Corporate governance overview

Governance structure and board composition

Governance structure

The board sets the strategic objectives of the Group, determines investment policy and performance criteria, and delegates the detailed planning and implementation of policies to management in accordance with the appropriate risk parameters. The board monitors compliance with policies and performance against objectives by holding management accountable for its activities through quarterly performance reporting and budget updates.

The board considers matters of strategic direction, significant acquisitions and disposals, and approves major capital expenditure, financial statements and other material matters. Board members are encouraged to debate and challenge matters in an atmosphere of mutual respect and cooperation.

The role of the board is regulated in a formal board charter, which defines its authority and power. In accordance with its charter, the responsibilities of the board include:

  • acting as a focal point for and custodian of corporate governance;
  • identifying key performance and risk areas;
  • ensuring the Group’s strategy will result in sustainable outcomes;
  • considering sustainability as a business opportunity that guides strategy formulation;
  • approving the Group’s strategy and annual business plans;
  • ensuring that the Group’s ethics are effectively managed;
  • the governance of risk;
  • overseeing IT governance and cybersecurity;
  • assessing the impact of the Group’s business operations on the environment; and
  • approving and adopting Group policies, programmes and procedures in relation to health, safety, economic, social and environmental impacts, and remuneration and benefits.

The governing body is satisfied that it has fulfilled its responsibilities in accordance with its charter for the reporting period.

Life Healthcare has a unitary board of directors and various board sub-committees as shown in the diagram that follows. The board created sub-committees to enable it to discharge its duties and responsibilities properly and to fulfil its decision-making process effectively. Each committee acts with appropriate terms of reference. Board committees may take independent professional advice at the Group’s expense when necessary. While retaining overall accountability, the board has delegated authority to the Group Chief Executive Officer to manage the day-to-day affairs of the Group. The Group Chief Executive Officer is supported by the Group operational executive board1.

1 On 1 July 2017, the Group executive management committee was changed and restructured to the Group operational executive board.

The following governance structure and decision-making processes are in place to manage and oversee all the businesses in the Group and to ensure that the interests of its stakeholders are protected.

Board committees

Executive structure

Group operational executive board

The Group Chief Executive Officer and Group Chief Financial Officer have monthly performance reviews with all territories’ chief executive officers and the relevant executives to obtain feedback relating to key initiatives and agreed KPIs. The Group operational executive board meets quarterly to discuss the overall performance of the business (financial and quality/clinical), progress on strategic initiatives and top risks by territory. Governance matters and investment committee-related items are also dealt with.

A Group IT steering committee, as a sub-committee of the Group operational executive board, is in place to deal with IT-specific operational, risk and investment matters from a Group perspective.

South African executive management

The South African operations are managed by the southern Africa executive management team. They report
to the Chief Executive Officer: Southern Africa who serves on the Group operational executive board.

The southern Africa executive management meets monthly to consider progress relating to key strategic initiatives, performance of the territory (financial and quality/clinical), governance matters, and key operational initiatives and challenges.

Alliance Medical

The Chief Executive Officer: Alliance Medical reports to the Group Chief Executive Officer and serves on the Group operational executive board. Alliance Medical is operationally managed through individual countries’ management teams with the appropriate oversight. Monthly country board meetings are held where the operational and financial performance is discussed. These discussion packs are circulated to Group executives.

The Alliance Medical board of directors is chaired by the Group Chief Executive Officer and includes the Group Chief Financial Officer, Group Strategy and Investor Relations Executive and the Chief Executive Officer: Alliance Medical, Chief Financial Officer: Alliance Medical and Chief Medical Officer: Alliance Medical. The Alliance Medical board operates within the ambit of the shareholders’ agreement and the articles of association, and normally meets quarterly in the UK. These meetings focus on progress relating to key strategic initiatives, the performance of each territory (financial and quality/clinical), governance matters and key operational initiatives and challenges.

Scanmed

The Chief Executive Officer: Scanmed reports to the Group Chief Executive Officer and serves on the Group operational executive board. In accordance with the Polish Commercial Code, the Scanmed business is managed by the management board chaired by the Chief Executive Officer: Scanmed. The managing board reports to the subsidiary board comprising the Group Chief Executive Officer (chairman), Group Chief Financial Officer, Group Strategy and Investor Relations Executive and the Group Chief Information Officer. The subsidiary board meets quarterly in Poland, and an annual general meeting takes place in accordance with the Companies Act (Poland).

The managing board operates within the delegation of authority framework approved by the subsidiary board.

Board composition

The composition of the board reflects an appropriate balance between executive and non-executive directors.

The board’s and executive management members’ biographies supplementary report includes a brief biography of each director and is available here.

Non-executive

Director

MA (Mustaq) Brey (63)

Chairman

Appointed to the board – 28 November 2003
Appointed Chairman – February 2013
South African
BCompt (Hons), CA(SA)

executive

Director

PP (Pieter) van der Westhuizen (46)

Acting Group Chief Executive Officer and Group Chief Financial Officer

Appointed to the board – 1 June 2013
South African
BCom (Acc), CA(SA)

Board composition as at 30 September 2017

Experience

Healthcare sector

Mergers and acquisitions

Leadership roles

Human resources

Governance of risk management

International business experience

Procurement

Skills

Finance

General business

Strategy

Medical

IT

EQUITY DIVERSITY

ACI

64%

White

36%

GENDER DIVERSITY

Male

64%

Female

36%

TENURE ON THE GROUP’S BOARD

< 3 years

3

3 – 5 years

3

5 – 9 years

2

> 9 years

3

INDEPENDENT

Non-executive Directors

PJ (Peter) Golesworthy (59)

Lead independent non-executive director

Appointed to the board – 10 June 2010
British
BA (Hons) (first class), Accountancy Studies, CA

Prof ME (Marian) Jacobs (69)

Appointed to the board – 1 January 2014
South African
MBChB (UCT), Diploma in Community Medicine (UCT), Fellowship of the College of South Africa (with paediatrics)

AM (Audrey) Mothupi (47)

Appointed to the board – 3 July 2017
South African
BA (Hons), (PolSci), Trent University, Canada

JK (Joel) Netshitenzhe (60)

Appointed to the board – 30 November 2010
South African
MSc (University of London, School of Oriental and African Studies), PGDip (Economic Principles), Dip (PolSci)

Dr MP (Malefetsane) Ngatane (63)

Appointed to the board – 25 July 2007
South African
BSc, MBChB, FCOG

ME (Mpho) Nkeli (52)

Appointed to the board – 1 October 2015
South African
BSc (Environmental Science), MBA

Adv M (Mahlape) Sello (55)

Appointed to the board – 3 July 2017
South African
MA and LLM (Russia), LLB

GC (Garth) Solomon (50)

Appointed to the board – 23 March 2005
South African
BCom, BCompt (Hons), CA(SA)

RT (Royden) Vice (70)

Appointed to the board – 1 January 2014
South African
BCom, CA(SA)

Board members that resigned during the year

LM (Louisa) Mojela (61)

South African
Resigned effective 25 January 2017
BCom (National University of Lesotho)
Having served on the board for five-and-a-half years, Louisa resigned from the board as she decided to resign from boards where she has served the longest.

