Integrated Annual Report 2021
Integrated Annual Report 2021

King IV application register

Having adopted the King IV Code on Corporate Governance for South Africa, 2016 (King IV), the principles are entrenched in many of Massmart’s internal controls, policies and procedures, frameworks and supporting structures and business practices. Governance is closely monitored by the Board and relevant Committees. Governance is embedded in the culture of the organisation through our values of respect for the individual, service to the customer, strive for excellence and act with integrity. During this reporting period, the key practices the Board focused on included: driving the Group’s strategy and Turnaround plan, embracing an ethical culture underpinned by the Group’s values, improving stakeholder engagement, driving and embedding good corporate governance and corporate citizenship within the South African economy; particularly during this year with the headwinds faced.

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    Principle 1:
    The governing body should lead ethically and effectively.

    Massmart’s governing body (the “Board”) accepts collective responsibility for the effective leadership of the Group and is ultimately accountable for achieving the Group’s strategy, operating performance and financial results in line with the Group’s corporate governance framework.  The Board endorses and accepts responsibility for achieving the values underpinning good governance, namely: integrity, competence, fairness, responsibility, transparency and accountability. 

    The Board ensures that Massmart’s Code of Ethical Conduct is reviewed and approved on an annual basis. To this end, the updated Code of Ethical Conduct, approved by the Board became effective in February 2021.   It further ensures that the Code of Ethical Conduct and the Group’s ethics policies address the key ethical risks facing Massmart as well as articulate and give effect to the Board’s direction on organisational ethics. Furthermore, the Board ensures ethical behaviour and the Group‘s compliance programmes are consistent with applicable laws and regulations and the Group’s own governance policies, including the Code of Ethical Conduct.

    During the reporting period, the Board focused on driving Group strategy, operating structure, operational and financial performance, corporate citizenship initiatives, stakeholder engagement, ethics and compliance, risk management, governance and other key pertinent business activities of the Group. With respect to the Board and its Committees’ activities, formal Board and Committee papers are prepared for every discussion item on the meeting’s agenda and are distributed timeously to Board and Committee members for deliberation and consideration. Directors are encouraged to take independent advice, at the Company’s cost, for the proper execution of their duties and responsibilities. Directors have unrestricted access to any Executive, manager or associate in the Group and this affords them the ability to make informed decisions. The Board and Committee members receive reports of the Group’s ongoing strategic and operational initiatives timeously in order to devote sufficient time to considering matters on the agenda and to prepare for discussion of those matters. Members of the Board own and take accountability for the execution of their responsibilities and duties, even when these are delegated.

    Massmart’s Board Charter prescribes that Directors must disclose in writing any conflicts of interest including, any share ownership of securities in the Company or in related parties and/or their financial interests in other businesses that may have dealings with the Company either as suppliers or customers, including any competitor of the Company. Directors are reminded of their obligation to disclose any conflicts of interest on a quarterly basis. Director’s declarations of conflict of interest are periodically monitored by the Company Secretary. Additionally, all Directors, associates and officers of the Company are notified as regularly as circumstances may require of restrictions on trading Company securities during closed periods, and thereby reminded of rules on insider trading and implications thereof in terms of the Financial Markets Act.

    The Board and its Committees, specifically through the Social and Ethics Committee are responsible for overseeing and monitoring on an ongoing basis; how the consequences of the Company’s activities affect its status as a responsible corporate citizen; measuring performance against targets of measures set for the environment (including responsibilities in respect of pollution and waste disposal and protection of biodiversity); society (including public health and safety, consumer protection, community development and protection of human rights). The Board further ensures that the organisations’ practices are sustainable. To support its stakeholder inclusive approach, Massmart participates in one-on-one meetings with key stakeholders throughout the year and undertakes regular engagements and themed discussions with subject matter experts.

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    Principle 2:
    The governing body should govern the ethics of the organisation in a way that supports the establishment of an ethical culture.

    The Board is bound and guided by its Charter, and through the Group’s Code of Conduct it ensures that ethical behaviour and compliance with laws and regulations prevails across by the Group. Through the Social and Ethics Committee, the Board monitors and assures that Massmart applies the highest ethical standards as reflected in the Group’s Code of Conduct. In addition, the Code of Conduct articulates and gives effect to the Board’s agenda to promote a culture of organisational ethics.

    In line with best practice Massmart adopted the Walmart Code of Conduct in February 2021 after which, it was distributed to all of Massmart associates, suppliers and contractors. As mentioned the Code of Conduct applies to all associates as well as all members of the Board. In addition, Massmart expects all suppliers, consultants, contractors and other service providers and professional advisors to act in a manner consistent with this Code of Conduct. In order to reinforce this, Massmart’s has included it into our formal trading agreements guiding principles that suppliers are expected to uphold. In addition, Massmart communicates our expectations and relevant ethics messaging to our supplier.

