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Corporate Governance Detailed

SANRAL prides itself on its commitment to good governance as it delivers on its mandate of providing an effective national road network using state and investor funding. The company complies with relevant governance legislation which includes the PFMA, the SANRAL Act and the Companies Act. In additional the organisation subscribes to the applicable King IV principles, which guide good corporate governance practices within any organisation. SANRAL applies the first 16 principles of King IV, which are relevant to the agency in the conduct of its business, striving to ensure efficient service delivery and to achieve the governance outcomes of an ethical culture, good performance, effective control and legitimacy. The intent of the Board and the management team is to run the business ethically and efficiently.

 

 

Leadership

None

The Board approves SANRAL’s policies, which include the code of conduct for      employees. The Board has delegated the implementation of approved policies to Management. The adherence of policies is monitored by Management and internal audit. Important principles of conduct include the annual declaration of interests, with a requirement to provide updates as and when there may be changes or potential conflicts of interest. Such declaration of interests is required of the Board, employees and suppliers (as part of the tender process). The maintenance of confidentiality, transparency, independence of decisions and clean procurement processes are part of the code of conduct which become binding on signature of the employment contract. There is, in addition, a SANRAL supply chain practitioners’ code of conduct, which all supply chain practitioners sign on an annual basis. Board members and employees are also required to sign their disclosures drawn from the CIPC website annually.          Induction presentations to employees and the annual governance, risk and compliance roadshows to all employees reinforce the importance of ethical behaviour.

Important policies include the Anti-Fraud and Corruption Policy and Risk Management Policy. SANRAL has an independently monitored fraud hotline for use by employees and external parties, including service providers, to report suspected fraud anonymously. SANRAL has a zero-gifts policy – employees may not accept any gifts offered to them by service providers. This is to ensure that independence and transparency in decision-making is not compromised.

All supplier contracts include the need to disclose any conflicting interests. Employees serving as bid specification, evaluation and adjudication committee members for the evaluation and award of bids are also required to disclose any conflict of interest and recuse themselves from any further involvement. The same goes for any directors involved in the award of major contracts.       

Should any clause of the code of conduct or policies affecting conduct be breached, consequence management, which may include disciplinary action, is mandatory.

The recruitment and appointment of employees is preceded by the necessary checks on personal credentials, criminal history, credit standing, qualifications and references.

The Management of Prominent and/or Influential Persons Policy (PIP Policy) requires SANRAL to evaluate every business relationship to determine  whether there is any reason to conclude that it brings higher risk of questionable association, perception of corrupt dealings, conflict of interest or potential abuse leading to fraudulent financial transactions, money laundering, terrorist financing etc.

Interpersonal respect, loyalty to the organisation, and respect for diversity are values which are defended vigorously by the SANRAL team.

The functioning and conduct of the Board and its committees

The functioning and conduct of the Board and its committees are guided by Board and committee charters and the Board Code of Conduct, which are reviewed and approved annually. SANRAL’s Delegation of Authority Framework has been undergoing an in-depth review during 2019/20 and based on this the charters’ review is also currently underway. This review is also aimed at ensuring better alignment with the provisions of the SANRAL Act.

The importance of acting in the best interests of SANRAL is a key principle that informs the conduct of the Board members. Any conflicts of interest are managed through the annual disclosure of interests in writing and additionally by disclosures at every Board and committee meeting. In terms of the Board Charter and Code of Conduct, Board members may not contract for any services with SANRAL in their individual capacities.    

The tone for ethical business practice is set by the Board and it filters through every level of the organisation. This includes the imperatives of transparency and fairness in all of SANRAL’s decisions, the avoidance of conflicts of interest across the organization and the maintenance of clean procurement processes as it pursues its core function of the award and management of large road projects across the national road network.

The Board is provided with training or workshops, as required, with respect to governance and the core functions of SANRAL. This is to enable it to fulfill its main functions of setting the strategic direction, monitoring implementation and performance, overseeing ongoing, effective risk management and ensuring timely and relevant disclosure of performance across the three areas of society, the economy and the environment.

Organisational ethics

The Board approves SANRAL’s policies, which include the code of conduct for      employees. The Board has delegated the implementation of approved policies to Management. The adherence of policies is monitored by Management and internal audit. Important principles of conduct include the annual declaration of interests, with a requirement to provide updates as and when there may be changes or potential conflicts of interest. Such declaration of interests is required of the Board, employees and suppliers (as part of the tender process). The maintenance of confidentiality, transparency, independence of decisions and clean procurement processes are part of the code of conduct which become binding on signature of the employment contract. There is, in addition, a SANRAL supply chain practitioners’ code of conduct, which all supply chain practitioners sign on an annual basis. Board members and employees are also required to sign their disclosures drawn from the CIPC website annually.          Induction presentations to employees and the annual governance, risk and compliance roadshows to all employees reinforce the importance of ethical behaviour.

Important policies include the Anti-Fraud and Corruption Policy and Risk Management Policy. SANRAL has an independently monitored fraud hotline for use by employees and external parties, including service providers, to report suspected fraud anonymously. SANRAL has a zero-gifts policy – employees may not accept any gifts offered to them by service providers. This is to ensure that independence and transparency in decision-making is not compromised.  

All supplier contracts include the need to disclose any conflicting interests. Employees serving as bid specification, evaluation and adjudication committee members for the evaluation and award of bids are also required to disclose any conflict of interest and recuse themselves from any further involvement. The same goes for any directors involved in the award of major contracts.        

