Annual integrated report 2011

Corporate governance report

Netcare is committed to and fully endorses the principles of good corporate governance recommended in the King Code of Corporate Practices and Conduct.


The directors and employees of Netcare strive to manage the Group in an efficient, accountable, transparent and ethical manner. This ethos is embedded in all the Group's activities, with Netcare's governance framework encompassing more than compliance with legislation. This commitment has been endorsed by the awards won by Netcare in reporting and related activities. The governance framework has been developed to attain a number of objectives and goals, which include the Group's strategic objectives within compliance requirements, balancing the interests of stakeholders, minimising and avoiding conflicts of interest, and practicing good corporate behaviour. Sound corporate governance practices are implicit in our values, culture and processes.

11 For Netcare's 2011 awards.

King III

Netcare is committed to and fully endorses the principles of good Corporate Governance recommended in the Code of Corporate Practices and Conduct set out in the King Report on Corporate Governance for South Africa (King III). Netcare followed a formal process to implement the recommendations of King III. Benchmarking Netcare's practices against King III established that the majority of principles have been applied, with the exception of those outlined below.

Apply or explain principle

The Audit Committee and the Remuneration Committee is not chaired by an independent non-executive director as defined by King III. This was deemed appropriate by the Board given HR Levin's extensive commercial and business experience, knowledge and skill that contributes to the effective functioning of both committees.

It has been decided that T Brewer, an independent non-executive director, will chair the Audit Committee and will join the Remuneration Committee as a member from 2012. HR Levin will continue to chair the Remuneration Committee and will continue as a member of the Audit Committee. In 2012 the Risk Committee will be strengthened with additional members, namely SJ Vilakazi, MJ Kuscus and N Weltman.

A combined assurance model has not been formally implemented. The Audit Committee and the Board recognises that an integrated approach to risk management can improve assurance coverage and quality. Consequently, a combined assurance model has been developed by Group Internal Audit that can be applied to major risks indentified. The proposed model has been considered by the Audit Committee and will be implemented by Group Internal Audit in 2012. Group Internal Audit resides within Group Risk, Audit and Forensic Services (GRAFS).

Sustainability performance and reporting has not been independently assured. The information was subject to stringent internal review and independent assurance will be contemplated in 2012.

King III requires non-executive directors to be paid an attendance fee and a base fee. Netcare has elected to pay non-executive directors a fixed fee for services rendered. The rationale is that services of directors extend beyond the boardroom and are therefore not confined to attendance at meetings.

King III requires the disclosure of the top three earners who are not directors. After significant deliberation it has been decided not to disclose this information due to the highly competitive market in which the Group operates, and the significant risk of losing key personnel.


The Board is committed to complying with all applicable legislation and regulations, and keeps informed of changes to standards and codes, as well as relevant sector developments that could potentially impact the Group and its operations. The Board also requires all business units, departments and subsidiaries to conform to applicable laws. For the period under review, the Board is satisfied that the Company complied with the Listings Requirements of the JSE Limited and the substance of the principles embodied in King III.

The Companies Act No 71 of 2008 came into effect on 1 May 2011. In anticipation of the Companies Act, Netcare prepared an action plan to address critical areas of governance and legislative oversight. This included a thorough review of directors' duties and the determination of the Company's prescribed officers, to ensure a suitable response to the codified level of responsibility and increased liability on directors.

The Board has been apprised of these issues and Netcare does not foresee any difficulties in meeting the requirements of the new legislation. The Company convened a meeting of shareholders on 6 October 2011 to approve a special resolution permitting the Company to provide direct or indirect financial assistance to entities within the Netcare Group, in terms of section 45 of the Companies Act. This resolution was unanimously approved.

Schedule 5(4) of the Companies Act provides for companies to change their Articles of Association by filing an amended memorandum of incorporation (MOI) within two years of the Companies Act coming into effect.

To align its current MOI with the Companies Act, Netcare intends amending its MOI before 1 May 2013.

