Background
This report describes the material matters and summarises the Group’s approach to transparent, fair and responsible remuneration. It sets out how the committee discharged its duties regarding the statutory requirements and other duties assigned by the Board. It also provides an overview of the Group’s remuneration philosophy and remuneration framework.
Roles and accountabilities
Responsibilities and reporting
This Remuneration Report highlights our policy’s key components and how these align with our performance and strategic objectives for the 2022 financial year.
AEEI’s ethos is an appreciation for an employee’s commitment, diligence, care, and attention to detail. We respect and recognise our employees for their contributions during the year and inspire them to realise their full potential and believe in rewarding them accordingly. Accordingly, we consistently applied the principle that our remuneration should be fair, transparent, and competitive and reflect the Group’s and business units’ performance.
Our executives’ remuneration is aligned to the longterm strategic goals of the Group to deliver sustainable value to shareholders and to build the business. Critical decisions and their related impact in setting targets in terms of performance-related remuneration were made for the executives and senior management of the Group. Weightings of performance, as well as specific financial targets, were reviewed and amended accordingly. The committee was satisfied and will continue to monitor remuneration against the appropriate strategic objectives, performance, and market benchmarks.
The committee remains mindful to ensure overall remuneration was appropriate for the performance of the Group against its operational peers. In doing so, the committee considered the challenging macroeconomic environment, the ongoing impact of the COVID-19 pandemic, the overall risk environment, its risk appetite and risk profile and the need to attract, retain, and motivate key talent to deliver the Group’s strategic objectives.
| COMPOSITION OF THE COMMITTEE | |
|---|---|
| Chairman | Gaamiem Colbie* |
| Members | Aziza Amod Bongikhaya Qama |
| By invitation | Valentine Dzvova – chief executive officer Alan Ipp – Independent Consultant |
| Number of meetings held | Two |
| * Gaamiem Colbie was appointed as the chairman of the committee effective 1 April 2022. | |
| GOVERNANCE, ROLE, AND SCOPE | |
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Governance The Board is responsible for the governance of remuneration matters by setting the direction for how remuneration should be approached and addressed on an organisation-wide basis and has delegated this responsibility to the Remuneration Committee. The Board established the Remuneration Committee to monitor the Group’s remuneration practices and perform the statutory functions required in King IV™, the JSE Listings Requirements, and the Companies Act. The committee is governed by its charter, which is reviewed annually. The Board tasked the Remuneration Committee with overseeing the execution and implementation of the Remuneration Policy, the achievement the Group’s strategic objectives, and the translation of positive results into market-related, yet affordable, performance-linked rewards. It also ensures balanced and transparent outcomes that align with shareholder interests over the short- and long-term. In addition, our policy ultimately enables the attraction and retention of valuable talent. The chairman provides feedback to the Board after each meeting, which includes key decisions made and relevant discussion. |
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Role The Remuneration Committee’s primary purpose is to implement the guiding principles in the application of remuneration governance, practices, and policies and to ensure that the Group remunerates fairly, responsibly, and transparently to promote the achievement of the strategic objectives as well as positive outcomes in the short, medium, and long-term. |
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Scope The Remuneration Policy aims to provide for competitive market-aligned remuneration, the need for which remuneration having been balanced with the need for cost containment. The policy needs to be seen within the context of total rewards, which embraces all elements of an employee value proposition for the Group including career and growth opportunities, recognition, culture and values, compensation, benefits, and the work environment. The total reward is differentiated between the various categories of employees, structured to meet their specific needs, in our South African businesses. |
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| 2022 FOCUS AREAS | |
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During the financial year, the Remuneration Committee assisted the Board by: |
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| 2023 FOCUS AND BEYOND | |
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| DETERMINATION OF PERFORMANCE INCENTIVES | |
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The Remuneration Committee reviewed the targets set in terms of performance-related remuneration for the CEO, the executive management team, and senior management; these targets include individual performance factors and a combination of portfolio-specific targets. In addition, the Group has formal and informal frameworks for performance that are directly linked to either an increase in total cost-to-company or annual short, medium, incentive bonuses. |
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Remuneration components The CEO and executive management team’s performances are assessed against predetermined objectives that include, inter alia, strategic leadership, execution of the strategy through business results and stakeholder relations. The Board recognises that the successful delivery of the Group’s objectives should constitute both financial and non-financial performance measures. |
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Remuneration comprises the following key elements:
| BASE SALARY | |
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| PERFORMANCE BONUSES | |
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| OTHER BENEFITS | |
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| METHODOLOGY | |
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| ELIGIBILITY | |
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Conditions for determining performance bonuses
| FINANCIAL TARGETS | NON-FINANCIAL TARGETS |
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The Group aims to ensure that the performancebased remuneration of executive directors and senior management should form a significant portion of their expected total compensation. Accordingly, the committee ensures an appropriate balance between fixed and performance-related elements of executive remuneration and the aspects of the package linked to short-term performance and those linked to long-term shareholder value creation.
