Integrated annual report for the year ended 31 March...

Integrated annual report for the year ended 31 March 2015

DefinitionsAMP Advanced management programme

AVE Average

B-BBEE Broad-based black economic empowerment

BEE Black economic empowerment

Capex Capital expenditure

CEO Chief executive officer, at Scaw, Markus Hannemann

CESA Consulting Engineers South Africa

CFO Chief financial officer, at Scaw, Patrick Malaza

CNC Computer aided machining

COSATU Congress of South African Trade Unions

CSI Corporate social investment

DEA Department of Environmental Affairs

DED Department of Economic Development

DFI Development Finance Institution

DQS DQS South Africa – an independent and competent management partner for companies of every size and all business sectors that offers objective assessments according to industry-specific standards

DRI Plant located at Union Junction

DTI Department of Trade and Industry

DWS Department of Water and Sanitation

ERM Enterprise Risk Management

ESOP Employee share ownership plan

Exco Executive committee of Scaw

GDP Gross domestic product

GRI Global Reporting Initiative

HCBP High Chrome Ball Plant

HDSA Historically disadvantaged South African/s

IBC Inside back cover of this integrated report

IDCIndustrial Development Corporation (of South Africa), the largest state-owned national development finance institution and a majority shareholder in Scaw

IFRS International Financial Reporting Standards

ISO International Organisation for Standardisation

ISPA Iron and Steel Producers Association

IT Information technology

ITAC International Trade Administration Commission of South Africa

King III King Report on Corporate Governance for South Africa, 2009

KPI Key performance indicator

LTI Lost-time injury

LTIFR Lost-time injury frequency rate

MEIBC Metal and Engineering Industries Bargaining Council

MEWUSA Metal and Electrical Workers Union of South Africa

MOI Memorandum of incorporation

MRP Manufacturing resource planning

MVA Reference installations for Tamini furnace transformers in South Africa

NEEC National employment equity committee

NIHL Noise-induced hearing loss

NUMSA National Union of Metalworkers of South Africa

OHSAS Occupational Health & Safety Assessment Series

PC Pre-stressed concrete

Pig-iron Crude iron from the blast furnace, refined to produce steel

PPE Personal protection equipment

PPPFA Preferential Procurement Policy Framework Act

QA Quality assurance

R&D Research and development

SABS South African Bureau of Standards

SAEFA South African Engineers and Founders Association

SAICA South African Institute of Chartered Accountants

SAIF South African Institute of Foundrymen

SAISI South African Iron and Steel Institute

SAP Systems, Applications and Products

SAPICS South African Production and Inventory Control Society

Scaw South Africa

Scaw South Africa Proprietary Limited, comprising all local operating divisions: Grinding Media, Wire Rod Products, Rolled Products, Scrap Processing and Cast Products, as well as Scaw Ghana Limited and Ozz International Limited (BVI) including Crushing Equipment Australia

Scaw Metals Group

Scaw Metals Group Proprietary Limited, comprising Scaw South Africa Proprietary Limited

SEFA Small Enterprise Finance Agency

SEIFSA Steel and Engineering Industries Federation of South Africa

SETA Small Enterprise Training Agency

SHE Plan Safety, health and environment management plan

SHE Safety, health and environment

SHEQ Safety, health, environmental and quality

SPD Scrap Processing division

the BEE consortium

Shanduka Resources Proprietary Limited, Izingwe Holdings Proprietary Limited and Southern Palace Group of Companies Proprietary Limited, which owns 21% of Scaw

the board The board of directors of Scaw South Africa Proprietary Limited

the current year

The year ending 31 March 2016

TRIFR Total recordable injury frequency rate

UASA United Association of South Africa

Union Junction operations

The various operations at the Union Junction site, Germiston

VAR Volt-ampere reactive

VFLVisible felt leadership: At Scaw executives and senior management are expected to lead by example in adopting a zero harm mindset and demonstrating the desired visible leadership behaviours that will drive continuous improvement in safety performance

WCap Winfield Capital Corporation

year under review

The year ended 31 March 2015

Our commitment to integrated reporting

This is Scaw’s second voluntary integrated report. It outlines our track record to date and maps our forward-looking strategy. Our aim is to provide you, the reader, with a comprehensive review of how Scaw creates sustainable value by providing insight into the group’s strategy, changes in the external environment and the consequent risks and opportunities. The report is a reflection of our aspiration to the highest reporting standards.

Our integrated reporting is an entirely voluntary exercise as

Scaw is not listed on JSE Limited and therefore does not fall

subject to JSE rules and regulations regarding integrated

reporting. Scaw is regulated by the Companies Act.

This report presents the annual financial results and

the economic, environmental, social and governance

performance of the group for the year 1 April 2014 to

31 March 2015, and follows our prior integrated report

published in July 2014. The scope of this report includes

Scaw Metals Group and its subsidiaries. There has been

no significant change in our size, structure, ownership or

products and there are no specific limitations on the scope

or boundary of this report.

The annual financial statements have been prepared in

accordance with IFRS, the SAICA Financial Reporting Guides

as issued by the Accounting Practices Committee and the

requirements of the Companies Act. Scaw has further

considered and applied many of the recommendations

contained in the International Integrated Reporting

Framework, December 2013. The integrated annual report

was also prepared based on the principles of the GRI.

The group embraces the principles of inclusiveness,

materiality, completeness and sustainability as set out

in the GRI G3 Framework.

AssuranceThe business’ external auditors, Deloitte & Touche have

independently audited the annual financial statements for the

year ended 31 March 2015. Scaw intends to implement

sustainability assurance on an ongoing basis.

The combined assurance model of the group in its current

format is set out below:

Business process

Nature of assurance Status

Assurance provider

Annual financial statements

Financial statements

Assured Deloitte & Touche

B-BBEE BEE scorecard Assured Veridex B-BBEE Verification Agents (Practice No 931403)

Sustainability information

ISO 9000 series accreditedOHSAS 18001 accreditedISO 14001 Environmental Management System accreditedCarbon disclosure projectVerified products for a select product range

Assured SABS

DQS

DQS

DQS

Ecospecifier Global

All Scaw sites in South Africa are fully compliant.

Businessprocess

Nature ofassurance

Assurance providerStatus

Responsibility statementThe audit and risk and the social, ethics and transformation

committees acknowledge responsibility on behalf of the board

to ensure the integrity of the Scaw integrated report 2015.

The committees have accordingly considered the report and

believe that it appropriately and sufficiently addresses all

material issues, and fairly presents the integrated performance

of Scaw for the year within the scope and boundary above.

Approved by

Ufikile Khumalo Markus Hannemann Executive chairman CEO

Neo Mokhesi Nkosemntu NikaSocial, ethics and transformation Audit and risk committee committee chairman chairman

Corporate informationThe current executive directors are Ufikile Khumalo (executive

chairman) and Markus Hannemann (CEO). They can be

contacted at the registered office of the company (see IBC).

Scaw’s integrated report 2015 is posted on the group’s

website: www.scaw.co.za.

The company’s contact details are disclosed on the IBC.

Engage with us on:

Weblink provides reference to online disclosure

QR code links will take you to information suitable to view on your mobile device. Download an application for your phone, take a picture of the code and the relevant page will open in your browser window

B-BBEE BEE scorecard Veridex B-BBEE VerificationAgents(PracticeNo 931403)

Assured

Annual financialstatements

Financialstatements

Deloitte &Touche

Assured

Our head office Physical address:Lower Germiston Road

Heriotdale

Johannesburg

Gauteng

Republic of South Africa

Postal address:PO Box 61721

Marshalltown

2107

Gauteng

Republic of South Africa

Phone: +27 (0) 11 621 1555

Fax: +27 (0) 11 621 1590

Email: [email protected]

Website: www.scaw.co.za

Feedback We welcome your feedback on this report. Comments, suggestions or queries should be directed to:

Dudu NdlovuExecutive Head: Public Affairs and Communications

Phone: +27 (0) 11 621 1524

Email: [email protected]

BASTION GRAPHICS

Editorial:

Contact details

Scaw Metals Group integrated annual report 2015 1

Scaw is a proudly South African integrated steel manufacturer with global reach through established operations in South Africa and Australia, and a presence in Ghana, Namibia, Zimbabwe and Zambia. The group generates over R6 billion turnover of a diverse range of beneficiated steel consumables for the global mining, infrastructure, oil and gas and construction sectors.

Integral to our growing business is the recycling of scrap metal into value- added secondary steel products for a wide range of industries, both locally and internationally.

www.scaw.co.za

About this report

1 Our commitment to integrated reporting

2 Who we are

Our group

10 Our operations

14 Scaw international market and production footprint

16 Sectoral reviews

18 Strategic scorecard

20 Risk management

Driving our business sustainably

36 Approach to sustainability

37 Our key stakeholders

39 Our people

44 SHE

51 Transformation

53 Enterprise development

54 Our communities

Performance review

26 Chairperson’s report

28 CEO’s report

30 CFO’s report

33 Value added statement

Accountability

58 Directors and executive management

61 Governance structure

62 Governance

66 Ethical leadership

67 Audit and risk committee report

68 Remuneration committee report

69 Social, ethics and transformation committee report

Appendices

70 Appendix 1: King III application

76 Appendix 2: GRI index (GRI 3 Guidelines)

IBC Contact details

FY15 review

4 Highlights and challenges

5 Value creation highlights

6 Living our vision and values

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Mining Infrastructure Power Generation and

Distribution

Rail and Port Construction Global Oil and Gas

DIVISIONS

CUSTOMER SECTORS

Grinding Media

Rolled Products

Cast Products

Wire Rod Products

2 Scaw Metals Group integrated annual report 2015

With roots dating back to the 1920s, Scaw was formed from the merger in 1998 of two steel manufacturing giants, Scaw Metals and Haggie Limited. In November 2012, the IDC acquired a 74% stake, driving renewed growth and revitalising our business.

Who we are

The Scaw group is currently segmented into four key business units:


Ownership

IDC: 74%

BEE consortium, Main Street 510 Proprietary Limited: 21%

Employees (through ESOP): 5%

Total: 100%

The Scaw group continues to transform in line with a changing local and global business environment. As such, management remains focused and aligned on a strategy of “stabilising, growing and harvesting” the business.

Snapshot

94 years

Only major level 3 BEE steel producer in South Africa

More than 5 500 employees

Over 500 000 tonnes steel produced annually

20% of sales are export

– Sole manufacturer in Africa of cast steel railway wheels

– Largest producer in the southern hemisphere of cast high-chrome grinding media

– Only significant producer in Africa of forged grinding media

– Steel wire rope operation is the largest integrated wire mill and ropery plant in the southern hemisphere

– Union Junction Foundry US-approved (American Association of Railroads)

– Only manufacturer of PC strand in southern Africa

– Single largest recycler of scrap in South Africa’s steel industry

– ISO 9000 series

– OHSAS 18001 Occupational Health and Safety Management System

– ISO 14001 Environmental Management System

– German Homologation

– SANAS

– Det Norske Veritas (DNV) & Berufsgenossenschaftliches Prüf und Zertifizierungsystem (H-Mark) – Scaw’s McKinnon®

Chain Operation in Vereeniging is approved to manufacture and supply premium chain products into the European oil and gas and industrial sectors

– AAR – Scaw’s Germiston Foundry is US approved to manufacture locomotive frames, freight car side frames, bolsters and cast steel railway wheels

– DNV accreditation at Scaw’s Cape Town branch for its wire rope slings and attachments

– Haggie Steel Wire Rope Technical Training course through merSETA

– CARES accreditation for reinforcing product: deformed rebar, wire rod for mesh manufacture and pre-stressed concrete wire

Key accreditationDistinction

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Highlights and challenges

Commenced R210 million emission control project at Union Junction Cast Products plant.

– Sustainable SHE programme delivering continuous improvement

– Zero fatalities recorded

– Commenced R210 million emission control project at Union Junction Cast Products plant

– Received all required air emission licences

– Grinding media, cast products and wire rod products and rolled products verified as Ecospecifier Verified Product – certifying the products to contribute to Green Building credits

– B-BBEE rating of level 3 maintained

– Under difficult circumstances Scaw’s revenue decreased by 3% to R6,3 billion

– Partly as a result of the metals and engineering strike which cost the group more than R33 million a week

– Metals and engineering industry’s four-week strike resulted in temporary closure of certain operations

– Five-month platinum strike depressed demand

– Ongoing import threat, particularly cheap subsidised imports from India and China

– Lifting of import duties on Chinese chain products

– Consistency of energy supply

– Availability of good quality scrap at competitive pricing

Key challengesKey highlights


Value creation components March

2015 March

2014

Input materials consumed (kt)Scrap 392 435Internally recovered metallics 19 17Iron ore 165 166

Coal 104 106Rod 78 92Ferrochrome 25 28Total material consumed 783 844

Energy (TWh) Electricity purchased 680 746

Water consumption (kl) Water intake 1 290 1 334

Human resources (number of people) Permanent 5 150 5 596Contractors 584 581Temporary 243 252Total 5 977 6 429

Safety LTIFR (excluding CWI) 0,41 0,33Fatalities – –

Production output (kt) Production 521 579

Investments (Rm) Capex 309 356

Socio-economic output (Rm) Socio-economic development 2,4 1,9Procurement spend 4 728 3 877

Value creation highlights

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Scaw is on an exciting journey of transformation. Reflecting this, we have new values which, together with our vision, demonstrate our commitment to remaining a sustainable, growth-oriented and profitable South African business.

Living our vision and values

Be a South African-led, globally competitive and responsible beneficiator of key raw materials into secondary value-added steel products.

– We work towards realising our vision through continually improving our products and processes, expanding our African footprint and consolidating our global reach. A thriving Scaw can offer benefits to all stakeholders, particularly in the context of helping grow the South African economy.

– During the year we held diversity workshops with 170 senior managers to help define the new values identified by the Siyaphambili survey conducted in 2013. More than two thirds of our employees participated in the survey. The workers’ indaba sessions aimed at addressing past issues have been substantially completed.

– Our CEO, the executives of HR and Public Affairs and Communications will embark on a roadshow throughout the course of the year to communicate the new values to all employees across the group.

Our vision

Our new values

Our new values are input-output focused, ie the behaviour derived from within will lead to the output that we require which will in turn drive the cultural changes that we seek as a group.

Articulating our values

Values Safety

Above all else, the safety and well-being of all our workers remains our first priority and we are therefore fully committed to achieving a zero harm work environment

Care and respect

Compassion and tolerance underpin the way we treateach other and all external stakeholders, regardlessof the circumstances

Accountability

We understand that takingcomplete ownership for what we do andconsistently delivering on our promises to all stakeholders is critical to sustaining our business

How we will live our values in 2016

– Comprehensive safety, health and environmental programme aligned with the international safety, health and environmental standardsISO 14001 and OHSAS 18001

– Respectful interactions

– Culture of equality

– A holistic, integrated and sustainable occupational healthcare system for all employees

– Culture of taking responsibility,transparency and taking pride in work

For more information please visit: www.scaw.co.za.


Teamwork Continuous improvement

Customer satisfaction

Quality

We support each other anddrive growth by sharing ideas and knowledge

Our commitment to innovation for improvedproduct quality and operational efficiency means we are able to perform optimally and responsibly

Our decisive priority is to consistently exceed the expectations of our customers by providing an excellent customer experience, world-classsteel products and value-added services

We strive to produce good quality products and aim to understand how our actions impact the final product

– Develop, empower and enable our people

– Promote workplace diversity

– Encourage debate and trust in the abilities and contributions of others

– Develop, empower and enable our people

– Promote workplace diversity

– Work hard and play hardtogether

– Help our people thrive

– Foster, recognise andreward innovation anddevelopment

– Understand and exceedour consumers’ needs

– Deliver consistently and on time

– Address customer feedback

– Produce quality products

As a globally recognised leader in numerous specialised products, Scaw serves markets across the globe.

We have 94 years of experience and technical expertise

Only level 3 B-BBEE steel producer in South Africa

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Our group

10 Our operations

14 Scaw international market and product footprint

16 Sectoral reviews

18 Strategic scorecard

20 Risk management


Our operations

Wire Rod Products

Corporate Services

Cast Products

Rolled Products

Grinding Media

Business unit Description

High Chromium – Largest producer in the southern hemisphere and leading supplier in Africa

– Technology licence with Magotteaux, a leader in the development and design of high chrome grinding media, ensuring world-class technical support and access to the latest technology

Forged Steel – Only significant producer of forged grinding media in Africa

– One of the largest suppliers of long steel products in South Africa utilising ferrous scrap metal as its major raw material input

– A leading manufacturer of specialised, high-quality cast products

– Germiston Foundry is one of the largest foundries in the southern hemisphere and holds the approval of the American Association of Railroads

– A leading manufacturer and distributor of specialised steel ropes, wire, strand and chains

– One of the largest and most advanced chain and fitting manufacturers globally

Total


Market positioning Facilities Number of employees

– Positioned to maintain its current local market share and continue to expand its volumes in African markets

– Located at Scaw’s Union Junction site, Germiston

– The forged plant operates three production lines and is vertically integrated, sourcing input barstock directly from Scaw Rolled Products

– Regional sales office, Scaw Ghana, services the West African region

390

– Our scrap collection and processing facility is located in the largest scrap generating area in South Africa giving good access to procure scrap for Scaw’s electric arc furnaces

– The business unit is focused on optimising its finished product range with a diversified customer base in construction and mining

– Operates from three sites in Germiston – Scrap steel is processed for the Germiston Foundry by a mega-shredder, shear and bailer at Union Junction. It is then melted in electric arc furnaces to produce billets, castings and grinding media

– The Rand Scrap and Leo Scrap businesses collect from scrap generators including the public

– The Meltshop is located at Scaw’s Union Junction site, Germiston in close proximity to the scrap processing facilities

– Scrap from SPD provides raw material for a 90 MVA ultra-high powered electric arc furnace which feeds liquid steel to a three strand continuous billet caster. Two rolling mills include equipment to roll large diameter rounds, reinforcing bar, wire rod and sections

1 179

– Possesses the infrastructure and IP to remain a significant supplier into the African rail market for the medium to long term

– The remaining capacity is focused on securing business for specialised castings for mining and industrial sectors

– Germiston Foundry at Union Junction, Germiston

– Cast wheel plant – Standard Foundry, Benoni – Boksburg Foundry, Boksburg – Eclipse East Foundry, Benoni – All foundries are serviced by in-house machine shops which include vertical and horizontal boring mills, CNC machining centres, lathes and planers

1 471

– Wire and Strand’s focus remains firmly on supplying its construction product range to its local, African, European and American customer base

– Steel Wire Rope is set to position as a niche producer of specialised wire rope, focusing on deep level and surface mining and with complementary ropes supplied to the oil and gas industries

– Chain will continue optimising its product range by transitioning its capacity to a higher grade while simultaneously developing its global footprint

– Steel wire rope is manufactured at the Jupiter plant and distributed from distribution facilities across South Africa

– Wire and Strand is based in Germiston – The Chain Products Plant is based in Vereeniging

2 060

877

5 977

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Our operations continued

Our supply chain framework is underpinned by good governance and efficient procedures and processes. Improvements in our supply chain are driven by KPIs, ethics, customer service, stakeholder interaction and a culture of team work.