    Massmart continues to ensure that its ethics and compliance programme is well known through associate induction programmes, information booklets, training and continuous communication on the programme initiatives to all associates. To this effect, Massmart achieved its target of 90% employee completion rate on the ethics and anti-corruption compliance training. The Massmart ethics programme further leverages the global practices used and applied by Walmart under its Global Ethics and Compliance programme, a process that has been effective in Massmart.  In order to further drive greater awareness, the Code of Conduct is published on Massmart’s website and is incorporated by reference in supplier and associate contracts.

    Massmart maintains an Ethics Reporting Line that is independently run by KPMG. KPMG follows the External Whistle-blowing Hotline Services Provider Standard E01.1.1.

    Key areas of focus during the reporting period and planned areas of future focus are detailed in the Integrated Annual Report. 

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    Principle 3:
    The governing body should ensure that the organisation is and is seen to be a responsible corporate citizen.

    Massmart’s business model and structure is underpinned by its purpose to save customers money so they can live better. The Board oversees that Massmart’s core purpose and values, strategy and conduct are congruent with it being a responsible corporate citizen and a regenerative company.

    The Board, through the Social and Ethics Committee, is responsible for overseeing and monitoring, on an ongoing basis, how the consequences of Massmart’s activities affect its status as a responsible corporate citizen. This is measured against performance targets agreed with management in support of Massmart’s strategic priorities.

    Massmart is dependent on the transparent trust-based relationships it builds with its customers, associates and trade unions, shareholders, suppliers, regulators, stakeholders and the communities in which we operate.

    The Board continues to focus on and ensure that Massmart drives its responsible business initiatives and agenda successfully and this is monitored by the Social and Ethics Committee. The Integrated Annual Report outlines the arrangements in place for governing and managing the Group’s efforts towards responsible corporate citizenship and sustainability; these include: Massmart’s efforts towards supporting small and medium size local manufacturers and suppliers; socio-economic development; responsible sourcing; efforts to minimise its environmental footprint; its drive towards becoming a regenerative Company; and contributing to society through employment and skills development.

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    Principle 4:
    The governing body 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 assumes responsibility for setting Massmart’s core purpose and values’ strategy and for giving direction on how it should be approached and addressed. The Board annually reviews and approves the Group’s competitive and sustainable strategies, and adopt business plans and budgets for the achievement of short, medium and long-term strategic objectives. In the short-term, the Annual Operating Plan is developed by Management and reviewed by Walmart before it is submitted to the Board for consideration and approval. Progress against this plan is tracked by the Massmart Executive Committee. Over the medium-term a 3-Year-Plan and the execution thereof is monitored by the Board. The Massmart Executive Committee periodically assesses management’s progress against this plan. As part of the Group’s long term strategy, a 5-Year-Plan is developed by the Executive Committee and reviewed by Walmart before it is presented to the Board annually at the Board strategy session for consideration and approval.

    The Board delegates operational strategy implementation and general executive management of the business to its Executive Directors and members of the Executive Committee. In approving Massmart’s strategy, the Board:

    • adopts a holistic view, actively challenges and debates the impact of the proposed strategy on the various forms of capital
    • takes into account the legitimate and reasonable needs, interests and expectations of Massmart’s key stakeholders
    • gives consideration to the interconnectivity and inter-dependence of the various forms of capital, and interests and expectations of material stakeholders
    • considers the material risks and opportunities.

    The Board considers the results of Massmart’s assessment of risks and opportunities emanating from the triple context in which the Group operates and the capitals that the Group uses and affects. The material risks are disclosed in the Integrated Annual Report and are approved by the Risk Committee. Through the Social and Ethics Committee, the Board is able to assess and responsibly respond to sustainability risks that may impact the long-term value creation of the business and/or the reputation of the Group.

    The Board continually monitors Massmart’s general viability and determines whether it appears reasonably likely that the Company will be able to pay its debts as they fall due and payable within the ensuing 12 months or become insolvent within the ensuing 12 months. The Audit Committee reviews the Annual Financial Statements and interim reports, the preliminary reports and any other announcement regarding the Group’s results or other financial information, focusing on (among other matters) the basis on which the Group has been determined to be a going concern.

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    Principle 5:
    The governing body 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, and where appropriate its sub-Committees, approves Massmart’s Annual Financial Statements, Integrated Annual Report, other reports and announcements to stakeholders.  The Board collectively assesses the content of the Integrated Annual Report and accompanying statutory information, and acknowledges its responsibility for ensuring the integrity of the Integrated Annual Report.