Executive directors’ service contracts
Executive directors do not have fixed-term contracts but have permanent employment agreements with the Company. The remuneration of executives is determined on a cost-to-company basis and is subject to an annual review by the Remuneration Committee. Provident or pension fund and healthcare provision form part of the overall cost-to-company packages. Executive directors are members of the Group’s provident fund and are required to retire as a director of the Board at the age of 65 unless requested by the Board to extend their term. There are no other special benefits for executive directors.
The contracts of executive directors do not contain termination packages or excessive notice periods. An executive director may, subject to the provisions of the Companies Act, No. 71 of 2008 and the JSE Listings Requirements, be appointed by contract for such period as the Board may determine. Executive directors are not subject to retirement by rotation at the AGM of the Company.
Prescribed officer
Valentine Dzvova is not remunerated separately for her role as the prescribed officer of the Company
Performance Appraisals
The Remuneration Committee reviewed performance appraisals for the Group executive management and management of subsidiaries. In addition, it was part of the appraisal process for the performance of the CEO and CFO. The performance appraisals are based on specific elements, including KPIs when considering salary increases.
Non-executive directors’ remuneration
The non-executive directors receive fees for serving on the Board and its committees. The fees for nonexecutive directors are reviewed annually by the Nominations Committee. Thereafter, it is referred to the Remuneration Committee, which seeks to ensure that the fees are market-related and presented to the shareholders for approval.
The Board recommends the fees to shareholders for approval at the AGM of the Company. In addition, the contribution of each non-executive director, and their participation in the activities of the Board and its committees is considered. Changes to the fee structure are effective 1 September each year, subject to the approval by shareholders at the AGM, which is typically held between February and April of each year. The annual fees payable to non-executive directors are, as in the past, fixed and not subject to the attendance of meetings. However, in the event of non-attendance regularly, this will be reviewed and amended accordingly.
Implementation of remuneration
The Remuneration Committee ensured that total remuneration is aligned with sustainable value-creating strategic objectives and the legitimate expectations of all stakeholders while being mindful of the income gap in South Africa. As a result, it is satisfied that the variable remuneration outcomes for the 2022 financial year align with the Group’s financial performance.
Guaranteed remuneration
The 2022 guaranteed remuneration of the executive directors is set out below:
| 2022 R’000 |
2021 R’000 |
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|---|---|---|
| Valentine Dzvova | 2 598 | 2 064 |
| Jowayne van Wyk | 1 949 | 1 748 |
Short-term incentive
Performance bonuses are paid to executive directors based on financial and non-financial performance targets.
The table below sets out the targets for actual targets achieved:
| PERFORMANCE | Weighting | Threshold | Target |
|---|---|---|---|
| Profit before tax | 70% | 70% | 70% |
| Non-financial targets | 30% | 30% | 30% |
There are no long-term incentives for executive directors.