Should any clause of the code of conduct or policies affecting conduct be breached, consequence management, which may include disciplinary action, is mandatory.

The recruitment and appointment of employees is preceded by the necessary checks on personal credentials, criminal history, credit standing, qualifications and references.

The Management of Prominent and/or Influential Persons Policy (PIP Policy) requires SANRAL to evaluate every business relationship to determine  whether there is any reason to conclude that it brings higher risk of questionable association, perception of corrupt dealings, conflict of interest or potential abuse leading to fraudulent financial transactions, money laundering, terrorist financing etc.

Interpersonal respect, loyalty to the organisation, and respect for diversity are values which are defended vigorously by the SANRAL team.

Corporate citizenship

SANRAL’s mandate to manage South Africa’s national road network offers it opportunities to contribute to the well-being, development and empowerment of the country and its citizens through the provision of an effective national road network and by driving internal and external transformation initiatives. Internally, these include promoting      diversity and the provision of skills development opportunities to employees.  External initiatives include the development of SMMEs and communities through job creation, enterprise development opportunities and skills development programmes. SANRAL also sponsors scholarships, bursaries and partnerships with universities and facilitates internships. Site or contractor staff are provided project-related training in business management and technical skills. Community development projects ensure the enhancement of access and mobility in rural communities and road safety related projects improve the safety on roads through pedestrian bridges, access roads and other features. SANRAL’s efforts as a corporate citizen can be assessed by its contribution in the following areas:

(a) Employees – SANRAL endeavours to be an employer which values its employees.

      Employment equity: SANRAL has a three-year Employment Equity Plan, the implementation of which is monitored by the Social, Ethics and Transformation Committee (SETC). The achievement of targets is reported to the Board and the Minister of Transport annually.

      Fair remuneration: Measures to ensure fair remuneration include a yearly salary review process, when an external company does an industry comparison to ensure that SANRAL’s remuneration structure is in line with the market.  The 2019/20 salary adjustments also took into account government’s policy to contain public sector remuneration. The SETC and Board approve the yearly remuneration adjustment levels. Another measure is the evaluation and grading of positions to ensure that incumbents within a particular scope of work are remunerated fairly, based on experience and skills.

      Safety, health and dignity: SANRAL subscribes to a wellness programme in the interests of employees. SANRAL ensures that contracts valued above R40m are registered with the Department of Labour and an occupational health and safety practitioner is appointed to oversee the site and ensure that all plans comply with safety regulations.

      Development of employees: A work skills plan, which is derived from each individual’s development plan, determines the career development path for each employee. There are other benefits, such as internal bursaries, offered to staff who wish to further their education.

(b) Economy – SANRAL endeavours to provide the nation with an effective network of highways and freeways and, in doing so, seeks to promote transformation.

      The national road network is critical for the mobility of people and goods across the nation and the infrastructure must be maintained in optimal condition to provide a satisfactory road user experience and service the South African economy.

All contracts stipulate a minimum percentage of local employment which helps in the development of communities. Contractors are encouraged to use local SMMEs. They must comply with all applicable legislation and adhere to the basic conditions of employment. Moreover, SANRAL also provides opportunities to SMMEs and small contractors to work on the agency’s projects. This is achieved by the unbundling of projects into smaller packages to create opportunities for the lower graded CIDB entities, such as for grades 5CE to 7CE. The SMMEs (these are largely from grade 1CE to Grade 5CE) will benefit from the increased mandatory subcontracting i.e. the 30% minimum subcontracting as per the 2017 PPPFA regulations.

      SANRAL’s Transformation Policy was launched by the Minister of Transport in September 2017. It was debated and consulted with various stakeholders prior to implementation. The document was also canvassed with government stakeholders for their recommendations and views. Several measures have been implemented to fast-track transformation within the construction industry such as reducing the size of selected projects to create opportunities for the  lower CIDB grades, entering into MOUs with the equipment manufacturers/suppliers in order for the SMMEs to build up equipment of their own which will enable them to tender at lower unit rates and thus increase their competitiveness, MOUs with DFIs (Development Finance Institution) and commercial banks for the new contractors to obtain financing at more competitive interest rates etc. More such measures are under consideration for implementation, some of which require government’s buy-in.

(c) Environment –      SANRAL has adopted the principle of continual improvement from the ISO 14001 environmental standard. SANRAL reports on its activities aimed at ensuring environmental management and sustainability in Volume 1 of this Integrated Report under ‘Natural Capital’.  The reporting covers SANRAL’s performance and compliance with legislative requirements, governance and risk management arrangements, environmental authorisations received for key road projects and climate change mitigation and adaptation initiatives. It also encompasses reporting on progress toward the sustainability goals and targets that have been set.

(d) Society – SANRAL provides scholarships, external bursaries and internships as a contribution to the national skills development objective.  SANRAL also supports the Chair in Maths, Natural Science and Technology Education at the University of the Free State, the Chair in Pavement Engineering at the University of Stellenbosch and the Chair in Transport Planning at the University of Cape Town. SANRAL’s Technical Excellence Academy in Port Elizabeth provides the required training to accelerate professional engineering registration.

 The impact of SANRAL’s projects on society is carefully monitored and discussed with the communities they affect through regular, planned stakeholder engagements. Every project, whether a large multi-billion Rand highway or modest community development road, has a positive developmental impact on society. Roads provide access and mobility, thus enabling economic activity and creating employment opportunities, business opportunities and general upliftment of the quality of life. SANRAL provides safe community mobility and access through pedestrian bridges, access roads, and other safety features.