Vertically integrated supply chain

Distribution network

Scaw’s distribution network includes 14 branches across South Africa that are primarily focused on products for lifting in mining

and industrial applications, including steel wire rope and chain products. Together with wholly owned subsidiaries of the IDC,

which Scaw manages, the distribution network stretches beyond South Africa to Australia, North America, Namibia, Zambia,

Ghana and Zimbabwe.

Besides adding value through cutting, stocking and assembling, these centres allow the Scaw group to compete more

effectively with import products that are offered by independent distributors.

Supply chain

During the year there were no significant changes in the location of suppliers, structure of the supply chain, or in our

relationships with suppliers. At Scaw we continuously strive to improve our relationships with internal and external stakeholders,

while maximising value-add throughout our value chain.

Scaw’s supply chain team manages the flow of materials and services across the group. A “total cost of ownership

methodology” is applied to drive efficiencies. This benefits our bottom line, while retaining focus on localisation, supplier

and enterprise development and maintaining quality and safety standards.

Despite the negative impact of dynamic market conditions on supply and demand, our supply chain team successfully

delivered on its commitments to the business. During the year our procurement team was responsible for R4 billion of

discretionary spend among 2 800 suppliers for approximately 68 000 orders. Our warehouse teams are responsible for

approximately 20 000 stock-keeping units, providing 24/7 service to its internal customers. The team has proven it can

“deliver more, together”.

Scaw Group Supply Chain Management

ProcurementWarehouse and inventory

management Enablement

Strategic sourcing

Transactional procurement

Inventory management

Warehouse management Enablement support

– Policies, processes and procedures

– Reporting

– Supplier adoption and contract administration

– Systems and tools

– Sourcing and contract management of strategic categories

– Strategic supplier performance management

– SAP transactional processes (requisitions, orders and expediting)

– Spot sourcing

– Low value (tactical) contract management

– (Inbound) inventory management and control

– MRP management

– Cataloguing

– Manage receiving, binning, safe storage, issuing and returns

– Quality assurance


Scaw’s Supply Chain Management responsibilities have been split into three main sections, as indicated below:

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Scaw international market and product footprint

Canada and USA

Mexico

South America

USA and Gulf of Mexico

Mining

Oil and Gas

Multi Sectors

Infrastructure

Scaw’s international footprint facilitates access to key mining geographies and extends its distribution network.


Ghana and West Africa

Singapore

Australia

UK, North Sea and Western

Europe

Southern Africa

High chrome grinding media

Chain products, fittings and masterlinks

Forge grinding media

ACSR wire and strand

PC wire and strand for pre-tensioned applications

PC strand for flexible roof bolts

Mining bar for rock anchors

Grinding elements castings

Ground engaging tools and wear parts

Drill, anchor and riser tensioner off-shore ropes

Mine winding steel wire ropes

Surface mining ropes

Castings for railway sectors, wheels, couplers, bogie components and loco frames

PC strand for post tensioning applications

Re-enforcing bar

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Sectoral reviews

– Overall decline in commodity prices placed increased pressure on pricing. Scaw is confident its market diversification enables it to maintain market share and absorb these challenges in this volatile sector

– Local volumes related to gold and iron ore mining expected to remain stable in the short/medium term

– Coal-related volumes expected to marginally increase in the short term

– Long-term volumes of product relating to platinum mining appear more positive

– Good overall volumes for mining ground support systems are expected in the medium term

– Increase in safety requirements in underground mining expected to benefit Scaw premium quality products

– Africa export volumes encouraging – particularly into West Africa

– Exports in Zambia likely to increase as copper prices and trading environment stabilises

– Difficult trading conditions in Australian mining expected to keep volumes subdued in the short term

– Volumes in North and South American mining expected to remain static in the short term.

– High-chrome grinding balls

– Forged grinding balls

– Grinding rods

– Cast iron cylpebs/eclipsoids

– Haggie® mine winding steel wire ropes

– Haggie® shovel ropes

– Haggie® dragline ropes

– Haggie® hoist ropes

– Haggie® scraper rope

– Flexible rock anchors PC strand

– Ground engaging tools

– Dragline wear parts and bucket components

– Earth moving under carriage wear parts

– Mill liners

– Crushing wear parts for gyratory and jaw crushers

– McKinnon® chain

– Fixed rock anchors and roof bolts

Grinding media Steel wire ropes Wire and strand Cast products Chain products Rolled products

MiningHighlights and challenges

Products

Oil and gas (marine and offshore)Highlights and challenges

Steel wire rope Chain products Distribution networks

Oil and gas – Riser tensioner lines

– Drill lines

– Anchor lines

– McKinnon® chain – Fishing ropes

– Current lower oil prices have impeded exploration activities

– Continued demand requires day-to-day drilling activities to continue at increased price pressure

– Increased local activity for oil exploration expected to generate demand for related products in the medium term.

Products


Infrastructure (rail, power, industrial)Highlights and challenges

Rail

– Demand for local rail products expected to remain robust over the short/medium term – Scaw local rail volumes expected to increase for the medium term, with firm supply contracts in place – International demand for railway products for the short term remains optimistic fuelled by expansion projects in Africa, USA and the Middle East. Scaw will look to further diversify into these markets in the medium term

– Increase in demand for products required in manufacturing railway sleepers (ties) expected due to expansion projects

in Africa.

Construction

– Current local demand expected to remain subdued as a result of a languid infrastructure projects pipeline – Increased competitive landscape has decreased selling prices – Medium-term volumes expected to increase supported by realisation of infrastructure spend initiatives and market

diversification.

Power

– Volumes expected to remain robust in the short/medium term in line with both local power generation and distribution projects.

Industrial

– In line with local GDP growth, lower volumes for industrial products are expected in the short term – Continued focus on exports of these products to grow volumes.

Rolled products Wire and strand Cast products Steel wire rope

Rail – Pre-stressed concrete wire and strand for sleepers

– Cast wheels

– Side frames and bolsters

– Locomotive frames

– Rail coupler systems

Construction – Reinforcing bar and coil

– Low carbon wire rod

– High carbon wire rod

– Steel sections

– Steel rounds

– Pre-stressed concrete strand and wire

– Lintel wire

– Lintel wire – export

– Earthmoving wear parts

Power – Grinding elements

– Engineering spares – spiders, yokes, air seals, throat rings

– ACSR wire

Industrial – Spring steel wire

– High carbon weave wire

– Bedding spring wire

– Girth gears

– Adjustment rings

– Slag pots, launders and ladles

Products

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Strategic intentStabilise, grow and harvestScaw strives to build a sustainable business. To this end we are guided by KPIs which are intended to align targets and goals across our diverse group. These KPIs have emerged from the group’s strategy, and in future years will be assigned either qualitative or quantitative targets.

Strategic scorecard

Key performance indicators

Being globally competitive Portfolio alignment

Objective Objective

– Improving operational efficiencies across the business

– Driving cost reductions and reducing wastage

– Improving quality and delivering to customers

– Driving capacity expansions in core markets and cementing Scaw’s position

– Seeking strategic upstream and downstream investmentsto protect the core

– Focusing on exposure to higher margin products

– Seeking portfolio optimisation

Progress in 2015 Progress in 2015

– Delivered supplier-related benefits of R170 million within our Supply Chain

– Significant progress in expansion projects as construction progresses

– Grew sales further into the rest of Africa, Europe, USA and South America

– Completed a critical review of some of our underperforming businesses

Focus/targets 2016 Focus/targets 2016

– Increased focus on cost and efficiencies as competitive pressures increase globally

– Commissioning of expansionary projects in three ofScaw’s four business divisions

– Further grow sales and customer base against existing and new markets

– Review and implement optimisation of business andoperational processes to ensure sustainability in an increasingly competitive market environment


Acting responsibly Unlocking people potential Adding value beyond products

Objective Objective Objective

– Maintaining an excellent safetyrecord

– Complying with updated environmental legislation

– Improving the organisational culture of adherence to standards

– Improving the industrial relations climate

– Entrenching a performance-orientedworkforce culture

– Investing in the technical and skills base

– Retaining skills in the organisation

– Understanding customer requirements and market opportunities

– Locking customers in and cross-selling other products

– Offering more compelling productsand services (technical service and features)

– Prioritising product innovation andresearch and development

Progress in 2015 Progress in 2015 Progress in 2015

– TRIFR reduced below previous year and improved on target

– All required air emission licences received

– Baseline risk assessments reviewed in all divisions and Golden Rules awareness campaign completed

– Rolled out individual performanceKPIs across the group

– Conducted CEO roadshows at all local sites

– Substantially completed the worker’s indaba sessions for all business units

– Conducted Siyaphambili diversity and inclusion workshops for 170 managers

– Evolved the corporate identity and improved brand positioning

– Sales Sector Leaders enabled to engage with customers, offering Scaw’s comprehensive product range particular to each sector.

Focus/targets 2016 Focus/targets 2016 Focus/targets 2016

– Achieve a TRIFR below 1,84

– Review of provisional air emission licences

– Seeking new opportunities to recycle waste

– Signing off all baseline risk assessments

– Review of all high-risk, task-based risk assessments

– Roll out individual 2015/16 KPIs across the group

– Sign pacts with all business units

– Launch new company values to all employees

– Develop a training and developmentroll out plan

– Roll out leadership competencies

– Achieve the targeted AVE

– Maintaining technical customer service levels at above marketexpectations

– Assist with customer support regarding B-BBEE initiatives.

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A central risk management team manages risk across the

group. At present our external and internal audit teams work

closely with risk management to ensure high risk areas are

covered. Going forward a formal combined assurance model

will be developed to include the second line of defence

functions such as SHE, QA and compliance.

All reputational issues in relation to customers are actively

managed by the sales, quality and production teams.

Reputational risk issues emanating from other sources are

documented on our risk registers and tabled at Exco for

discussion. The corporate risk register includes identified

social, ethical and environmental risks, which are reviewed

by the audit and risk committee on a quarterly basis. Where

possible, the potential financial impact of social, ethical and

environmental risks has been quantified.

The table overleaf sets out the most material risks identified

in our risk management process based on an inherent

risk rating.


Risk management

We recently introduced a robust risk management framework at Scaw. We have embedded a scalable, world-class risk management process that ensures risk management is core to our business activities. This enables both management and the board to make informed decisions in driving the business.

Our progress

FY2014

FY2017 – Internal audit scheduled on risk management activities and processes

– Developed the ERM Framework

– Tabled a high-level overview of the Top 20 risks for the group

FY2015 – Built a corporate risk register encompassing the Top 50 company risks

– Identify KPIs, key controls and management actions plans

FY2016 – Develop business units’ risk registers for the key businesses

– Develop a risk appetite framework with defined levels

– Develop a combined assurance framework


Risk name Risk description Aligned strategic objective Risk mitigations

External factors

Macro-economic cycle Protracted economic downturn impacting negatively on the sustainability of the organisation

Slow economic recovery placing strain on market demand for products

– Be globally competitive – Portfolio alignment – Adding value beyond products

– Review product mix – Expansion into rest of Africa – Growing export sales – Securing strategic tenders and long-term contracts

Increased competition (locally and internationally)

New entrants in the local and international market in direct competition with Scaw


– Review product mix – Product improvement – Defensive pricing strategy – Improved product quality

Economic/industrial policy

Changes in industrial/economic policy which may place additional pressure on costs, margins and profitability

Removing import tariff barriers, imposing export tariffs on scrap and introduction of carbon tax, etc


– Engaging the dti through SEIFSA on tariffs on export scrap and carbon tax

Strategy

Balance sheet restructuring

Excessively geared

Debt and shareholder funds need to be restructured

Limited access to capital

High interest burden

Limit on strategic capex

– Be globally competitive – Restructuring of the balance sheet with shareholders

– Debt restructuring – Working capital management – Market diversification – Corporate restructure

Finance

Financial sustainability Balance sheet and income statement ratios negatively impacted

The strength of the order book

Success of tenders bid

Inadequate pricing

High scrap rates

Product and market diversification

Cost control


– Securing strategic tenders and long-term contracts

– Synergy with junior iron ore mining players

– Inventory reduction initiatives – Exploring further backward integration

– Supplier agreements with scrap generators

– Production incentives – Cost containment programme

Funding/liquidity challenges

Working capital conversion cycle

Inability to secure finance at a competitive rate due to the strength of the balance sheet

Failure to free up cash locked up in unproductive assets for capital projects

High interest burden

– Be globally competitive – Portfolio alignment

– Inventory optimisation programme

– Procurement management – Migrating scrap customers to terms

– Increasing efficiencies with more utilisation of scrap compared to iron-ore

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Risk management continued


Finance continued

High input costs High cost burden due to increased raw material, scrap, electricity and labour costs (overtime)

Concentration of supply

Scaw is in some instances a price taker

Increased competition


– Cost containment programme

– Renegotiating supplier contracts

– Continual engagement with unions with the object of improving productivity and reducing labour stoppages

Operations

Customer service Product quality/liability risk

Meeting delivery deadlines

Non-adherence with organisational and product quality standards could have a detrimental effect on Scaw’s reputation and credibility


– Acting responsibly

– Embedding of quality systems and processes

– Specification and technical testing for all products

– Additional design recommendations to client where appropriate

– Senior management oversee customer complaint resolution processes

– Training and development

Production inefficiencies (including wastage)

Failure to optimise unit costs due to inefficient and outdated production processes, old and outdated plant and equipment as well as labour productivity challenges

High scrap rates in certain business units

– Be globally competitive – Portfolio alignment – Unlocking people potential – Acting responsibly

– Investment in infrastructure – Proactive resource planning – Proactive communication and engagement with staff

– Training and development – Performance management

Overtime Abuse of overtime leading to excessive spend on the wage bill

Increased cost of production

– Be globally competitive – Unlocking people potential – Acting responsibly

– Proactive resource planning – Proactive communication and engagement with staff

– Improved process controls and management of overtime

Business disruptions Lack of a business continuity management plan for each plant

– Acting responsibly – Developing a business continuity plan

People

Volatile industrial relations climate

Challenging labour environment with greater demands from unions and the workforce

Impact of strikes on production

– Unlocking people potential – Acting responsibly

– Worker indabas – Monthly meeting with shop stewards

– Proactive communication and engagement with staff

Attraction and retention of skills

Failure to attract and retain key skills required for Scaw to achieve its strategic objectives

Inadequate succession planning

Dependence on critical/rare skills

– Be globally competitive – Unlocking people potential

– Employee retention scheme – Accelerated development programme for high potential employees

– Individual development plans



People continued

Knowledge management

Loss of institutional memory vested with some key individuals

Inadequate/slow progress with respect to succession planning


– Document standard operating procedures and process maps

– Review of business technical skills capability and requirements

Training and development

Inadequate training and development

Insufficient training budget

Training and development plans not documented


– Accelerated development programme for high potential employees

– Individual development plans

Regulatory compliance

Non-compliance to health and safety legislative requirements

Non-adherence with health and safety requirements resulting in injuries and fatalities which could have serious consequences for Scaw

– Acting responsibly – Safety improvement plans in place

– VFL sessions and health improvement plans

Environmental legislative compliance

Non-adherence with environmental legislative requirements resulting in fines, criminal prosecution or environmental impacts

– Acting responsibly – Compliance monitoring and action plans in place

Governance

Supply chain management

Procurement processes not optimised to ensure maximum benefit to Scaw

Conflict of interest, transparent tender process

Maintain B-BBEE rating

Collusion and fraud

Availability of key spares

Delegation of authority levels

Warehouse management

– Be globally competitive – Acting responsibly

– Updated procurement policy – Procurement committee established

– Establishment of fraud prevention committee

– Improved contract coverage – More emphasis on enterprise and supplier development

– More emphasis on vendor audits

Information technology

Ageing IT infrastructure leading to system downtime and affecting future scalability for growth

SAP (malfunctions, functionality)

Disaster recovery

Software and hardware failure

Third-party outsourced support (BCX)

Dependence on contractors and third parties

Customer service levels

– Be globally competitive – Acting responsibly

– Strategy in place for replacement of infrastructure

– Formulation of standards and architecture

– Redundant technology for larger sites

– Backup equipment in the event our current equipment fails

– Conduct business impact analysis

– Managing third-party contracts and SLAs

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Performance review


Performance review

26 Chairperson’s report

28 CEO’s report

30 CFO’s report

33 Value added statement



The performance of the South African economy was no different from the rest of the world. The growth rate, at 1,4% was way below market expectations and mirrored the poor global growth.