The Board has been advised of the intent and requirements of a Social and Ethics Committee as prescribed by section 72(4) and regulation 43 of the Companies Act. It intends to appoint a Social and Ethics Committee before 1 May 2012 with due regard to the functions of other board committees.

The Consumer Protection Act No 68 of 2008 came into effect on 31 March 2011 and Netcare has amended its practices to align with this legislation.

The Board has noted its duty to ensure that Netcare complies with applicable laws and considers adherence to non-binding rules, codes and standards as an integral part of doing business. The Board and senior management remain informed of the requirements of competition legislation and other legislation that impacts the healthcare sector. Netcare's review of the National Health Insurance system and related legislation is addressed in the SA Health policy and regulation report on page 48. The Risk Committee has included compliance as a risk to be monitored, to mitigate any potential impact on the Netcare business, and aims to fortify the compliance review and monitoring framework in 2012.

Board of directors

Structure, composition and rotation

King III imposes specific responsibilities on the Board. The directors embrace these and acknowledge that the Board is primarily responsible for ensuring that Group strategy, risk, performance and sustainable are inseparable. It provides effective leadership based on an ethical foundation of responsibility, accountability, fairness and transparency.

Netcare has a unitary Board structure that comprises an appropriate balance of executive and non-executive directors. At 30 September 2011, the Board comprised 11 directors, two of whom are executive, and six of the nine non-executive directors are independent. The biographical details of the Board of directors at 10 November 2011 are provided on pages 14 and 15.

T Brewer was appointed as an independent non-executive director with effect from 24 January 2011.

VE Firman resigned as Group Financial Officer and executive director with effect from 31 July 2011. KN Gibson was appointed as Acting Group Financial Officer on 1 August 2011, and on 10 November 2011 he was appointed as Group Financial Officer and executive financial director.

MI Sacks retired from the Board as a non-executive director effective 30 September 2011. VLJ Litlhakanyane announced his resignation on 30 September 2011, effective 31 December 2011.

The directors of Netcare have a wide range of expertise and significant experience in strategic, financial, commercial and healthcare activities. Moreover, they are drawn from diverse backgrounds that reflect the South African demography and bring extensive experience, insight and professional skills to the Board, ensuring effective leadership of Netcare. The Board is led by the Chairman, SJ Vilakazi, who is an independent non-executive director.

Generally, directors have no fixed term of appointment and retire by rotation every three years. If available, they are considered for re-appointment at the annual general meeting. The Chief Executive Officer, RH Friedland, is not required to stand for re-election.

Upon appointment directors are provided with relevant Company information and guidance on their legal obligations. As part of a formal induction process, meetings with senior executives are scheduled to inculcate an understanding of Netcare's complex business.

The Nominations Committee considers executive and non-executive succession planning, and makes recommendations regarding appointments to the Board. This process encompasses an evaluation of the skills, knowledge and experience required to implement Group strategy as well as due consideration for transformation imperatives. The Board periodically reviews the composition of the Board and its committees to ensure it maintains the requisite skills and independence. The Board intends increasing the number of independent non-executive directors during 2012. Due consideration will be given to diversity and independence, and the new directors will help ensure the Board benefits from fresh skills and experience.

Independence and performance

The Board assesses the performance of the Board and its individual directors as well as their independence on an ongoing basis. To assist the Board in this process, the Chairman of the Board and the respective chairmen of the Board committees meet with the Group Chief Executive Officer to evaluate the independence of directors, Board effectiveness and individual Board member performance. This process is supported by the deliberations of the Nominations Committee at a specially convened meeting, held for the period under review on 28 October 2011.

In 2011, a Board evaluation was conducted by way of a questionnaire and a personal evaluation to ensure the appropriate assessment of Board composition, Board effectiveness and director development. The Board also deliberated the merits of using an external facilitator to assist in its evaluation in 2012 to ensure enhanced Board effectiveness.