A (André) Meyer (51)

Group Chief Executive Officer

South African
Stepped down effective 30 June 2017
After three years as the Group Chief Executive Officer, the board and André mutually decided that he would step down as Group Chief Executive Officer.

Group operational executive board composition

The Group operational executive board is responsible for the operational delivery across the Group and the delivery of the combination of benefits of southern Africa, Alliance Medical and Scanmed.

The board and the Group operational executive board’s biographies, contained in the supplementary report, include a brief biography of each executive and is available here.

PP (Pieter) van der Westhuizen (46)

Acting Group Chief Executive Officer and Group Chief Financial Officer

Refer board of directors

CLW (Lourens) Bekker (58)

Chief Executive Officer: Southern Africa

South African
Industrial Psychology (Hons)

AM (Adam) Pyle (51)

Group Strategy and Investor Relations Executive

South African
BCom, LLB

GE (Guy) Blomfield (49)

Chief Executive Officer: Alliance Medical

British
BA Hons (Accounting and Finance), MSc (Corporate Finance)

H (Hubert) Bojdo (44)

Chief Executive Officer: Scanmed S.A.

Polish
MEC, PhD studies, Licensed stock exchange broker and licensed tax advisor

Dr C (Charles) Niehaus (47)

Chief Medical Officer: Alliance Medical

South African
MBChB

Power, control, support and appointments

MA Brey, a non-executive director, is the Chairman of the board. In accordance with King IV, PJ Golesworthy is the lead independent non-executive director. The lead independent non-executive director’s role includes acting as a sounding board for the Chairman, chairing board meetings in the absence of the Chairman and leading the performance appraisal of the Chairman.

A Meyer, an executive director, was the Group Chief Executive Officer until he, together with the board, decided he would step down effective 30 June 2017. PP van der Westhuizen, current Group Chief Financial Officer, will be the acting Group Chief Executive Officer until Dr Shrey Viranna assumes office on 1 February 2018. Based on representations made by the Group, the JSE granted Life Healthcare a dispensation until 31 December 2017 from the requirements of paragraph 3.84(g) of the JSE Listings Requirements regarding the retention of a full-time position for the Group Chief Executive Officer. The Group is in the process of submitting an application to the JSE for an extension to the dispensation until 31 January 2018.

The roles of Chairman and Group Chief Executive Officer are separate, and there is a clearly outlined division of responsibilities.

Effective control is exercised through the Group Chief Executive Officer, who is accountable to the board through regular reports. Senior executives may attend board meetings as and when necessary to apprise the directors of important events and to develop and implement strategy. This encourages communication and cooperation between the directors and executive management.

The board ensures that no individual has unfettered powers of decision-making and authority, and that shareholder interests are protected. The board considers whether there is an appropriate balance of knowledge, expertise and collective experience among the non-executive directors. The non-executive directors are considered to have the required skills and experience to have objective judgement on matters of strategy, resources, transformation, diversity and employment equity, standards of conduct, evaluation of results and economic, social and environmental policies.

At the Group’s expense, directors are entitled to seek independent professional advice to further their duties. All directors have access to the Group Company Secretary, who is responsible for ensuring Group compliance with applicable legislation and procedures.

In compliance with JSE Listings Requirements, non-executive directors do not participate in any share incentive or option scheme of the Group.

Appointments and diversity

Any new appointment to the board involves a formal and transparent process and is a matter of consideration for the full board, assisted by the nominations committee.

The board diversity policy applies to the appointment of new directors and has been taken into account for purposes of succession planning for the board. The nominations committee will make the board appointment recommendations on merit and will consider candidates against objective criteria with due regard to the benefits of diversity, including gender, and the contribution that the candidate will bring to the board. There is an ongoing commitment from the board to strengthen female representation, and preference will be given to female candidates who meet the criteria.

The nominations committee commenced the process for recruiting two independent non-executive directors in April 2017. The process outlined in the policy was applied when considering the shortlist and the appointment of the independent non-executive directors. In addition, an independent party was engaged to conduct reference checks on the shortlisted candidates. The board looks forward to the positive dynamic and contribution that AM Mothupi and Adv M Sello will add to the board’s deliberations.

The memorandum of incorporation stipulates that one-third of the board members will retire from office at the annual general meeting and will be eligible for re-election. The directors to retire are those who have been in office longest since their last election or who were appointed during the year. The Group Chief Executive Officer and Group Chief Financial Officer are included in determining the rotation of retiring directors.

Delegation of authority

Life Healthcare has an international, capital intensive business. The strategy, capital and investment budget and plans are approved by the board. In order to control trading activities, it is the board’s philosophy that authority and responsibility be delegated to the lowest prudent level, and management is expected to always to act in accordance with the Group values formally and informally.

The delegation of authority was revised to provide for the authority levels in all the territories. The board’s oversight of Alliance Medical is evolving to ensure continued good governance. Despite these transitions, Life Healthcare is satisfied that the existing framework contributes to role clarity and the effective exercise of authority and responsibilities.

Directors’ attendance at board and sub-committee meetings

The board meets quarterly and on an ad hoc basis to consider specific matters as needed. The board and management meet annually to review strategy and agree on focus areas. Where directors are unable to attend board meetings for any reason, every effort is made to communicate their comments regarding the agenda and general items.

