in the past year and earmarked for immediate preventative measures. No significant fines or instances of material or often-repeated instances of non-compliance were identified in FY2013. The Fast-Track Settlement process in relation to Competition Law infringements was concluded in the year under review, and comprehensive and detailed steps have been put in place to ensure compliance with Competition Law.
Fraud, Corruption, Anti-competitive Behavior And Unfair Business Practices
Khulani Trading Enterprises subscribes to good corporate governance, good corporate citizenship and ethical business practices. The Group subscribes to the World Economic Forum Partnering Against Corruption Initiative, it also subscribes to the values of Business Leadership South Africa and supports its Code of Good Corporate Citizenship manifesto. Every executive involved in preparing and authorising a project bid, signs a declaration that he or she has not committed, and is not aware that anyone else affiliated with the bid has committed, whether directly or indirectly, any unethical or unlawful practice in the preparation and submission of the tender or resultant project delivery in question.
We reject anti-competitive or collusive conduct in any shape or form by our employees in every jurisdiction in which we operate, whether or not there are anti-competitive or anti-collusive laws in place. We are also committed to compliance with the South African Competition Act.
The Group encourages concerned employees to report observed unethical behaviour within any of its operations, and promotes the “Tip-Offs Anonymous” hotline service that supports reporting of workplace dishonesty and unethical behaviour, including discrimination, theft, fraud and corruption. A professional firm of forensic consultants and investigators appointed by the Group assists with investigations into any reported cases.
Khulani Trading Enterprises endorses the employee rights enshrined in the Constitution of the Republic of South Africa 1996, including the right to collective bargaining and other labour rights, wherever we operate. Khulani Trading Enterprises acknowledges the right of individuals to freedom of association and rejects child and forced labour. Approximately 76% of South African employees, particularly those in the mining activities, are represented by trade unions and by collective bargaining agreements Khulani Trading Enterprises respects the rights of indigenous people and where appropriate, partners with indigenous and local communities.
Unfair Discrimination And Equality
Discrimination of any form is viewed in a very serious light by Khulani Trading Enterprises and appropriate disciplinary action is taken against offenders. The Group does not condone unfair discrimination and expects everyone who works for or acts on the Group’s behalf to adhere to the highest ethical standards. The Group expects all employees and service providers to treat those with whom they come in contact with dignity and respect. As a South African based company, the Group believes that it is not unfair discrimination to promote affirmative action consistent with the Employment Equity Act or to prefer any person on the basis of an inherent job requirement.
Our unrelenting focus on health and safety produced some impressive results so far. Highlights include the achievement of a lost time injury free frequency rate , a further reduction in fatal incidents, and the achievement of world-class safety performances at all of our operations. These achievements have strengthened our belief that it is possible to achieve Zero Harm at all Khulani Trading Enterprises operations.
We are fortunately to meet our key objective of zero fatal incidents during the year.
Central to this is our Zero Harm through Effective Leadership programme which seeks to cultivate leadership that is empowered to engage effectively with employees and other stakeholders, while actively crafting a high-performance culture that will ensure sustainable improvement in health and safety.
Employee health and wellness
Work to enhance our employee health and wellness programme continues and includes interventions for the prevention, early identification, early intervention and clinical management of all occupational health and wellness conditions which may impact on our employees’ health and productivity. During the year we reviewed and implemented Group standards to guide operations on occupational health and wellness. We invited reputable service providers to provide proposals to help operations in implementing this programme.
We aim to ensure a consistent standard across our South African operations in addressing the following key areas of our health and wellness programme:
- Occupational health
- HIV/Aids and TB
- Substance abuse
- Chronic diseases
- Psychosocial wellbeing
- Incapacity management.
Great projects start with great people
People are the core of our Group and use their skills and experience to deliver our projects according to client expectations. Every one of our employees is crucial to delivering projects that fulfil our client expectations, and to realising our vision of becoming the leading diversified engineering and construction group by 2020. Recognising this, we focus on providing a safe and conducive working environment where employee performance drives Group success. Furthermore, our values of care, integrity, respect, accountability and commitment shape decisions and behaviour on a day-to-day basis influencing how business is conducted.
Investing in our people
We encourage our employees to stretch their capabilities and support them in achieving their full potential by providing a range of learning and development opportunities. The bulk of spend continues to be on technical training. During FY2013 the Group spent millions on training and development. This represents money spent on formal training initiatives, and not continuous on-the-job training and coaching which enables every employee to perform their duties effectively and safely.
Diversity and employment equity
Diversity management and transformation of our workforce continue to be a priority and a challenge.
A diversity programme facilitated by skill development department from the Diversity Institute has been implemented across the Group’s South African senior leadership and will be rolled out throughout the businesses. This interactive programme deals with myths and prejudices based on perceived differences. This, together with our values of care and respect, has created a stronger foundation for conducive relationships in a high-performance working environment.
Broad-based Black Economic Empowerment
Khulani Trading Enterprises is committed to Broad-Based Black Economic Empowerment (“BBBEE”) in our South African business. We follow the provisions of the Broad-Based Black Economic Empowerment Act No. 53 of 2003 and the principles embodied in the Codes of Good Practice on Broad-Based Black Economic Empowerment (“BBBEE Codes”) and the Construction Sector Charter.