Messrs JM Kahn and APH Jammine have served as independent nonexecutive directors for more than nine years. The Board performed a rigorous review on both an objective and subjective basis, and is satisfied that there are no relationships or circumstances likely to affect, or which appear to affect, their judgement. The Board is also satisfied that their independence is not affected or impaired by their length of service.

The Board is also satisfied that the Chairman of the Board, SJ Vilakazi, is independent and free from any conflicts of interest. It should be noted that no one director on the Board exercises unfettered power, which ensures an equitable balance of power and authority.

The performance of the Board and its committees are also assessed annually against the applicable terms of reference.

Board responsibilities and charter

The Board is accountable to shareholders and other stakeholders for the performance of the Group. It is responsible for the strategic direction of the Group and its primary objective of creating and building sustainable value for all its stakeholders. It does this by establishing goals for management and monitoring the achievement of these goals.

A Board Charter is in place, which articulates the Board's role, objectives and responsibilities, and the requirements for its composition and meeting procedures. The Charter was amended in 2011 to incorporate a review of stakeholder reports on a periodic basis to ensure the interests of the Company are suitably balanced against the legitimate interests of stakeholder groups.

Netcare participated in a pilot project in 2011 focusing on enhancing stakeholder relationships. In 2012, the Board intends to develop an overarching stakeholder strategy that will define stakeholder groups, outline how stakeholders should be identified and define a stakeholder communication guideline. This will clarify roles and responsibilities regarding communication with stakeholders.

The Board Charter has also been amended to ensure disputes are resolved effectively and efficiently as possible. Alternate Dispute Resolution is considered by Group Legal in respect of all contracts negotiated. As such, a formal policy on Alternate Dispute Resolution will be reviewed in 2012 but is not considered a priority for the immediate future.

Board meetings

The Board met four times during the year in Sandton, with all meetings convened by formal notice. Ad hoc meetings are held when necessary. Information is distributed in a timely manner prior to Board meetings, to facilitate adequate preparation for these meetings.

Attendance of directors at Board meetings during the year ended 30 September 2011

Director Status Attendance
T Brewer1 Independent non-executive 3/4
APH Jammine Independent non-executive 4/4
JM Kahn Independent non-executive 4/4
MJ Kuscus Independent non-executive 4/4
KD Moroka Independent non-executive 4/4
SJ Vilakazi Independent non-executive 4/4
HR Levin Non-executive 4/4
MI Sacks2 Non-executive 4/4
N Weltman Non-executive 4/4
VE Firman3 Executive 3/4
RH Friedland Executive 4/4
KN Gibson4 Executive 1/4
VLJ Litlhakanyane5 Executive 4/4
1 Appointed 24 January 2011.
2 Retired 30 September 2011.
3 Resigned 31 July 2011.
4 Appointed 10 November 2011 (Acting CFO 1 August 2011).
5 Resigned 31 December 2011.

Board committees

In accordance with the established principles of delegation of authority, the Board has delegated specific duties to Board committees, which are responsible for assisting the Board in discharging its responsibilities and providing an in-depth focus on specific areas. During the year there were six Board committees in place. Each committee acts within the ambit of clearly defined terms of reference approved by the Board. These terms are periodically reviewed and have been updated to address the recommendations of King III and the requirements of the Companies Act.

The Board committees meet independently and provide feedback to the main Board through their chairpersons. In addition, all committee meeting minutes are included in the main Board pack and all directors can raise any questions arising from these minutes. The various chairpersons have confirmed to the Board that the terms of reference have been materially complied with.

Audit Committee

The Audit Committee met three times during the financial year. The Audit Committee's terms of reference were reviewed extensively as of 1 May 2011 to incorporate the requirements of section 94 of the Companies Act. The terms of reference were tabled and approved by the Board, and require the Audit Committee to, inter alia, review the Company's financial statements and accounting policies; monitor internal control systems; liaise with Group Internal Audit through closed sessions (if so required); audit Information Technology (IT) and provide internal framework assurance; determine the scope of internal and external audit functions; perform the functions required under the Companies Act on behalf of all subsidiary companies of Netcare; oversee the integrated reporting process and recommend the integrated report to the Board for approval; as well as all other statutory functions as disclosed in the Audit Committee report. This also includes the formal approval of the appointment of the Audit Committee by shareholders in 2012.