Chairperson’s report

Executive chairman: Ufikile Khumalo

The steel and foundry industry in South Africa continues to be faced with competition from cheap imports, low and fluctuating order books from the rail operators, ageing plant and equipment as well as a low-skilled workforce.


from imports. Internally, Scaw continued to make progress with

stabilising the company after a protracted sale process that

resulted in a change of shareholder.

Future outlookAlthough the inflation outlook in South Africa remains positive, GDP

growth is expected to be curtailed by the shortage of electricity

as the power utility struggles to introduce new generation

capacity and also maintain the power network. The drop in oil

price, if sustained, is likely to stimulate global demand hence

creating opportunities for Scaw in overseas markets.

The industrial relations environment in South Africa is expected

to remain volatile largely due to the mooted split in Cosatu, with

Numsa, the largest union in our company, already not being

affiliated to Cosatu. This will play itself out within a changing

political landscape and intense union rivalry. To minimise

possible disruptions to our business, Scaw will continue to

develop strong relationships with all our employees.

The impact of the proposed carbon tax, if introduced in its

current form this coming year, will have a negative impact on

Scaw’s financial performance and will lead to Scaw evaluating

the viability of some of its business units. All efforts are under

way to improve the company’s energy efficiency.

Even though the overall outlook remains bleak, management will

take all the necessary steps to navigate the company through

this challenging period. The focus will be on operational cost

control, customer satisfaction and protecting our market share

in areas where we operate.

AppreciationI would like to thank my fellow board members for their input

during the year. I commend the dedication of CEO, Markus

Hannemann, and our executive management who have

tenaciously guided the group through tumultuous times and

continue to expend every effort to ensure our sustained

leadership in the domestic steel industry.

Thank you also to our shareholders, customers, business

partners and the industry regulators for your ongoing support.

Ufikile KhumaloExecutive chairman

The year in retrospectThe global economy during the past financial year was

dominated by general weakness as commodity prices

experienced downward pressure. Growth rates in the

developed economies and emerging markets continued to be

poor and way below potential. The end of quantitative easing

in the United States resulted in a poor investment climate and

access to credit globally remained tight. The resultant impact of

these changes in the global economy on the steel and related

industries has been severe. During this period, we have

witnessed a drop in demand, the unbundling of large steel

corporations, delays in capital expenditures and frequent

capital calls, as steel companies struggle to survive.

The performance of the South African economy was no

different from the rest of the world. The growth rate, at

1,4% was way below market expectations and mirrored the

poor global growth. Although inflation was within the target

range of 3% to 6%, bottlenecks in infrastructure and adjusting

to the strikes in the mining and metals sector have not helped

the economy. Economists have calculated that South Africa

needs a growth rate in excess of 5% in order to create new

employment opportunities. The poor growth environment has

resulted in the private sector remaining subdued and reluctant

to hire, making the public sector the only significant employer

during this period. Given the deterioration of public finances

including that of the major state-owned entities, the prospects

of further employment creation are diminished.

Difficult environmentThe steel value chain experienced protracted periods of

excess supply exacerbated by high raw material prices due

to either unfavourable exchange rates or import parity on

the price of local scrap. Increased competition from cheap

imports continued to put pressure on local margins especially

given the comparative high cost of labour in the country. For

the same reasons, many local companies also struggled to

maintain or grow market share in the rest of the African

continent. Only companies with strong balance sheets or

with easy access to financial markets will manage to navigate

the challenging economic landscape. The rest of the

companies will have to focus on internal cost controls and

margin protection.

The steel and foundry industry in South Africa continues to

be faced with competition from cheap imports, low and

fluctuating order books from the rail operators, ageing plant

and equipment as well as a low-skilled workforce. Succession

planning and training and development will remain key focus

areas due to the widespread ageing of the experienced

workforce, especially given that plans for rolling out

infrastructure investments have been delayed and will require

a trained workforce to implement.

Scaw’s operations have not been immune to the vagaries of the

market. The performance of the company, which was below

company and shareholder expectations, was largely driven

by poor demand, protracted strikes in the mining sector and

metals and engineering sector as well as increased competition

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CEO’s report

Globally, the past year has been a year of unprecedented turmoil. Locally, numerous unique events and factors compounded the situation. The Scaw group was not immune to these market conditions. Although our stability and growth strategy provided a cushion, it was not enough to negate a subdued performance.

CEO: Markus Hannemann

The group is pleased to have achieved a full year of operation without a single fatality. We are proud of our strong safety ethic and I am grateful to every employee for making this possible.

The group is also delighted to be able to maintain its B-BBEE rating at level 3 and with a notable improvement in our scorecard in five of the seven criteria, particularly employment equity and preferential procurement. Under the revised codes Scaw has advanced plans to ultimately reach the same level over time.

Despite the adverse market environment and protracted strikes during the financial period, our teams have done well to remain agile and compete under the most difficult circumstances while laying the foundation for the future.

Our Cast Products division proved to be our most significant challenge. The division suffered from low utilisation rates for much of the year as adjudication of infrastructure rail component tenders progressed slowly. Regardless, in line with Scaw’s growth strategy, significant investment has been made to modernise and ensure increased levels of competitiveness, as investment into Africa’s rail infrastructure accelerates.

Group overviewScaw’s performance was largely driven by weak demand, protracted strikes in the mining sector and metals and engineering sector. Additionally, weak global demand for steel products witnessed unprecedented import levels, impacting already fragile margin levels.

Scaw’s business divisions reflected a mixed performance given Scaw’s diversity in products and markets. The Grinding Media division performed close to targeted levels given the adverse conditions. While mining demand in South Africa proved to be erratic, alternative sectors outside of South Africa absorbed surplus volumes.

The sluggish release of infrastructure projects impacted the Rolled and Cast Products divisions. The Rolled Products division continued to make positive strides in cost containment while fending off low priced imports from China.

The Cast Products division’s low utilisation rates necessitated restructuring within the business as tender adjudication delays and aggressive global competition took its toll.

Wire Rod Products continued to export aggressively given the adverse local mining and infrastructure construction sector demand.

Safety, health and environmentFor the year the group continued to maintain a reduction in the TRIFR to 1,19 compared to 1,46 in the prior year, despite the increase of LTIs by 7 (from 23 in the prior year to 30 YTD). This TRIFR is also below the target for the year of 1,89. The rise in LTIs is of concern and a special action plan is being implemented in the specific plant where the rise occurred, to turn the performance around.

There were only two reportable occupational diseases recorded for the period under review. We regard good employee health as a fundamental cornerstone; all employees have access to various clinics across the group. Medical surveillances, hygiene surveys and voluntary counselling and testing for HIV provide the foundation for the group programme to ensure the sustainable health of our employees. The group has a well-established HIV wellness programme and provides employees with ARV treatment.

Reducing potential environmental impacts remains a priority. During the past financial year the group invested more than R63 million (invoiced) in improving fume emissions in line with future stricter standards.


Even under difficult conditions, long-term sustainability remains a priority. During the year, the group continued to invest in its employees and in projects that will boost competitiveness and capacity.

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thas undertaken the roll out of refreshed values. A total of seven values were selected by employees through an independent process and a rollout plan for all our sites is currently in progress. (More information on the company’s new values is set out on pages 6 – 7.)

Scaw recognises that an increasing competitive environment requires a mind-shift and a higher level of flexible skills. With this in mind, Scaw has boosted employee technical training, student learnerships while importantly establishing a production training programme that will develop the pipeline for skilled new recruits to the business. The production training programme once fully functional will recruit 125 students. (More information on our training and development programme is set out on pages 39 – 42.)

Scaw has also prioritised the issue of gender in the organisation. Only an estimated 8% of our employees are females and this has prompted us to focus on improving this by working closely with the Women’s Forum. (More information on the Women’s Forum is set out on page 51.)

OutlookWe expect tough trading conditions to prevail during 2015 and 2016. Slowing growth from China has dampened demand for all major commodities. The impact has caused commodity prices to plunge, impacting mining groups. Steel prices will remain under pressure as major iron-ore producers are expected to hold down pricing levels to weed out the small producers. Weakening of the rand is viewed as highly likely thus providing some relief to imports while benefiting export efforts.

Scaw continues to pursue its stabilisation and growth strategy in pursuit of a transformed business, mirroring a rapidly changing and competitive world. The group remains confident in defending its markets while absorbing volume on various pipeline projects/tenders across all of its businesses. The group continues to pursue ventures and sales beyond its historical market to diversify and mitigate market vagaries.

AppreciationI wish to express my sincere appreciation to all of Scaw’s employees for their commitment and contribution through what has proved to be a challenging year. I am also grateful to our board and chairman for their unwavering support and guidance.

Finally, I also wish to thank our business partners, suppliers and customers for their invaluable support.

Markus HannemannCEO

Optimising the recovery and reuse of metal from our waste streams has continued with additional recovery from the Union Junction Waste Disposal facility. Apart from the slag produced by the melt shops, an additional 70 000 tonnes of slag was removed from the old disposal site 3 and processed. Scaw was also issued with a certificate by Ecospecifier verifying Scaw’s products as meeting Ecospecifier Verified Products Standard and being likely to contribute to the achievement of Green Building credits.

Strategic actions Scaw’s stabilisation strategy continued to yield benefits favourable to operating in such a difficult economic climate. An ongoing critical review of the various Scaw businesses continues to ensure that optimal value is being derived in the development of an increasing sustainable Scaw. Unfortunately, the critical review of some of the businesses resulted in the rationalisation and termination of certain processes given both internal and external factors.

Beyond tremendous cost savings initiatives, management’s plans advanced well in evaluating and implementing “strategic blueprints” for each operating division. Given Scaw’s diverse product and market range, these “strategic blueprints” are uniquely stretched across division business units and market sectors.

In parallel with Scaw’s stabilisation strategy, management is already well-advanced in implementing the growth pillar of the group’s strategy. During the past financial period some R187 million has been invested in four major projects that will benefit all of Scaw’s divisions in volume growth, competitiveness and competitive advantage.

On an industry level, Scaw continues to dogmatically pursue workable mechanisms to limit the export of steel scrap from South Africa. Steel scrap is our key raw material ingredient. The large-scale export of steel scrap to Asia has choked the supply and fuelled pricing to local steelmakers and foundries. The beneficiation of steel scrap and subsequent secondary steel product production is key to developing a sustainable steel manufacturing sector locally; the large-scale export of steel scrap dilutes industry competitiveness and erodes value addition potential. Scaw continues to engage with authorities as the current policy to limit steel scrap exports is ineffective and not enforced.

Transformation Following the successful launch of the Siyaphambili Transformation project in 2013, we are excited to have progressed to the point of having embarked on indaba sessions representing employees, trade unions and management across all of our divisions. The indaba sessions have marked the starting point in developing improved industrial relations while developing a more inclusive and performance oriented culture.

Further to developing a competitive work ethic and ensuring alignment across our vast spectrum of businesses, the group

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Trading conditions have remained challenging for steel producers globally, and the domestic market has mirrored this trend combined with the unique local adverse variables. The financial performance echoes the difficult trading environment Scaw continues to face.

CFO’s report

CFO: Patrick Malaza

The group spent R288 million (2014: R356 million) on capital expenditure during the period to maintain, improve and expand production capacity.


RevenueThe group’s total revenue of R6,3 billion for the year is some 3% below the prior year. This is as a result of an unfavourable mix of variables as already mentioned in our executive chairman and CEO reports. Weak infrastructure demand combined with strikes and plunging commodity prices, resulted in steel sales volumes decreasing by 7,4%, impacting revenue by some R493 million.

This was mitigated by a combination of pricing initiatives yielding a net benefit of R311 million. These benefits were primarily made possible by aggressive cost saving initiatives despite rising energy and labour cost and increased raw material costs for a large part of the year fuelled by a shortage of steel scrap as a result of large-scale exports.

EBITDA (earnings before interest, tax and depreciation) As a consequence of largely lower sales volumes and higher realised costs rates, we reported an EBITDA loss of R254 million compared to a profit of R361 million in the prior year.

Finance costsAs a result of the EBITDA loss incurred, compounding effect of existing long-term loans, pension funding and the increased Nedbank facility use, finance costs increased to R465 million against last year of R381 million.

Capital expenditureThe group spent R285 million (2014: R338 million) on capital expenditure during the period to maintain, improve and expand production capacity. Key capital expenditure projects for the period include the side frame and bolsters (Omega project) and the Chain expansion project. As a result of cash constraints during the year some of the projects were deferred until shareholder funding calls were finalised in December 2014.

Funding In response to a shareholder capital call, the IDC subscribed for preference shares in Scaw amounting to R1,8 billion in December 2014. This was used to pay off the R1,15 billion Mezzanine loan from Nedbank, pay instalments for the Senior Nedbank loan and the balance to be used to fund delayed capital projects.

0

1 000

2 000

3 000

4 000

5 000

6 000

7 000

TurnoverMarch 2014

Market volumeimpact

TurnoverMarch 2015

Managementinitiatives

Revenue

R million

6 450 6 268

493 311

Capital expenditure (Rm)

Other stay in business capex: R93m

Side frames and bolsters: R74m

Fumex: R74m

Chain expansion: R18m

Thermal sand reclamation: R14m

Shaker drum: R10m

Roll former plant (Ghana): R4m

Outlook While trading conditions are not expected to improve much in the foreseeable future, we maintain a positive outlook. On the back of nearly complete capital expansion projects (Chain expansion, Cast expansion, etc), efficiency initiatives currently in

600

0-100-200-300

100200300400500

March 2013 March 2014 March 2015

EBITDA (Earnings before interest, tax and depreciation)

R million

184

361

-254

328

3 months 12 months

progress DRI plant, Scrap sourcing, etc, strategic sourcing initiatives, government lobbying (anti-dumping import duties, scrap export control, etc), export market drive and balance sheet restructure we anticipate improving our performance going forward.

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CFO’s report

March 2015

(12 months)Rm

March2014

(12 months)Rm

March2013

(15 months)Rm

Statement of comprehensive income – key figuresRevenue 6 268 6 450 8 252

EBITDA (254) 361 328

Finance costs (465) (381) (819)

Statement of financial position – extractsNon-current assets 2 658 2 245 2 317

Current assets 2 562 2 525 2 419

Total assets 5 220 4 770 4 736

Total equity and non-current liabilities 3 130 3 666 3 286

Current liabilities 2 090 1 104 1 450

Total equity and liabilities 5 220 4 770 4 736

Cash flows – extractsCash flows from operating activities (51) 65 458

Cash flows from investing activities (285) (338) (423)

Cash flows from financing activities 272 22 161

Net cash flow movement for the period (64) (251) 196

Extracts from the group’s financial statements

Patrick MalazaCFO


Value added statement

March2015

Rm

March2014

Rm

March2013*

Rm

Wealth createdTurnover 6 268 6 450 8 252

Purchase of material and services 4 946 4 568 5 837

Income from investments 1 2 15

Total wealth created 1 323 1 884 2 430

Wealth distributed as follows:To employees 1 578 1 524 1 913

To government (in the form of taxes) 0 0 3

To providers of capital 437 352 795

Finance costs on borrowings 437 352 795

Dividends to shareholders 0 0 0

To support future growth (692) 8 (281)

Depreciation 195 174 204

Retained profit/(loss) (887) (166) (485)

Total wealth distributed 1 323 1 884 2 430

% % %

Wealth distribution proportionsEmployees 119 81 79

Government 0 0 0

Providers of capital 33 19 33

Support future growth (52) 0 (12)

Total wealth distributed 100 100 100

* The year ended 31 March 2013 had 15 months because of the change in year-end.

Value added statement (%)

2015

Employees: 119%

Providers of capital: 33%

Support future growth: (52%)

Government: 0%

Value added statement (%)

2014

Employees: 81%

Providers of capital: 19%

Support future growth: 0%

Government: 0%

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36 Approach to sustainability

37 Our key stakeholders

39 Our people

44 SHE

51 Transformation

53 Enterprise development

54 Our communities


We are committed to running and managing our business sustainably with a particular focus on people – in particular transformation and more specifically the development of women – as well as safety and the environment. Our various programmes to enhance sustainability are outlined on pages 37 to 55.

Approach to sustainability

Exco is responsible for ensuring that a sustainable approach forms part of group strategy and is filtered down at every level. In so doing seven focus areas have been highlighted:

1

2

3

4

5

6

7

Shareholdermatters

Human capital

Operations

Carbon tax initiatives

Procurement and supply

chain

Transformation, promotions and change at senior management

Cash flow


At Scaw we believe that building collaborative stakeholder relationships is imperative for success.