    Massmart follows a structured process for identifying material matters to be included in external reports to stakeholders. The Board, through the Audit Committee, assesses and approves management’s basis for determining materiality. The reporting process for all external reports has been guided by the principles and requirements contained in the framework principles set out in the Integrated Reporting Framework of the International Integrated Reporting Council; the King IVTM Report on Corporate Governance for South Africa 2016; Johannesburg Stock Exchange (JSE) Listing Requirements; International Financial Reporting Standards; United Nations Sustainable Development Goals; and the Companies Act of South Africa, No. 71 of 2008, as amended.

    Our Board acknowledges its responsibility for ensuring the integrity of this Integrated Annual Report. It has applied its collective mind to the preparation and presentation of this report and is of the opinion that the report is in accordance with the International Integrated Reporting Council International Framework. The Board has critically assessed the assurance obtained from Massmart’s combined assurance model. It is satisfied that the model enables an effective internal control environment that supports the integrity of information used for internal decision-making by management, the Board and its Committees, and the integrity of the Integrated Annual Report.

    Massmart’s Integrated Annual Report, Corporate Governance disclosures, Annual Financial Statements and other external reports are published and are available on Massmart’s website.

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    Principle 6:
    The governing body should serve as the focal point and custodian of corporate governance in the organisation.

    The Board is wholly responsible for the formulation, development and effective implementation of Group strategy and delegates operational strategy implementation and general executive management of the business to its Executive Directors and Executive Committee. This is achieved through the direction provided by the application of the Board Charter, Memorandum of Incorporation, its respective letters’ of appointment and its application of the King IV Code on Corporate Governance. The corporate governance terms of reference are codified and are reviewed on an annual basis to ensure that they are relevant to Massmart and its strategic objectives. The Board’s sub-Committees play a pivotal role in ensuring that good corporate governance is achieved by embedding the principles enshrined in King IV in their terms of reference and mandates established in their respective Charters, which are ultimately incorporated in the Group business practices.

    The Board, which adopts a unitary model is the focal point for corporate governance within the organisation and its mandate and authority are set out in its Charter. It delegates operational strategy implementation and general executive management of the business to the Group’s Executive Directors and Executive Committee. The Board, through its various sub-Committees, monitors and oversees the Group governance framework. The Board monitors governance and any transgressions thereof are reported to the Board by the management team, represented by the two Executive Directors and the Company Secretary. Digression from the Board’s corporate governance framework is deliberated at Board meetings and is ratified by the Board, where required and where relevant. The Board has the ultimate decision-making authority and relevant policies and protocol which underpin the Group’s operating model are in place to direct Management in the furtherance of governance in the Group.

    The Board has unrestricted access to Massmart’s business and other information it may require to discharge its responsibilities and does engage with members of the Executive Committee and senior management teams to request resources or information at the Company’s cost in line with established governance protocols. These resources include the Board’s ability to obtain professional and expert guidance or advice on matters presented by management. Additionally, the Board (either itself or through the sub-Committees) has access to all of the Group’s strategic and operational information, records, documents and property and has unfettered access to any associate of the Company it may wish to engage to enable the Board to properly assess the Group’s operating landscape in a holistic manner.

    Massmart adopts the Board’s corporate governance framework. The Board is responsible for directing the Group towards achieving high standards of corporate governance and is ultimately accountable for the Group’s strategy, operating performance and financial results, aligned to the Group’s corporate governance framework.

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    Principle 7:
    The governing body 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 Board of Directors are appointed and elected in accordance with the South Africa Companies Act No 17 of 2008, as amended, the JSE Listings Requirements and in line with King IV principles. Each Director is selected for the experiences, expertise, knowledge and leadership competences he or she brings to the Board to ensure that the best interests of the Group are served in an effective manner. The range of skills and expertise on the current Massmart Board include, but are not limited to: leadership, strategy, corporate governance, ethical governance, finance and accounting, operational management, internal control environment, digital, ecommerce and technology, emerging markets, marketing and merchandising, supply chain, responsible business, FMGC and retail, real estate strategy and investor relations and corporate affairs. In addition to the aforesaid skills the Board is strengthened by the cultural, gender and racial diversity of its composition.

    There is a clear split of roles and responsibilities on the Board and cross functioning is achieved through members of the Board having cross-Committee membership. The roles of the Chairman and the Chief Executive Officer are separated. A balance of power is maintained and all major decisions considered by the Committees are tabled to the Board for holistic consideration and approval.