The Audit Committee in conjunction with the Board also critically reviewed the requirements prescribed by section 94 (4) in relation to Audit Committee members and concluded that the minimum requirements have been met.

Risk Committee

The Risk Committee met twice during the year. The responsibilities of the Risk Committee are to, inter alia, determine policy regarding Group risk appetite; determine the nature, role, responsibility, authority and scope of risk management functions in the Group; develop procedures to quantify and measure business risks and IT risks; develop risk mitigation action plans; and identify and assess risks facing the Group.

The Risk Committee satisfied all its responsibilities in accordance with its terms of reference.

Nominations Committee

The Nominations Committee met on an ad hoc and informal basis during the financial year, and convened a special meeting post financial year-end. The responsibilities of the Nominations Committee are to, inter alia, review the structure, size and composition of the Board and its committees; evaluate the leadership needs of the Company and succession planning; and identify and nominate candidates for Board appointment.

The Nominations Committee considered the independence criteria as defined by King III of all non-executive directors, including those directors whose term exceeded nine years, and satisfied itself that all directors on pages 14 and 15 that are classified as independent are independent.

Board committees

Composition of Board committees

at 30 September 2011












Quality Leadership


T Brewer1                    
VE Firman2 Inv                  
RH Friedland Inv     Inv   Inv    
APH Jammine       Chair          
JM Kahn     Chair              
MJ Kuscus     Inv           Chair    
HR Levin Chair           Chair        
VLJ Litlhakanyane3                
KD Moroka4                   Chair
MI Sacks5              
SJ Vilakazi Inv   Inv       Inv   Inv
N Weltman                    

Committee attendance

at 30 September 2011












Quality Leadership


T Brewer1 2/3                    
VE Firman2     2/2                
RH Friedland     1/2   Inv       1/1   2/2
APH Jammine 3/3       1/1   2/2        
JM Kahn     2/2   1/1            
MJ Kuscus                 1/1    
HR Levin 2/3       Inv   2/2        
VLJ Litlhakanyane3     1/2           1/1   2/2
KD Moroka4 2/3                   2/2
MI Sacks5 2/3   1/2   1/1   2/2        
SJ Vilakazi Inv Inv   Inv   1/1   1/1   Inv   Inv
N Weltman 3/3                    
1 Appointed 24 January 2011.
2 Resigned 31 July 2011.
3 Resigned 31 December 2011.
4 Resigned 12 May 2011 from Audit Committee.
5 Resigned 30 September 2011.
Inv By invitation.

Committee members' attendance at the Board committees to 30 September 2011, reflected above, includes an extraordinary meeting held by the Nomination Committee on 28 October 2011.

Remuneration Committee

The Remuneration Committee met twice during the year. The responsibilities of the Remuneration Committee are to, inter alia, develop the remuneration philosophy and strategy for the Group; determine the Group policy regarding executive remuneration; determine specific remuneration packages for executive directors and senior management; and recommend for approval by the Company in a general meeting, the fees payable to non-executive directors. The remuneration policy to be tabled to shareholders for a non-binding advisory vote was also approved by the Remuneration Committee and is outlined on page 125 of this report.

The Remuneration Committee satisfied all its responsibilities in accordance with its terms of reference.

Quality Leadership Committee

The Quality Leadership Committee, previously known as the Quality Assurance and Clinical Risk Committee, met twice during the year. The responsibilities of the Quality Leadership Committee are to, inter alia, ensure the availability of transparent and accountable systems for the provision of patient-centred, safe, high quality care; identify areas of clinical risk and standardise clinical practice; review systems, policies and procedures for clinical governance throughout the Group; and report on the effectiveness of clinical risk and clinical audit management processes and structures.

