Jacques Marnewicke

1. African Peer Review Mechanism: Parliamentary Ad Hoc Committee on Corporate GovernanceCape Town 5 December 2005 Jacques Marnewicke

2. Who is BUSA? • Established by the merger of Black Business Council & Business South Africa in 2003 • BUSA is: • the voice of organised business; • at both national and international levels; and • will proactively by means of effective co-ordination, dynamically address different business views.

3. The Vision of BUSA BUSA is: • a unified and fully representative organisation; • that contributes to a vibrant, transforming and growing economy in South Africa.

4. The Mission of BUSA BUSA aims to ensure that: • organised business plays a constructive role; • within the context of the country’s economic growth, development and transformation goals; • in achieving an environment in which businesses of all sizes and in all sectors; • can thrive, expand and be competitive; • both nationally and internationally.

5. CHAMSA Business Unity South Africa CORPORATE ASSOCIATIONS PROFESSIONAL ASSOCIATIONS UNISECTORALS MEMBERSHIP CATEGORIES OF THE SAME STANDING

6. Membership Chambers of Commerce and Industry (CHAMSA) AHI • Foundation for African Business and Consumer Services (FABCOS) • National African Federated Chambers of Commerce (NAFCOC) • South African Chamber of Business (SACOB) Corporate Associations • Black Business Executive Circle (BBEC) • Congress of Business and Economics (CBE) • National Black Business Caucus (NBBC) • South Africa Foundation

7. Membership Professional Associations • Association for the Advancement of Black Accountants of South Africa (ABASA) • Association of Black Securities and Investment Professionals (ABSIP) • Black Lawyers Association (BLA) • Black Management Forum (BMF) • South African Black Technical and Allied Careers Organization (SABTACO) • South African Institute of Black Property Practitioners (SAIBPP)

8. Membership: Unisectorals • Agri SA • African Minerals and Energy Forum (AMEF) • Automotive Industry • Banking Association • Black Information Technology Forum (BITF) • Master Builders of South Africa (MBSA) • Chamber of Mines of South Africa(COM) • Chemical and Allied Industries’ Association (CAIA) • Insurance Industry Employer Association (IIEA) • Life Offices Association (LOA) • Retailers’ Association • Road Freight Employers Association (RFEA) • South African Communications Forum (SACF) • South African Federation of Civil Engineering Contractors (SAFCEC) • South African Insurance Association (SAIA) • South African Petroleum Industry Association (SAPIA) • Steel and Engineering Industries Federation of South Africa (SEIFSA) • Casino Association of South Africa (CASA)

9. Corporate Governance: General • “The system by which companies are directed and controlled” – King 1994; • The structures associated with management, decision-making and control; • It relates to the governing of an organisation at the top; • Key elements: • Supervising and monitoring management performance; and • Ensuring accountability to shareholders and other stakeholders

10. Corporate Governance: General • King reports: • King I in 1994; • King II effective from financial years 1 march 2002; • JSE Securities Exchange listing requirement • Sarbanes-Oxley Act: • United States of America; • More stringent than King; • Legislation

11. Corporate Governance: General • High profile corporate scandals: • Enron, Worldcom, Leisurenet & others • Ethical failures, not governance failures • Lack of integrity at highest level • Countermeasures: • Corporate governance measures & legislation will not prevent ethical failure; • “Legislation, regulation, listing rules or ethical norms will not restrain individuals who are intent on fraud” – Manager’s guide to S-O Act; • Risk of over-regulation; • An Ethical Framework for Financial Services – UK FSA October 2002 Discussion Paper 18 • Total cost of compliance commensurate with benefits?

12. Codes of Good Business Ethics • The promotion of good business ethics • Institute of Directors - IOD • Ethics SA • Combating white collar crime: • NPA & Scorpions • Specialised Commercial Crime Project - BAC and NPA • BUSA / BAC Alliance • National Anti-Corruption Forum • Business Actions: • FSB : FAIS debarment • LOA S-reference • SAICA, Law Society, etc • The role of the regulators – capacity and enforcement

13. Codes of Good Business Ethics • Assessment of integrity of corporate sector • BESA Survey 2002: Internal survey of organisation • Ask Africa Trust Barometer 2004: External survey of customers • Assessment of corruption in corporate sector • KPMG 2005 Africa Fraud and Misconduct Survey • PWC Global Economic Crime Survey 2005

14. Business Ethics SA Survey 2002 • 53 JSE listed companies - over 800 000 employees • All sectors, except media participated • 421 telephonic interviews • Measured technical ethical compliance against effective ethical compliance.