    Regarding its position on diversity, the Board, through the Nominations Committees, established, adopted and implemented a Gender and Race Diversity Policy. The Board’s diversity is one of Massmart’s strengths. With combined experience ranging from global retail and commercial experience, to business and finance experience and length of service, Massmart’s Board is well-positioned to add value to the business. The Board continues to meet its gender equality target by appointing 44% of women to independent non-Executive Director positions (target 40%). The Board has also met its target of appointing 50% African, Coloured and Indian candidates to the Board, with 67% Board members meeting this criteria.

    The Nominations Committee is responsible for conducting a search of replacement non-Executive Directors and undertakes a full inquisition into candidates identified for Board membership and recommends suitable candidates to the Board. Once the Board has approved the appointment of a Director, the Company Secretary ensures that the Director attends a rigorous Board induction programme in which a detailed overview of the Group, its regulatory landscape, its strategic objectives, risk and governance framework and its operational structure are explained. The Director induction is robust and affords the newly appointed Directors the opportunity to maximise their impact on the Board within the shortest time.

    The Board, through the Nominations Committee, frequently discusses and reviews succession planning of Executive Directors, Executive and Senior Management including, the Chief Executive Officer and the Chief Financial Officer.

    While the Board of Directors delegates its authority to the five sub-Committees and the Executive Committee, it exercises overarching oversight on matters within the Board’s mandate. The Board is able to monitor the matters dealt with by the sub-Committees through its members attending the sub-Committee meetings as members or invitees, and the reports of the respective sub-Committee chairs are shared with the Board on a quarterly basis. Additionally, the minutes of the sub-Committee meetings are further included in the Board pack for deliberation and noting. Each Chairman of a sub-Committee provides verbal feedback at the quarterly Board meetings.

    Directors are categorised as Executive, non-Independent non-Executive and Independent non-Executive, and this is disclosed in the Integrated Annual Report and on the Massmart website. Currently, 44% of the non-Executive Directors of the Board are considered to be independent. The remaining 33% of the non-Executive Directors are nominee representatives of the majority shareholder, Walmart. The non-Executive Chairman of the Board is deemed independent. The Deputy Chairman of the Board acts as the lead Independent non-Executive Director. A robust assessment of the independence of the Board is conducted on an annual basis under the guidance of the Company Secretary, in line with the principles set out in King IV recommended practices (RP 27 and RP 28) read with paragraph 3.84(e)(iii) of the JSE Listings Requirements and section 94(4) of the Companies Act, no 71 of 2008.

    A rigorous review of the independence and performance of independent non-Executive Directors serving longer than nine years is undertaken by the Nominations Committee and its outcomes are reported to the Board. Following this independence review, and on the recommendation of the Nominations Committee, the Board is satisfied that there are no relationships or circumstances likely to affect, or which may appear to affect, the judgement of Kuseni Dlamini notwithstanding his tenure of seven years on the Board.

    All Directors and the Company Secretary declare and disclose any conflicts of interest they may have in accordance with the provisions of section 75 of the Companies Act no 71 of 2008. None of the Board members hold securities in the Group which are deemed to be material to their personal wealth. Two of the independent non-Executive Directors hold minor equity interests in Massmart. The Directors’ interests are disclosed on an annual basis in the Directors’ Report of the Annual Financial Statements.

    Directors of the Board are subject to, and participate in annual formalised assessments conducted by the Company Secretary. The annual assessment considers and evaluates the performance of each Director having regard to their technical knowledge, skill-set and experience and further considers the effectiveness of each participant in their role on the Board and its Committees. The 2021 annual Board assessments results indicate that all members of the Board are adequately and suitably equipped with knowledge, skills and experience to discharge of their duties and do so effectively, and that the Board and its Committees are all comprised of an encouraging mix of skills and varied experiences. The abridged curriculum vitae of each Director and the Company Secretary appear on the Massmart website.

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    Principle 8:
    The governing body 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.

    By conducting annual self-assessments, the Board aims to ensure the effectiveness of Board structures and governance procedures. The Board actively delegates its authority to the five sub-Committees and the Executive Committee in accordance with the scope and mandate prescribed in their respective Charters. These include the Charters for the Audit, Risk, Nominations, Remuneration and Social and Ethics Committees. All Board sub-Committee Charters deal with the respective sub-Committee roles, duties, functions, responsibilities, mandate required composition, objectives, purpose and activities, delegated authorities – including the extent of power to make decisions, tenure and reporting mechanisms to the Board.