The Quality Leadership Committee satisfied all its responsibilities in accordance with its terms of reference.

Transformation Committee

The Transformation Committee met twice during the year. The responsibilities of the Transformation Committee are to, inter alia, develop transformation strategy and policy; and guide, monitor and review progress against the transformation plan.

The Transformation Committee satisfied all its responsibilities in accordance with its terms of reference. It also considered the requirements of the Social and Ethics Committee mandated by the Companies Act.

Operating committees

In addition to the Board committees, several operating committees function within the Group. Minutes of the meetings held by the Executive Committee and the Finance and Investment Committee are monitored and formally noted by the Board. The Board Transformation Committee monitors the activities of the Operational Transformation Committee. All other committees are assigned to specific executives who report to the Executive Committee. Certain of the committees within the governance framework of the Group are highlighted as follows.

Executive Committee

The Executive Committee is chaired by the Group Chief Executive Officer and typically meets on a monthly basis. It comprises the executive directors. Other key senior managers present to the Executive Committee on issues as and when required.

The Executive Committee terms of reference include, inter alia, strategic planning; monitoring the competitive landscape; shaping and approving the business philosophy and practices; managing the Group's human resources; managing the Group's information systems; approving business plans and budgets; ensuring adequate operational policies and procedures; designing and monitoring key performance indicators; and evaluating performance against targets. The Executive Committee also has oversight over sustainability issues to ensure it remains a key strategic imperative.

Finance and Investment Committee

The Finance and Investment Committee is chaired by the Group Chief Financial Officer and meets regularly during the year. Membership comprises one independent non-executive director, three executive directors, and our executive committee members.

The Finance and Investment Committee's terms of reference include, inter alia, raising capital; administering banking facilities and relationships; evaluating acquisitions and capital expenditure; determining budget parameters; overseeing the Group's treasury protocol; managing accounting policies; and monitoring taxation and transaction approval frameworks.

Operational Transformation Committee

The Operational Transformation Committee is chaired by VLJ Litlhakanyane and meets on a monthly basis. The committee will be chaired by T Nkosi, Managing Director – Emergency services in 2012. Membership comprises two executive directors, various executive committee members and other senior managers.

The terms of reference of the Operational Transformation Committee include, inter alia, implementing transformation strategies at Netcare; reviewing Broad-based Black Economic Empowerment (B-BBEE) legislation and regulations; and liaising with relevant stakeholders regarding B-BBEE targets.

IT Steering Committee

The IT steering committee was constituted to ensure the Board is provided with the requisite oversight of the implementation and monitoring of IT within the Company, due to the inherent risks in information technology systems. It comprises a number of executives and senior management, who meet on a regular basis to review the use of information systems, infrastructure and objectives in terms of technology plans developed for the Group.

The committee monitors and reviews the IT governance framework and the relevant controls and procedures, and ensures effective business continuity plans and disaster recovery processes are in place. The IT Steering Committee manages the SAP system implementation in the Hospital division.

Sustainability Committee

The Sustainability Committee was constituted in 2011 to enhance the Group's oversight of key issues, including entrenching sustainability in the Group's long-term strategy, appropriately addressing the collation of data applicable to climate change, promoting energy efficient initiatives and ensuring the production of an integrated report. It also endeavours to critically review the Group's compliance with prevailing codes of best practice, considering the principles of the UN Global Compact and human rights. The committee also evaluates issues relating to corporate social investment, stakeholder relations and the importance of promoting Netcare as a good corporate citizen.

Through the Sustainability Committee, the Group intends to review procurement and supply chain practices so Netcare can be agents for change in respect of different aspects of sustainability.

The Committee met five times during the year. A review of Netcare's sustainability initiatives for the financial year can be found in the SA and UK operational reports on pages 45 and 83 respectively, which also details environmental and corporate social investment initiatives.