Targets pertaining to some of the above performance areas have been included in the Annual Performance Plan and performance against the plan is monitored on a quarterly basis.

Strategy and performance

The Board is responsible for setting the organisation’s strategic direction, which is aligned to the National Development Plan and government priorities. The Shareholder’s Compact requires that the Board shall integrate any governmental policy relating to the agency, into its Strategic Plan, key performance measures and borrowing programme in order to execute its legislative mandate.

 In 2017/18, the Board approved SANRAL’s strategic framework, Horizon 2030. It was launched by the Minister of Transport in September 2017. Management’s efforts are aimed at achieving the strategic objectives set out in this framework through concrete initiatives that are listed in the annual performance plan of the company. The Board      reviews the risks which could influence the achievement of strategic objectives and is accountable for risk management.

The strategic objectives have been translated into key performance indicators (KPIs) with annual targets, which are monitored quarterly, semi-annually or annually. The KPIs measure performance of important aspects of SANRAL’s business, such as road asset performance, road safety, transformation efforts, financial efficiency, research and stakeholder relations. The performance report for 2019/20 is published in the Integrated Report.   These KPIs are also linked to the individual performance agreements of employees.

Reporting

SANRAL’s Integrated Report, which includes the annual financial statements, is published on the SANRAL website. The Integrated Report includes governance disclosures with respect to the King IV Code, as recommended under each principle. 

The Integrated Report provides information on SANRAL’s contribution to the national road infrastructure, transformation and empowerment, performance with respect to pre-determined targets in key performance areas and financial performance.

The Board, supported by the Audit and Risk Committee, oversees the compilation of the Integrated Report including the Annual Financial Statements and the related accounting policies and materiality thresholds used for financial reporting. Combined assurance has been put in place to ensure the integrity of the reports.

Primary role and responsibilities of the accounting authority

The Board’s role and responsibilities are detailed in the Board Charter. Its functions include the setting of strategic direction, the approval of policy, the oversight of implementation, and accountability through appropriate disclosure in the Integrated Report and through performance management and reporting. The Board is comfortable that it has fulfilled its responsibilities in line with the Board Charter and the Board Code of Conduct.

The Board held thirteen meetings during the year, including 8 special board meetings to ensure proper oversight.

The shareholder meeting (AGM) for 2019 was held on 10 September 2019.

Composition of the accounting authority

SANRAL’s sole shareholder is the state, represented by the Minister of Transport. Other than the representative from National Treasury, who is nominated by the Minister of Finance, the non-executive Board members are appointed by the Minister of Transport in terms of the SANRAL Act, No. 7 of 1998, as amended.

The Board as at 31 March 2020 comprised seven members, as listed on page …. in Volume 1. The Chairperson: Mr T Mhambi, Mr R Haswell, Ms L Madlala and Mr T Matosa are independent, non-executive members and were appointed on 1 September 2018.

The non-executive members were:

Ms Avril Halstead, a non-executive member representing National Treasury and appointed on 24 May 2016     .

Mr Prasanth Mohan representing the Department of Transport and appointed on 1 April 2019 but was retired by the Minister on 14 July 2020.

Mr Alec Moemi was appointed by the Minister of Transport effective 14 July 2020 to serve on the Board

The CEO, who is the only executive member, is the seventh member of the Board.

The SANRAL Act provides for a total of 8 Board members and the Minister of Transport has been requested to appoint      another non-executive, independent member on the Board.

All non-executive board members serve for a maximum of two terms of three years, in terms of section 13(1)(a) of the SANRAL Act.

The Board members include      engineering professionals,      an employee relations expert, a      finance professional and experts with knowledge of the governance and the public sector. The Board is of the view that this is an appropriate mix of skills that are relevant to SANRAL and the Board has appointed an external adviser to assist the Audit and Risk Committee with specialist skills in this area. However, the Board was also of the view that the Board is too small, which places limitations on the composition of the committees, but the number of members is limited by the SANRAL Act and the Board has engaged the Minister of Transport to effect amendments in this regard.      The gender composition of the Board as at 31 March 2020 was 71% men and 29% women.

The Chairperson is an independent, non-executive member of the Board. The SANRAL Act does not provide for a lead independent member. The Board appoints another voting member to serve as chair, if the Chairperson is absent from any meeting. The Chairperson must appoint an independent, non-executive member of the Board as Acting Chairperson should he be absent for any period of time due to illness, vacation, travel etc.

Committees of the accounting authority

Section 16 (1) of the SANRAL Act states that “the Board may from time to time appoint one or more committees to assist the Board in performing its functions”.

The Board has established four committees to assist it in discharging its duties. These are the Contracts Committee, the Audit and Risk Committee, the Social, Ethics and Transformation Committee and the Assets and Liabilities Committee.

The committees do not assume any management or operational functions but have oversight of the functions that fall within their area of responsibility and make recommendations to the Board in this regard. All committees have the responsibility of monitoring the management of risks within their area of oversight.

The Board has agreed that a Nominations Committee may be established on an ad-hoc basis as required     .

All committees function in accordance with the mandate and delegations determined by the Board, as detailed in their respective charters. The charters are currently being updated to ensure alignment with the Delegation of Authority Framework, which is also undergoing an in-depth review.