    While the Board of Directors delegates its authority to the five sub-Committees and the Executive Committee, the ultimate authority and responsibility vests with the Board and any responsibilities which have not been delegated to the sub-Committees remain the responsibility of the Board. The minutes of the sub-Committee meetings are included in the Board pack for deliberation and noting and each Chairman provides verbal feedback at the quarterly Board meetings. The Board further reviews and approves sub-Committee Charters annually. The Board is able to monitor the matters dealt with by the sub-Committees through attending the sub-Committee meetings as members or invitees, and the reports of the respective sub-Committee chairs are shared with the Board on a quarterly basis.

    The Board and sub-Committee Charters enable cross membership between the Board and its sub-Committees which in turn require coordinated timing of meetings to avoid duplication or fragmented functioning, insofar as possible, and consequently the Board is able to achieve effective collaboration. There is a balanced distribution of power in respect of membership across Committees, so that no individual has the ability to dominate decision-making, and no undue reliance is placed on any individual. The Massmart’s Board Charter ensures that a relevant system of policies and procedures is in place to ensure control and the devolution of authority and responsibility to individuals as identified and delegated.

    Each of the five Massmart Board sub-Committees comprise no less than three members and the Board sub-Committee meetings are attended by senior management, as and when invited. Some members of the Executive Committee have standing invitations to certain sub-Committee meetings. Senior management’s attendance at Board sub-Committee meetings is disclosed in the Integrated Annual Report.              

    The sub-Committees are responsible for the following duties, responsibilities:

    Audit Committee

    The Audit Committee oversees the continued application of a combined assurance model which provides a coordinated approach to all assurance activities and ensures that the combined assurance received from management and internal and external assurance providers, is sufficient to address all identified significant risks. The Audit Committee also oversees the internal financial controls and any reporting, fraud and Information Technology risks that may affect the integrity (i.e. accuracy and reliability of information) of the Integrated Annual Report and other external reports within its mandate. The Audit Committee manages the relationship with the Group’s internal and external auditors and assesses their independence and effectiveness.

    Risk Committee

    The Risk Committee assesses and exercise oversight of Massmart’s risk management and governance. The Audit and Risk Committees are separate committees and there is cross-functionality of its members.

    Remuneration Committee

    The Remuneration Committee oversees fair and responsible Group remuneration policies and protocols.

    Nominations Committee

    The Nominations Committee is responsible for nominating, electing and appointing Board members and Executive management by the Board as well as succession planning, and conducting Board evaluations.

    Social and Ethics Committee

    The Social and Ethics Committee is responsible for overseeing and reporting on ethics, employment equity, transformation, responsible corporate citizenship, sustainable development, health and safety and stakeholder relationships.  It is also responsible to execute on its statutory duties as set out in the Companies Act.


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    Principle 9:
    The governing body 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.

    On an annual basis, the Board and its sub-Committees undergo an informal, internally conducted assessment navigated by the Company Secretary to consider the balance of skills, expertise and competencies of the Board and its sub-Committees. In addition to this, an external evaluation regarding the Board’s effectiveness to assist in identifying and addressing opportunities for improvement is conducted every three years.

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    Principle 10:
    The governing body should ensure that the appointment of, and delegation to, management contribute to role clarity and the effective exercise of authority and responsibilities.

    Massmart operates under a formal Delegation of Authority (“DoA”) framework, which is reviewed and updated by the Board on an annual basis. The DoA sets the direction and parameters for the authority and powers which are to be reserved for the Board and those that are to be delegated to the Executive Directors (the Group CEO and Group CFO) and management. The framework defines the Board’s level of materiality and approval thresholds and clearly sets out the instances in which the Board’s authority is reserved. The Executive Committee manages and oversees the day to day affairs of the Group in line with the DoA conferred on them by the Board and key executives of Massmart’s major subsidiaries lead and oversee key operational and management functions of the operating subsidiaries in line with the Group’s strategic, operational and financial objectives.

    The Board is satisfied that the powers and responsibilities delegated to the Executive Directors, in particular the Group CEO, are clear and effectively discharged, and that the Group CEO provides effective leadership and management of the Group’s business affairs and he is accountable to and reports to the Board on a regular basis within the scope of his service contract.

    The Group CEO’s overall responsibility is to lead the Company effectively and implement the policies and strategies adopted by the Board. The CEO chairs the Massmart Executive Committee and the business unit Management operating Committees reports to the Group and further to the Board, thereby having the CEO serving as the chief link between management and the Board.  