Netcare was included on the JSE SRI index at the end of March 2011 and qualified for the 2011 SRI Index based on the EIRIS assessment (Experts in Responsible Investment Solutions). Netcare made incremental improvements across all indicators. The Index assesses performance in terms of corporate governance and the environmental, economic and social practices of listed companies.

The table below outlines the Group's performance and scores for each indicator.

SRI Index scorecard

  2011   2010
Governance and sustainability      
Core indicators 32/32   32/32
Desirable indicators 29/33   29/33
Core indicators 39/39   36/39
Desirable indicators 46/49   43/49
Impact Low   Low
Policy Met   Met
Systems Met   Met
Reporting Met   Met
Climate change1 BP level   BP level

1 Best Performer (BP) level indicates that all six climate change indicators have been met.

Company Secretary

In addition to various statutory functions, the Company Secretary provides individual directors and the Board with guidance on duties, responsibilities and powers, and the impact of legislative and regulatory developments. The Board has empowered the Company Secretary with the responsibility for advising the Board, through the Chairman, on all governance matters.

In consultation with the Chairman, the Company Secretary ensures that the contents of the agenda are relevant to Board decision-making and the outcome of Board deliberations is communicated throughout the Group as appropriate. The Company Secretary also acts as the primary point of contact between shareholders and the Group.

The Company Secretary is qualified to perform the duties in accordance with the applicable legislation and is considered by the Board to be fit and proper for the post.

Professional advice

The directors are entitled, at the Group's expense, to seek professional advice about the affairs of the Group, and have unrestricted access to all Group information, records, documents and property.

Corporate governance in the United Kingdom

General Healthcare Group (GHG) understands that it must conduct its business within the ambit of stakeholder expectations and local regulations. GHG strives to maintain the highest standards of discipline, integrity and transparency, combining the twin requirements of conformance and performance to support an appropriate legal, regulatory and institutional foundation.

Overall structure

The Board of GHG leads corporate governance activities, encompassing both business, service and safety aspects. Committees of the Board have been established to deal with specific components of governance.

The Board comprises executive and non-executive directors. The 15 non-executives are generally appointed by and drawn from GHG's investors, although the non-executive Chairman, Sir PO Gershon, is independent of shareholders.

Two executive directors sit on the GHG Board: the Chief Executive Officer (CEO) and the Chief Financial Officer (CFO). The General Counsel is not a director but attends GHG's Board meetings and ensures proper records are kept of the meetings. The CEO is responsible for GHG's day-to-day operations and its strategic development, and the CFO is responsible for its financial management. The General Counsel is responsible for advice to the Board and the executive, GHG's compliance to its responsibilities, and relations with external agencies.

The constitution and function of the Board committees are as follows:

Audit Committee

Chaired by Sir PO Gershon (GHG Chairman), its responsibilities include the appointment and remuneration of external auditors; overall responsibility for internal and external audit of GHG's financial activities and financial reporting; the GHG's internal controls; and other financial and business risk issues, including specific compliance functions.

Remuneration Committee

Chaired by Sir PO Gershon, it reviews and sets GHG's remuneration strategy and salary and benefit levels across GHG, to ensure competitive remuneration. It also monitors the management of equity arrangements.

Quality and Risk Committee

Chaired by Sir PO Gershon, it monitors the safety, effectiveness and quality of GHG's operational activities. It also monitors GHG's regulatory compliance, operational conformity to internal policy, and the level of risk faced by GHG.

Finance and Investment Committee

Chaired by one of the investor-appointed non-executive directors, it reviews potential capital investments and capital projects, and undertakes post acquisition reviews.

Leadership Committee

The team comprises GHG's senior executive functional and regional heads, with meetings chaired by S Collier (CEO). The Committee was created in the year and represents the merger of the former BMI Healthcare Operations Board and GHG's Management Board. Its role is to address all GHG operational matters, and it is the principal executive decision-making body within BMI Healthcare.

Corporate Social Responsibility Committee (CSR)

Chaired by S Collier, it comprises representation from key functional heads. Its role is to agree GHG's CSR strategy and review the strategy against key performance indicators.