The Board appoints the members of committees based on the skills required to fulfil the functions of the committees. The tenure of the committees is concurrent with that of the Board – three years as per the SANRAL Act, as amended. The Board may reconstitute the membership of committees during its tenure depending on the context.     The Board may appoint external, independent members or advisors to committees should their skills be required for the effective functioning of the committees. Such appointments are always subject to an open and competitive recruitment process. An external adviser has been appointed to assist the Audit and Risk Committee.

Contracts Committee

The Contracts Committee is responsible for reviewing the recommendations from the Management Bid Adjudication Committee for the award of major contracts with a value exceeding R300m, and making recommendations to the Board for approval. It also has oversight of all contracts awarded by SANRAL while monitoring that the SCM processes are inclusive of  SANRAL’s transformation initiatives in the construction industry and the empowerment of SMMEs and small contractors.

As at 31 March 2020, the committee comprised two non-executive members, Ms Avril Halstead (chair) and Mr Prasanth Mohan, and the CEO.

The Committee has not had external advisors or invitees who attended committee meetings regularly. The Committee Secretary attends committee meetings, as do the Engineering Executive, the Contracts Manager, the Legal Advisor, the CFO, the Risk Officer, the CAE and the Company Secretary, by invitation.

Key areas of focus during the year have been the consideration of large contracts, the implementation of the Transformation Policy and the provision of opportunities for smaller contractors.

Four meetings were held during the year.

The committee is satisfied that it fulfilled its responsibilities in accordance with its charter during 2019/20.

Audit and Risk Committee

The Audit and Risk Committee (ARC) functions in terms of its charter which details the functions of the committee as:

  • Independent oversight of the Annual Integrated Report and the annual financial statements.
  • Independent oversight of combined assurance, internal financial controls, internal audit function and external audit.
  • Oversight of IT governance.
  • Oversight of compliance, risk management and anti-fraud and corruption measures.
  • Other functions such as the oversight of the annual performance plan, organisational performance report, annual budget, legal reports, public liability claims.    

Importantly, the ARC oversees risk governance within SANRAL. It reviews reports on the strategic risk register and the fraud hotline at least once every quarter. The committee leads an annual risk session for the Board. This is an opportunity for Board members to identify new risks and review the performance of internal controls implemented in the previous financial period.

The three committee members who served on the Committee during 2019/2020 were: Mr R Haswell (chair), Mr T Matosa and Ms L Madlala. All are independent, non-executive directors.

The Board appointed an adviser to the committee effective 1 April 2019. Mr Thamsanqa Zikode supported and strengthened the committee’s financial and auditing skills and experience. He is also an expert in internal controls and risk analysis.

The committee met in camera, as required, with the internal and external auditors, to facilitate an exchange of views and concerns that may not be appropriate for discussion in an open forum.

The internal audit team and the external audit team attend all ARC meetings by invitation as does the Committee Secretary. The CEO, CFO, the Management Accountant, the Engineering Executive, the Risk Manager, Company Secretary and the Chief Audit Executive also attend by invitation, as do other managers who have matters on the agenda. Key areas of focus during the year included the oversight of the internal audit function, audits related to GFIP, risk management, IT governance and the management and follow-up of audit findings by operational teams.

Five meetings were held during the year.

The Report of the Audit and Risk Committee can be found in the Integrated Report on pages and it provides detailed information on the committee’s activities and its governance responsibilities.

The committee is satisfied that it fulfilled its responsibilities in accordance with its charter during 2019/2020.

Committee for nomination of members of accounting authority

None

The Board approves SANRAL’s policies, which include the code of conduct for      employees. The Board has delegated the implementation of approved policies to Management. The adherence of policies is monitored by Management and internal audit. Important principles of conduct include the annual declaration of interests, with a requirement to provide updates as and when there may be changes or potential conflicts of interest. Such declaration of interests is required of the Board, employees and suppliers (as part of the tender process). The maintenance of confidentiality, transparency, independence of decisions and clean procurement processes are part of the code of conduct which become binding on signature of the employment contract. There is, in addition, a SANRAL supply chain practitioners’ code of conduct, which all supply chain practitioners sign on an annual basis. Board members and employees are also required to sign their disclosures drawn from the CIPC website annually.          Induction presentations to employees and the annual governance, risk and compliance roadshows to all employees reinforce the importance of ethical behaviour.

Important policies include the Anti-Fraud and Corruption Policy and Risk Management Policy. SANRAL has an independently monitored fraud hotline for use by employees and external parties, including service providers, to report suspected fraud anonymously. SANRAL has a zero-gifts policy – employees may not accept any gifts offered to them by service providers. This is to ensure that independence and transparency in decision-making is not compromised.

All supplier contracts include the need to disclose any conflicting interests. Employees serving as bid specification, evaluation and adjudication committee members for the evaluation and award of bids are also required to disclose any conflict of interest and recuse themselves from any further involvement. The same goes for any directors involved in the award of major contracts.       

Should any clause of the code of conduct or policies affecting conduct be breached, consequence management, which may include disciplinary action, is mandatory.

The recruitment and appointment of employees is preceded by the necessary checks on personal credentials, criminal history, credit standing, qualifications and references.

The Management of Prominent and/or Influential Persons Policy (PIP Policy) requires SANRAL to evaluate every business relationship to determine  whether there is any reason to conclude that it brings higher risk of questionable association, perception of corrupt dealings, conflict of interest or potential abuse leading to fraudulent financial transactions, money laundering, terrorist financing etc.