Our key stakeholders

Stakeholders: people who can affect our

business or who are affected by it

Stakeholders are defined by each

portfolio/business unit

Tailored engagement processes

Engagement informs our decision making and

influences business strategy

Established internal and external communication

channels and mechanisms, roadshows, integrated report, regular meetings, stakeholder

forums, plant tours, independent surveys, advertising, exhibitions

and trade shows

Stakeholders are grouped and responsibility assigned

to a group executive

OperationalGovernment, regulators: employment equity, environmental impact, resource scarcity, scrap metals legislation on the export of ferrous and non-ferrous metals, local manufacturing pertaining to the PPPFA legislation and outbound investments

Trade unions: Workplace environment and employee benefits

Internal Employees: Group strategy and development plans, performance feedback, transformation and change management, employment equity, recruitment and promotion policies, safety in the workplace

ExternalShareholders: Group prospects, financial performance, implementation of strategy, carbon footprint, governance

Local communities: Socio-economic development, environmental impact, responsible corporate citizenship

Customers: Product sales and on-time delivery, brand reputation

– CEO roadshows focused on briefing management and unions on the business’ performance and Scaw’s strategic objectives

– Strong relationships with trade unions proactively fostered

– Five-year EE plan registered with the Department of Labour

– Performance KPIs rolled out across the group– A culture established of celebrating employee successes – Review of ESOP Trust to enhance its value – Partnerships formed with various communities where

Scaw operates– Online, print and broadcast media coverage increased

by 100% for the brand, valued at more than R10 million– Introduced social media channels – Continued engagement at a senior level in government– Ongoing customer engagement addressing any

reputational issues– Successful execution of seven major events including

participating at the 2015 Mining Indaba

Key stakeholder engagement action in 2015

Industry associations: Global and local industry trends, sector expertise and collective lobbying

Key stakeholders in our group are shown below. We have included issues of concern to each stakeholder group, and summarised key actions taken during the year.

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Our key stakeholders continued

Industry association Purpose Scaw’s proactive engagement above membership

Steel Engineering Industries Federation of South Africa (SEIFSA)

SEIFSA is a national employer federation representing the metal and engineering industry

– Sponsoring the Environment & Stewardship award for the 2015 SEIFSA Excellence Awards

– Our executive chairman remains President of SEIFSA

– Actively participate in the safety committees when legislative changes occur

– Provide comment and issues to be raised with the authorities

South African Institute of Steel and Iron (SAISI)

SAISI is a member of the World Steel Association

– Hosted 28 students at two of our plants who participated in the 2014 Steel Day arranged by SAISI

– Actively participate in environmental and safety committees when legislative changes occur

Iron and Steel Producers of South Africa (ISPA)

They are an independent employer association represented by SEIFSA

– Our HR executive serves as the chairman of the association

South African Engineers & Founders Association (SAEFA)

They are an independent employer association represented by SEIFSA

– Actively participate in the association

– Our GM, Cast Products has held the position of chairman

Energy Intensive User Group (EIUG)

The EIUG focuses on developments in electricity security of supply and pricing in South Africa, functioning as a lobby group and technical centre of excellence on electricity supply/savings/management in South Africa

– Active participation at EIUG meetings and presentations

South African Institute of Foundrymen (SAIF)

SAIF promotes job growth and opportunities through training, skills development and education. It also seeks to improve the competitiveness of the South African metal casting industry

– Represented Scaw and was the deputy chairman of SAIF in 2014

Lifting Equipment Engineering Association of South Africa (LEEASA)

Comprises providers, manufacturers, maintenance, inspection, examination and training representatives

National Foundry Technology Network (NFTN)

Established to promote foundry technology and technical training

SAWA (SA Wire Association)

SAWA is the officially recognised representative body for the wire industry in South Africa

South African Quality Institute (SAQI)

SAQI promotes quality awareness in all South Africans and influences the general public to expect quality in products and services and to spontaneously include quality in all their activities


We regard our almost 6 000 employees as critical to achieving our strategic objectives, especially as we operate in an industry where skills are scarce.

Our people

We strive to attract and retain employees of the highest calibre to uphold the group’s performance and sustainability, and in parallel prioritise optimal working conditions and opportunities for development. Our employee relations manager is responsible for overseeing our employee relations initiatives in this regard.

Labour relationsWe endorse the rights of employees to freedom of association and collective bargaining. Scaw has a policy of negotiating wages centrally.

Breakdown of workforce byregion and employment type

SA permanent: 5 562

SA fixed term: 313

SA contractors: 584

Rest of Africa: 172

Australia: 99

North America: 3

Scaw South Africa is a member of two associations: SAEFA and the ISPA, which affiliate to SEIFSA. Collective bargaining takes place at industry level at the MEIBC at three-year intervals. The negotiation process is of extreme importance to achieving a mutually beneficial outcome. 78,1% of the total workforce falls under national collective bargaining agreements for the entire metal and engineering sector of the South African economy.

Scaw’s largest union is NUMSA. The following other unions also have representation within the Scaw group: MEWUSA, Solidarity, UASA and SAEWA.

During the year, Scaw experienced a month-long strike as part of an industry wage negotiation process. Our initial production losses at the start of the strike were estimated at more than 20 000 tonnes a week in production and a loss of more than R33 million a week in revenue. While we had no reported incidence of violence or intimidation, attendance by striking workers was low. We experienced complete lockouts for all unions except Solidarity, as SEIFSA withdrew the lockout on Solidarity members.

Training by category

Training and development courses Course outline

Employee numbersFY14/15

HoursFY14/15

CostsFY14/15

Employee numbersFY13/14

Hours FY13/14

Crane and machine operators Training of operators in overhead, pendant crane,forklift, slinging loads, hoist operation, tractors,front end loaders, bell tractors, truck drivers andloco drivers

2 072 45 768 R3 219 701 2 304 35 416

Production training Training of personnel in business understanding,business integrity, future forum, foundry skills,melding methods and operation requirements

2 103 22 333 R1 695 354 2 646 23 209

Safety training Safety training in risk management,fatal risk standards, incident investigation,safety reps and safe operation procedures

3 792 32 507 R2 840 235 2 496 19 599

Management training Supervisory programmers, skills programmers,competition compliance, quality programmers, SAP and computer training

894 14 155 R1 617 741 417 5 022

Total 7 863

Internal skills development programmes

Apprentice trainingAtrami Programme/artisan apprenticeshipInternship P1 and P2 StudentsGraduate programme

11417

47

64

195 510

14 280

55 272

R7 299 421

R1 586 000R2 604 000

160 224 000

Total hours 379 825 307 246

Average hours of training per year per employee

69,05909

Total spend R20 862 452 R12 280 513

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Our people continued

We also provided local annual training to employees including in the following areas:

– Legal compliance and licences

– Safety

– Production operator and competency assessments

– Multi-skilling

– Management development and learnerships

In the year ahead the group plans to roll out the following training programmes:

– Employment equity and diversity development programmes

– Career ladder-based training for production and

engineering

– Structured talent retention and succession development

– Trainee operator programme for external candidates

– Leadership development

– Critical knowledge retention and accelerated skills transfer

programme

– Production operator learnerships

– Coaching skills development for line managers

– Competency-based development programme for

managers at various levels

– Comprehensive induction programme

– Mentor programme

In addition, extending beyond the confines of Scaw, the group is planning to establish both an accredited computer training school and a boilermaking and welding education facility for employees as well as unemployed community members. The group is aiming to increase the number of apprentices beyond Scaw’s immediate needs in order to support broader local economic development.

Technical training and apprenticeshipsScaw has a proud tradition of technical training, offering apprenticeships in a number of trades and the majority of successful apprentices go on to enjoy long and fruitful careers in the business. During the year Scaw trained 114 apprentices.

Learnership NQF L2-4At Scaw nine employees started their artisan learnerships NQF L2-4 for the first time, in electrical and mechanical trade.

Bursary schemeBursaries worth R539 736 were awarded to external previously disadvantaged students from different universities.

Key skills development programmes

Training Objective No of employees

Accredited coaching and mentoring training for first line managers

Training line managers in effectively coaching and developing their teams, managing performance and delivering consistently high performance

202

Accredited assessor training for first line managers

Ensuring first line managers are accredited and competent in the assessment process in order to support the roll out of accredited qualifications – such as production learnerships, first line management learnerships and production, safety and quality skills programmes

155

Accredited moderators for trainers

Ensuring the quality of our learning and teaching by training trainers in a moderating process for checking and reviewing our assessment processes

21

Problem solving and root cause analysis for middle and junior managers

Changing the reactive maintenance cycle, improve safety, integrity and reliability and optimise the asset lifecycle to effect significant improvement in performance. Root cause analysis and problem solving training is a critical foundational skill for achieving operational excellence

109

A3 training for senior managers

Establishing a baseline for hazard and risk management, managers received safety risk management training. This included an introduction to risk management as well as models of work processes and management systems used to develop effective risk management strategies

22

Black Female Management Development Programme (BFMDP)

Equipping black female middle managers with the skills to become effective managers and to pursue the strategic objective of their companies. The management development programme bursary also creates a pathway for development and career growth for participating candidates. This programme attempts to address the skills gaps identified in the merSETA’s Sector Skills Plan by enhancing the availability of skilled middle management in the manufacturing and engineering sectors and specifically supports the role of black female managers

13


Graduate intern sponsorship Scaw offers university bursaries in engineering disciplines. Electrical, mechanical and metallurgical engineers graduating from university who join the group will undergo Scaw-specific training in the group’s operations. 54 employees benefited from study assistance while nine children of employees received bursaries and 123 received assistance with school fees. A total number of 77 interns were appointed in 2015. The majority of our graduate trainees are female reflecting our drive to empower and provide training to females in our industry.

ApprenticeshipsThe following apprenticeships were offered during the year:

Apprenticeship Enrolment 2014 Male Female Enrolment

2013 Male Female

Millwrights 10 8

Electrical 19 8

Fitter 17 9

Fitter and turner 5 4

Boilermaker 5 2

Total 56 39 17 31 25 6

Graduate intern sponsorship (%)

Female: 61

Male: 39

DisciplineGender Number of

interns per discipline

% Males Females

Metallurgical engineering 1 2 3 5,5

Metallurgical engineering P1-P2 5 5 10 18,5

Mechanical engineering 1 3 4 7,4

Mechanical engineering P1-P2 1 – 1 1,8

Electrical engineering 2 – 2 3,7

Electrical engineering P1-P2 2 – 2 3,7

Industrial engineering – 1 1 1,8

Industrial engineering P1-P2 1 – 1 1,8

Chemical engineering P1-P2 1 2 3 5,5

Non-destructive testing P1-P2 1 1 2 3,7

Administration 3 7 10 18,5

Industrial psychology – 1 1 1,8

Human resource management – 4 4 7,4

Public relations and communications – 3 3 5,5

Law – 1 1 1,8

Accountancy 1 – 1 1,8

Information technology 1 1 2 3,7

Information technology P1-P2 – 1 1 1,8

Logistics – 1 1 1,8

Environmental sciences 1 – 1 1,8

Total 21 33 54 100

Graduate trainees starting 1 April 2014 to date

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Our people continued

The group has the following training accreditations:

MerSETA (Manufacturing, Engineering and Related Services Seta) MerSETA skills programmes

– National Certificate GETC – Manufacturing, Engineering& Related Services NQF Level 1 (23253)

– National Certificate: Production Technology NQF L2 (58781)



– National Certificate: Manufacturing and Assembly Operations NQF L4 (48915)

– National Certificate: GETC Foundry Production NQF L1



– Introduction to the manufacturing environment

– Life skills – understand and deal with HIV/Aids

– SHE business relations

– Post-production finishing operations

– Production process operations

– Apply quality assurance techniques

– Supervisory techniques

– Labour relations in the workplace

– Measurements and statistics within quality control

– Post-production finishing operations

– Maintain and monitor SHEQ systems and procedures

– Optimising production

– Tool setting and troubleshooting

TETA (Transport, Education Training Authority Seta) MICSETA (Media, Information and Communication Technologies Seta)

– Operating cranes

– Operating lift trucks

– National Certificate: Information Technology; End User Computing

CESA (Consulting Engineers for South Africa)

– Accredited programme: Steel Wire Rope Technical Training Course


Bathabile Mosala is a training instructor in the Training and Development department and joined Scaw in 2002 as an engineering clerk. Her managers describe her as “a self-starter who takes the initiative and does her best”.

Case study

Being a teacher was something Bathabile had always dreamt

about. “What I have realised during my time at Scaw and

while working in the training department, is that there’s

always a need to upgrade one’s skills and knowledge. For

me, this means that I have to study constantly to be a step

ahead of the learners.”

“I enjoy the challenges that my job brings. It enables me

to meet new people, conduct my training sessions and

see the necessary results. I get motivated to do more when

I see improvement from the learners. These learners

come from disadvantaged backgrounds, without any

computer knowledge and they leave as a different person,”

says Bathabile.

Born and raised in Dube Village, Soweto, Bathabile was the

youngest of four siblings and the only daughter to her

doting parents, Mrs Gladys and the late Mr Sello Mosala.

True to her name which means “Happy”, Bathabile describes

herself as a spirited, compassionate woman with an ever

enquiring mind.

In her youth, Bathabile always had an enquiring mind and

a thirst for knowledge. She began her schooling at Sizanani

Primary School, progressing to Vukayibambe Higher Primary

School and finally completing her Grade 12 at Langlaagte

Technical High School.

She later attended Innovation Business School where she

completed a computer course and achieved outstanding

results and later worked as a computer tutor. Before joining

Scaw she worked in a number of temp positions.

After joining Scaw consistent delivery and achievement saw

Bathabile climb steadily up the ranks receiving further

appointments in 2004, as a Production Administrator and

2005, as Scaw’s Computer Training Instructor.

Seeing this as her opportunity to finally realise her childhood

dream of being a teacher, she completed a Diploma in

Human Resource Management and obtained a BCom in

Industrial and Organisational Psychology, through Scaw’s

study assistance programme, both from Unisa. Subsequently

she has attended further training courses including project

management, management and leadership skills for women,

moderator and skills development facilitator training. All of

this has upskilled her to reach her full potential in the training

environment.

“My greatest achievement to date, while working for Scaw,

was when we obtained the accreditation through MICT Seta

to offer computer training for the employees and contributing

to Scaw’s latest and most unique achievement of obtaining

CESA accreditation for our Haggie® Steel Wire Rope product

training course.” In addition Bathabile facilitates end user

computing courses and she manages the computer training

centre.

Bathabile recognises the important role that training plays

in the development of skilled labour within the mining and

metalwork industries. “At Scaw Metals, our motto is being

about more than just steel. Great emphasis is placed on our

people and their development. For a company to be

outstanding, skilled labour is needed.”

Along with her career aspirations of progressing into the role

of a training consultant within the next five years, Bathabile

also demonstrates a passion for gender equality in the

workplace. “Women need to be upskilled and given

opportunities to balance gender inequality in the metal

industry. Women at Scaw are encouraged and supported to

work towards their career aspirations, no matter how difficult,

unconventional or impossible they seem.”

Bathabile Mosala

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SHE

Our group values guide our approach to SHE, prioritising the protection of our people and the environment through leadership, education and collaboration as we work towards zero harm.

Safety firstScaw does not accept that it is necessary for people to be injured or become ill while at work, and believes that all employees should be able to return home fit and well at the end of each shift armed with the knowledge to educate their families and communities as to SHE issues. To this end our operations should have fundamentally safe, well-designed plant, equipment and infrastructure with risk-based SHE management systems driving our goal of zero harm.

SHE principles – Zero harm mindset: An acceptance of and responsibility for the premise that all injuries and occupational illnesses are preventable and that the group can avoid, minimise and mitigate environmental impacts arising from our operations.

– No repeats: All unsafe practices and incidents and environmental incidents and poor environmental practices will be investigated to determine the root causes and the steps necessary to prevent recurrences.

– Strict rules and standards: Scaw has adopted SHE standards to ensure that minimum standards are maintained throughout the group. Divisional line management at all levels are responsible for implementing and maintaining these.

Our group values guide our approach to SHE, prioritising the protection of our people and the environment through leadership, education and collaboration as we work towards zero harm. Our SHE Management Framework defines the roles and responsibilities of the corporate centre and business units in respect of SHE. Safety, health and environmental performance is a main agenda item in all forums in the group and a KPI at all levels of the organisation.

The SHE department is based at the Union Junction operation, led by the Head of SHE. It is responsible for ensuring that the SHE management framework is maintained and continuously improved in line with the ISO 14001 environmental and the OHSAS 18001 safety and health accreditations and other policies and procedures to which the group subscribes. This team facilitates SHE programmes across the group with the support of onsite SHE teams worldwide.

2015 2014 2013

Fatalities 0 0 1

TRIFR 1,19 1,46 1,87

LTIFR 0,44 0,34 0,41

Key safety indicators at a glance


Corporate

Divisions

Leadership Scaw Metals SA Audits

Leadership Operational locations Audits

The corporate centre will define and communicate what is required, including clear, non-negotiable standards. This will require, inter alia, resourcing, communication, setting of executive KPIs and an overarching safety plan

The divisions will implement the Scaw corporate policy and add their own business-specific standards and rules to these. This will require resourcing, communication, setting of business-specific KPIs and operational safety plans

Scaw vision, principles and policy

Scaw safety management system standards

Scaw fatal risk standards

Scaw safety golden rules

Scaw board

Executive committee

Corporate SHE

Peer review

Third party

Scaw Metals’ vision and principles

Corporate and divisional policy and standards

(including contractors) Self-assessment

Divisional

Third party

BehaviouralProcedures

Training

Behaviour

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SHE continued

SHE management standards These standards form the basis for the group-wide SHE management system and are based on the ISO 14001 and OHSAS 18001 management system standards. For those sites where certification to the latter standards are not pursued, a Scaw Standard has been created and published in our document The Group Safety Way. An overview of these standards is illustrated below:

In addition, Scaw has implemented the fatal risks standards (FRS) which determine minimum requirements for managing certain specific high risks. The Scaw FRS are specific in-house controls associated with identified fatal risks. The Scaw FRS apply beyond Scaw business units and operations to contractors and visitors involved in controlled activities.