The table below sets out the remuneration received by executive directors for the 2022 financial year:
| 2022 | Base Remuneration R’000 |
Performance Bonus R’000 |
Provident Fund & Medical Aid R’000 |
Company Contribution to UIF & Skills Development Levy R’000 |
Total R’000 |
|---|---|---|---|---|---|
| Valentine Dzvova | 2 175 | 500 | 393 | 30 | 3 098 |
| Jowayne van Wyk | 1 610 | 350 | 316 | 23 | 2 299 |
The 2022 annual remuneration of the non-executive directors is set out below:
| 2022 R’000 |
2021 R’000 |
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|---|---|---|
| Aziza Amod | 717 | 682 |
| Willem Raubenheimer | 489 | 350 |
| Bongikhaya Qama | 243 | 231 |
| Ismet Amod | ‐ | 172 |
| Ambassador Membathisi Mdladlana | 246 | ‐ |
| Stephen Nthite | 246 | ‐ |
| Carin-Lee Geuking-Cohausz | 154 | ‐ |
| TOTAL | 2 095 | 1 435 |
Gaamiem Colbie waived his non-executive directors’ remuneration for the 2022 financial year.
Ambassador Membathisi Mdladlana and Stephen Nthite were not remunerated for their attendance at the August 2021 board meeting.
Carin-Lee Geuking-Cohausz’s remuneration only reflects her attendance at meetings since her appointment on 1 January 2022.
AEEI covers all reasonable travelling and accommodation expenses incurred by directors in order to attend Board and committee meetings.
Non-executive directors do not have any employment contracts, nor do they receive any benefits associated with permanent employment.
The Board has approved the information provided in this report on the recommendation of the Remuneration Committee. For the year under review, the Remuneration Committee is satisfied that it has fulfilled and complied with its obligations and statutory duties as reflected in its charter in terms of the policy and duties assigned by the Board.
AEEI’S remuneration policy
Introduction
AEEI’s Remuneration Committee is primarily responsible for overseeing the remuneration and incentives of the Group’s executive directors and key management and providing strategic guidance.
To assist in achieving AEEI’s long-term strategic goals, the Remuneration Committee has a formal Remuneration Policy in place. In addition, each major subsidiary has its own Remuneration Committee and a policy specific to its business unit, including the industry in which it operates, taking into account AEEI’s long-term strategic goals.
The Remuneration Committee’s main aim is to assist the Board in fulfilling its responsibilities in establishing formal and transparent policies and guiding principles of a standardised approach in applying remuneration practices within all its business units and functions.
Overview of the main provisions of the remuneration policy
The Remuneration Policy is aimed at aligning remuneration practices that will enable the committee to support the Group in achieving its strategic objectives, translating these into market-related, yet affordable performance-linked rewards, and ensuring balanced and transparent outcomes that align with shareholders’ interests over the short and long-term, and ultimately enable the attraction and retention of valuable talent. Our remuneration approach aligns with our ethical approach, corporate governance philosophy, shared values, and best practices.
The Remuneration Policy is designed to achieve the following strategic objectives:
- Support the attainment of AEEI’s strategic business objectives and strategies.
- Attract, retain, and motivate key and talented individuals.
- Compete in the marketplace to be an employer of choice.
- Reward individual, team and business performance and encourage superior performance.
- Support AEEI’s shared values.
- Promote the achievement of the Group’s strategic objectives within its risk appetite.
- Promote positive outcomes.
- Promote an ethical culture and responsible corporate citizenship.
The Remuneration Policy addresses the Group’s remuneration and includes provisions for:
- Arrangements towards ensuring that the remuneration of executive management is fair and responsible in the context of overall employee remuneration in the organisation.
- The use of performance measures that support positive outcomes across the economic, social, and environmental context in which the Group operates and all the capitals that the Group uses or affects.
- The Company to attract, engage, and retain talent to drive performance and to meet the Group’s strategic objectives.
Executives and employees
The remuneration of the executives is reviewed annually by the Remuneration Committee, which seeks to ensure that balance is maintained between the fixed (base salary) and variable (discretionary bonus) elements of remuneration, as well as between the short-term (base salary and discretionary bonus) and the long-term financial performance objectives of the Group.
Cost-to-company remuneration incorporates the following elements:
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BASE SALARY
Base salary is guaranteed annual pay on a cost-tocompany basis. It is subject to annual review, and adjustments are effective 1 September of each year, coinciding with the commencement of the Group’s financial year. Benchmarking is performed with reference to companies comparable in size, industry, business complexity and the level of responsibility that the individual assumes.