Interpersonal respect, loyalty to the organisation, and respect for diversity are values which are defended vigorously by the SANRAL team.

Committee for nomination of members of accounting authority

The Board has agreed that a Nominations Committee be appointed as and when required. The Committee has a charter which has been approved by the Board.

The appointment of the non-executive members of the Board is the responsibility of the Minister of Transport, as legislated in the SANRAL Act. The representative from National Treasury on the Board is nominated by the Minister of Finance.

Social, Ethics and Transformation Committee

SANRAL has a Social, Ethics and Transformation Committee (SETC).      It functions in terms of its charter and its responsibilities are governed by Regulation 43 of the Companies Act. These include oversight of:

  • Labour and employment matters, including the review of the remuneration policy and annual remuneration adjustments.
  • Social and economic development functions, including transformation, skills development, employment equity and good corporate citizenship endeavours.
  • Customer and stakeholder relations.
  • Environmental, health and safety matters.

The activities of the SETC and key areas of focus are guided by an annual work plan to ensure that all the responsibilities are monitored effectively.

The committee consisted of three non-executive members as at 31 March 2020: Mr T Matosa (chair), Mr R Haswell and Ms L Madlala.

The committee held four meetings during 2019/2020.

The committee does not have any advisors or external invitees who attend the committee meetings regularly. However, SANRAL has a remuneration service provider, which advises on employee remuneration and rewards, including annual salary adjustments for various employee grades every year. The remuneration and adjustments are based on an annual remuneration survey.

The Committee Secretary attends every meeting. The CEO, the Acting Business Operations Executive, the Transformation Manager, the Company Secretary and other managers with matters on the agenda attend by invitation. 

The committee provides a report on its functions and activities to the annual shareholder meeting.

The committee is satisfied that it fulfilled its responsibilities in accordance with its charter during the financial year 2019/20.

The Assets and Liabilities Committee

The Assets and Liabilities Committee (ALCo) oversees SANRAL’s borrowing activities and its property and financial asset portfolio. It monitors the implementation of policies and controls governing SANRAL’s financial risk management with respect to liquidity, investments, interest rates, and credit.  The committee, which operates in terms of a charter, sets risk management parameters for each risk category and monitors compliance. Provisions of the Treasury Policy and Control Manual regulate the activities of the Treasury Function, whose performance ALCo monitors. ALCo reviews the relevance and validity of the policies and controls periodically. Any proposed amendments are subject to approval by the Board.

As at 31 March 2020, the committee had two non-executive members: Ms A Halstead (chair) and Mr P Mohan, and the CEO.

The committee had no external advisors or regular invitees to its meetings. The Committee Secretary attended all meetings and the Treasurer, the Financial Risk Manager, the CFO and the Company Secretary attended by invitation.

The main areas of focus were SANRAL’s property portfolio, borrowing plan and liquidity management.

The committee held four meetings during 2019/2020.

The committee is satisfied that it fulfilled its responsibilities in accordance with its charter during the financial year 2019/20.

Evaluation of performance of the accounting authority

The performance of the Board and its committees was self-evaluated by the newly constituted Board at the end of 2018/19. The assessment results were reviewed during 2019/20. A full Board evaluation by an independent service provider will be conducted during 2020/21.

The self-evaluation included areas such as setting strategy, board relationships, board skills, meetings and information provided, committees, and stakeholder management. The conclusion of the evaluation was that internal board relationships, communication and information provided were good. It was felt, however, that the Board was too small and this affected the skills set represented to the Board and the proper constitution of the committees. SANRAL’s founding legislation restricts the board to a maximum of eight members. Areas identified for improvement were the Board’s role in enhancing stakeholder management, developing strategy and succession planning. The Board’s involvement in stakeholder interactions increased during 2019/20. The Board      interrogates SANRAL’s strategic priorities annually and monitors performance against the Horizon 2030 outcomes as reflected in the Annual Performance Plan. The Board was satisfied that the evaluation had added value to its functioning and had increased members’ awareness of their oversight role and fiduciary responsibilities.

Management appointments and delegations

Chief Executive Officer

The CEO commenced duties on 1 December 2016 on a five-year contract, as per the SANRAL Act. The CEO is appointed by the Minister of Transport on the recommendation of the Board after careful assessment of the agency’s requirements and an open and competitive recruitment process. The CEO reports to the Board. The Board is responsible for the performance evaluation of the CEO and also for the recommendation of his annual salary adjustment to the Minister of Transport.

The CEO is accountable for the implementation and execution of the Board approved strategy and policies and for leading operational planning and implementation.

The CEO’s major responsibilities include delivering on the KPIs captured in the Annual Performance Report, managing business operations, driving company strategy, maintaining technical excellence in delivery and addressing key company challenges.

The CEO’s succession plan is overseen by the Board with delegation to the Social, Ethics and Transformation Committee to monitor.

The CEO has no other professional commitments.

Delegation of powers

The Board has approved a Delegation of Authority Framework, guided by the requirements of relevant legislation and general governance principles. This ensures adequate control and oversight on the part of the Board and at the same time ensures that the CEO has the authority to implement and execute the Board-approved strategy. The CEO, in turn, has delegated certain powers to the executive and management teams. Delegations of powers are routinely reviewed annually, and also when statutory changes necessitate their revision. The Board undertook an in-depth review of the Framework during 2019/20, which is still being finalised. This review included obtaining legal advice, particularly with respect to the powers of the committees. The Framework as approved in August 2018 continued to be effective during 2019/20.