Currently most divisions exceed the group average of 90% compliance and some have even achieved 95%. Self-assessments of compliance are reviewed during independent audits. We decided in the year to focus on the implementation of the Scaw Safety Way at those sites which are not certified to ISO 14001 and OHSAS 18001, before any further new standards are introduced. Gap analyses on compliance to the Scaw Safety Way have been conducted at the relevant sites and action plans have been implemented to address any shortcomings.

Another main focus area for the year was implementation of a risk assessment review programme. During the year under review the emphasis was on the review of the baseline risk assessments and their formal signing off. The review has been completed and the sign off is nearing completion. In the coming year focus will be on the review of task-based risk assessments for high-risk tasks and relevant procedures. Training on the Safety Risks Management Programme will also continue in the new year.

Entrenching a culture of safety Living our SHE principles requires the involvement of everyone working for and with us. Visible leadership and clear accountability are emphasised and we continued to focus in the year on the time that managers spend on the shop floor. Senior and line managers conducted VFL walkabouts and engaged directly with employees at least once a week. This proved to have a positive impact on safety behaviour, safety awareness and the early identification of potentially unsafe acts.

We continue to positively reinforce safe behaviour among employees and, where necessary and appropriate, to enforce disciplinary procedures for certain unsafe actions. Zero harm certificates continue to be awarded to business units that work an entire calendar year without experiencing LTIs. The awards ceremonies are generally hosted by Scaw’s divisional managing directors. Other significant safety improvements are celebrated with the achieving teams.

TrainingThe group human resources department manages the roll out of training, while a training matrix and schedule are maintained in the individual operations of those SHE training courses required.

During the year training was held group-wide on FRS and the training material was modified in some instances to overcome

1. Policy, leadership and commitment

11. Incident reporting and investigation

12. Monitoring, audits and reviews

2. Risk and change management 3. Legal and other requirements 4. Objectives, targets and performance

5. Training, awareness and competence 6. Communication, consultation and participation 7. Documentation and control of documents 8. Operational control 9. Emergency preparedness and response 10. Contractor and business partner management

Continual improvement

Policy

Checking and corrective action

Management review

Planning

Implementation and operation


literacy challenges, for instance in lock out and isolation training. Safety fundamentals training was also formalised in the updated employee induction programme. Further, one A3 course for management risk training, 11 A2 courses for supervisors and 21 A1 courses for team members were presented in the group. In addition, specialised competency-based training held during the year included:

– Gas safety (shop floor and classroom) – Slinging and safe lifting practices training (basic level, shop floor and classroom)

– Transport Education Training Authority (TETA)-accredited pendent and overhead crane training

– TETA-accredited forklift training – Vienna testing for all mobile equipment operators – Hazard identification and risk assessment (HIRA) training for shop floor level

– SHE representative training – First aid training – Confined spaces training

Contractor induction training is provided by an external service provider.

Safety audits and reviewsSafety compliance audits continue to be regularly conducted by external auditors for OHSAS 18001 and ISO 14001 certification. During prior audits certain non-compliances were identified in respect of machine guarding and electrical installation certificates. In respect of machine guarding, projects continued but not all have been completed during the year due to financial constraints. These are expected to be completed in FY16. On the certificates only the Union Junction site remains in the process of remediating non-

compliances. This too was delayed due to financial constraints but is hoped to be completed during FY16.

The types of reviews conducted internally are determined primarily by the risk profile of the respective business units. They comprise:

Annual reviews – Scaw’s Exco reviews the group’s SHE objectives, targets and standards annually to ensure that they remain current and valid.

– Occupational hygiene surveys are conducted every two years to measure workplace exposure. In 2015, 96% of employees scheduled for medical surveillance attended the consultations.

Peer review programme (PRP) and internal audits – The PRP provides some assurance that fundamentally sound, risk-based management systems are in place at all operations, but also works to build core competence and act as a mechanism for learning and sharing across Scaw. The group reintroduced the PRP by using the SHE personnel in certain plants to cross-audit other plants. This will be expanded to more sites in the coming years. Management is responsible for implementing actions arising from the PRP.

Self-assessment and safety plans – Conducting self-assessments of the implementation of FRS is key to continuous improvement in the business units. The gaps between the self-assessments and full compliance provide a basis for safety improvement plans and reporting on self-assessments forms part of the assurance process required by Exco.

Employee wellness

Health objectives FY15

Objective Performance Target FY16

Employees to participate in VCT (including previously tested) 67%80% (including

previously positively tested)

Known HIV positive cases to be enrolled on a recognised wellness programme

91% 90%

Uptake of employees for risk-based medical surveillance 96% 100%

Reduction in South Africa of level 3 and level 4 NIHL cases 0 cases <10 cases

Group Health Improvement Plan Has been maintained

To be maintained

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SHE continued

We aim to proactively protect the well-being of employees,

providing primary and acute healthcare services, lifestyle and

chronic disease assistance and facilities and trained staff to

manage medical emergencies at work.

In South Africa, Prime Cure Wellness operates our outsourced

onsite health clinics. The group’s occupational healthcare

system tracks the entire life cycle of an employee’s career

with Scaw, so that any potential deterioration in health status

can be detected early and managed proactively. Scaw holds

to this approach because it takes into account the whole

person, not simply the visible injury, and recognises that

the injured or ill employee is an income provider for a family

who is therefore entitled to the proper time and attention to

recuperate fully.

A consolidated database of individual employee health data

was introduced in the year to advance the system.

Health clinicsScaw’s occupational health clinics (also known as medical

centres), equipped with professional medical staff and

equipment, are the first ports of call in dealing with employee

disease and injury and are responsible for monitoring

employee treatment until recovery.

At the two largest sites, Union Junction and Steel Wire Rope,

the clinics are open 24/7. Medical personnel treat injury-on-

duty cases, manage a wellness HIV/Aids clinic and will

arrange for the evacuation of South African employees who

are injured on duty overseas. The Union Junction medical

facility is staffed by seventeen medical and associated

professionals with an onsite ambulance. Access is provided

to advanced medical emergency vehicles including a

helicopter. The site’s x-ray facility is available to other medical

centres within the group, as well as that of a clinical

psychologist and optometrist on a weekly basis.

Scaw prioritises education of employees as a means to

reduce occupational health risks. Medical surveillance

includes hearing tests, spirometry (lung function testing),

visual acuity and biological monitoring where indicated.

Various programmes and awareness campaigns are

conducted to prevent NIHL cases. Those who are identified

with NIHL are monitored regularly to protect them from further

hearing loss. In some areas engineered measures have been

implemented to reduce exposure to excessive noise.

Health daysAnnual health days are conducted at most Scaw sites to

educate employees about health resources available to them

within their communities. The South African Blood Bank, and

various other external health-related service providers, all

participate. Employees are free to attend the exhibits that

interest them and share the advantages of this extended

health service with family members.

During the health days, employees also have access to

cholesterol level and kidney function tests and blood type

analyses. For many employees the health days represent their

first exposure to health services outside of the group.

HIV/AidsScaw’s HIV/Aids programme continues the battle against the

pandemic in the workplace with continual education about

prevention, treatment (including nutrition), family and social

impacts, and destigmatisation of the disease. Specifically the

programme includes:

– Voluntary counselling and testing (VCT)

Monthly testing targets are set to achieve annual testing

targets of 80%. Although this target was not achieved

many employees who had never been tested came forward

to be tested.

– Wellness programmes

When an employee has been diagnosed with HIV, she/he is

enrolled in a wellness programme unless s/he refuses.

Testing of the CD4 count is repeated at set intervals.

Antiretroviral therapy (ART) is commenced when the CD4

count reaches a certain level. In addition, the employee is

counselled and general health is monitored.

– ART

The provision of ART has proven to be successful, with the

result that nearly all employees who have been treated are

performing their normal duties. The critical importance of

adhering to therapy requirements and the continuance of

treatment forms the thrust of ART counselling.

– Training

To improve employee understanding about the impact of

HIV on individuals and society, Scaw conducts HIV/Aids

awareness campaigns and training on an ongoing basis.

One of these programmes is peer education facilitated

by HIV positive employees as trainers/speakers, who

encourage participants to get tested and use Scaw’s

wellness programme.

– HIV committees

A number of employees have joined Scaw’s volunteer

HIV/Aids education programme as peer educators. HIV

committees formed by the peer educators at most of the

large sites are integral to the HIV/Aids management

programme. Committee members and other employees

participate in the annual World Aids Day activities.


Occupational disease The principal occupational health risks in Scaw are NIHL,

illness due to dust exposure, and dermatitis or asthma due

to chemical exposure. During the year under review, two

incidences of occupational diseases were reported.

Protecting our environmentAs a manufacturer of value-added steel products from steel

scrap and directly reduced iron, Scaw is active in one of

the world’s most sustainable industries. Steel is the most

recyclable material on the planet. Every new steel product

contains recycled steel and in some countries the recycled

rate is as high as 85%. We procure and process our own

steel scrap requirements and recycle significant volumes

of scrap steel in our steelmaking operations.

Our approach to environmental management is based on

international best practice and legal compliance. Most of our

operations are ISO 14001: 2004 certified. Responsibility

for environmental management extends to every employee.

We have a comprehensive Environmental Management

Framework in place and a Scaw Assurance Programme.

Each business unit’s line management is responsible for the

full implementation including:

– the allocation of appropriate resources and the provision

of training, education, consultation and auditing to ensure

compliance;

– the development, implementation and maintenance of

programmes and procedures; and

– effective environmental impact identification, assessment

and control.

Scaw’s Exco reviews the environmental objectives, targets

and standards annually to ensure that they remain current

and valid. These include objectives for energy consumption,

water consumption and waste reduction.

We are pleased to inform you that energy consumption and

water use per tonne of steel produced are being continually

reduced year-on-year throughout the group. The following

environmental impact reduction projects were completed

during the year:

– A recycling project for slag generated at the melt shops

– Licence acquired to also recover metal from the slag at

the old disposal facilities at Union Junction

– Improving the collection of paper waste in the office areas

at the Union Junction site.

One of Scaw’s key environmental objectives is finalising

closure of historic legal non-conformances with 90% having

been closed out. The remaining items require either

substantial capital investment or are dependent on

completion of the authorisation process. For instance, the

R210 million secondary emission extraction system for the

Union Junction Foundry, is in progress and expected to be

completed in 2016.

The non-compliances that require authorisations include

the issuing of a waste licence for the closure of the waste

disposal site at the decommissioned Dimbaza site. During

the year the environmental authorisation for decommissioning

was received, but the relevant waste licence is still awaited.

It is hoped that all the required authorisations will be finalised

during the next financial year.

Interested and affected partiesWe believe that engaging with our environmental stakeholders

in a constructive manner is essential, so we host forums and

ensure we keep lines of communication open with community

members. The Union Junction site hosts an annual

environmental stakeholder forum meeting. Stakeholders in

this instance include local residents, national, provincial and

local government authorities such as the Department of

Environment (DEA), the Gauteng Department of Agriculture

and Rural Development (GDARD) and the Department of

Water and Sanitation (DWS), as well as the Ekurhuleni

Metropolitan Municipality.

Complaints from the communities in which we operate are

recorded as and when they are received and addressed

and feedback is provided to complainants. A register of

complaints received and the status of such complaints

is maintained at each site.

EnergyThe group is focused on improved energy management and

has been tracking improvements on a central database since

2005. Over this time Scaw has achieved a reduction of more

than 10%.

The group has a number of short- and long-term initiatives

under way in this regard which include, at the Union

Junction site:

– Variable speed drives for arc furnace regulation. This has

been completed for the HCBP and Wheel Plant furnaces.

– Energy efficient motor survey

– Energy efficient lights around Scaw’s Union Junction

perimeter and in the DRI plant. This was completed. Similar

projects are being investigated for various plants inside the

plant at Union Junction and also for the Benoni Foundry

– Heat pumps for change houses. These have been installed

at the Union Junction change house and seem to have had

a positive impact. An evaluation was conducted and

demonstrated energy savings

We are also in progress with other initiatives including:

– Melt Shop Number 3 scrap pre-heating

– Static VAR compensation for voltage stabilisation at 33 kV

incoming supply

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WasteScaw ultimately aims to recycle as much waste produced on

site as possible and therefore reduce or eliminate the need

for disposal at a separate waste site. Scaw is appropriately

licenced to recover metal for recycling as far as possible.

Currently the Union Junction site is the largest producer of

process waste in the group. A phased approach has been

adopted here. Process waste recycling initiatives were

implemented in the year with a focus on char and dust. All

slag from the furnaces is also now recycled and the metal

extracted and reused in the furnaces.

WaterGiven that South Africa is a semi-arid country, Scaw Union

Junction site, being the biggest consumer of water in Scaw,

has endeavoured to reduce its consumption of potable water

by recycling water through its onsite dams.

SHE continued

EmissionsScaw voluntarily participates in the Carbon Disclosure

Project. Greenhouse gas emissions, specifically of carbon

dioxide, are reported as part of the programme. Further

particulate emissions are continuously monitored at certain

stacks at Union Junction and a dust fallout sampling

programme is also in place at the site. This consists of dust

buckets placed in strategic locations on the boundary of the

site and in the surrounding communities. In addition external

consultants undertake annual emission surveys.

Further, specific annual projects get under way each year to

ensure continuous progress in the reduction of emissions.

During the year these comprised:

– The upgrade of the fume extraction system at the Union

Junction Foundry. A capital cost of R210 million was

approved and the project is expected to conclude by the

end of 2015.

– HCBP – scrubber: an additional fumex bin was installed to

allow for the removal of the other bin and disposal of the

fumex without bypassing the emission control equipment.

– New projects consider the best available technology and

practices in order to mitigate impacts on the environment.

All air emission licence applications submitted to the air

quality authorities for all Scaw plants have been granted

and either a provisional or final licence issued.

During the year Scaw maintained its level 3 B-BBEE rating, evidencing our commitment to making real change in South Africa. This is a notable achievement given the inherent challenges of the steel industry, particularly skills scarcity and gender bias. We improved our rating in five of the seven scorecard criteria, significantly in employment equity-related elements and preferential procurement.


Transformation

B-BBEE scorecard

Element Maximum points 2013 calendar 2014 calendar

Ownership 23 23 23

Management control 11 8,9 8,9

Employment equity 18 4,8 4,0

Skills development 15 3,9 5,3

Preferential procurement 20 20 19,3

Enterprise development 15 15 15

Socio-economic development 5 5 5

Total 107 80,6 80,5

B-BBEE level 3 B-BBEE level 3

The social, ethics and transformation committee has reviewed the new incoming codes and in terms of the new codes the group is targeting a level 4 status for the year ahead. Action plans have been implemented to ensure continued compliance and improvement.

As part of Scaw’s Women’s Forum, the “Women of Steel” campaign was introduced as a platform that gives recognition to women in the organisation. The key objective was to profile selected junior and senior level women that have made a contribution to the organisation. Interviews were conducted to gather the personal and career journey of these women. The profile pieces were crafted to tell the remarkable story of how these women have climbed the ladder in an industry historically dominated by men. Their stories shared their experiences, challenges and key insights for those interested in pursuing careers in the industry. The individuals were profiled in various publications.

A limited pool of black females in the industry and scarce financial resources to fund skills programmes hampers our performance in the Employment Equity and Skills Development categories. During the year a comprehensive B-BBEE strategy was formulated and approved by the board focusing on these two categories. To mitigate specific challenges: – Learnerships and apprenticeships will be rolled out to both current employees as well as unemployed individuals

– Group supplier and enterprise development programmes

will be developed and implemented

Our board continually monitors progress against transformation objectives, supported by the social, ethics and transformation committee.

Transformation in FY15: SiyaphambiliDuring the year Siyaphambili diversity and inclusion workshops were conducted for 170 managers. Further workshops are planned for in the year ahead for superintendents and foremen.

Indaba sessions were also facilitated by our diversity management partner, Mandate Molefi. These provided an opportunity for managers and employees to openly air their views regarding both the good and bad in terms of transformation at Scaw. The sessions also served as a platform for participants to identify major issues and articulate possible solutions moving forward. More Indaba sessions are planned for the coming year to ensure employee participation is as inclusive as possible.

Employment equityIn June 2013 we committed to a formalised five-year employment equity plan, although the principles of employment equity had been at play in the group since before the 1994 democratic elections.

The policy supporting the plan places significant emphasis on achieving a workplace demographic that is at least congruent with the South African labour market (as reported by Statistics South Africa). We believe this approach will

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transformation project. Employees are encouraged to communicate any concerns related to employment equity (diversity, discrimination or harassment) to committee members in their respective areas, or to the group transformation and employment equity manager. There were no reported incidents of discrimination during the year.

The employment equity categorisation of our almost 6 000-strong workforce which excludes contractors is summarised below:

Transformation continued

ensure that the business has an excellent mix of skills and cultures as well as a balanced cross-generational worker profile. Our policy further highlights the importance of improving gender representation through the employment of more women across the business. We are certain that a representative workforce, underpinned by skill, provides Scaw with a distinct competitive edge.

Our national employment equity committee drives the group’s employment equity agenda in compliance with legislation and according to the five-year plan and our own Siyaphambili

Occupational levels 2014/2015 actual 2015/2016 target Number of persons required to reach target

Top management* 50% 50% 0

Senior management 35% 38% 2

Middle management 56% 63% 21

Junior management 75% 71% 0

Gender equity

Women in management 13,79% 14,89% 65

Women in Scaw 9,12% 9,52% 23

Employment equity by race and gender

African: 83%

White: 12%

Coloured: 3%

Asian: 2%

Female: 9%

Male: 91%

Employment equity

Semi-skilled: 40%

Skilled: 29%

Unskilled: 25%

Professionally qualified: 5%

Senior management: 1%

Top management: 0%

*Top management includes only chairman and CEO

Scaw actively supports the development of local business by engaging in enterprise development partnerships with entrepreneurs and skills education training authorities.


