Audit Committee report

This report incorporates the requirements of the statutory responsibilities of audit committees, as contemplated in section 94 of the Companies Act.

Composition of the committee

In accordance with its Terms of Reference, the company's Audit Committee comprises at least three non-executive, independent directors with the financial expertise required to properly advise the committee in the execution of its duties.

The members of the committee for the year ended 31 March 2014 were Dr D Konar, Messrs M J Hankinson and T S Munday, and Mrs C W N Molope. The committee Chairman is Dr D Konar who attends the annual general meeting in his capacity as such.

Although they are not members of the committee, the Chairman of the board, Mr D G MacLeod, and a non-executive director nominated by Illovo's holding company (Mr R N Pike until 31 August 2013 when he resigned and thereafter Mr G M Rhodes), as well as appropriate members of Executive Committee, senior management and the independent external and internal auditors attend the meetings of the committee.

The independent and internal auditors have unrestricted access to the committee and its Chairman.

Annual evaluation

In accordance with the provisions of King III, a detailed annual evaluation of the Audit Committee was carried out in March 2014 which concluded that the committee is carrying out its duties and responsibilities in the most effective and professional manner, and that the Chairman of the committee brings sound knowledge and experience to the committee, which is invaluable to management.

Election of committee members at AGM

Pursuant to the provisions of section 94(2) of the Companies Act, which requires that a public company must elect an audit committee at each annual general meeting, it is proposed in the notice of annual general meeting to be held on 16 July 2014 that Dr D Konar, Mrs C W N Molope and Messrs M J Hankinson and T S Munday be re-appointed as members of the Audit Committee until the next annual general meeting in 2015.

Meetings

In the past year, three meetings of the committee were held, attendance at which is reflected in a table in the Corporate Governance report.

Terms of Reference and functions

The committee operates in terms of formal Terms of Reference approved by the board, which were reviewed and amended during the year.

The main objectives of the committee, as incorporated in its Terms of Reference, include:

  • promoting the overall effectiveness of corporate governance within the Illovo group;
  • acting as an effective means of communication between the board, and the independent external auditors and the internal auditors;
  • satisfying the board that adequate internal financial controls are in place, and that material financial risks have been identified and are being effectively managed and monitored; and
  • assessing the impact of the general control environment on the statutory audit, and reporting to management any areas of perceived control weaknesses.

During the year under review, the committee satisfied its responsibilities in compliance with its Terms of Reference, including the following:

  • reviewing and approving of the scope of the independent external and internal audits;
  • reviewing the level of effectiveness of both the independent external and internal auditors;
  • reviewing the internal audit charter, and in conjunction with executive management, assessing the competence of the group internal audit manager, and approval of the performance of the internal audit function;
  • recommending the appointment of the independent external auditors to the board for approval by the shareholders, and approving their remuneration;
  • establishing a policy in respect of and approving the extent of non-audit services undertaken by the independent external auditors;
  • reviewing reports from both the independent external and internal auditors, including management's responses thereto;
  • assessing the effectiveness of internal policies and procedures;
  • ensuring that all material financial risks are identified, assessed, monitored and managed;
  • monitoring that there are no material breakdowns in internal controls;
  • considering the company's accounting policies and reviewing their compliance with International Financial Reporting Standards and other relevant regulatory requirements;
  • reviewing and recording going concern assumptions;
  • reviewing the company's interim reports, results announcements, and annual reports;
  • monitoring that management suitably addresses information technology risks and information security;
  • monitoring compliance with the JSE's Listings Requirements; and
  • receiving and dealing with any complaints relating to accounting practices, independent external and internal audits, and the content or auditing of financial statements or any related matter.