1 Non-executive director: attends all the board sub-committee meetings as an invitee where he is not a member.
2 Appointed to the social, ethics and transformation committee effective 25 January 2017.
3 Resigned effective 25 January 2017.
4 Appointed effective 3 July 2017.
5 Stepped down as Group Chief Executive Officer and executive director effective 30 June 2017.
6 Resigned as a member of the remuneration and human resources committee effective 4 July 2017.
7 The first committee meeting was held in October 2017.

Board accountability

Code of ethics

The board is responsible for ensuring that management embeds a culture of ethical conduct and sets the values by which the Group abides. As such, Life Healthcare’s code of ethics (the code) commits employees to the highest standards of integrity, ethics and business conduct. The code is available here.

Guidance for appropriate behaviour in the Group is based on the code. The code sets out policies and procedures to be followed in all aspects of professional, clinical and business dealings, and establishes a set of standards. It guides employees in their behaviour towards supporting medical professionals, patients, customers, suppliers, shareholders, co-workers and the communities in which the Group operates. The code also extends to safety, health, security, conflicts of interest, environmental matters and human rights. While common sense, good judgement and conscience apply in managing a difficult or uncertain situation, the code assists in detailing the standards and priorities within the Group. Alliance Medical has an anti-corruption and an anti-fraud policy in place, these will be aligned to the Group code of ethics going forward.

New employees are familiarised with the code as part of their induction. The code is presented to the social, ethics and transformation committee annually where relevant updates are discussed and submitted to the board for approval. No material changes were made to the code in 2017.

A confidential guidance and support hotline, operated by an international auditing firm, provides an independent facility for employees and suppliers to report fraud or any form of malpractice. A policy of non-retaliation protects and encourages people wishing to share their concerns.

The Group maintains a zero-tolerance approach to fraud. Executives and line management are responsible for implementing procedures against fraud and corruption.

In tandem with the code, individuals from Life Healthcare are represented on the South African Nursing Council, and the professional conduct committee that monitors professional misconduct within the nursing profession. Professional employees are encouraged to become members of their professional associations.

2017 focus areas

Developed and rolled out proactive ethics-related communication to the business, in conjunction with marketing and communications.

Monitoring ethics within the Group

The Group’s ethics standards, as stipulated in the code, are monitored to track achievement. In the case of non-compliance, appropriate disciplinary action is taken as Life Healthcare responds to offences and aims to prevent their recurrence.

Business ethics assessment

As part of the 2016 internal audits, a business ethics assessment of Life Healthcare was conducted, covering July 2015 to June 2016. Tangible metrics and evidence pertaining to the promotion, implementation and monitoring of ethics across the Group were examined to evaluate the effectiveness of ethics management. In addition, internal audit conducted an independent survey across the employee spectrum to gauge their perceptions regarding ethics.

The ethics assessment revealed an overall positive outcome. Life Healthcare has sound policies, and the governance structures are designed to support and incorporate ethics considerations as part of the day-to-day management. Responses to potential and real ethical breaches are prompt and thorough. The employee ethics perception survey indicated a positive overall response, which indicates generally positive leadership affirmation. Improvement areas were identified, including that proactive ethics-related employee communications and ethics training should be consistently applied throughout the Group.

Tip Offs Anonymous

Employees, doctors and suppliers can report suspected irregularities anonymously to an independent service provider. Reported incidents are independently assessed, and where relevant, independently investigated. These incidents are also reported to the audit committee and the social, ethics and transformation committee.

Of all the tip-offs received in the year, the majority were deemed to be unfounded and only two matters remain under investigation.

quick fact

Efficient control compliance, with internal and external audits yielding no material deviations.

2018 focus areas

  • Training on ethics to be standardised throughout the Group.
  • Proactive communication on ethics will be continued through print and digital media, including our international businesses.

Internal controls

We maintain accounting records, and developed systems designed to provide reasonable assurance as to the integrity and reliability of the financial statements. The board delegates responsibility for the adequacy and operation of these systems to the Group Chief Executive Officer. These records and systems are designed to safeguard assets and minimise fraud. The systems of internal control are based on established organisational structures, such as written policies and procedures, which include budgeting and forecasting disciplines and the comparison of actual results against these budgets and forecasts.

The Group has a key operational processes checklist, and has assigned responsibilities for controls in the processes to relevant employees. Compliance is tested by internal and external audit reviews.

Internal audit

Internal audit is an independent, objective assurance and consulting function designed to add value and improve the operations of the Group. It assists the Group with accomplishing its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes.

Internal audit reports administratively to the Group Chief Financial Officer and functionally to the audit committee, and has unrestricted access to its chairman, the Chairman of the board and the Group Chief Executive Officer. A Chief Internal Audit Executive was appointed with effect from 1 December 2017 to provide strategic direction and oversight of all our operations. In May 2017, we appointed EY to provide outsourced internal audit services for the southern Africa operations. In Poland, internal audit is outsourced to Deloitte and the optimal internal audit structure for Alliance Medical is under consideration.

A risk-based internal audit plan is developed and approved by management and the audit committee. Every internal audit assignment is accompanied by a detailed report to management, which includes recommendations for improvement. Significant business risks and weaknesses in the operating and financial control systems are highlighted and brought to the attention of the audit committee, senior management and external auditors.

Induction and training of directors

It is important that directors are kept up to date with their duties as well as changes in the Group. On appointment, new directors are briefed on their fiduciary duties and responsibilities by executive management. The nominations committee approved an induction policy which includes the requisite reading material and the required exposure to the business. The policy is reviewed annually by the nominations committee. In addition, new directors receive information on JSE Listings Requirements, King IV, the Companies Act and obligations they have to comply with. The Group Company Secretary assists the Chairman with the induction of directors.

Directors are informed of relevant new legislation and changing commercial risks that affect the Group. Board training sessions are linked to board meetings. Presentations relating to, inter alia; NHI, the HMI, and amendments to the JSE Listings Requirements, took place during the year. A King IV gap analysis presentation was also performed.

Directors have full and unrestricted access to management and information when required. Directors are entitled to seek independent professional advice in support of their duties at the Group’s expense.

Independence and conflicts of interest

The Group’s nominations committee is responsible for assessing the independence of the Group’s directors on an annual basis. Independence is determined according to the Companies Act, JSE Listings Requirements and the recommendations in King IV, which takes into account, among others, the number of years a director has served on the board.