Enterprise development

In 2013 the group created 11 entities in terms of our Enterprise Development Programme and partnered with the Small Enterprise Finance Agency to set up a joint fund of R100 million to fund these businesses. Scaw supports the growth of exempted micro enterprises (EMEs), which, by their nature, are 100% B-BBEE compliant.

Recently Scaw honed its focus onto EMEs in the scrap metal industry. This is intended to help create a complete service in the scrap metal value chain in order to promote the local beneficiation of scrap. Scaw selects scrap metal EMEs with complementary services and builds each to promote healthy competition in the industry. The employee base of each EME is sourced from the local communities in which these entities trade to promote job creation.

The group’s contributions consist of monetary and non-monetary, recoverable and non-recoverable “donations” aimed at assisting or accelerating the development, sustainability and ultimate financial independence of the beneficiary. This is accomplished through the expansion of a beneficiary’s financial and/or operational capacity with continuous training and skills development.

During the year Scaw presented certain of the initiatives to SEFA for direct financing to expedite trading. To date, financing for two entities has been approved and both are operational with Scaw’s assistance. In addition, five other entities have been contracted as part of Scaw’s ED programme to support the business in different areas.

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Our communities

We are committed to investing and allocating resources to aid development and improve the quality of life in the communities in which we live and work. Our social investment projects aim to empower communities through sustainable education, health, housing, community and infrastructure.

Category Project name

Cyril Ramaphosa Education Trust

Adopt-A-School – Eketsang

Epworth Children’s Village Outreach Programme

Cricket

Soccer

Athletics

Food and trees

The Chairman’s Fund

Total Scaw CSI contribution FY15

Education

Sports development

Environment

Chairman’s fund


Scaw’s contribution FY15 Value donated in 2015

Funded five bursaries R0,6 millionFunded: – Voluntary after-hours training for learners and educators in mathematics and science – The refurbishment of the library – English and literacy intervention – “Drop Everything and Read” – Matric revision camp

R0,6 million

– This project focuses on supporting teachers, parents and learners in various communities in Johannesburg. The impact on the communities is evident in academic success rates, a reduction in teenage pregnancies and school dropouts, etc

R0,2 million

– Transportation for the senior and junior teams – Equipment for senior and junior sides – Meals on match days

R51 000

– Transportation for players – Equipment for senior and junior sides – Funding for licence and referee fees

R31 000

– Transportation for athletes – Sponsorship – Accommodation and clothing

R0,15 million

– During Arbour month, Scaw donated 1 000 fruit trees for homes in Katlehong – For World Food Day donated vegetable gardens for a primary school in Katlehong R0,2 million

– Sponsorship of the netball team at Germiston High School R25 000

R1 796 532

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Accountability


Accountability

58 Directors and executive management

61 Governance structure

62 Governance

66 Ethical leadership

67 Audit and risk committee report

68 Remuneration committee report

69Social, ethics and transformation committee report



Directors and executive management

Ufikile Khumalo (49)

Independent non-executive directors

Executive chairman

BSc Elec Eng, MSc Eng, MAP, EDP, AMP

Appointed February 2013

CEO

NHD Mech Eng, GCC (Mech Eng) Factories, MBA, AMP

Appointed August 2013

Nkosemntu Nika (57)

CA(SA)

Appointed January 2013

Nko

Vusi Opper Twala (52)

BSc (Acc), MBA, MA Development Finance


Markus Michael Hannemann (47)

Executive directors


Neo Violet Mokhesi (54)

BCom, MAP


Non-executive directors

Ashley Basil Ally (51)

BSc Elec Eng, Town and Regional Planning, Business and Public Administration

Appointed May 2007

Nokuzola Amanda Mpulo (36)

CA(SA), MBA


(36)

Lucas Lefu Tseki (36)

BCom

Appointed November 2008

Neo36)

Alternate directors

Ortal Sharp (33)

CA(SA)

Appointed December 2013, alternate to Ashley Ally

Sechaba Serote (34)

CA(SA)

Appointed December 2013, alternate to Nokuzola Mpulo

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Directors and executive management continued

Executive management

Bheka Khumalo (49)

Human Resources

BCom, Post Graduate Diploma in Management, Master of Management


Ray Abrahams (46)

TechnicalBSc Mech Eng

Appointed September 2013

George Katergarakis (41)

Sales and Marketing BTech Metallurgical Eng

Appointed February 2013

Gerrit van Wyk (55)

Professional ServicesBCom (Hons), MCom, MBL, AMP

Appointed March 2014

Steve van Wyk (43)

OperationsBSc Metallurgical Eng, AMP

Appointed September 2013

Vimla Reddy (39)

Company secretaryBA LLB LLM

Appointed October 2012

Dudu Ndlovu (45)

Public Affairs and CommunicationBA Comm, MAP

Appointed December 2012

CEO, Markus Hannemann, Exco comprises:

CFO

CA(SA)


Ge

ProBCo

AppPatrick Malaza (54)


Governance structure

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Lucas TsekiNokuzola Mpulo1

Ashley Ally2

1Sechaba Serote (Alternate)2Ortal Sharp (Alternate)

Neo MokhesiNkosemntu Nika

Vusi Twala

Scaw board of directors

Ufikile Khumalo (Chairman)Markus Hannemann (CEO)

Executive directors Independent non-executive directors Non-executive directors

Executive committee

Markus Hannemann (Chairman)Ufikile KhumaloPatrick MalazaGerrit van WykVimla ReddyDudu Ndlovu

Ray AbrahamsGeorge Katergarakis

Bheka KhumaloSteve van Wyk

Sub-committees

Audit and risk committee

Remuneration committee

Social, ethics and transformation

committee

Board investment committee

Nkosemntu Nika (Chairman)Ashley AllyVusi Twala

Vusi Twala (Chairman)Ashley AllyLucas TsekiNeo Mokhesi

Neo Mokhesi (Chairperson)Nkosemntu NikaNokuzola Mpulo

Vusi Twala

Lucas Tseki Neo Mokhesi

Nokuzola MpuloOrtal Sharp

Scaw is committed to applying high corporate governance standards aimed at ensuring the group’s ongoing sustainability, the creation of long-term shareholder value and benefits for other stakeholders.


Governance

Applying good corporate governance principles is a dynamic responsibility in line with developments in South Africa and internationally. A table setting out Scaw’s compliance with King III appears in Appendix 7 to this report.

The boardOur directors have a diverse range of qualifications, experience and expertise. In addition, they have an

understanding of the complicated and demanding business environment in which we operate and a knowledge of the challenges facing the business.

Responsibilities:– To draw on their experience, skills and business acumen to ensure impartial

and objective viewpoints in decision-making processes and standards of conduct

Responsibilities:– Providing strategic leadership – Stabilising the business and growing it in line with the strategy approved by

the board– Facilitating the positioning of Scaw as a benefactor of steel scrap into

value-added secondary steel products– Contributing insight gained from more than 20 years of experience at Scaw

Responsibilities:– Overall leadership of the board– Liaison between the board and management and particularly between the

board and the CEO– Providing leadership which enables the attraction of appropriate partners for

further market penetration and technology transfer – Working closely with the IDC, Scaw’s majority shareholder– Setting the tone and culture for transformation

The appointment of directors is a formal process that takes into account the applicable provisions of the company’s MOI and the Companies Act, 2008. When appointments to the board are considered, skills, experience, gender andracial composition are carefully considered. An induction programme is in place for directors.

The role and responsibilities of the executive chairman and the CEO have been clearly defined and are distinct.

The board’s responsibilities include: – Assessing and approving strategic plans– Monitoring operational performance and management– Determining policy and processes for the group’s risk management and

internal controls

Responsibility

Composition

Executive chair

CEO

Non-executive directors


Members and meeting attendance Executive directorsUfikile Khumalo (Chairman)Markus Hannemann

Independent non-executive directorsNkosemntu NikaVusi TwalaNeo Mokhesi

Non-executive directorsLucas TsekiNokuzola MpuloAshley Ally Ortal Sharp (Alternate to A Ally)Sechaba Serote (Alternate to N Mpulo)

Number of meetings/attendance

6/66/6

5/65/66/6

5/66/64/63/60/6

Independent non-executive directors 3/10The board formally evaluates the independence of the non-executive directors annually having due regard to the relevant factors which might impair independence.

Self-evaluation Performance evaluation: board, sub-committees and individual directors

The board conducts self-assessments on an annual basis and every third year an independent external service provider undertakes an independent evaluation.

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Governance continued

Members and meetings attendance

Nkosemntu Nika (Chairman) 3/3Vusi Twala 3/3Ashley Ally 0/3Ortal Sharp 2/3(Alternate to A Ally)

Vusi Twala (Chairman) 3/3Neo Mokhesi 3/3Ashley Ally 3/3Lucas Tseki 2/3

By invitation:Ufikile Khumalo (executive chairman)Markus Hannemann (CEO)Patrick Malaza (CFO) Bheka Khumalo (Executive head of human resources)

Neo Mokhesi (Chairperson) 3/3Nkosemntu Nika 3/3Vusi Twala 3/3Nokuzola Mpulo 0/3Sechaba Serote 3/3 (Alternate to N Mpulo)

Lucas Tseki (Acting chairperson) 1/2Neo Mokhesi 1/2Nokuzola Mpulo 2/2Ashley Ally 2/2

Number of independent non-executive directors

2 2 3 2

Self-evaluation completed

All committees review their performance annually.

Committees

Activities during the year

Audit and risk committee (for the full report see page 67)

Remuneration committee (for the full report see page 68)

Social, ethics and transformation committee (for the full report see page 69)

Board investment committee

Responsibility – The committee hasan independent rolewith accountability tothe board andshareholders

– Oversee and makerecommendations tothe board for itsconsideration andfinal approval

– Risk management,internal controls, accounting systemsand information,accounting policies, internal audit,external audit, informationtechnology systems, protection of assetsand public reporting, and monitoring of compliance withlaws, rules, codes of conduct andstandards

– Assist the board inensuring that thecompanyimplements aneffective risk management policyand plan

– Assist the board inensuring that thecompany remuneratesdirectors andexecutives fairlyand responsibly; remuneration iscompetitive, accurate, complete and transparent

– Ensure effectiveretention, successionplanning and talentmanagement isin place

– Assist with therecruitment of theCEO and the CFO,making independentrecommendations tothe board for itsconsideration andfinal approval

– The committee does not assume thefunctions ofmanagement,which remain theresponsibility of theexecutive directors, officers and senior management

– The role of the committee is toassist the board withstrategic direction,monitoring andproviding oversightof social, ethical andtransformation matters related tothe company andreporting thereon,as required

– The committee hasan independent role,operating as adecision maker where applicableand as an overseer and a maker of recommendationsto the board for itsconsideration andfinal approval. The committee’s functions include thefollowing:

– Consider and, ifappropriate, approve new investments,capex, sale or scrapping of assets,acquisition/merger of businesses, and disposal ofexisting businesses

– Reviews progress withimplementationof key projects(capital investment> R75 million


Exco

Responsibilities Responsible for the day-to-day management of the company and implementing the strategy approved by the board

Members Markus Hannemann (Chairman)

Ufikile Khumalo

Patrick Malaza

Vimla Reddy

Bheka Khumalo

Dudu Ndlovu

Steve van Wyk

Ray Abrahams

Gerrit van Wyk

George Katergarakis

Company secretaryThe company secretary plays a significant role in facilitating good governance, supporting the executive chairman and the board by: – providing guidance on discharging responsibilities; and – ensuring the effective functioning of the board in accordance with the relevant laws.

The company secretary also acts as secretary for the sub-committees of the board.

Access to the advice and services of the company secretary and to company records, information, documents and property is unrestricted. In its annual evaluation, the board has considered and satisfied itself on the competency, qualifications and experience of the company secretary.The executive chairman, in consultation with the CEO and the company secretary, is responsible for setting the agenda of each board meeting. Board meetings are scheduled in advance in order to facilitate the making of decisions which management is required to implement. The board is timeously provided with all relevant information to enable efficient and well-informed decision making.

IT governanceIT is a standard item on the board and the audit and risk committee agendas and included as a formal responsibility in their respective charters. A formal IT strategy has been documented and is monitored by the Exco, which is aligned to Scaw’s vision and strategy.

Exco has delegated implementing strategy to an IT steering committee (ITSC) comprising representatives from business and IT, including the head of IT who reports into the executive head of Professional Services.

An IT risk register, comprising IT and operational risks, is in play. Risks are reported to the audit and risk committee and included in the register by the ITSC. The internal control framework comprises independent assurance to Exco, the board and the audit and risk committee by internal and

external audit that are formally documented and tracked by internal audit. Most recently, PwC performed an IT controls review on the ERP application as well as infrastructure systems. IT has remediated or applied control methods to all the findings and is in the process of formally closing the findings with internal audit.

All IT investments are approved by the board investment committee. Capital and operating expenditure including project monitoring is presented at the quarterly board and audit and risk committee meetings.

IT assets are comprehensively protected through day-to-day IT practices, such as being bar-coded before distribution to the business. Assets are also recorded in an information security management system.

Scaw’s IT department provides information processing services to all divisions and departments. Using a formal business impact analysis (BIA) of the major systems and business processes and an IT disaster recovery plan was developed and is maintained by performing two recovery tests a year.

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Ethical leadership

Ethical leadershipDuring the year Scaw embarked on several ethics-related initiatives. These initiatives included a review of our business integrity policy and the gifts policy, the creation of a formal conflicts of interests policy and a whistle blowing policy. An awareness programme relating to these policies has been implemented and training on the business integrity policy has commenced. Suppliers have been informed of the update to the business integrity policy as they are required to agree to be guided by the policy.

A fraud prevention committee was established during the year which is responsible for ensuring strategies are in place to prevent, detect and to respond to fraud and corruption and occurrences of corporate crime. The committee further provides a forum for consideration of all ethics-related issues within the group as well as raising the level of awareness of ethical issues within the group.

An annual declaration of interest form for employees was devised during the year and will be rolled out to all relevant employees in due course. Declaration forms will be assessed with the Exco having final review, where applicable.

Directors are required to declare their personal interests at each board and sub-committee meeting. In addition, they are

Earning and continuing to command trust is paramount to our reputation and the success of our business. By acting with integrity, we reflect positively on our new values of safety, accountability, care and respect, teamwork, continuous improvement, customer satisfaction and quality.

required to complete a declaration of interest form every six months. They are also required to recuse themselves from any discussion and decision on matters in which they have a personal interest. In addition, the board has delegated the function of evaluating the declaration of interests by directors to the social, ethics and transformation committee. This matter will now be a standing agenda item for the committee.

The social, ethics and transformation committee continues to regularly monitor the group’s ethical compliance including feedback from the whistle blower hotline and internal audit department. Our anonymous whistle blowing facility is available to employees, customers, suppliers and shareholders to report dishonesty, fraud and other inappropriate or unethical behaviour in the workplace in a safe, confidential and secure way. It is operated and managed by Tip-offs Anonymous. The whistle blower facility operates 24/7 through varied channels including a toll free telephone line, email, FreePost and free fax. Trained telephone operators answer in English, isiZulu, Afrikaans, isiXhosa and seSotho. Reports are “sanitised” and provided to internal audit who prioritises (with the approval of the executive chairman) and investigates said reports.

There were no ethics-related penalties, fines or criminal prosecutions during the year.

The information below constitutes the report of the audit and risk committee. The report is provided by the committee in respect of Scaw South Africa Proprietary Limited in compliance with section 94 of the Companies Act, 71 of 2008, as amended (the Act). The committee’s function is guided by a detailed charter that is informed by the Act and King III and approved by the board.


Audit and risk committee report

The information below constitutes the report of the audit and risk committee. The report is provided by the committee in respect of Scaw South Africa Proprietary Limited in compliance with section 94 of the Companies Act, 71 of 2008, as amended (the Act). The committee’s function is guided by a detailed charter that is informed by the Act and King III and approved by the board.

The committee is chaired by independent non-executive director, Nkosemntu Nika, and comprises a further independent non-executive director Vusi Twala and non-executive directors Ashley Ally and Ortal Sharp.

The committee meets three times a year and attendance is set out on page 64. Special meetings are convened as required. The external auditors and executive management are invited to attend every meeting.

DeclarationsThe committee is satisfied that it has met its responsibilities for the year under review and to the date of this report with respect to its terms of reference as set out in its charter. Further, the committee is satisfied that it has complied with its legal and regulatory responsibilities throughout the year. In terms of the Act, the committee has considered and satisfied itself of the appropriateness of the expertise and experience of Patrick Malaza, who was appointed CFO effective 4 August 2014.

Further, the committee has satisfied itself that Deloitte & Touche and Patrick Ndlovu, the external auditors and designated auditor respectively, are independent of Scaw. The auditor’s independence was not impaired by any consultancy, advisory or non-audit services undertaken by the auditor

ReportingThe committee is tasked with reviewing the interim and annual financial statements and integrated report of Scaw South Africa.

The audit and risk committee is of the view that in all material respects they comply with the relevant provisions of the Act and the International Financial Reporting Standards, and fairly present the group and company’s financial position at that date and the results of operations and cash flows for the period ended 31 March 2015.

The audit and risk committee recommended the annual financial statements for the year ended 31 March 2015 for approval to the board and has reviewed for completeness and accuracy the 2015 integrated report.

Nkosemntu Nika

The audit and risk committee has also reviewed an assessment by management of the going-concern premise of the group before recommending to the board that the group will be a going concern in the foreseeable future.