    The Board is assisted by a competent, suitably qualified Company Secretary who has the necessary qualification, competence and expertise required of a Company Secretary. In as much as the Company Secretary is employed by the Board, he is appointed by Massmart on a full-time basis and is empowered to properly fulfil the duties and statutory obligations set out in section 88 of the Companies Act 71 of 2008. The Company Secretary has an arm’s length relationship with the Board, notwithstanding the access to guidance and counsel that the Board enjoys from the company Secretary. Measures are in place for the Board to assess adherence to the DoA and delegated executive management responsibilities, including regular review of prevailing governance protocols and risk management processes. The Risk Committee serves as an independent source of assurance for the Board in relation to adherence to the DoA and other governance protocols.

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    Principle 11:
    The governing body should govern risk in a way that supports the organisation in setting and achieving strategic objectives.

    Through its risk framework, the Board takes responsibility for ensuring that the Group implements an effective process to anticipate and identify risk, measure its potential impact and implement steps it believes are necessary to proactively manage associated risks and identify opportunities. When approving Massmart’s strategy, the Board takes into consideration the strategic opportunities available and the related risks associated with its strategy.

    The risk policy includes all of the following: Massmart’s definitions of probabilities and risk management; risk management objectives; the risk approach and philosophy; and the various responsibilities and ownership for risk management within Massmart, which enable the achievement of organisational objectives.

    Massmart’s risk framework encompasses both the potential positive and negative effects of identified risks on the achievement of the organisational objectives; this is documented in the risk framework. The Board considers operational; strategic; regulatory; financial and reputational risks in executing its duties and considers risk as an integral part of its decision-making. In considering the potential loss appetite of the organisation, the Board is mindful of the following factors: the cause of the risk; the amount of the loss; the impact and management response; any current or envisaged risks threatening Massmart’s sustainability, and the effectiveness of its risk management controls.

    The significant opportunities available to Massmart are determined by taking the following qualitative elements into consideration: Massmart’s definition of purpose; the internal and external risks affecting Massmart; how Massmart streamlines its processes and behaviours to be more responsive to customer demands; and opportunities to maximise stakeholder value in the most efficient manner.

    The Board, through the Massmart Chief Information Officer (CIO) Forum, ensures that adequate contingency plans are in place to ensure business continuity in the event of the destruction of major assets, head offices, IT sites, and/or loss of executive teams. These include, but are not limited to formal Divisional Business Continuity Plans; significant focus on IT back-up and redundancies; off-site documentation storage and retention; and cyber and IT security. 

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    Principle 12:
    The Board should govern technology and information in a way that supports the company setting and achieving its strategic objectives.

    The Board is responsible for ensuring proper system security, data integrity and disaster recovery, but this is given effect by the Audit Committee, the CIO, an IT-Governance sub-Committee and Massmart’s formally contracted Information Technology (IT) business partners and service providers. There is a comprehensive information and technology framework in place that outlines the structures processes and mechanisms that will enable the delivery of value to the business and reduce information and technology risks.

    Massmart aligns its IT teams with best practice frameworks including the Information Technology Information Library (ITIL), Control Objectives for Information Technology (COBIT) and National Institute of Standards and Technology (NIST) Cyber Security Framework and the Group’s own IT Policy framework. Measures are in place to ensure compliance with all relevant laws, information security and the protection of personal information. The CIO and the IT-Governance sub-Committee are tasked with ensuring proper system security, data integrity and disaster recovery. Through its link into Walmart Information Technology and Information Security Departments, Massmart receives frequent updates regarding any concerns and security threats that are identified internationally, as well as active monitoring of Massmart owned and managed IT systems.

    This information is shared with Massmart’s business units through the Divisional CIOs. Active network monitoring and profiling is managed through industry best-practice tools and firewall traffic is submitted real-time to Walmart’s Security Operations Centre for interrogation.

    As a responsible retailer, Massmart is committed to ensuring that all internal e-waste is discarded in a safe, responsible and secure manner, minimising the risk to human health and the environment and maintaining the security of public and private information. The Board, through the Risk Committee and Massmart’s Compliance department, oversees the protection of privacy and personal information. To ensure that management keeps abreast of changing regulation and best practices across all jurisdictions in which Massmart operates, regular meetings are held with management to discuss regulatory requirements and identified risks and opportunities. Data privacy training has been conducted throughout the Group to increase awareness of data privacy compliance requirements. An independent Global Risk Assessment team also completes a risk assessment on the privacy programme annually.

    The Board receives independent assurance on the effectiveness of technology and information internal controls from internal and external auditors. Massmart Audit Services (MAS) not only assesses the processes and controls around large projects, but also assesses the control environment within existing systems and the Group’s general computer control environment.  MAS adopted the Control Objectives for Information and Related Technologies (COBIT) methodology for technology auditing several years ago.

    Massmart has cyber security insurance which assists with reducing the associated cost-impacts related to security incidents. This can also be utilised to assist with the liability exposure for Members of the Board.