Share dealings

As prescribed by the Listings Requirements of the JSE, the Company operates within closed periods. During these periods or any period when Netcare is trading under a cautionary announcement, directors, officers and other designated members of management who may have access to price-sensitive information are precluded from dealing in the Company's shares. This practice is fortified by circulating closed period memoranda that are reviewed and approved periodically by the Audit Committee and Board.

Dealings in the Company's shares by directors and designated managers require the prior written approval of the Chairman. During the period under review an updated Directors' Dealing Policy was tabled and approved by all directors. This policy is reviewed periodically to ensure legislative and regulatory changes are addressed.

Accountability and control

Financial reporting

The Board is responsible for preparing the Group's annual financial statements and other information presented to shareholders in a manner that fairly presents the state of affairs and results of the Group's business operations. The external auditors are responsible for carrying out an independent examination of the annual financial statements in accordance with International Standards on Auditing.

The annual financial statements are prepared in terms of the Companies Act, the Listings Requirements of the JSE Limited and International Financial Reporting Standards (IFRS).

The annual financial statements are based on appropriate accounting policies that have been consistently applied, unless specifically stated, and are supported by reasonable and prudent judgments and estimates. The Board is satisfied that the Group annual financial statements fairly represent the state of affairs of the Group at the end of the financial year, and its financial performance and cash flows.

Going concern

The Group's annual financial statements have been prepared on a going concern basis. The directors have reviewed the Group's budget and cash flow forecasts and have satisfied themselves that the Group is in a sound financial position with access to sufficient borrowing facilities to meet its foreseeable cash requirements. Based on this review, the directors consider it appropriate to adopt the going concern basis in preparing the Group's annual financial statements.

138 For further details on going concern.

Internal control and internal audit

The Board is responsible for ensuring that appropriate systems of internal control are maintained to ensure that Group assets are safeguarded and managed, and losses arising from fraud and/or other illegal acts are minimised. Control systems are continually monitored and improved in accordance with generally accepted best practice.

Group Internal Audit functions at Group level and reports to the Audit Committee, to assist executive management and the Audit Committee in the effective discharge of their respective responsibilities, through independent financial, internal control and operational systems reviews. The Internal Audit Charter was formulated in accordance with the recommendations of King III and has been approved by the Board on the recommendation of the Audit Committee. The internal audit function has also critically reviewed the implementation of a combined assurance model for rollout in 2012. The Audit Committee's responsibility in regard to the internal audit function has been reported in the Audit Committee report in the Group annual financial statements on page 134 and 135.

The Board is confident that major business risks are being identified and managed appropriately, and that the risk management and internal control framework is operating effectively. Nothing has come to the attention of the Board to indicate that any material breakdown in the functioning of the Group's internal controls and systems has occurred during the year under review.

Relations with shareholders

Netcare considers regular communication on the Group's activities with stakeholders as essential and endeavours to present information in good time. Investor relations activities include the presentation of interim and annual results, participation in investor conferences, issuing regular updates on trading performance and arranging periodic site visits for major investors.

Regular presentations are made by the executive directors and senior management to institutional shareholders, analysts and the media. An investor website (www.netcareinvestor.co.za) communicates relevant announcements and houses useful Group financial and non-financial information. All new material and price sensitive information is disseminated via a formal press release and on the JSE's electronic news service (SENS) to ensure appropriate public disclosure.


South Africa

The Board recognises that governance emanates from effective, responsible leadership, which is characterised by the ethical values of responsibility, accountability, fairness and transparency.

The Group's Code of Ethics articulates the Group's policy regarding conflicts of interest, gifts, confidentiality, fair dealings and protection, and proper use of Group assets. The Group entrenches the Code's various principles in a number of ways. These include rewards and incentives for ethical behaviour, and disciplinary procedures, including criminal and civil charges, for unethical or dishonest behaviour.