Local economic development
Khulani Trading Enterprises is committed to supporting local economic development, with the aim of supporting government and client localisation strategies. We have made a significant investment in our plant and equipment over the past three years with a substantive cumulative capital expenditure that has contributed to the expansion of our productive base.
This investment has created more jobs both directly and indirectly and provides a platform for future growth and economic development in the economies in which we operate.
Three strategic programmes encompass the Khulani Trading Enterprises community development strategy, namely Khulani Trading Enterprises Corporate Social Investment (“CSI”), the Church Community Development programme and the Khulani Trading Enterprises needy student bursary programme. The programmes are aligned with the overall business strategy, focusing on development in the core areas of mathematics, science and technology education, numeracy and literacy development in early childhood and environmental education. Priority is also placed on women’s empowerment, youth development, supporting people living with disabilities, orphans and vulnerable children and promoting high-performance sports development and needy students
|Implement an electronic system for reporting and consolidation of environmental data across the Group.||The system has been implemented across the Group.|
|Implement an environmental data reporting standard.||The standard has been implemented and formal training provided to operating companies. Additionally, an internal data assurance process was conducted on a selection of environmental parameters at a number of operating companies.|
|Implement an environmental incidents and risks standard.||The standard has been implemented and formal training provided to operating companies.|
|Establish Group environmental reduction targets.||Qualitative environmental targets were set at Group level during the reporting period. Reporting against these targets will commence in FY2014. Additionally, a process will be undertaken during FY2014 to set quantitative targets at operational level. More details are provided below.|
In terms of environmental management and reporting across the Group, the following strategic objectives and targets have been developed and will form the basis of our focus during the next reporting period.
|Improve energy and carbon management practices across the Group||Develop a Group energy and carbon management standard and associated awareness campaign.|
|Improve understanding and reporting of supply chain greenhouse gas emissions||Review and implement new Scope 3 GHG protocol requirements.|
|Improve water management practices across the Group||Ensure accurate reporting of water usage across Group.|
|Improve waste management practices across the Group||Develop a Group waste management standard and associated awareness campaign.|
|Improve environmental risks and incidents reporting across the Group||
|Improve the quality of environmental reporting across the Group||Seek independent assurance of energy, carbon and hazardous waste.|
The quantifiable benefits of our contribution to society are not easily identified, but considering the positive impact of an adequate built environment on socioeconomic development and the scale required to make the difference measurable, the significance Khulani Trading Enterprises has attained in its markets over more than 20 years, offers some testimony in this respect.
The financial sustainability of engineering and construction businesses hinges on the following value drivers:
- Financial position strength which impacts the Group’s credit rating for performance bonds and working capital
- Sound cash flows to support investment and growth
- A formalised project procurement system which defines our risk appetite
- The project order book relative to revenues.
Procurement of projects is the primary source of risk for the Group. The Group risk appetite sets the operational parameters for risk. Prospects are filtered against criteria such as value, country, legal system and scope, and the level of authorisation required is specified. The opportunity management system (OMS) supports the evaluation and approval of project opportunities in the context of the risk appetite.
We believe that management is ultimately responsible for providing a safe and healthy workplace. However, this cannot be achieved without the participation of highly motivated employees and other stakeholders. As a result, appropriate strategies, structures and resources are continuously implemented to make this partnership possible. The majority of our operations have installed extensive societal health programmes, including substance abuse programme, voluntary HIV/AIDS counselling and testing and others. The Group’s risk-based HIV/AIDS policy promotes voluntary testing, non-discrimination and awareness about preventing the spread of the disease and mitigating its effects.
The CSI budget is calculated annually on the basis of company performance. Progress concerning the CSI programme is reported and disclosed to appropriate stakeholders in terms of relevant regulations and good practice. Khulani Trading Enterprises has developed a comprehensive CSI handbook for employees, detailing the objectives of CSI, explaining the strategy and describing the focus areas of its CSI programme. Employees are thus ena¬bled to become involved as CSI champions in projects of interest to them. CSI committee members, HR departments and line managers within the Group use the handbook to Khulani Trading Enterprises’ investment in socio-economic development.
Both the head office and each of the five divisions within Khulani Trading Enterprises Construction have adopted projects in com¬munities where they are active. Divisions complete contracts throughout South Africa, leaving behind them a lasting legacy for the communities in the area. These concentrate on education, healthcare and skills development. Strong partnerships lie at the foundation of the CSI programme, fostering open relationships of trust and cooperation which promote optimal use of all resources.
This is achieved through the on-going education, training and development of all its employees in line with the strategic objectives of the Company and the personal needs of its employees.
In doing so, the Company believes in:
The fundamental objective of the Company’s training and development initiatives is thus to provide a career development programme for employees that would be in line with the individual needs of the employee, as well as with the organisational demands of the Company. During the process, every individual’s strengths and weaknesses, as well as his / her ability to participate in such a career development programme, is taken into account.