The board was satisfied that all its independent non-executive directors met its independence criteria for the 2017 financial year.

The following non-executive directors have served on the board for longer than nine years:

Mustaq Brey     Mustaq owns shares in the Company, the value of which is material to his personal wealth, he can thus not be considered to be an independent non-executive director. However, the nominations committee board is satisfied that Mustaq displays objective, unfettered judgement in decision-making and that his objectivity has not been compromised by virtue of his shareholding. Mustaq has served on the board for 13 years and 10 months.
Dr Malefetsane Ngatane     Despite serving on the board for longer than nine years, the board is satisfied that Dr Ngatane continues to exercise objective judgement in decision-making. In its assessment, the nominations committee confirmed that Dr Ngatane has no interest, position, association or relationship which is likely to influence unduly or cause bias in decision-making. Dr Ngatane has served on the board for 10 years and 2 months.
Garth Solomon     Despite serving on the board for longer than nine years, the board is satisfied that Garth continues to exercise objective judgement in decision-making. In its assessment, the nominations committee confirmed that Garth’s shareholding in the Company is not material to his personal wealth. It further confirmed that Garth has no position, association or relationship which is likely to influence unduly or cause bias in decision-making. Garth has served on the board for 12 years and 6 months.

Directors are required to avoid a situation where they may have a direct or indirect interest that conflicts with the Group’s interests. A conflicts of interest policy is included in the code of conduct and ensures that directors disclose conflicts of interest at every meeting in terms of section 75 of the Companies Act. Directors present an updated list of their directorships and interests to the Group Company Secretary annually, or when a change has occurred.

Succession planning

Succession planning is important in ensuring continuity and maintaining the correct mix of expertise on the board. The nominations committee continually assesses the board and its sub-committees’ composition. This year the nominations committee, in considering the skills set of the board, was of the view that a board member with significant international experience, in addition to Royden Vice, was required given the Group’s increased global presence. It was agreed that this be considered further post appointment of the new Group Chief Executive Officer. The nominations committee reviewed the board diversity policy and it was recommended to the board that no changes be made to the policy.

The board is satisfied with the current board composition for 2017.

Group operational executive board succession planning

In September 2017, a remuneration and human resources committee meeting was dedicated to the succession planning of the Group operational executive board and other key positions in the Group. The succession plan identified emergency successors. Development plans will be put in place for successors where readiness levels of three to five years were indicated. The committee will continue to monitor progress in this regard.

Board evaluation

An external evaluation facilitated by the IoDSA was conducted for the 2017 performance evaluation under the auspices of the nominations committee. Based on the results of the appraisal, the board had significantly more areas that performed well, and the overall score was in line with the listed sector benchmark. The appraisal results also highlighted that the board was well balanced in terms of the gender, race and skills, and works well as a team, with different skills prompting a diversity of ideas.

The assessment identified two key focus areas for 2018:

  • The recruitment, appointment and onboarding of the new Group Chief Executive Officer and management of the transition and integration of the Group Chief Executive Officer.
  • Ensuring that the Alliance Medical Group is well managed from a governance perspective and properly integrated.

The Group operating model meets the requirements of the board’s oversight role from a combined assurance, compliance and risk perspective.

The prior year’s internal board assessment identified three key focus areas:

Focus area 2017 progress
The role of the board in stakeholder engagement needs to be more clearly defined
  • The board received regular updates on stakeholder engagements including those in relation to the Life Esidimeni matter and investor roadshows.
  • Opportunities for the board to interact with stakeholders were provided.
  • The board continued to receive updates on the HMI and matters related to NHI.
The board’s desire to interact more broadly across the Group to gain a better understanding of the operations
  • The induction of the two new directors included a visit to a hospital in the area where they reside.
  • The members of the investment committee visited selected Alliance Medical sites in the UK and Italy.
  • The attendance at board meetings and the board strategy sessions has been expanded to include members of the Group operational executive board. The attendance at board sub-committee meetings includes senior management and functional heads. Exposure is also provided to individuals to present at these meetings if this forms part of an individual’s development plan.
The implementation of succession planning for the board going forward
  • The nominations committee embarked on a process to ensure appropriate succession planning and, at the 2017 AGM, shareholders approved the consequent amendment to the Company’s MOI. The amendment provides that a director, at the annual general meeting following their 70th birthday, shall retire and not be eligible for reelection, unless the nominations committee determines otherwise. This will enable the group to retain board members with valuable knowledge, skills and experience while maintaining continuation on the board. This also provides opportunities for mentoring less experienced board members if required.
  • The nominations committee ascertained the intentions of individual board members with regard to their tenure on the board and, given the recruitment of the two board members, the committee is satisfied with the current skill sets represented on the board. However, given the Group’s international expansion, the committee is of the view that another board member with international experience will enhance the collective skill set of the board.

Group Company Secretary

F Patel’s role as Group Company Secretary is to guide the board in its duties and responsibilities, keeping directors abreast of relevant changes in legislation and governance best practices. She works with the board to ensure compliance with Group policies and procedures, applicable statutes, regulations and the roll-out of King IV.

She plays an active role in the Group’s corporate governance process and ensures that the proceedings and affairs of the directorate, the Group and, where appropriate, shareholders are properly administered. The Group Company Secretary oversees the induction of new directors. She is kept apprised of directors’ dealings in Life Healthcare’s shares and ensures that the appropriate disclosures are made in accordance with the JSE Listings Requirements.

In line with King IV and paragraph 3.84(h) of the JSE Listings Requirements, the board assessed the competence, qualifications and experience of the Group Company Secretary through a formal external evaluation process conducted by the Institute of Directors in Southern Africa (IoDSA) under the auspices of the nominations committee. The board is satisfied that the Company Secretary has the requisite qualifications and experience to effectively discharge her duties and maintains an arm’s-length relationship with the board and directors.

Board sub-committees overview

Each sub-committee is chaired by an independent non-executive director. Certain executives are required to attend sub-committee meetings by invitation. External auditors attend the audit committee meetings.

The sub-committees report back to the board at every board meeting, and the minutes of the sub-committee meetings are tabled for noting. Where the minutes are not available, the chairman of the sub-committee provides verbal feedback, and the minutes are then tabled for noting at a subsequent board meeting.