The Board of directors is committed to ensuring the consistent application of the Code. Moreover the Company has a formal disclosure process whereby directors are required to declare any personal financial interests that pose a conflict of interest. This is done on a periodic basis and is a standing agenda item at all Board meetings. The Directors' Dealing Policy also requires declaration of interests.

The Group is mindful of the professional codes that govern the conduct and ethics of health professionals in South Africa. The Group supports the Health Professions Council of South Africa in all its endeavours to enforce its code, principles and values.

Netcare has a whistle-blowing mechanism to facilitate the anonymous reporting of alleged fraudulent, corrupt or unethical behaviour in the Group (including unethical medical behaviour). This is facilitated through the Fraud and Ethics Hotline and is available to all Netcare employees.

This mechanism ensures the anonymity of all reports and the protection of the employees reporting these incidents. The Hotline can also be used by the public – including suppliers and patients – and posters with relevant information are placed in the business units.

As a responsible corporate citizen, Netcare takes a zero tolerance approach to fraud and corruption. Accordingly all identified cases are reported to the South African Police Services.

The Fraud and Ethics Hotline is only one of a number of mechanisms that employees, management and external parties can use to report irregularities. All internal and external parties can contact Group Forensics by telephone, email or meeting request. Group Forensics resides within GRAFS.

The Hotline details are as follows: 0860FRAUD1 (0860 372 831). If anonymity is not a concern, the email address fraud@netcare.co.za can be used.

Every incident reported through the Hotline or any other source is investigated, logged onto the defalcation register and reported on a monthly basis. The register is also included in the Audit Committee meeting papers.

United Kingdom

GHG's Code of Business Conduct sets out standards to prevent any illegal or unethical behaviour, to which all staff are expected to adhere. There is also a whistle-blowing policy which allows staff to confidentially raise any concerns about the conduct of others in running the business, or the way in which the business is run. When issues are raised, immediate action is taken to resolve the matter, and the individuals responsible are dealt with according to GHG's Disciplinary Policy.

GHG's basic values are honesty, directness and openness in dealing with others, and these values encompass GHG's relationships with employees, shareholders, customers, suppliers and local communities. A formalised policy details GHG's Code of Business Conduct and articulates GHG's policy with regard to:

  • Basic values;
  • Confidential information;
  • Equality and diversity;
  • Gifts and entertainment;
  • Accuracy and integrity of books and records;
  • Health and safety standards affecting employees and customers;
  • Outside interests;
  • Maladministration; and
  • Monitoring and compliance.

The Fraud and Ethics Hotline is a whistle-blowing facility available to GHG employees to report fraudulent and unethical behaviour. It provides an alternative channel to report infringements anonymously, and protects employees reporting incidents. It can be accessed on the GHG intranet, and individuals can also report their concerns by email.

Fraud and Ethics Hotline – statistics

    2011   2010   % change
South Africa            
General fraud1   153   151   1.3
Hotline   16   19   (15.8)
United Kingdom            
General fraud   5   4   25.0%
Hotline   2   3   (33.3%)

1 All incidents reported to GRAFS via email, telephonically or through meeting requests.

Access to information

The Company has complied with the requirements of the Promotion of Access to Information Act, 2000. A detailed policy pertaining to this Act is widely distributed within the Company.

Political donations and affiliations

Netcare is an ardent supporter of democracy in South Africa but did not make donations to individual political parties during the period under review. If any donation is made, it would be done in accordance with internal policies and the Independent Electoral Commission's (IEC) formula for political party funding, and would be accompanied by detailed disclosure.

Litigation and legal

In the ordinary course of business, the Company is subject to legal proceedings, claims and actions. The outcomes of the matters instituted against the Group cannot be predicted. Detailed legal reports are tabled to the Risk Committee and in turn the Chairman of the Risk Committee reports to the Board on any material legal matters. The Board is of the opinion that there is no legal action, pending, ongoing or potentially threatening, that will have a material effect on the operations of the Group. It should also be noted that the Group has not been found guilty or fined for any non-compliance with regulations in the period under review.