The Board is satisfied that the SANRAL Delegation of Authority Framework contributes to role clarity and the effective exercise of authority and responsibilities.

Company Secretary

The Board has appointed a Company Secretary, as required by the Companies Act. The Company Secretary is not a member of the Board. Her performance is reviewed and evaluated by the Board every year. 

The Company Secretary is responsible for providing support to the Board and for developing systems and processes to enable the Board to function effectively. She provides guidance and support with regard to the powers, roles and responsibilities of the Board and its committees and on corporate governance matters, the Companies Act and other governance-related legislation. She serves as the main link between the Board and Management. The Company Secretary is considered by the Board to be fit and proper for the position and is qualified to perform the duties which are required of the role. She reports to the Board functionally, and to the CEO administratively.

Risk governance

The Board has approved the Risk Management Policy and Framework, which is reviewed annually.

SANRAL uses the ISO 31000 risk management methodology in assessing both strategic and operational risks. At a management level, SANRAL has a Risk Focus Group, which meets quarterly and reviews the operational risk profile of the organisation and monitors the associated internal control environment. The strategic risk profile is monitored by the Audit and Risk Committee (ARC) and the Board tracks the progress and effectiveness of risk management.

Strategic risks are identified annually during the Board Risk Workshop.

The key strategic risks identified in the strategic risk profile of the organisation are as follows:

  • Uncertainty relating to the funding of key national road projects.
  • Negative public perceptions of SANRAL caused by factors that     include      anti-toll sentiments.
  • The slow rate of transformation in the construction industry.
  • Regulatory risks arising from the current SCM regulatory framework in the country.

Internal Audit is risk-based with the areas of risk that have been identified used to inform the focus for audit.

The annual governance, risk and compliance roadshow to all SANRAL’s offices provides a reminder to employees about SANRAL’s anti-fraud and corruption philosophy and its approach to risk management. It is also an opportunity to highlight new risks or weaknesses in risk management identified in order to improve the response.

The Board is ultimately accountable for risk management and the ARC monitors risk management on an ongoing basis on behalf of the Board.

Technology and information governance

SANRAL recognises that governance of Information and Technology (I&T) should include the following:

  • Be governed from an enterprise level,
  • Business and IT alignment by ensuring that goals, strategies and priorities are balanced between stakeholder and enterprise needs and IT
  • Value creation by ensuring benefits delivery, risk optimization and resource optimization.

The Board is the governing body of SANRAL and thus the governance objectives are to evaluate strategic options, direct senior management on the chosen strategic options, approve policies and monitor achievement of the strategy. The use of ICT within SANRAL is in compliance with relevant laws.

  The operational and management objectives (as listed below) have been delegated to management and the ICT department:

  • Addressing the overall organisation, strategy and supporting activities for I&T
  • Addressing the definition, acquisition and implementation of I&T solutions and their integration in business processes
  • Addressing the operational delivery and support of I&T services including cyber security
  • Address performance monitoring and conformance of I&T with internal performance targets, internal control objectives and external requirements

The ICT Governance Steering Committee represents the interests of the Board in delivering sustainable and enabling services to the organisation. The committee is accountable for ethical and effective management of SANRAL’s information technology resources with which it aims to achieve strategic outcomes and create value for stakeholders.    

During 2018/19, the ICT department concluded the development of a five-year ICT strategy which was approved by the Board. The strategy aims to ensure that the ICT function enables SANRAL to achieve its strategic objectives as set out in Horizon 2030. ICT has the potential not simply to make the business of SANRAL more efficient by automating processes but also to ensure that it plays a strategic role, for instance, through the data gathering, sharing and analysis potential and capabilities it offers. 

The ICT strategy sets out a process to prepare SANRAL for emerging technology that is relevant to the organisation. In 2019 SANRAL embarked on major technology upgrades/procurement to enhance SANRAL’s ability to operate deliver.

ICT Risk Management is done in accordance with the enterprise risk management approach and methodology with information security and privacy risk given specific attention and handled through the outsourced Security Operations Centre (SOC) project.  A few (but not limited) of the areas that are covered are as follows:

  • Vulnerability Management – cyclical practice of identifying, classifying, prioritizing, remediating and mitigating software vulnerabilities
  • Email security, archiving and continuity
  • Network security and management – monitors and controls incoming and outgoing network traffic based on predetermined security rules.

Compliance.

None

The Board approves SANRAL’s policies, which include the code of conduct for      employees. The Board has delegated the implementation of approved policies to Management. The adherence of policies is monitored by Management and internal audit. Important principles of conduct include the annual declaration of interests, with a requirement to provide updates as and when there may be changes or potential conflicts of interest. Such declaration of interests is required of the Board, employees and suppliers (as part of the tender process). The maintenance of confidentiality, transparency, independence of decisions and clean procurement processes are part of the code of conduct which become binding on signature of the employment contract. There is, in addition, a SANRAL supply chain practitioners’ code of conduct, which all supply chain practitioners sign on an annual basis. Board members and employees are also required to sign their disclosures drawn from the CIPC website annually.          Induction presentations to employees and the annual governance, risk and compliance roadshows to all employees reinforce the importance of ethical behaviour.