The role of the board sub-committees is formalised by terms of reference which define their authority and scope. All sub-committee terms of reference were reviewed and amended where relevant. There were no changes in key terms of reference for board sub-committees in 2017 unless otherwise stated.

Audit committee   CompositionChairman
  • Peter Golesworthy
Members
  • Louisa Mojela1
  • Audrey Mothupi2
  • Garth Solomon
  • Royden Vice
  Key focus areas in 2017
  • Poland impairment
  • Rights offer matters
  • The Alliance Medical transaction and matters flowing from this such as funding and control on non-audit services
  • The tax policy, which was adopted for the first time, and the hedge policy
  • Critical matters namely, the rights issue, debt and covenants
  • Material judgements from a financial perspective

The committee was satisfied that it had executed its duties during the financial year in accordance with its terms of reference.

         
Risk committee   Composition Chairman
  • Joel Netshitenzhe
Members
  • Peter Golesworthy
  • Prof Marian Jacobs
  • André Meyer3
  • Audrey Mothupi2
  • Adv Mahlape Sello2
  • Pieter van der Westhuizen
  Key focus areas in 2017
  • Appointment of an independent adviser to assist the committee on IT-related matters.
  • Cyber risk, particularly in relation to medical devices and equipment
  • Group compliance strategy
  • Review of the risk process followed by Alliance Medical
  • Revised risk appetite and tolerance statements to take account of the different territories that the Group operates in

The committee was satisfied that it had executed its duties during the financial year in accordance with its terms of reference.

       
  Key changes to terms of reference
  • To provide for the committee’s responsibility in monitoring management’s response to cybersecurity and social media risks
         
Nominations committee   Composition Chairman
  • Peter Golesworthy
Members
  • Mustaq Brey
  • Louisa Mojela1
  • Dr Malefetsane Ngatane
  Key focus areas in 2017
  • Desktop board skills analysis
  • Succession planning
  • Process and appointment of two independent non-executive directors in line with the diversity policy
  • Recruitment of a new Group Chief Executive Officer

The committee was satisfied that it had executed its duties during the financial year in accordance with its terms of reference.

       
Investment committee   Composition Chairman
  • Garth Solomon
Members
  • Mustaq Brey
  • Peter Golesworthy
  • Royden Vice
  • André Meyer3
  • Pieter van der Westhuizen
  Key focus areas in 2017
  • Consideration of the Group’s budget
  • The acquisition of Alliance Medical
  • Rights offer matters including pricing
  • Funding strategy
  • Acquisitions in South Africa and the cyclotron business in Germany
  • Review of the performance of the international operations
  • India strategy
  • Distribution policy

The committee was satisfied that it had executed its duties during the financial year in accordance with its terms of reference.

       
  Key changes to terms of reference
  • To provide for the review of the international operations performance, integration and alignment in the early stages post acquisition.
  • The materiality amount was revised from R80 million to R100 million. This amendment was carried through to the delegation of authority document.
         
Remuneration and human resources committee   Composition Chairman
  • Royden Vice
Members
  • Prof Marian Jacobs4
  • Louisa Mojela5
  • Mpho Nkeli
  • Adv Mahlape Sello6
  • Garth Solomon
  Key focus areas in 2017
  • Consideration of the Group’s remuneration policy and implementation report
  • Reviewing the Group’s HR strategy
  • Succession planning for executive management throughout the Group
  • Approval of the salary mandate
  • Impact of the rights offer on the employees share plan and the long-term incentive plan
  • Retirement fund matters

The committee was satisfied that it had executed its duties during the financial year in accordance with its terms of reference.

       
  Key changes to terms of reference
To provide for:
  • the committee’s responsibility in approving the HR strategy including reviewing the Group’s performance in terms of HR development and retention against internal transformation targets; and
  • finalising and making recommendations to the board in respect of key performance indicators for the Group Chief Executive Officer on an annual basis.
         
Social, ethics and transformation committee   Composition Chairman
  • Mpho Nkeli7
  • Louisa Mojela5
Members
  • Peter Golesworthy8
  • Dr Malefetsane Ngatane
  • André Meyer3
  • Dr Nilesh Patel9
  • Pieter van der Westhuizen10
  Key focus areas in 2017
  • Consideration of the Group’s B-BBEE strategy and progress against the B-BBEE scorecard
  • Environmental initiatives and progress against targets
  • Code of ethics review and implementation including whistleblowing arrangements
  • Health policy and related legislation
  • PoPI roll-out
  • Skills development and progress against plan
  • Plan to roll-out code of ethics, CSI and environmental reporting throughout the Group

The committee was satisfied that it had executed its duties during the financial year in accordance with its terms of reference.

         
Clinical governance, quality and safety committee   Composition Chairman
  • Prof Marian Jacobs
Members
  • Dr Malefatsane Ngatane
  • André Meyer3
  • Pieter van der Westhuizen10
  Key focus areas in 2017
  • Governance framework to establish effective reporting to the committee
  • Clinical governance processes by territory
1 Resigned from the board effective 25 January 2017.
2 Appointed effective 4 July 2017.
3 Stepped down as Group Chief Executive Officer and executive director effective 30 June 2017.
4 Resigned from the committee effective 4 July 2017.
5 Resigned from the board effective 25 January 2017.
6 Appointed to the committee effective 4 July 2017.
7 Appointed chairman of the committee effective 25 January 2017.
8 Appointed to the committee effective 25 January 2017.
9 Resigned effective 4 March 2017.
10 Appointed to the committee effective 26 July 2017.

Codes, regulations and compliance

The board is responsible for the Group’s compliance with applicable laws, rules, codes and standards. Compliance is an integral part of the Group’s culture in ensuring the achievement of its strategy. The Group’s board has delegated the implementation of an effective compliance framework to management. Supervision of compliance risk management is delegated to the risk committee, which reviews and approves the arrangements in place to monitor compliance. The Group complies with various codes and regulations such as the Companies Act, the JSE Listings Requirements and King III, and is in the process of rolling out King IV.

In respect of the southern Africa business, a QMS is in place which is designed to ensure compliance with legal requirements, industry standards and the Company’s internal Group requirements across all aspects of its business and operations. Internal quality audits are performed annually at hospitals to assess compliance with legal and industry requirements from an occupational health and safety, environment, quality, and human capital perspective.