BENEFITS
Benefits form part of the total cost-to-company and include:
- Membership of the pension/provident fund (providing death, disability and dread disease benefits)
- Medical aid
- Unemployment insurance fund
- Funeral cover
Compliance
The Remuneration Policy is reviewed annually to ensure that the remuneration framework remains effective in supporting the achievement of the Company’s business objectives and remains in line with best practices. AEEI complied with the Remuneration Policy and relevant remuneration governance codes and statutes. The recommended practice, as stated in Principle 14 of King IV™, has been applied and is explained throughout this report through the outcomes achieved.
During the year, the committee engaged the services of an independent external advisor to support our endeavours to act independently and provide specialist input.
Non-binding advisory votes on the remuneration policy and implementation report
In the event that more than 25% of the votes are cast on the resolutions at the AGM, the Board will invite dissenting shareholders to send reasons for such votes in writing. Thereafter, further engagements may be scheduled to address legitimate and reasonable objections and concerns raised appropriately.
Implementation report
This part of the report focuses on the performance outcomes against the targets set for 2022.
Salary increment
The Remuneration Committee reviewed the targets set in terms of performance-related remuneration for the CEO, executive management team and senior management in the Group, including individual performance factors and a combination of portfolio-specific targets. As a result, for the year ended 31 August 2022, a general salary increase was approved based on the annual average current price index of 8% for all employees in the Group and 10% for the CEO and CFO.
Discretionary bonus
A discretionary bonus may be awarded and calculated as a percentage of the qualifying executive/senior management/employee’s base salary according to seniority and the level of responsibility assumed. Qualifying executives and senior management may receive a discretionary cash bonus, dependent on meeting both financial and qualitative strategic performance objectives. Employees may receive a discretionary cash bonus, dependent on meeting their personal and the Company’s strategic objectives. Financial, qualitative, personal, and Company strategic performance are aimed at ensuring sustainable long-term value creation to the benefit of all stakeholders. The total base salary and bonus paid will be deemed to be fair to the Company and the executive/senior manager/employee.
The Remuneration Committee will assess the CEO and executive management team’s performance against a set of predetermined objectives that include, inter alia, strategic leadership, execution of the strategy through business results and stakeholder relations.
The successful delivery of the Group’s objectives constitutes financial and non-financial performance measures, with the key financial measures, including profits, cash flow, and asset growth weighted to 70% and the remaining 30% weighted to non-financial measures for most executives in the Group. The committee remains mindful of ensuring that overall remuneration is appropriate for the performance of the Group and in relation to its operational peers. In doing so, the Remuneration Committee will consider the overall risk environment, its risk appetite and risk profile and the need to attract, retain, and motivate key talent to deliver the Group’s strategic objectives (Principle 14).
Shareholder voting/feedback
As required by King IV™ and the JSE Listings Requirements, the Company will put a non-binding advisory vote to shareholders regarding the approval of the Remuneration Policy and the Implementation Report. The Company seeks the support from its shareholders at the upcoming AGM. If any shareholders are inclined not to support the resolutions, we would ask that the reasons for such a decision be communicated to the Company so that consideration can be given to those reasons. Please forward any comments to the company secretary at [email protected].
Should either vote receive 25% or more votes against, the Company will:
- Issue a SENS announcement regarding the outcome of the voting results.
- Invite shareholders to engage with the Company regarding their dissatisfaction with either of the votes.
- Schedule engagements with concerned shareholders to record their concerns and objections.
- Assimilate all responses and schedule a Remuneration Committee meeting to analyse concerns and issues raised to formulate changes to the policy and implementation required.
- Develop a formal response to shareholders that articulates the concerns raised, the details of where the changes will be made to address concerns raised and provide responses for areas where the Company, despite the shareholder feedback, believes its current policy and/or implementation is adequate.
Results of the shareholders’ votes at the most recent AGM held on 24 February 2022, as a percentage of the total number of shares voted at the AGM, are indicated below and therefore, no shareholder engagement was required:
| 2022 % |
2021 % |
2020 % |
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|---|---|---|---|
| Approval of the Remuneration Policy | 84.30 | 97.30 | 99.85 |
| Implementation of the Remuneration Policy | 84.30 | 97.30 | 99.85 |
| Non-executive directors’ fees | 84.30 | 100.00 | 99.85 |