    Massmart is committed to the highest level of information and technology governance, as managed by the Group CIO. The Board is satisfied that Massmart complies with the significant governance principles in King IV, and has identified information and cyber security as an area for future focus.

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    Principle 13:
    The governing body 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.

    Massmart’s Delegation of Authority delegates responsibility for implementation and execution of effective compliance management to senior members of management and/or members of the Massmart Executive Committee. The Board ensures compliance with laws and regulations by the Group and the Group’s own governing documents, Code of Conduct and legal standards. Massmart has a Risk and Compliance Committee which comprises of certain Massmart’s Executive Committee members and senior management and they are responsible for embedding compliance within the Group as delegated by the Board. This Committee reports back to the Risk and Social and Ethics sub-Committees of the Board. The Board approves the Ethics Code of Conduct, which contains our Compliance Policy Statements and commitment which is implemented by management. By reviewing and approving the Ethics Code, the Board sets the direction on the adoption of the Group’s Ethics and Compliance philosophy.

    The Board has oversight of the effectiveness of the Group’s commitment to the principles of good corporate governance and ensuring that compliance is reviewed regularly. This ensures that there is a general understanding of the rights and protections afforded by the compliance measures implemented. Massmart’s Risk and Social and Ethics Committee is responsible for ensuring that the Group embeds its ethics and compliance philosophy and approach, as directed by the Board. Massmart has a centralised Group Ethics and Compliance function which leverages the Walmart Global Ethics and Compliance Programme that aims to leverage best practices in respect of Compliance risks and strives to comply with all local risks. The Board has an overview of the arrangements for governing and managing compliance and the key areas of focus during the reporting period. Through the Risk and Audit Committees, the Board determines, on an ongoing basis, what independent assurance is needed to manage the effectiveness of compliance management. The Board, through its Risk and Audit Committees monitors the tracking of risks and the outcomes thereof. This is the manner in which the Board ensures effective compliance management.

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    Principle 14:
    The governing body 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 Remuneration Committee assists the Board to oversee a formal and transparent procedure for developing and implementing a fair and responsible policy on remuneration that enables the Group to recruit, retain and motivate talent in order to create value for the Company over the long term. The Remuneration Policy sets out arrangements for ensuring that the remuneration of Executive Management is fair and responsible in the context of overall employee remuneration in the Group. As documented in the Remuneration Policy, the Remuneration Committee is committed to reviewing remuneration at all levels, as well as comparing remuneration between levels, to ensure that progress is made in addressing any inequality identified in the Group, whilst at the same time ensuring that key associates and Executives are remunerated competitively, ensuring internal equity and market competitiveness across all levels.

    Massmart’s total reward offering is clearly described and defined in the Remuneration Policy, including an explanation of: base salary, and financial and non-financial benefits; sign-on, retention and restraint payments; termination and severance payments; any commissions and allowances; and a description of the fees paid to the non-Executive Directors. Massmart’s Remuneration Policy defines the Group’s short and long-term incentives, both of which are aligned to the strategic objectives of the Group. Massmart’s incentive schemes are aligned to the achievement of Group financial and strategic objectives, directly linking this remuneration component to Company financial performance and the sustained creation of shareholder value. The Remuneration Policy sets out the use of performance measures that support positive outcomes across the economic, social and environmental context in which the Group operates. The non-financial metrics include, not in order of importance: the business objective of improvement against the B-BBEE score; improved customer satisfaction, addressing team or business unit management succession, food safety, market share gains, completing specific significant projects or interventions, new product category or geographic market developments, etc. This is in line with the Group’s culture and values, whilst aligning remuneration with stakeholder interests and best practice in the retail environment.

    Massmart’s Remuneration report is presented in the three sections in the Integrated Annual Report: Section one serves as a background statement with the Remuneration Committee Chairman’s letter to the shareholders; Section two provides an overview of Massmart’s remuneration philosophy and policy; and Section three reports on Massmart’s implementation of the Remuneration Policy during the year under review.

    Massmart tables its Remuneration Policy and the implementation thereof for two separate non-binding advisory votes at all of its Annual General Meetings. If 25% or more of the shareholders vote against either resolution at the Annual General Meeting, the Board commits to inviting dissenting shareholders to engage with the Remuneration Committee on their concerns.

    At the May 2021 AGM, 9.1% of the shareholders voted against the Remuneration Policy, and 4.8% of the shareholders voted against the remuneration implementation report.

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    Principle 15:
    The governing body 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 Audit Committee, on behalf of the Board, oversees the effectiveness of the Group’s governance and internal control systems and of ensuring coordination between the activities of internal and external audit. Massmart’s combined assurance model enables an effective control environment; supports the integrity of information used for internal decision making by Management and the Board; and supports the integrity of the Group’s external reports.