In respect of Alliance Medical and Scanmed, there are dedicated legal and compliance resources that actively support business monitoring and provide advice on relevant new laws and dealing with regulators and enforcement action.

There were no material or repeated regulatory penalties, sanctions or fines for contraventions of, or non-compliance with, statutory obligations or environmental laws.

2017 focus areas 2018 focus areas
  • Approval of a compliance framework for the Group
  • Commencement of the roll-out of compliance metrics throughout the Group in line with the compliance framework

King IV

Life Healthcare endorses and endeavours to adhere to the guidelines and principles of King IV. A King IV implementation report and a gap analysis is available at www.lifehealthcare.co.za.

Principle   Application of the principle
Leadership, ethics and corporate citizenship
Principle 1   Leadership
The board should lead ethically and effectively.  

Based on the recent board evaluation conducted by the IoDSA, the performance assessment tested, inter alia, whether the board exercised leadership, enterprise, integrity and judgement in directing the business of Life Healthcare. The board was found to be effective in the afore-mentioned key areas.

A code of ethics has been adopted by the board. The code is intended to focus the board and each director on areas of ethical risk, and it fosters a culture of honesty and accountability which all directors ascribe to.

Principle 2   Organisational values and ethics
The board should govern the ethics of the organisation in a way that supports the establishment of an ethical culture.  

In terms of the board charter, the board discharges its role and responsibilities with due regard to the values that support the central tenets of Life Healthcare’s name and brand. In providing the required leadership in terms of establishing and maintaining an ethical culture within the organisation, and to ensure that ethics is managed effectively, the board applies the governance principles contained in King IV and continues to entrench the recommended practices through the Group’s governance processes and procedures. There is a code of ethics in place which is applicable to employees and contractors. Adherence to the code of ethics is also incorporated as part of the contractual arrangements with parties in the supply chain. Part of the Group’s core values, Quality to the power of e (Qe), encompasses ethics to ensure that all business endeavours are conducted within the framework of legal and ethical standards.

The board, with the assistance of the social, ethics and transformation committee and the audit committee oversees the management of ethics and monitors the Company’s activities to ensure they are in line with the code of ethics.

Principle 3   Responsible corporate citizenship
The board should ensure that the organisation is and is seen to be a responsible corporate citizen.   The board has delegated to the social, ethics and transformation committee the responsibility for monitoring and reporting of social, ethical, transformational and sustainability practices that are consistent with good corporate citizenship.
Strategy, performance and reporting
Principle 4   Strategy, implementation and performance
The board should appreciate that the organisation’s core purpose, its risks and opportunities, strategy, business model, performance and sustainable development are all inseparable elements of the value creation process.  

The board approves and monitors the implementation of the strategy and business plans for each of the territories that the Company operates in. The board, assisted by the risk committee, reviews key risks and opportunities impacting on the achievement of its strategic objectives.

The board, in determining strategy, considers the six capitals in directing the Company’s inputs and activities towards sustainable and positive outputs and outcomes. The value creation process is set out in the integrated report as well as the Company’s performance against its strategic objectives. Information on material matters and risks and opportunities can be found in the integrated report.

Principle 5   Reports and disclosure
The board should ensure that reports issued by the organisation enable stakeholders to make informed assessments of the organisation’s performance and its short-, medium- and long-term prospects  

The board is assisted by the audit committee in reviewing and approving the integrated report. The report is prepared in line with recognised local and international guidelines including International Financial Reporting Standards (IFRS), the International Integrated Reporting Council’s (IIRC) Integrated Reporting <IR> Framework, the reporting principles contained in King IV and the JSE Limited Listings Requirements.

The integrated report, when read with the annual financial statements, provides a comprehensive view of the Company’s performance.

Governing structures and delegation
Principle 6   Role of the board
The board should serve as the focal point and custodian of corporate governance in the organisation.   The board has an approved charter which it reviews annually. The board’s role and responsibilities are articulated in the board charter. The board is the focal point and custodian of corporate governance, both in terms of how its role and responsibilities are documented and the way it executes its duties and responsibilities.
Principle 7   Composition of the board
The board should comprise the appropriate balance of knowledge, skills, experience, diversity and independence for it to discharge its governance role and responsibilities objectively and effectively.  

The nominations committee considers, on an annual basis, the composition of the board in terms of the balance of skills, experience, diversity, independence and knowledge needed to discharge the board’s role and responsibility.

Further details regarding the composition of the board, assessment of the independence of the non-executive directors, induction and the board’s diversity policy is contained in the governance section of the integrated report.

Principle 8   Committees of the board
The board should ensure that its arrangements for delegation within its own structures promote independent judgement, and assist with balance of power and the effective discharge of its duties.   The board has seven committees that assist it in discharging its duties and responsibilities as follows:
  • Audit committee
  • Risk committee
  • Remuneration and human resources committee
  • Investment committee
  • Nominations committee
  • Social, ethics and transformation committee
  • Clinical governance, quality and safety committee

The committees operate in accordance with written terms of reference which are reviewed and approved by the board annually. The nominations committee reviews the board committees as well as the composition of the committees annually and makes recommendations to the board with due regard to the skills sets required which contribute to the effectiveness of the committees and the distribution of the balance of power to avoid a situation where individual/s dominate decision-making. The nominations committee also considers whether the existing committees allow the board to properly discharge its duties. Each of the committee chairmen provide feedback to the board on the deliberations of the committee meetings and copies of the minutes of the committee meetings are included in the board pack. Additional information on the board committees are to be found in the governance section of the integrated report.

Principle 9   Evaluations of the performance of the board
The board should ensure that the evaluation of its own performance and that of its committees, its chair and its individual members, support continued improvement in its performance and effectiveness.   Formal assessments of the effectiveness of the board, board committees, Chairman, directors and Group Company Secretary are conducted annually under the auspices of the nominations committee. In-house assessments are conducted and external formal assessments take place every three years. Further details of the external board assessment conducted for FY2017 are contained in the governance section of the integrated report.
Principle 10   Appointment and delegation to management
The board should ensure that the appointment of, and delegation to, management contribute to role clarity and the effective exercise of authority and responsibilities.   While retaining overall accountability, and subject to matters reserved to itself, the board has delegated authority to the Group Chief Executive Officer to run the day to day affairs of the Company, subject to a delegation of authority framework. The delegation of authority framework sets out authority thresholds and governs sub-delegation. The framework also prescribes authority levels for each of the territories that the Group operates in.
Governance of functional areas
Principle 11   Risk governance
The board should govern risk in a way that supports the organisation in setting and achieving its strategic objectives.  