Important policies include the Anti-Fraud and Corruption Policy and Risk Management Policy. SANRAL has an independently monitored fraud hotline for use by employees and external parties, including service providers, to report suspected fraud anonymously. SANRAL has a zero-gifts policy – employees may not accept any gifts offered to them by service providers. This is to ensure that independence and transparency in decision-making is not compromised.

All supplier contracts include the need to disclose any conflicting interests. Employees serving as bid specification, evaluation and adjudication committee members for the evaluation and award of bids are also required to disclose any conflict of interest and recuse themselves from any further involvement. The same goes for any directors involved in the award of major contracts.       

Should any clause of the code of conduct or policies affecting conduct be breached, consequence management, which may include disciplinary action, is mandatory.

The recruitment and appointment of employees is preceded by the necessary checks on personal credentials, criminal history, credit standing, qualifications and references.

The Management of Prominent and/or Influential Persons Policy (PIP Policy) requires SANRAL to evaluate every business relationship to determine  whether there is any reason to conclude that it brings higher risk of questionable association, perception of corrupt dealings, conflict of interest or potential abuse leading to fraudulent financial transactions, money laundering, terrorist financing etc.

Interpersonal respect, loyalty to the organisation, and respect for diversity are values which are defended vigorously by the SANRAL team.

Compliance governance

Ensuring compliance is integral to every activity or operation of the organisation. A Compliance Policy has been adopted. It confirms SANRAL’s commitment to comply not only with legislation but also with codes, standards and best practice.                

The identification of legislation and regulation that impact on SANRAL’s activities is one of the processes to ensure compliance. A key area of focus has been on ensuring compliance with procurement legislation and regulations, changes in which are closely monitored through SANRAL’s Supply Chain Management Unit. The unit      is required to give effect to such changes     . Controls in this area continue to be strengthened.      Strict adherence to SCM regulations is critical, as is the avoidance of any real or perceived conflict of interest.  

The annual governance, risk and compliance roadshow to all employees informs staff of the importance of compliance in every function.

There have been no regulatory penalties, sanctions or fines for non-compliance or contravention of statutory obligations by the Board or senior management since SANRAL was established.

Remuneration governance

SANRAL’s remuneration philosophy and policy support its business strategy.

The Remuneration Policy guides the determination of remuneration of employees.  The Policy is updated annually and approved by the Board, on the recommendation of the SETC, which has the responsibility for overseeing employee remuneration. It is also tabled and approved at the shareholder meeting, most recently on 10 September 2019.

The purpose of the SANRAL Remuneration Policy and implementation strategy is to attract, retain, motivate and reward high-performing employees who constructively contribute to the achievement of SANRAL’s objectives.

SANRAL is committed to the principle of fair and responsible remuneration for the whole company. Actions in this regard include:

  • Assessment of remuneration conditions among employees at the same level, in accordance with the principle of “equal pay for work of equal value”, to identify and address any unjustifiable remuneration disparities.
  • Initiatives to invest in its people, including through talent management, development opportunities for all employees, various training courses as per identified needs, and an employee value proposition aligned with corporate values and culture.

On an annual basis, SANRAL engages the services of a specialist service provider      to advise SANRAL on a range of reward issues, including, senior executive rewards and governance, tax and regulatory compliance, a “total” reward strategy and analytics, competitive benchmarking, incentive design and linkage to performance management. The SETC was satisfied with the independence of the service provider.

SANRAL has two components of remuneration:

  • Guaranteed-package (including benefits).
  • Short-term incentives in the form of its STI scheme.

The setting of remuneration of the CEO is the responsibility of the Board. The CEO’s remuneration adjustment must be approved by the Minister of Transport with the concurrence of the Minister of Finance. This is done on recommendation from the Board, based on its assessment of the CEO’s performance.

All employees other than the CEO have permanent employment contracts. The notice period ranges from one to three months and the normal retirement age is 65 years.

The Minister annually approves the remuneration for the Chairperson and the independent, non-executive members of the Board. The Board is then remunerated at a daily rate for every day spent on SANRAL business.

The remuneration of the Board and senior management is on page xxx    

Assurance.

None

The Board approves SANRAL’s policies, which include the code of conduct for      employees. The Board has delegated the implementation of approved policies to Management. The adherence of policies is monitored by Management and internal audit. Important principles of conduct include the annual declaration of interests, with a requirement to provide updates as and when there may be changes or potential conflicts of interest. Such declaration of interests is required of the Board, employees and suppliers (as part of the tender process). The maintenance of confidentiality, transparency, independence of decisions and clean procurement processes are part of the code of conduct which become binding on signature of the employment contract. There is, in addition, a SANRAL supply chain practitioners’ code of conduct, which all supply chain practitioners sign on an annual basis. Board members and employees are also required to sign their disclosures drawn from the CIPC website annually.          Induction presentations to employees and the annual governance, risk and compliance roadshows to all employees reinforce the importance of ethical behaviour.

Important policies include the Anti-Fraud and Corruption Policy and Risk Management Policy. SANRAL has an independently monitored fraud hotline for use by employees and external parties, including service providers, to report suspected fraud anonymously. SANRAL has a zero-gifts policy – employees may not accept any gifts offered to them by service providers. This is to ensure that independence and transparency in decision-making is not compromised.

All supplier contracts include the need to disclose any conflicting interests. Employees serving as bid specification, evaluation and adjudication committee members for the evaluation and award of bids are also required to disclose any conflict of interest and recuse themselves from any further involvement. The same goes for any directors involved in the award of major contracts.       