15. Business Ethics SA Survey 2002 • General findings: • Corporate ethics management in RSA is healthier than expected; • A relatively stronger emphasis on ethical values - as opposed to technical compliance - in corporate governance issues; • Business must catch up on technical and effective compliance; and • Must improve the ethical culture in organisations to remain attractive to investment of mobile and risk-sensitive capital.

16. Business Ethics SA Survey 2002 Findings • Negative: • Internal communication by top management; • Maintenance of theft-free environment; • Adequate ethics education & training; • Credibility of corporate values; • 25% of management & 33% of staff not aware of code of ethics; • Hotlines in less than 50% of companies;

17. Business Ethics SA Survey 2002 Findings • Positive: • Pressure to act unethically low; • 96% of respondents had written disciplinary procedures; • High commitment to BEE; • High level of reporting on: • Good governance - 94% • Social responsibility - 92% • BEE & transformation - 85% • Discrimination against HIV positive individuals low; • Sexual harassment incidence very low.

18. KPMG Survey 2005 • 237 Companies surveyed by questionairre; • 64% considered fraud a major problem; • 68% expected an increase in fraud; • Reasons for fraud: • 67% listed economic pressure; • 58% listed a decline in society’s values; • More than 50% listed ineffeciences in the justice system. • 76% experienced fraud by employees; • 32% experienced fraud by management; • 81% had written ethics policy; • 88% communicated their ethics policy; • BUT 65% had no ethics officers or committees in place.

19. PWC Survey 2005 • 100 companies surveyed, 60% were listed on the JSE; • 83% were subjected to economic crime; • 26% expected economic crime to increase; • 54% experienced internal frauds.

20. Fair Treatment of Stakeholders • Shareholder protection • Companies Act • JSE rules & listing requirements • Recognition of shareholder rights by corporate governance framework • Legislation, voluntary codes • Access to information - PROATIA • Representation and interaction

21. Fair Treatment of Stakeholders • JSE Socially Responsible Investment (SRI) Index: • Launched in May 2004; • Second review 9 October 2005 to 15 December 2005; • Measures triple bottom line. • All companies on the FTSE/JSE Index may participate; • Participation is voluntary. • Three Pillars of the triple bottom line: • Environmental sustainability: • Impact on the environment; • Economic sustainability: • Long-term growth as opposed to short-term performance • Social sustainability: • Strategies to promote social upliftment, development & poverty reduction • JSE SRI Index also addresses corporate governance • Dow Jones SRI

22. Accountability of corporations, directors & officers Reporting requirements (financial & non-financial) • Accounting standards • IFRS - International Financial Reporting Standards • Auditing standards • International Auditing and Assurance Standards Board (IAASB) of the International Federation of Accountants (IFAC) • External : International Standards for Auditing (ISA’s) & International Auditing Practice Statements (IAPS’s) – previously South African Audit Standards (SAAS) • Internal : Institute for Internal Auditors (IIA Inc) • Auditing & Assurance Standards Board (AASB) established by S10 of Public Accountants’ and Auditors’ Act, 80 of 1991

23. Four Pillars Network Background & Aims • Commission for Africa: • Calls for a widespread business partnership; • A response to the humanitarian crisis in Africa; • Africa is the world’s foremost development challenge. • The Four Pillars Network aims to: • Promote a positive investment climate in Africa; • Enable African and Western business professionals to share expertise and information; • Focus on the four pillars of trust in business: • Corporate governance; • Audit; • Compliance; and • Corporate responsibility.

24. Four Pillars Network • Comprises: • committed individuals; • with expertise and practical experience in the focus areas; • Seeks to: • work with Chambers of Commerce, business leaders and their counterparts in African business; • help identify potential solutions to the challenges facing businesses in Africa. • Operate: • through conferences, seminars, and training programmes; • will explore with African business leaders other ways in which the practical experience of participants can be made available to African businesses.

25. Four Pillars Network • Activities: • Initial conference in Johannesburg scheduled for April 2006 • Members of the Network and business leaders in Africa interested in participating in this project • Subject to approval at this conference, further events will be held in Africa and in the West • The individuals in the Network have agreed to participate in an annual conference and/or an annual summer school.  

26. Questions?