The board, supported by the risk committee, is ultimately responsible for the governance of risk. The role of the risk committee is to ensure that the Company has implemented an effective policy and plan for risk management which enhances the Company’s ability to achieve its strategic objectives. The risk committee oversees the development and annual review of a policy and plan for risk management and recommends these for approval to the board. Management designs, implements and monitors the risk management plan and is accountable for embedding the risk management process in the business. Mitigating controls are formulated to address the risks, and the board is kept up-to-date on progress on the risk management plan. The day-to-day responsibility for management of the risk management plan rests with the Group Risk Manager.

Two independent non-executive director members of the audit committee also serve on the risk committee ensuring there is co-ordination in respect of the evaluation and reporting of risks.

Principle 12   Technology and information governance
The board should govern technology and information in a way that supports the organisation setting and achieving its strategic objectives.   The board is cognisant of the importance of technology and information as it is interrelated to the strategy, performance and sustainability of the Company. The risk committee is responsible for information and technology governance in accordance with King IV. The committee oversees the implementation of IT governance mechanisms, IT frameworks, policies, procedures and standards to ensure the effectiveness and efficiency of the Group’s information systems. The committee has co-opted an external IT specialist to assist it in governing technology and information.
Principle 13   Compliance governance
The board should govern compliance with applicable laws and adopted, non-binding rules, codes and standards in a way that supports the organisation being ethical and a good corporate citizen.  

The board is responsible for the Group’s compliance with applicable laws. The board has delegated the responsibility for implementing compliance to management. The board is assisted by the risk committee in monitoring compliance.

The social, ethics and transformation committee assists the board with ensuring responsible business practices within the Group and monitors the Group’s activities in line with section 72 of the Companies Act, no 71 of 2008 (as amended).

Principle 14   Remuneration governance
The board should ensure that the organisation remunerates fairly, responsibly and transparently so as to promote the achievement of strategic objectives and positive outcomes in the short-, medium and long-term.  

The Group’s remuneration strategy’s objective is to attract and retain key talent and to motivate and reward employees appropriately to ensure they achieve key organisational objectives.

The remuneration report and remuneration policy set out in the 2017 integrated report have been designed to give effect to the Group’s strategic objectives.

Principle 15   Assurance
The board should ensure that assurance services and functions enable an effective control environment, and that these support the integrity of information for internal decision-making and of the organisation’s external reports.  

The Group has implemented a combined risk assurance model which is coordinated and managed by internal audit. Combined assurance at Group and subsidiary levels are overseen by the audit committee.

The board has delegated to the audit committee oversight of, inter alia, effectiveness of the Company’s assurance services with focus on combined assurance including external audit, internal audit, and the finance function as well as the integrity of the integrated report and the annual financial statements.

The audit committee receives on a quarterly basis a detailed report on the progress of the internal audit function against its annual risk based plan.

The audit committee report is contained in the annual financial statements.

Stakeholder relationships
Principle 16   Stakeholders
In the execution of its governance role and responsibilities, the board should adopt a stakeholder-inclusive approach that balances the needs, interests and expectations of material stakeholders in the best interests of the organisation over time.  

Establishing and maintaining effective stakeholder relationships are not only essential to sustain the growth of the Company but also an essential component of sound governance. The board has approved a stakeholder framework and engagements with stakeholders are in accordance with the framework.

Details of stakeholder relationships and stakeholder engagements are included in the integrated report.

Relationship within a Group of Companies   The board is the custodian of corporate governance across the Group. The delegation of authority framework is approved by the board and reviewed annually. The approved framework and authority levels are implemented throughout the Group. Policies are developed and implemented at Group and subsidiary levels. In cases where polices are required to address specific needs of business, these are developed and applied at business unit level with appropriate Group oversight by the Group operational executive board.

Key southern Africa regulations

These are the key changes/concerns/pending regulations that can have material impact on the southern Africa operations.

National Health Act’s Office of Health Standards Compliance    

The Minister of Health intends to set norms and standards for quality, in terms of the National Health Act, 61 of 2003. These norms and standards will be aligned with the norms and standards for health establishments as published by the Office of Health Standards Compliance.

The draft norms and standards were published for comment in March 2015. Life Healthcare has reviewed the documents and presented its comments to HASA. HASA attorneys have prepared the consolidated version incorporating the various groups’ feedback for submission to the Minister, and HASA submitted collective comments on the regulations. This submission highlights many issues contained in the regulations that currently apply equally to public and private facilities despite the significant differences in operating practices and regulatory frameworks. The procedural regulations pertaining to the functioning of the Office of Health Standards Compliance and handling of complaints by the Ombud came into operation in October 2016.

National Health Insurance (NHI)    

South Africa’s National Department of Health released the White Paper on NHI on 10 December 2015. The Group submitted its response to the NHI White Paper in May 2016 with a position that fundamentally supports the principle of all South Africans having access to affordable, comprehensive quality healthcare services, but one that questions the approach of the NHI policy in its current form. The NHI White Paper was gazetted in June 2017. The next phase extends from 2017 to 2022, which will focus on the development of NHI legislation and amendments to related legislation.

NHI implementation: Institutions, bodies and commissions that must be established was gazetted in July 2017.

Our view is that the NHI fails to address the critical issues required to ensure universal health coverage, namely:

  • developing a well-run and functioning public sector;
  • improving management skills; and
  • addressing the shortage of healthcare professionals.

The costing in the White Paper is not aligned with the current economic reality and there has been no real change from the 2011 Green Paper.

Life Healthcare remains supportive of the government’s desire to ensure a stronger healthcare system and looks forward to continued engagement on ways to collaborate and provide constructive input into the direction of the reform agenda in a broader manner.

Free State Licensing Regulations    

The Free State Department of Health published regulations in August 2014 on the licensing framework for private hospitals. We submitted comments relating to the premature inclusion of the National Health Act section 36 criteria (certificate of need), and certain inappropriate anomalies and conditions that exist within this Act.