Nkosemntu Nika

Audit and risk committee chairman12 June 2015

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The fees for non-executive directors are set out in the table below.

Vusi Twala

Remuneration committee chairman12 June 2015

The remuneration committee assists the board in ensuring that group remuneration and recruitment is aligned with overall business strategy, with the aim of enabling us to attract and retain personnel who will create long-term value for all stakeholders.

Remuneration committee report

It ensures that executive remuneration is linked in parts to individual performance, the group’s performance, market conditions and benchmarks. The committee considers and makes recommendations to the board on remuneration packages and policies in this regard. It is therefore authorised by the board to seek any information required from any employee and may further obtain external legal and/or other independent professional advice if deemed necessary.

The committee met three times during the year under review and attendance is set out on page 64. Special meetings are convened as required. The executive chairman, CEO, CFO and executive head of human resources are invited to attend every meeting. Executive directors who attend committee meetings by invitation are barred from deliberations in respect of their own or each other’s remuneration.

The committee is chaired by independent non-executive director Vusi Twala and further comprises independent non-executive director Neo Mokhesi and non-executive directors Lucas Tseki and Ashley Ally.

Remuneration philosophyScaw’s remuneration philosophy follows international best practice.

Type of fee (per annum) FY15 fee per meeting

attendance R

Proposed FY16 fee per meeting

attendance R

Board

Board member 27 000 28 350

Audit and risk committee

Chairman 36 000 37 800

Member 16 000 16 800

Remuneration committee

Chairman 24 000 25 200

Member 13 000 13 650

Social, ethics and transformation committee

Chairman 24 000 25 200

Member 13 000 13 650

Investment committee

Chairman 24 000 25 200

Member 13 000 13 650

Vusi Twala

The social, ethics and transformation committee’s responsibility is to ensure that the company acts as a responsible corporate citizen and also establishes ethical guidelines within which staff should engage with stakeholders and interact with the environment.


Social, ethics and transformation committee report

Although management is tasked with overseeing the day-to-day operational sustainability of their respective areas of business and reporting thereon to the social, ethics and transformation committee, the board remains ultimately responsible for the objectives which it has delegated.

The committee is chaired by independent non-executive director Neo Mokhesi, and further comprises independent non-executive directors Nkosemntu Nika, Vusi Twala and Nokuzola Mpulo. Details of attendance are set out on page 64. Executive management including the executive chairman, CEO, CFO and the executive heads of human resources, legal, sales and marketing, public affairs and communications and SHE are invited to attend every meeting.

The purpose of the committee is to guide the board’s approach to the ethical conduct of business and to regularly monitor the group’s activities with regards to inter alia: – monitoring the social, labour, economic and environmental activities of the company;

– ensuring that the company remains a socially committed corporate citizen; and

– evaluating directors’ declarations of interests and making recommendations thereon (with effect from 1 April 2015).

The committee draws these matters to the attention of the board and reports on them to shareholders at the annual general meeting.

2015 review The committee monitored the company’s activities in social and economic development, labour employment and training, consumer relations, environment, health and public safety and ethics. In so doing it considered the impact assessment of the current CSI projects against group policies, strategy and budget. The key focus areas of CSI were education, environment, sports development and health in the communities where the company operates (see Our communities on page 54).

The social, ethics and transformation committee also considered labour, employment and transformation matters specifically: – the introduction and retention of more women in the workplace;

– improving skills development; and – improving industrial relations.

No human rights incidents were reported. Scaw does not tolerate any use of child labour within its own operations. The committee monitored the company’s ethics-related initiatives (see page 66 for further detail).

Neo Mokhesi

Social, ethics and transformation committee chairperson12 June 2015

Neo Mokhesi

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Appendix 1: King III application

Corporate governance principles

This table is a useful reference to each of the King III principles and how, in broad terms, they have been applied by Scaw.

King III reference King III principle Application of principle

1. Ethical leadership and corporate citizenship

1.1 The board should provide effective leadership based on an ethical foundation.

The board directs Scaw’s activities with integrity, by the tone it sets through its actions, decisions, policies and codes, the culture it instils and the example set by its directors, thereby demonstrating transparency, accountability, fairness, honesty and responsiveness to stakeholders.

1.2 The board should ensure that the company is and is seen to be a responsible corporate citizen.

The board ensures through its social, ethics and transformation committee that Scaw conducts its affairs in a manner that takes into account the realistic expectations of its stakeholders and is sensitive to inter alia, Scaw’s social, economic and environmental impacts, and ensures that it reports on its initiatives in this regard in its integrated report.

1.3 The board should ensure that the company’s ethics are managed effectively.

The board has endorsed Scaw’s business integrity policy, business philosophy, ethical values, codes of conduct and disciplinary policies developed by management, and monitors the application and effectiveness thereof through the social, ethics and transformation committee.

2. Board and directors

2.1 The board should act as the focal point for and custodian of corporate governance.

The board’s charter records the board’s responsibility for good corporate governance by Scaw. The board seeks to practise good corporate governance through its structures, actions and reporting and regularly monitors same.

2.2 The board should appreciate that strategy, risk, performance and sustainability are inseparable.

The board understands and executive management appreciates that Scaw’s strategy, risk, performance and sustainability are interrelated, and ensures that Scaw’s activities are designed, managed and reported on in an integrated manner.

2.3 The board should provide effective leadership based on an ethical foundation.

The board directs Scaw’s activities with integrity, through its decisions, policies and codes and the example set by its directors demonstrating transparency, accountability, fairness and honesty.

2.4 The board should ensure that the company is and is seen to be a responsible corporate citizen.

The board ensures through its social, ethics and transformation committee that Scaw conducts its affairs in a manner that takes into account the realistic expectations of its stakeholders and is sensitive to inter alia, Scaw’s social, economic and environmental impacts, and ensures that it reports on its initiatives in this regard in its integrated report.

2.5 The board should ensure that the company’s ethics are managed effectively.

The board has endorsed Scaw’s business integrity policy and business philosophy developed by management, and monitors the application and effectiveness thereof through the social, ethics and transformation committee.

2.6 The board should ensure that the company has an effective and independent audit committee.

The board has in place an audit and risk committee whose responsibilities are documented in a written charter, whose members are financially literate and constitute at least two independent non-executive directors, whose chairman is not the chairman of the board and whose activities, observations and recommendations are reported to the board regularly.

2.7 The board should be responsible for the governance of risk.

The board’s charter records that it is responsible for risk governance and the standard agenda items for its meetings is the report of the chairman of the audit and risk committee which includes risk. Further, risk features as a standard agenda item in the audit and risk committee meetings.

2.8 The board should be responsible for information technology (IT) governance.

The board’s charter records that it is responsible for information technology governance and one of the standard agenda items for its meetings is the report of the chairman of the audit and risk committee which includes IT governance. Further, IT governance features as a standard agenda item in the audit and risk committee meetings.

2.9 The board should ensure that the company complies with applicable laws and considers adherence to non-binding rules, codes and standards.

A robust compliance policy has been approved by the board to complement the compliance initiatives well under way in Scaw, together with a Compliance Framework.

2.10 The board should ensure that there is an effective risk-based internal audit.

The board, through its audit and risk committee, promotes the standing and value of Scaw’s internal audit department, assesses the adequacy of its resources and the effectiveness of its work and engages with management to ensure audit plans are risk based.



2.11 The board should appreciate that stakeholders’ perceptions affect the company’s reputation.

The board is sensitive to the fact that Scaw’s reputation is most important. Management endeavours to engage meaningfully and frequently with Scaw’s stakeholders, through a variety of forums and channels, to ensure that negative perceptions are identified and appropriate remedial action is taken.

2.12 The board should ensure the integrity of the company’s integrated report.

Following a recommendation from the Scaw Exco, the board through its audit and risk committee, supported by the social, ethics and transformation committee reviews the fairness and adequacy of the disclosures made in Scaw’s integrated report, and formally approves the report.

2.13 The board should report on the effectiveness of the company’s system of internal controls.

Based on assurance provided by the internal audit department to the audit and risk committee and reported to the board, the board reports in the integrated report on the effectiveness of Scaw’s system of internal control.

2.14 The board and its directors should act in the best interest of the company.

The directors are aware of their fiduciary duties to act in the best interest of the company and to avoid conflicts of interest, and disclose bi-annually to the board, their personal financial interests.

2.15 The board should consider business rescue proceedings or other turnaround mechanisms as soon as the company is financially distressed as defined in the Companies Act (71 of 2008, as amended).

To the extent that this may be necessary, the board will consider such proceedings and mechanisms if and when appropriate.

2.16 The board should elect a chairman of the board who is an independent non-executive director. The chief executive officer of the company should not also fulfil the role of chairman of the board.

The board has an executive chairman. The non-independence of his role is adequately addressed by the composition of the board and particularly by the appointment of a lead independent non-executive director, who is also the chairman of Scaw’s audit and risk committee. The CEO is not the chairman of the board.

2.17 The board should appoint the chief executive officer and establish a framework for the delegation of authority.

The board has appointed the CEO whose appointment has been vetted and recommended by the Scaw remuneration committee. Further, there is an approved delegation matrix in place.

2.18 The board should comprise a balance of power, with a majority of non-executive directors. The majority of non-executive directors should be independent.

The majority of the board is non-executive, including three (3) non-executive directors who are independent.

2.19 Directors should be appointed through a formal process.

New directors are appointed in terms of Scaw’s MOI and in line with the applicable legislation.

2.20 The induction of and ongoing training and development of directors should be conducted through a formal process.

New directors undergo an induction programme including site visits. Ongoing director education and development takes place through presentations by management and attendance at external educational events.

2.21 The board should be assisted by a competent, suitably qualified and experienced company secretary.

The board is assisted by a company secretary and according to the most recent assessment the board is satisfied that she is suitably competent, qualified and experienced for the role.

2.22 The evaluation of the board, its committees and the individual directors should be performed every year.

The evaluation of the board, individual directors including board committees takes place annually in line with its charter.

2.23 The board should delegate certain functions to well-structured committees but without abdicating its own responsibilities.

The board has established the social, ethics and transformation committee, the audit and risk committee, the remuneration committee and the board investment committee as committees of the board in terms of written charters and reporting obligations to the board.

2.24 A governance framework should be agreed between the group and its subsidiary boards

There are informal practices in place regarding Scaw’s interaction with its subsidiary boards. Further improvements are required to implement a more formal process.

2.25 Companies should remunerate directors and executives fairly and responsibly.

The board believes that Scaw’s remuneration policy and strategy are designed to ensure that executives are appropriately remunerated, with an acceptable balance between guaranteed and performance-based elements, as well as between short and long-term incentives, and ensures that reward levels benchmark fairly against sector norms.

2.26 Companies should disclose the remuneration of each individual director and certain senior executives.

The company discloses in its annual financial statements, the remuneration of directors and prescribed officers in accordance with the requirements of the Companies Act (71 of 2008, as amended).

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Appendix 1: King III application continued


3. Audit committees

3.1 The board should ensure that the company has an effective and independent audit committee.

Scaw’s audit and risk committee operates in terms of a written charter and performs the duties prescribed. This committee meets at least three times annually, considers detailed reports from management and reports and makes recommendations in writing to the board.

3.2 Audit committee members should be suitably skilled and experienced independent non-executive directors.

Scaw’s audit and risk committee comprises financially literate, professionally qualified and commercially astute members and is constituted by a majority of independent non-executive directors.

3.3 The audit committee should be chaired by an independent non-executive director.

The audit and risk committee is chaired by an independent non-executive director.

3.4 The audit committee should oversee integrated reporting.

The audit and risk committee does oversee Scaw’s integrated reporting process, and does review the content of the integrated report, recommending same for approval by the board.

3.5 The audit committee should ensure that a combined assurance model is applied to provide a coordinated approach to all assurance activities

The audit and risk committee ensures that it obtains regular and comprehensive assurance from the external auditor, the internal audit department and/or management in relation to matters such as financial reporting, legal compliance, adequacy of internal controls and veracity of risk management processes.

3.6 The audit committee should satisfy itself of the expertise, resources and experience of the company’s finance function.

The audit and risk committee is satisfied as to the expertise, resources and experience of the company’s finance function and the CFO.

3.7 The audit committee should be responsible for overseeing of internal audit.

The audit and risk committee’s mandate imposes an oversight role in regard to internal audit, and the committee monitors internal audit resources, activities, findings and coverage plans via the comprehensive reports submitted by internal audit management to each committee meeting.

3.8 The audit committee should be an integral component of the risk management process.

The executive head of professional service has line responsibility for risk and is a permanent invitee to audit and risk committee meetings. Risk is a standing agenda item for the committee meetings.

3.9 The audit committee is responsible for recommending the appointment of the external auditor and overseeing the external audit process.

In terms of the audit and risk committee’s charter its mode of operation, the audit and risk committee is responsible for recommending the appointment of the external auditor and overseeing the external audit process, including receiving reports on the external auditor’s findings during the annual audit.

3.10 The audit committee should report to the board and shareholders on how it has discharged its duties.

The audit and risk committee reports to each board meeting. The chairman of the audit and risk committee is a permanent invitee to annual general meetings and reports to shareholders by way of the audit committee report which forms part of the group’s annual financial statements, on its activities, findings and recommendations.

4. The governance of risk

4.1 The board should be responsible for the governance of risk.

The board’s charter reflects its responsibility for risk governance and it discharges this responsibility by receiving reports from the chairman of the audit and risk committee at its quarterly meetings and by making recommendations to management on its risk management programme.

4.2 The board should determine the levels of risk tolerance.

The approved risk management plan, the risk appetite framework and risk tolerance levels are deliverables for FY16.

4.3 The risk committee or audit committee should assist the board in carrying out its risk responsibilities.

The charter of the audit and risk committee requires said committee to assist the board in carrying out its risk governance responsibilities and this committee provides this assistance by monitoring Scaw’s risk management activities.

4.4 The board should delegate to management the responsibility to design, implement and monitor the risk management plan.

The executive head of professional services is responsible for designing, implementing and monitoring the risk management plan. The board has entrusted the audit and risk committee to monitor the activities and processes re risk.



4.5 The board should ensure that risk assessments are performed on a continual basis.

The board receives assurance from the audit and risk committee that risk assessments are carried out continually and that Scaw’s corporate risk registers are updated at least annually by management.

4.6 The board should ensure that frameworks and methodologies are implemented to increase the probability of anticipating unpredictable risks.

The ERM framework has been implemented and the board receives assurance from the audit and risk committee that the process of continual risk assessment by management takes into account emerging and unusual risks not typical of normal operating and environmental conditions.

4.7 The board should ensure that management considers and implements appropriate risk responses.

The board receives assurance from the audit and risk committee and the executive head of professional services that management appropriately identifies, manages, transfers and mitigates risk facing Scaw.

4.8 The board should ensure continual risk monitoring by management.

The board receives assurance from the audit and risk committee that it and management continually monitor risks facing Scaw through Scaw Exco, Opco and other management committees.

4.9 The board should receive assurance regarding the effectiveness of the risk management process.

As the risk management process in Scaw in still being embedded, an audit of the effectiveness of the risk management process is scheduled for FY18.

4.10 The board should ensure that there are processes in place enabling complete, timely, relevant, accurate and accessible risk disclosure to stakeholders.

The board ensures that Scaw’s integrated report appropriately discloses risk-related information of importance to stakeholders.

5. The governance of information technology

5.1 The board should be responsible for information technology (IT) governance.

The written charter of the board records its responsibility for IT governance, and it discharges this duty by monitoring reports on IT governance-related matters provided by the audit and risk committee.

5.2 IT should be aligned with the performance and sustainability objectives of the company.

Scaw’s IT strategy is designed to support Scaw’s business strategy and with the aim of ensuring that Scaw will operate effectively and remain sustainable.

5.3 The board should delegate to management the responsibility for the implementation of an IT governance framework.

The Scaw Exco takes responsibility for IT governance. IT governance forms an integral part of the IT strategy. IT is a standard agenda item at the monthly Scaw Exco meetings. An IT steering committee (ITSC) comprising representatives from business and IT has been established.

5.4 The board should monitor and evaluate significant IT investments and expenditure

All IT investments are approved by the board investment committee, as applicable. Expenditure is controlled by budgets. Strategic projects have been included within the IT strategy document. Capital and operating expenditure including project monitoring is presented at the quarterly audit and risk committee meetings.

5.5 IT should form an integral part of the company’s risk management

The risks associated with Scaw’s IT infrastructure, applications and networks are identified, managed and mitigated as a key element of Scaw’s risk management processes that are overseen by the Scaw Exco, the audit and risk committee and by the executive head of professional services.

5.6 The board should ensure that information assets are managed effectively.

IT assets are extensively protected through normal day-to-day IT practices. IT assets are appropriately bar-coded before distribution to the business. Assets are recorded within an information security management system.

5.7 A risk committee and audit committee should assist the board in carrying out its IT responsibilities.

The audit and risk committee assists the board in carrying out its IT governance responsibilities, as required by its written charter.

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Appendix 1: King III application continued


6. Compliance with laws, rules, codes and standards

6.1 The board should ensure that the company complies with applicable laws and considers adherence to non-binding rules, codes and standards.

The board monitors compliance/adherence through the audit and risk committee.

6.2 The board and each individual director should have a working understanding of the effect of the applicable laws, rules, codes and standards on the company and its business.

A robust compliance policy and compliance framework have been adopted by the board which will be rolled out. Laws applicable to Scaw have been identified and provisionally risk rated. Further, a gap analysis of the top laws applicable to Scaw has been conducted.

6.3 Compliance risk should form an integral part of the company’s risk management process.

Compliance risk is a key area of focus of Scaw’s risk management programme and departmental heads will be actively considering regulatory compliance when compiling and annually reviewing the risk registers for their business units.

