BUSINESS REVIEW

Social and ethics committee report

FOR THE YEAR ENDED 30 JUNE 2018

The social and ethics committee ("SEC") is a formal committee operating in accordance with a board-approved mandate to assist the board with monitoring, developing, reviewing and improving the group's social, ethical and sustainability practices. The board, in addition to its statutory responsibilities, assumes responsibility for ensuring that the company's ethics are effectively managed and does so through exercising ethical leadership, integrity and judgement in directing the company. Employees are in turn expected to act in a manner that upholds the company's values as contained in the City Lodge code of ethics and business conduct ("the code"). The code details the standards of behaviour expected of employees and is provided to employees at the commencement of their employment with the company.

This report outlines how the SEC has discharged its responsibilities as set out in section 72 of the Act and regulation 43 of the Companies Regulations 2011 issued in terms of the Act and its charter, which was amended during the year to align with King IV. Attendance of members at committee meetings is reflected here. Fees paid to members as well as the proposed fees for 2018/2019 are set out in the remuneration report. Progress in this regard is covered in the social and ethics committee and our capitals report.

Composition

The three member committee comprises the chairman, an independent non- executive director, and two executive directors. While the committee complies with the Act's requirements regarding its constitution, it does not meet the King IV recommendation for a majority of the committee members to be non-executive directors. Having applied its mind to the current membership, and having taken into consideration that a significant portion of the matters falling within its mandate are operational, the board remains comfortable with the current membership and its ability to effectively discharge its responsibilities.

The group company secretary and representatives from the various functions responsible for managing the subject matter falling within the remit of the

SEC assist the committee in the discharge of its responsibilities.

Role and responsibilities

The committee is primarily responsible for ensuring the group is and remains a responsible corporate citizen and engages in sustainable business practices. Its role and responsibilities, which cover the group's South African operations, include:

  • compliance;
  • social and economic development;
  • good corporate citizenship;
  • issues around the environment, health and public safety, including the impact of the company's activities and services;
  • consumer relationships;
  • management of the company's ethics;
  • labour and employment, including transformation; and
  • reporting annually to shareholders on matters falling within the scope of its responsibilities.

Meetings and activities

The primary focus of the two meetings held during the year was to consider:

  • Socio-economic development, including the company's standing in terms of:
    • The 10 principles set out in the United Nations Global Compact Principles

      The group has adopted the 10 principles and monitors and reports on compliance with human rights, labour, anti-corruption and environmental matters despite not being a signatory to the compact.

    • Human rights

      The group remains committed to protecting and upholding human rights as far as it is able to exercise control over such. It subscribes to and supports "the Code", a compact between members of the international tourism industry that deals with the awareness of its staff with regard to issues and circumstances prevalent in the practices of human trafficking and child sex tourism.

      City Lodge is not complicit in human rights abuses. It does not vet its suppliers in this regard on the basis that it does not believe doing so is necessary in the context of its operations and profile of suppliers.

    • Freedom of association

      The group recognises the right to freedom of association as well as the right to collective bargaining and continues to recognise and bargain with the trade union, SACCAWU. All staff (up to supervisory level) in the deemed "bargaining unit" may belong to the union from a bargaining perspective. While any other level of staff member may belong to the union, they are not covered by any bargaining gains made by the union.

    • Forced or compulsory labour

      The group supports the elimination of all forms of forced or compulsory labour and has no exposure to such practices. Suppliers are not vetted in this regard as the group is of the opinion that this is not necessary in the context of its operations and the profile of its suppliers.

    • Abolition of child labour

      The group demonstrates its support for the abolition of child labour by ensuring that no minors are employed. It is a condition of employment that all employees provide proof of age upon commencement of employment.

    • The Organisation for Economic Co-operation and Development's recommendations regarding corruption.
  • Activities associated with good corporate citizenship including the group's positioning and efforts with regards promotion of equality, prevention of unfair discrimination, reduction of corruption, contribution towards community development in the areas within which the company operates and record of sponsorship, donations and charitable giving.

    In this regard it is to be noted that:

    • no material or repeated penalties, sanctions and/or fines for contraventions of or non-compliance with statutory obligations were imposed on the company or its directors for failure to comply with any legislative or regulatory requirement;
    • no compliance inspections were carried out by environmental regulators nor were any findings of non-compliance with environmental laws or criminal sanctions for non-compliance imposed on the company;
    • no political donations were made during the year; and
    • no requests for information under the Promotion of Access to Information Act were received during the year under review.

    For details on sponsorships, donations and charitable giving refer here.

  • Align the committee's terms of reference to King IV.
  • The group's labour and employment practices, including its standing in terms of the International Labour Organisation Protocol on decent work and working conditions, its employment relationships and contribution toward employee educational development.
  • Progress made with regard to transformation, taking the Employment Equity and Broad-Based Black Economic Empowerment ("B-BBEE") Acts into account. The company, in its most recent verification, achieved level 4 B-BBEE recognition.
  • The group's compliance with applicable legislation, regulation and codes of good practice.
  • Environmental sustainability practices, in particular three of the UN Global Compact Principles relating to supporting a precautionary approach to environmental challenges and supporting greater environmentally friendly technologies.
  • Consumer relationships, including advertising and public relations and stakeholder engagement, it being specifically noted that no complaints have been lodged with the Consumer Tribunal. The two complaints lodged with the Advertising Standards Authority ("ASA") were resolved to the satisfaction of the ASA.

Going forward, efforts will be directed towards improving reporting in respect of corporate citizenship and implementation of employee-centric initiatives, including:

  • rolling out the new service excellence and employee recognition programme; and
  • providing the necessary training to employees to deliver sustainable value.

The committee is of the view that the group takes its environmental, social and governance responsibilities seriously and that appropriate policies, plans and programmes have been put in place to contribute to social and economic development, good corporate citizenship, environmental responsibility, fair labour practices and good consumer relations.

No incidents or acts indicating a material breach in the required standard of ethical behaviour were brought to the attention of the committee during the period under review nor were any instances of substantive non-compliance with legislation and regulation or non-adherence to codes of best practice.

Based on its monitoring activities, the SEC has no reason to believe that any such non-compliance or non-adherence has occurred and that the group is addressing the matters required to be monitored as detailed in its mandate in the appropriate manner and that it has effectively discharged its responsibilities.

K I M Shongwe
Chairman of the social and ethics committee

15 October 2018