Final regulations were published in September 2014 with no major changes to the draft regulations. This resulted in Life Healthcare challenging the Department, through HASA, in the Free State High Court. The matter was heard on 25 July 2016. Regulations 2, 3, 4, 6 and 14 of the 2014 regulations and the annexures were set aside. Pursuant to the judgment, further amendments were published that are intended to amend and replace the amendments which were set aside with effect from 22 June 2017. The updated regulations published in September 2017 remain problematic and comments have been provided.

Protection of Personal Information Act (PoPI)    

PoPI was promulgated in November 2013 with the commencement date still to be identified. The Act protects the personal information collected and processed by organisations and will impact how personal information held by the Group is dealt with – in relation to employees, patients, doctors and suppliers.

We formed a working group that conducted a gap analysis to highlight areas where additional controls and actions were required to ensure full compliance with PoPI.

Deloitte was appointed to perform a verification of the gap analysis and assisted in the development of an implementation road map. We are in the process of addressing the gaps and rolling out PoPI awareness training throughout the southern Africa operations.

A privacy officer for the Group was appointed effective 1 November 2016.

Labour Relations Amendment Act     Changes to the Labour Relations Act became effective on 1 January 2015, and the impact of the changes in legislation is being addressed as legal precedent develops. The amendment introduced significant changes to the regulation of non-standard forms of employment (part-time), namely temporary employment services (agency staff), employees on fixed-term employment contracts and sessional employees. In order to align with emerging precedent, we made amendments to the way in which we contract with temporary employees.
Proposed amendments to the Medical Schemes Act (MSA)    

The proposed amendments attempt to introduce certain limitations on prescribed minimum benefits which are not currently the case under the MSA. In addition, the section also attempts to make prices charged by medical professionals dependent on a 2006 National Health Reference Price List (NHRPL) tariff that was ruled unlawful by the courts during previous HASA litigation or may negotiate alternative tariffs with the relevant healthcare provider where no co-payment or deductible is payable by a member.

Life Healthcare has submitted comments on these proposed amendments, through HASA, wherein it challenges the basis of the proposed amendments as unlawful.

Other reporting requirements

National Health Act’s Office of Health Standards Compliance    

The Minister of Health intends to set norms and standards for quality, in terms of the National Health Act, 61 of 2003. These norms and standards will be aligned with the norms and standards for health establishments as published by the Office of Health Standards Compliance.

The draft norms and standards were published for comment in March 2015. Life Healthcare has reviewed the documents and presented its comments to HASA. HASA attorneys have prepared the consolidated version incorporating the various groups’ feedback for submission to the Minister, and HASA submitted collective comments on the regulations. This submission highlights many issues contained in the regulations that currently apply equally to public and private facilities despite the significant differences in operating practices and regulatory frameworks. The procedural regulations pertaining to the functioning of the Office of Health Standards Compliance and handling of complaints by the Ombud came into operation in October 2016.

National Health Insurance (NHI)    

South Africa’s National Department of Health released the White Paper on NHI on 10 December 2015. The Group submitted its response to the NHI White Paper in May 2016 with a position that fundamentally supports the principle of all South Africans having access to affordable, comprehensive quality healthcare services, but one that questions the approach of the NHI policy in its current form. The NHI White Paper was gazetted in June 2017. The next phase extends from 2017 to 2022, which will focus on the development of NHI legislation and amendments to related legislation.

NHI implementation: Institutions, bodies and commissions that must be established was gazetted in July 2017.

Our view is that the NHI fails to address the critical issues required to ensure universal health coverage, namely:

  • developing a well-run and functioning public sector;
  • improving management skills; and
  • addressing the shortage of healthcare professionals.

The costing in the White Paper is not aligned with the current economic reality and there has been no real change from the 2011 Green Paper.

Life Healthcare remains supportive of the government’s desire to ensure a stronger healthcare system and looks forward to continued engagement on ways to collaborate and provide constructive input into the direction of the reform agenda in a broader manner.

Free State Licensing Regulations    

The Free State Department of Health published regulations in August 2014 on the licensing framework for private hospitals. We submitted comments relating to the premature inclusion of the National Health Act section 36 criteria (certificate of need), and certain inappropriate anomalies and conditions that exist within this Act.

Final regulations were published in September 2014 with no major changes to the draft regulations. This resulted in Life Healthcare challenging the Department, through HASA, in the Free State High Court. The matter was heard on 25 July 2016. Regulations 2, 3, 4, 6 and 14 of the 2014 regulations and the annexures were set aside. Pursuant to the judgment, further amendments were published that are intended to amend and replace the amendments which were set aside with effect from 22 June 2017. The updated regulations published in September 2017 remain problematic and comments have been provided.

Protection of Personal Information Act (PoPI)    

PoPI was promulgated in November 2013 with the commencement date still to be identified. The Act protects the personal information collected and processed by organisations and will impact how personal information held by the Group is dealt with – in relation to employees, patients, doctors and suppliers.

We formed a working group that conducted a gap analysis to highlight areas where additional controls and actions were required to ensure full compliance with PoPI.

Deloitte was appointed to perform a verification of the gap analysis and assisted in the development of an implementation road map. We are in the process of addressing the gaps and rolling out PoPI awareness training throughout the southern Africa operations.

A privacy officer for the Group was appointed effective 1 November 2016.

Labour Relations Amendment Act     Changes to the Labour Relations Act became effective on 1 January 2015, and the impact of the changes in legislation is being addressed as legal precedent develops. The amendment introduced significant changes to the regulation of non-standard forms of employment (part-time), namely temporary employment services (agency staff), employees on fixed-term employment contracts and sessional employees. In order to align with emerging precedent, we made amendments to the way in which we contract with temporary employees.
Proposed amendments to the Medical Schemes Act (MSA)    

The proposed amendments attempt to introduce certain limitations on prescribed minimum benefits which are not currently the case under the MSA. In addition, the section also attempts to make prices charged by medical professionals dependent on a 2006 National Health Reference Price List (NHRPL) tariff that was ruled unlawful by the courts during previous HASA litigation or may negotiate alternative tariffs with the relevant healthcare provider where no co-payment or deductible is payable by a member.

Life Healthcare has submitted comments on these proposed amendments, through HASA, wherein it challenges the basis of the proposed amendments as unlawful.