    Massmart adopts a collaborative approach to risk identification, mitigation and assurance activities between the management of the various Divisions, Head Office support functions and internal and external assurance providers. The Divisional risk committees give feedback on their significant risks and material matters to the Risk Committee, who ultimately own and manage risks, and in turn give feedback to the Board thereon.

    The Board, through the Risk Committee, objectively reviews the Group’s combined assurance model bi-annually, forming an opinion on the integrity of information and reports, and the degree to which an effective control environment has been achieved. An important role of Massmart’s Audit Committee, as delegated by the Board, is to monitor and supervise the effective function of Massmart Internal Audit Services to provide an objective overview of the operational effectiveness of the Group’s systems of internal control and reporting. The Board, through the Audit Committee, reviews and approves the Audit Committee Charter, internal audit coverage plan and budgets and satisfies itself that the coverage plan makes provision for effectively addressing, the critical risk areas of the business, including addressing its role within combined assurance and the internal audit standards to be adopted.

    It further ensures that the arrangements for Massmart Internal Audit Services provide for the necessary skills and resources to address the complexity and volume of risk faced by the Group, and that Massmart Internal Audit Services is supplemented as required by specialist services such as those provided by forensic fraud examiners and auditors, safety and process assessors, and statutory actuaries. The Chief Audit Executive has unrestricted access to anyone in the Group, has frequent and independent discussions and updates with the Audit and Risk Committee Chairmen and Massmart Executive Directors.

    Massmart Internal Audit Services apply the standards of the International Standards for the Professional Practice of Internal Auditing and the recommendations of King IV. In accordance with the International Standards for the Professional Practice of Internal Auditing, it has been determined that Massmart Internal Audit Services will be subjected to an independent external quality assessment review at least once in five years.

    The Board and its sub-Committees assume responsibility for the integrity of the Group’s issued external reports, and through the Audit Committee sets the direction for how assurance of the external reports should be approached and addressed.  Massmart has obtained assurance on the data included in the Integrated Annual Report from the following sources:

    • Group and Company Annual Financial Statements are audited by Ernst & Young
    • Emissions and renewable energy data was externally verified by GCX Africa
    • Massmart’s B-BBEE scorecard was verified by Honeycomb BEE Ratings
    • Massmart Internal Audit Services assured corporate social investment, sustainability and human capital performance indicators
    • Execution of combined assurance plan and reporting monitored by the Audit Committee, which reports to the Board on a quarterly basis
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    Principle 16:
    In the execution of its governance role and responsibilities, the governing body 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.

    Massmart’s purpose is to save customer’s money so they can live better. Our ability to fulfil this purpose is dependent on the transparent trust-based relationships we build with our customers, associates, shareholders, suppliers, regulators and the communities in which we operate. The Board, through the Social and Ethics Committee, is responsible for the governance of stakeholder relationships by providing guidance on stakeholder engagement policies and monitoring the quality of stakeholder relationships.

    Management develops a strategy and formulates policies and mechanisms for the management of relationships with each stakeholder grouping. Through regular reporting by management to the Social and Ethics Committee and the Chairperson of that Committee to the Board, the Board is equipped with the necessary information to enable it to take the legitimate interests and expectations of our material stakeholders.

    In order to identify relevant issues, the following forms of engagement are used:

    i.desktop research to identify topics of interest in the broader public discourse;

    ii.track media coverage to understand leading public viewpoints;

    iii. assess the materiality of these issues to the Group through workshops and engagement with subject matter experts and interested parties; and alignment to broader Group objectives and priorities.

    Stakeholder engagement activities occur on an ongoing basis throughout the year. Massmart participates in numerous one-on-one meetings with key stakeholder groupings and undertakes regular engagements and themed discussions with subject matter experts. Massmart seeks opinion from customers through day-to-day liaison, call centres, online, surveys and social media. Massmart seeks opinion from suppliers through advocacy surveys, site visits and workshops. Engagement occurs as needed throughout the year. Engagement with associates occurs through regular interactions, performance reviews and career planning discussions, internal communication, town hall meetings and BUA employee engagement survey. Massmart actively engages trade unions and bargaining councils on industrial and labour relations. Through its Corporate Affairs Function, Massmart is involved in public policy discussions with government and civil society representatives, and engage consumer interest groups. There is regular engagement and facilitated discussion with regulators and industry bodies in respect of legislative developments. Furthermore, Massmart, through its Executive Management engages with shareholders through investor presentations, meetings and road-shows, as well as during the Annual General Meetings.