Statutory duties

In the execution of its statutory duties during the past financial year, the Audit Committee:

  • confirmed the appointment of both Deloitte & Touche as the independent external auditors and Mr G Tweedy as the registered auditor responsible for the audit;
  • satisfied itself that the independent external auditors were independent of the company;
  • agreed the terms of engagement of and determined the fees payable to the independent external auditors;
  • ensured that the appointment of the independent external auditors and the registered auditor complied with the provisions of the Companies Act;
  • pre-approved the non-audit services provided by the independent external auditors, in terms of a policy in this regard previously adopted by the committee;
  • noted that it had not received any complaints, either from within or outside the company, relating either to the accounting practices, the independent external and internal audits of the company, or to the content or auditing of its financial statements or any related matter; and
  • performed its other functions as determined by the board in terms of its Terms of Reference.

Regulatory requirements

Pursuant to the provisions of the JSE's Listings Requirements, the Audit Committee:

  • confirmed the adoption of a policy with regard to non-audit services provided by the independent external auditors;
  • satisfied itself of the appropriateness of the expertise and experience of the financial director, Mr M H Abdool-Samad; and
  • satisfied itself that the appointed independent external auditors and registered auditor were duly accredited as such on the JSE's list of auditors.

Legal, regulatory and corporate governance requirements

Pursuant to King III, and based on specific procedures performed by the independent external auditors, the committee satisfied itself with the expertise, resources and experience of the company's finance function. The Audit Committee also satisfied itself with the effectiveness of the group's internal control function.

The committee reviewed legal matters that could have a material impact on the group and considered reports provided by management, legal advisors, internal audit and the independent external auditors regarding compliance with legal and regulatory requirements.

Appointment of independent external auditors

In accordance with section 90(1) read with section 61(8) of the Companies Act, which requires that shareholders approve the appointment of the independent external auditors on an annual basis, the committee has recommended to the board, which in turn has recommended to the shareholders that Deloitte & Touche be appointed as the company's independent registered external auditors for the year ending 31 March 2015 at the forthcoming annual general meeting.

Annual financial statements

Having reviewed the audited annual financial statements of the group, which are electronically available on the group's website at www.illovosugar.com, particularly to ensure that disclosure was adequate and that fair presentation had been achieved, the committee  has recommended the approval of the annual financial statements to the board.

Financial assistance to related or inter-related companies or other legal entities

At the forthcoming annual general meeting, shareholders will be requested to pass a special resolution pursuant to section 44 of the Companies Act, authorising the directors of the company, as a general approval, to cause the company to provide "financial assistance" to fund the purchase of the company's shares, for and on behalf of any person approved by the board to receive shares in terms of the company's Forfeitable Share Plan (salient details of which are set out in Appendix 1 to the notice of AGM contained in this report), subject always to compliance with the requirements of the Companies Act, the JSE Listings Requirements and any other applicable laws from time to time.

In addition, shareholders will be requested to pass a special resolution in terms of section 45 of the Companies Act, authorising the directors, by way of a general authority, to allow the company to provide direct or indirect financial assistance to any company or other legal entity which is related or inter-related to the company, subject to the relevant provisions of section 45.

Holding company

ABF Overseas Limited is the holding company of Illovo Sugar Limited with a 51.4% interest in its issued share capital. ABF Overseas Limited is a wholly-owned subsidiary of Associated British Foods plc which is therefore the ultimate holding company of Illovo Sugar Limited. Associated British Foods plc is listed on the London Stock Exchange.

Special resolutions passed by subsidiary companies

During the year under review, Zambia Sugar Plc passed special resolutions in terms of which its authorised share capital, comprising 7 000 000 000 ordinary shares of ZMW0.0005 par value each, were consolidated and subdivided on a 20-for-1 basis into 350 000 000 authorised ordinary shares of ZMW0.01 par value; and its issued and fully paid up ordinary shares of ZMW0.0005 par value each (as at the consolidation date) were consolidated and subdivided on a 20-for-1 basis into issued and fully paid up ordinary shares of ZMW0.01 par value each.

No other material or special resolutions contemplated by paragraph 8.63(i) of the JSE Listings Requirements were passed by any of the company's subsidiaries during the year.

Subsequent events

There have been no material changes in the affairs or financial position of the company and its subsidiaries since the end of the period under review.

On behalf of the Audit Committee

Dr D Konar
Audit Committee Chairman

23 May 2014