6.4 The board should delegate to management the implementation of an effective compliance framework and processes.

The executive head of legal and company secretary is responsible for the design and implementation of an effective compliance framework. Key elements will include the establishment of project teams to ensure compliance with applicable legislation.

7. Internal audit

7.1 The board should ensure that there is an effective risk-based internal audit.

Scaw has established an internal audit function that the board considers to be effective and substantially risk based.

7.2 Internal audit should follow a risk-based approach to its plan.

The internal audit department’s coverage plan is informed by Scaw’s risk registers, the audit plan of the external auditor and the requirements of top management, and is endorsed annually by the audit and risk committee as being appropriately risk based.

7.3 Internal audit should provide a written assessment of the effectiveness of the company’s system of internal controls and risk management.

No opinion is provided to the board by the internal audit department on the effectiveness of the company’s system of internal controls. Given the limited number of audits that are performed by Scaw’s outsourced internal audit service provider, they are not in a position to express an opinion on the company’s system of internal controls. To be able to express an opinion on the control environment would require substantially more internal audits to be performed. This is not a financially viable option at this time.

7.4 The audit committee should be responsible for overseeing internal audit.

The internal audit department reports on its work, findings and recommendations at each meeting of the audit and risk committee, presents its coverage plan annually to the audit and risk committee for approval, and the head of internal audit reports functionally to the chairman of the audit and risk committee.

7.5 Internal audit should be strategically positioned to achieve its objectives.

The stature of the internal audit department within Scaw, the appropriateness of its resources, its reporting line to the CEO and its regular reporting to the audit and risk committee indicate that the department is well positioned to fulfil its mandate. However, the resourcing of the department remains a priority.

8. Governing stakeholder relationships

8.1 The board should appreciate that the stakeholders’ perceptions affect a company’s reputation.

The board recognises that perceptions of its key stakeholders can impact Scaw’s reputation and encourages management to engage meaningfully with such stakeholders with a view to upholding Scaw’s reputation.

8.2 The board should delegate to management to proactively deal with stakeholder relationships.

The board has tasked management with the responsibility of engaging with Scaw’s key stakeholders, being customers, employees, as well as suppliers, regulators and community organisations, of devising suitable forums and communications channels for such interaction and of responding appropriately following such engagements, in the interests of Scaw.

8.3 The board should strive to achieve the appropriate balance between its various stakeholder groupings, in the best interest of the company.

The board aims to ensure that the interests of Scaw’s different stakeholders are suitably considered and appropriately balanced.



8.4 Companies should ensure the equitable treatment of shareholders.

The company does have a majority shareholder, and endeavours to ensure that all shareholders are treated in a fair manner, through the dissemination of information, its transparent financial reporting and its encouragement of shareholder involvement at meetings.

8.5 Transparent and effective communication with stakeholders is essential for building and maintaining their trust and confidence.

The board and management work to ensure that communication with Scaw’s stakeholders is frequent, substantive, transparent and credible, recognising that such communication leads to trust and mutual respect and helps to ensure the sustainability of Scaw.

8.6 The board should ensure that disputes are resolved as effectively, efficiently and expeditiously as possible.

The board encourages management to resolve disputes with customers, suppliers, employees and regulators in an effective and reasonable manner and in appropriate forums including alternative dispute resolution mechanisms, having due regard for contractual and legislative obligations and the best interest of Scaw.

9. Integrated reporting and disclosure

9.1 The board should ensure the integrity of the company’s integrated report.

The board ensures the integrity of Scaw’s integrated report by requiring management to draft it in a fair, balanced and transparent manner, through requiring an initial review thereof by the Scaw Exco, the audit and risk committee, supported by the social, ethics and transformation committee.

9.2 Sustainability reporting and disclosure should be integrated with the company’s financial reporting.

Scaw adheres to GRI 3 guidelines in the compilation of the integrated report.

9.3 Sustainability reporting and disclosure should be independently assured.

Scaw is committed to ensuring sustainability reporting is independently assured over a period of time.

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Appendix 2: GRI index

Indicator Description Page

1. Strategy and analysis

1.1 Statement from the most senior decision-maker of the organisation. 26 – 29

1.2 Description of key impacts, risks, and opportunities. 21 – 23

2. Organisational profile

2.1 Name of the organisation. Definitions

2.2 Primary brands, products, and/or services. 10 – 11

2.3 Operational structure of the organisation, including main divisions, operating companies, subsidiaries and joint ventures.

2

2.4 Location of organisation’s headquarters. IBC

2.5 Number of countries where the organisation operates, and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report.

14 – 15

2.6 Nature of ownership and legal form. 1

2.7 Markets served (including geographic breakdown, sectors served and types of customers/beneficiaries). 14 – 17

2.8 Scale of the reporting organisation. 10 – 11

2.9 Significant changes during the reporting period regarding size, structure, or ownership. 1

2.10 Awards received in the reporting period. No awards were received

3. Report parameters

3.1 Reporting period (eg fiscal/calendar year) for information provided. 1

3.2 Date of most recent previous report (if any). 1

3.3 Reporting cycle (annual, bi-annual, etc) 1

3.4 Contact point for questions regarding the report or its contents. IBC

3.5 Process for defining report content. 1

3.6 Boundary of the report (eg countries, divisions, subsidiaries, leased facilities, joint ventures, suppliers). 1

3.7 State any specific limitations on the scope or boundary of the report. 1

3.8 Basis for reporting on joint ventures, subsidiaries, leased facilities, outsourced operations and other entities that can significantly affect comparability from period to period and/or between organisations.

AFS

3.9 Data measurement techniques and the bases of calculations, including assumptions and techniques underlying estimations applied to the compilation of the indicators and other information in the report. Explain any decisions that do not apply, or substantially diverge from, the GRI Indicator Protocols.

Not reported

3.10 Explanation of the effect of any restatements of information provided in earlier reports, and the reasons for such restatement (eg, mergers/acquisitions, change of base years/periods, nature of business, measurement methods).

1

3.11 Significant changes from previous reporting periods in the scope, boundary or measurement methods applied in the report.

Not applicable

3.12 Table identifying the location of the standard disclosures in the report. GRI Index

3.13 Policy and current practice with regard to seeking external assurance for the report. 1

4. Governance, commitments and engagements

4.1 Governance structure of the organisation, including committees under the highest governance body responsible for specific tasks, such as setting strategy or organisational oversight.

61

4.2 Indicate whether the chair of the highest governance body is also an executive officer. 61

4.3 For organisations that have a unitary board structure, state the number and gender of members of the highest governance body that are independent and/or non-executive members.

61

4.4 Mechanisms for shareholders and employees to provide recommendations or direction to the highest governance body.

27, 61 – 62

4.5 Linkage between compensation for members of the highest governance body, senior managers, and executives and the organisation’s performance (including social and environmental performance).

68

4.6 Processes in place for the highest governance body to ensure conflicts of interest are avoided. 66

4.7 Process for determining the qualifications and expertise of the members of the highest governance body for guiding the organisation’s strategy on economic, environmental, and social topics.

58, 64

4.8 Internally developed statements of mission or values, codes of conduct, and principles relevant to economic, environmental, and social performance and the status of their implementation.

6, 66

4.9 Procedures of the highest governance body for overseeing the organisation’s identification and management of economic, environmental and social performance, including relevant risks and opportunities, and adherence or compliance with internationally agreed standards, codes of conduct and principles.

64, 69

4.10 Processes for evaluating the highest governance body’s own performance, particularly with respect to economic, environmental, and social performance.

63 – 64

4.11 Explanation of whether and how the precautionary approach or principle is addressed by the organisation. 20

4.12 Externally developed economic, environmental, and social charters, principles, or other initiatives to which the organisation subscribes or endorses.

69

4.13 Memberships in associations (such as industry associations) and/or national/international advocacy organisations. 38

4.14 List of stakeholder groups engaged by the organisation. 37

4.15 Basis for identification and selection of stakeholders with whom to engage. 37

4.16 Approaches to stakeholder engagement, including frequency of engagement by type and by stakeholder group. 37

4.17 Key topics and concerns that have been raised through stakeholder engagement, and how the organisation has responded to those key topics and concerns, including through its reporting.

37



Disclosures on management approach (DMAs)

DMA EC Economic performanceMarket presenceIndirect economic impacts

33

DMA EN Materials EnergyWaterBiodiversityEmissions, effluent and wasteProducts and servicesComplianceTransportOverall

27, 45, 49 – 50

DMA LA EmploymentLabour/management relationOccupational health and safetyTraining and educationDiversity and equal opportunityEqual remuneration for women and men

45 – 46

DMA HR Investment and procurement practicesNon-discriminationFreedom of association and collective bargainingChild labourPrevention of forced and compulsory labourSecurity practicesIndigenous rightsAssessmentRemediation

51 – 52

DMA SO Local communitiesCorruptionPublic policyAnti-competitive behaviourCompliance

53 – 54

DMA PR Customer health and safetyProduct and service labellingMarketing communicationsCustomer privacyCompliance

Not reported

Economic

EC1 Direct economic value generated and distributed, including revenues, operating costs, employee compensation, donations and other community investments, retained earnings and payments to capital providers and governments.

33

EC2 Financial implications and other risks and opportunities for the organisation’s activities due to climate change. Not reported

EC3 Coverage of the organisation’s defined benefit plan obligations. Not reported

EC4 Significant financial assistance received from government. No financial assistance is received from government

Market presence

EC5 Range of ratios of standard entry level wage compared to local minimum wage at significant locations of operation. Not reported

EC6 Policy, practices and proportion of spending on locally based suppliers at significant locations of operation. 51

EC7 Procedures for local hiring and proportion of senior management hired from the local community at significant locations of operation.

39, 51

Indirect economic impacts

EC8 Development and impact of infrastructure investments and services provided primarily for public benefit through commercial, in-kind or pro bono engagement.

53 – 54

EC9 Understanding and describing significant indirect economic impacts, including the extent of impacts. 5, 54

ENVIRONMENTAL

Materials

EN1 Materials used by weight or volume. Not reported

EN2 Percentage of materials used that are recycled input materials. Not reported

Energy

EN3 Direct energy consumption by primary energy source. Not reported

EN4 Indirect energy consumption by primary source. Not reported

EN5 Energy saved due to conservation and efficiency improvements. 49

EN6 Initiatives to provide energy-efficient or renewable energy-based products and services and reductions in energy requirements as a result of these initiatives.

Not reported

EN7 Initiatives to reduce indirect energy consumption and reductions achieved. 49 – 50

Water

EN8 Total water withdrawal by source. Not reported

EN9 Water sources significantly affected by withdrawal of water. Not reported

EN10 Percentage and total volume of water recycled and reused. Not reported

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Biodiversity

EN11 Location and size of land owned, leased, managed in or adjacent to protected areas and areas of high biodiversity value outside protected areas.

Not reported

EN12 Description of significant impacts of activities, products, and services on biodiversity in protected areas and areas of high biodiversity value outside protected areas.

Not reported

EN13 Habitats protected or restored. Not reported

EN14 Strategies, current actions and future plans for managing impacts on biodiversity. Not reported

EN15 Number of IUCN Red List species and national conservation list species with habitats in areas affected by operations, by level of extinction risk.

Not reported

Emission, effluents and waste

EN16 Total direct and indirect greenhouse gas emissions by weight. Not reported

EN17 Other relevant indirect greenhouse gas emissions by weight. Not reported

EN18 Initiatives to reduce greenhouse gas emissions and reductions achieved. 49

EN19 Emissions of ozone-depleting substances by weight. Not reported

EN20 NO, SO, and other significant air emissions by type and weight. Not reported

EN21 Total water discharge by quality and destination. Not reported

EN22 Total weight of waste by type and disposal method. Not reported

EN23 Total number and volume of significant spills. Not reported

EN24 Weight of transported, imported, exported, or treated waste deemed hazardous under the terms of the Basel Convention Annex I, II, III, and VIII, and percentage of transported waste shipped internationally.

Not applicable

EN25 Identity, size, protected status, and biodiversity value of water bodies and related habitats significantly affected by the reporting organisation’s discharges of water and run-off.

Not reported

Product and services

EN26 Initiatives to mitigate environmental impacts of products and services, and extent of impact mitigation. 49

EN27 Percentage of products sold and their packaging materials that are reclaimed by category. Not reported

Compliance

EN28 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations.

Not reported

Transport

EN29 Significant environmental impacts of transporting products and other goods and materials used for the organisation’s operations, and transporting members of the workforce.

Not reported

Overall

EN30 Total environmental protection expenditures and investments by type. Not reported

SOCIAL

Employment

LA1 Total workforce by employment type, employment contract and region. 39, 52

LA2 Total number and rate of employee turnover by age group, gender and region. Not reported

LA3 Benefits provided to full-time employees that are not provided to temporary or part-time employees, by major operations.

Not reported

LA15 Return to work and retention rates after parental leave, by gender. Not reported

Labour/management relations

LA4 Percentage of employees covered by collective bargaining agreements. 39

LA5 Minimum notice period(s) regarding operational changes, including whether it is specified in collective agreements. Not reported

Occupational health and safety

LA6 Percentage of total workforce represented in formal joint management/worker health and safety committees that help monitor and advise on occupational health and safety programmes.

39

LA7 Rates of injury, occupational diseases, lost days and absenteeism, and number of work-related fatalities by region and by gender.

44

LA8 Education, training, counselling, prevention and risk-control programmes in place to assist workforce members, their families, or community members regarding serious diseases.

47 – 49

LA9 Health and safety topics covered in formal agreements with trade unions. Not reported

Training and education

LA10 Average hours of training per year per employee by employee category. Not reported

LA11 Programmes for skills management and lifelong learning that support the continued employability of employees and assist them in managing career endings.

39 – 42

LA12 Percentage of employees receiving regular performance and career development reviews. Not reported



Diversity and equal opportunity

LA13 Composition of governance bodies and breakdown of employees per category according to gender, age group, minority group membership and other indicators of diversity.

52

Equal remuneration for women and men

LA14 Ratio of basic salary of men to women by employee category. Not reported

HR1 Percentage and total number of significant investment agreements that include human rights clauses or that have undergone human rights screening.

Not applicable

HR2 Percentage of significant suppliers and contractors that have undergone screening on human rights and actions taken.

Not applicable

HR3 Total hours of employee training on policies and procedures concerning aspects of human rights that are relevant to operations, including the percentage of employees trained.

Not applicable

Non-discrimination

HR4 Total number of incidents of discrimination and actions taken. 52

Freedom of association and collective bargaining

HR5 Operations identified in which the right to exercise freedom of association and collective bargaining may be at significant risk, and actions taken to support these rights.

39

Child labour

HR6 Operations identified as having significant risk for incidents of child labour, and measures taken to contribute to the elimination of child labour.

Not applicable

Prevention of forced and compulsory labour

HR7 Operations identified as having significant risk for incidents of forced or compulsory labour, and measures to contribute to the elimination of forced or compulsory labour.

Not applicable

Security practices

HR8 Percentage of security personnel trained in the organisation’s policies or procedures concerning aspects of human rights that are relevant to operations.

Not applicable

Indigenous rights

HR9 Total number of incidents of violations involving rights of indigenous people and actions taken. Not applicable

Assessment

HR10 Percentage and total number of operations that have been subject to human rights reviews and/or impact assessments.

Not applicable

Remediation

HR11 Number of grievances related to human rights filed, addressed and resolved through formal grievance mechanisms. Not reported

Local communities

SO1 Percentage of operations with implemented local community engagement, impact assessments, and development programmes.

54

SO9 Operations with significant potential or actual negative impacts on local communities. Not reported

SO10 Prevention and mitigation measures implemented in operations with significant potential or actual negative impact on local communities.

54

Corruption

SO2 Percentage and total number of business units analysed for risks related to corruption. Not reported

SO3 Percentage of employees trained in organisation’s anti-corruption policies and procedures. Not reported

SO4 Actions taken in response to incidents of corruption. 66

Public policy

SO5 Public policy positions and participation in public policy development and lobbying. Not reported

SO6 Total value of financial and in-kind contributions to political parties, politicians and related institutions by country. Not reported

Anti-competitive behaviour

SO7 Total number of legal actions for anti-competitive behaviour, anti-trust and monopoly practices and their outcomes. 66

Compliance

SO8 Monetary value of significant fines and total number of non-monetary sanctions for non-monetary sanctions for non-compliance with laws and regulations.

66

Customer health and safety

PR1 Life cycle stages in which health and safety impacts of products and services are assessed for improvement and percentage of significant products and services categories subject to such procedures.

Not reported

PR2 Total number of incidents of non-compliance with regulations and voluntary codes concerning health and safety impacts of products and services during their life cycle, by type of outcomes.

Not reported

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Product and service labelling

PR3 Type of product and service information required by procedures, and percentage of significant products and services subject to such information requirements.

Not reported

PR4 Total number of incidents of non-compliance with regulations and voluntary codes concerning product and service information and labelling, by type of outcomes.

Not reported

PR5 Practices related to customer satisfaction, including results of surveys measuring customer satisfaction. 6 – 7

Marketing communications

PR6 Programmes for adherence to laws, standards, and voluntary codes related to marketing communications, including advertising, promotion and sponsorship.

Not reported

PR7 Total number of incidents of non-compliance with regulations and voluntary codes concerning marketing communications, including advertising, promotion and sponsorship by type of outcomes.

Not reported

Customers’ privacy

PR8 Total number of substantiated complaints regarding breaches of customer privacy and losses of customer data. Not reported

Compliances

PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision of products and services.

66


Integrated annual report for the year ended 31 March...

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