Should any clause of the code of conduct or policies affecting conduct be breached, consequence management, which may include disciplinary action, is mandatory.

The recruitment and appointment of employees is preceded by the necessary checks on personal credentials, criminal history, credit standing, qualifications and references.

The Management of Prominent and/or Influential Persons Policy (PIP Policy) requires SANRAL to evaluate every business relationship to determine  whether there is any reason to conclude that it brings higher risk of questionable association, perception of corrupt dealings, conflict of interest or potential abuse leading to fraudulent financial transactions, money laundering, terrorist financing etc.

Interpersonal respect, loyalty to the organisation, and respect for diversity are values which are defended vigorously by the SANRAL team.

Assurance

The Board is responsible for ensuring an effective internal control environment to ensure the integrity of information and operations and the implementation of Board-approved policies. To do so, the Board has implemented a combined assurance model, involving line management, the risk management function and internal and external audit.

Internal auditor

The internal audit function followed the co-sourced model during FY 2019/2020. The panel of service providers was appointed by the Board during the year for the duration of 3 years. The Board has also put in place an in-house internal audit team  which performed the majority (90%) of audits which were planned for the year. The remainder were outsourced. 88% of the FY 2019/2020 internal audit plan was completed giving assurance to ARC and the Board. The CAE reports functionally to the chairperson of ARC and administratively to the CEO and has direct access to the Board. ARC approved the FY20/21 Internal Audit Charter, methodology and three-year rolling internal audit plan, which takes a risk-based approach. Most of the vacant positions (75%) on the approved internal audit structure have been filled.

Internal Audit has confirmed to the ARC that, for 2019/20, there was no material breakdown in the functioning of the systems, procedures and controls, which could lead to material losses, contingencies or uncertainties or require disclosure in the financial statements. Any control deficiencies identified by the internal and external auditors were brought to the attention of the ARC and management implemented corrective action. Where internal controls did not operate effectively throughout the year, corrective action has been taken.

External auditor

In terms of the SANRAL Act and the PFMA, the Auditor-General of South Africa (AGSA) is the appointed external auditor. The ARC has considered the quality of the external audit done by the AGSA and is satisfied with the processes and audit deliverables.

The AGSA is mandated by the Public Audit Act No 25 of 2004 to conduct the audits in accordance with the International Standards on Auditing. The AGSA adopted the International Federation of Accountants’ Code of Ethics and International Organisation of Supreme Audit Institutions’ Code of Ethics to ensure that the audits are conducted in an ethical manner and in accordance with the standards. These codes require that any threats to independence be identified and mitigations put in place. The Board is satisfied that the external auditor is independent of the organisation. The external auditor did not provide any non-audit services.

The AGSA rotates engagement managers whenever a familiarity threat to independence is identified. The rotation policy stipulates that an engagement manager should be rotated on a five-year basis and this is monitored by the risk and ethics unit within the AGSA. However, if conditions suggest a significant threat to independence, the rotation can be done earlier than five years.

Combined Assurance

With regard to this Integrated Report,      Management compiles and provides the first level of assurance for the veracity of the information. Project-specific information was vetted by project consultants and project managers as well as Management. The internal and the external audit (AGSA) teams have provided further assurance of the financial statements and performance reports. The Board is satisfied with the integrity of the information provided in the Integrated Report 2020.  Please also refer to the Report of the Audit and Risk Committee on page ……

Stakeholders

SANRAL has prioritized the building of its business around constructive relations with its stakeholders and seeks to create mutually beneficial relationships between its projects and the provincial and local governments and communities in the areas where the projects are implemented. SANRAL’s efforts have now emphasised the observation and adherence to the industry’s international best practice standard AA1000. Institutions and individuals who have a stake or interest in SANRAL’s projects are proactively engaged. This has included meetings with local communities to share information, raise awareness, solicit views and seek to create opportunities for their participation to enable seamless execution of projects while optimising the beneficial impact on the community.

SANRAL also interacts regularly with provincial governments, local and district municipalities, chambers of commerce and business forums and civil society organizations affected by SANRAL’s projects. Relationships with both the South Africa Local Government Association (SALGA) and the National House of Traditional leadership (NHTL) were formalized, amongst others. The Board also has adopted a proactive approach to engaging with key stakeholders.   The Board has been actively involved in engaging with the shareholder representative, the Minister of Transport, and with other government and political stakeholders to deal with various challenges, including resolving the way forward on the Gauteng Freeway Improvement Project (GFIP). Protest action on project sites, which resulted in the disruption of work, is being dealt with by Management and the Board together with the relevant provincial authorities.

The strides made in the previous year of taking the Transformation Policy from paper to implementation through a number of Memoranda of Understanding agreed to with major industry players such as Bell Equipment, Barloworld and the National African Federated Building Industry (NAFBI),  were enhanced by further agreements with Pilot Crushtec who assist SMMEs with access to construction equipment, financing, training, information and mentoring. This enables smaller, growing companies in the industry to access opportunity and meaningfully participate in SANRAL projects.                       

The COVID-19 pandemic has disrupted planned stakeholder and social facilitation engagements with large face-to-face engagements no longer possible during this time of social distancing.

 

This has required SANRAL to refocus its efforts utilising digital communication. Where the effectiveness of digital communication is limited due to technology accessibility and availability, as is in many parts where SANRAL’s projects are located, the organisation is exploring alternative mechanisms for enabling dialogue with these stakeholders.