Barloworld Limited: Leading Brands

Governance

THE BOARD CHARTER

The board charter (the charter) regulates the parameters within which the board operates and ensures the application of the principles of good corporate governance in all its dealings. Additionally, the charter sets out the roles and responsibilities of the board and individual directors, including the composition and relevant procedures of the board. The charter is aligned with the provisions of all relevant statutory and regulatory requirements, including, among others, the Companies Act, the JSE Listings Requirements, King IV and Barloworld's Memorandum of Incorporation.

The charter further addresses the powers delegated to various board committees and the relevant principles of the Group's approval limits and delegations of authority. The charter describes the policies and practices of the board in respect of matters such as corporate governance, trading by directors in the securities of the company, declarations and conflicts of interest, board meeting documentation and procedures, including the training and evaluation of directors and members of board committees.

The charter is reviewed annually, or as and when required during the year. In addition to the regulatory framework provided by the charter and the terms of reference of the committees, board members are encouraged to seek independent advice at the company's expense, during the execution of their fiduciary duties and responsibilities,
if so needed. Members also have direct access to Barloworld's external and internal auditors, the company secretary, and members of the Group executive committee.

BOARD MEETINGS

The board uses its meetings to discharge its governance and regulatory responsibilities. Meeting agendas follow an approved board workplan and also provides for the inclusion of urgent, non-routine matters. Meeting agendas comprise management reports on operational and financial performance as well as matters of strategy and resource allocation; risk and opportunities; mergers, acquisitions and disposals; governance, compliance and legal issues; and matters otherwise reserved for board decision-making.

Board meetings take place at least quarterly, and more regularly as needed. For the reporting period, the board held its quarterly meetings, and an additional four special meetings. The special meetings focused on the organisation's response to the COVID-19 pandemic.

STANDING BOARD COMMITTEES

To support it in its broader oversight and governance role, the board has six standing committees through which it executes some of its duties, namely: the audit committee, the risk committee, the nominations committee, the remuneration committee, the strategy and investment committee and the social, ethics and transformation committee.

With the reduction of non-executive directors and scope of the risk committee the board has taken a decision to merge the audit and the risk committees into one committee, with measures in place not to compromise the oversight previously handled by the two committees.

The terms of reference of these committees are slightly different to the board committees we had in place in FY19. For details regarding the changes to the board committee focus areas, memberships and attendance, please refer here in this report.

OUR GOVERNANCE FRAMEWORK

Our governance framework enables the board to oversee, assess and approve the strategic direction, financial and non-financial performance areas, resource allocation and risk appetite of the Barloworld Group. Importantly, it also supports the board in ensuring that it can hold the Group executive accountable for the execution of the Group strategy and financial and non-financial key performance areas.

EFFECTIVE CONTROL

The board has overall responsibility for governance across the Group and retains effective control through the board-approved governance framework and provides for delegation of authority with clearly defined mandates and authorities while retaining its accountability.

The board has delegated certain functions to the six standing board committees; allowing it to allocate sufficient time and attention for decision-making on material matters. This also allows for the delegated matters to receive in-depth focus at committee level. The Group chief executive officer and the executive committee are charged with the implementation of the Group strategy and are measured against strategy-aligned performance targets. The board is satisfied that it fulfilled all its duties and obligations in the 2020 financial year.

BOARD EVALUATION

To assess the board's effectiveness and that of its committees and the overarching governance framework, we conduct an external and internal board evaluation every two years. The board was externally evaluated in 2019 and no material issues were noted. The next evaluation will take place in 2021 and will evaluate the board individually and collectively, governance issues and the Group company secretary's performance of statutory and other administrative duties.

THE COVID-19 PANDEMIC AND THE ROLE OF GOOD GOVERNANCE

During our 2020 financial year, both international and local efforts to curb the spread of the COVID-19 global pandemic led to significant, far-reaching and, in some instances, long term impacts on society and economies. On 15 March 2020, a national state of disaster was declared in South Africa, with a nationwide lockdown imposed from 27 March 2020. South Africa's reaction to the pandemic was decisive and the Barloworld Group stands in solidarity with the country's leadership in presenting an aggressive approach to protect our people to the fullest extent possible.

Similar measures to that taken by the South African government were also implemented in other countries in which we operate.

Several products and services offered by Barloworld are considered essential services, and these parts of our business continued to operate under the strictest safety and health measures, during some of the most challenging times we have experienced in our 118-year corporate history.

The Group implemented strict governance measures which have enabled us to safely and effectively operate during these unprecedented times. Throughout, the following remained top-of-mind:

• the health and safety of employees, as well as customers interacting with our people
• the multi-skilling, cross-skilling and upskilling of our people across the organisation
• implementation of clear productivity measures and precise output requirements
• ongoing technological support and adaptive methods of working, including the promotion and facilitation of remote and virtual work practices

Throughout the period, the board and executive committee assessed the shorter and longer term impacts of their decisions on the sustainability of the organisation. The board believes that the following were critical in achieving the appropriate balance between the urgent and immediate response required with that which would enable our longer term value creation potential:

• tracking and responding to trends and changes in the industry, locally and internationally
• putting in place measured plans to mitigate against future risks while taking advantage of any learnings
• ensuring that we continue to adhere to all applicable laws and regulations
• evaluating the impact of the pandemic on the performance of contractual obligations by us and third parties
• integrating governance processes into the day-to-day operations of our company

See here for details about our response to the global pandemic.

BOARD DIVERSITY

Considerable thought is given to board balance and composition. Collectively, the board believes the current mix of knowledge, skills, experience, gender and tenure meets the requirements to lead the company effectively.

There is a clear balance of power and authority at the board of directors' level and no one director has unfettered powers of decision-making.

The board has evaluated the rationale and meaning of the requirements of independence of directors in accordance with King IV. An assessment of the factors and circumstances of each non-executive director is performed annually. The independence of non-executive directors who have served on the board for longer than nine years is also assessed annually. The board is satisfied that all of the non-executive directors are independent.

The board is diverse in terms of race and gender, comprising 55% women and 73% black representation.

CONFLICTS OF INTEREST

Every board and board committee meeting is preceded by a declaration of interests on the matters that are on the meeting agenda. In a case where there are material interests, a director is recused from the meeting and does not participate in the decision-making on the particular matter. In addition, a general disclosure of interests is conducted on a quarterly basis and the interests' register is maintained and kept by the company secretary.

The Group Conflicts of Interest policy requires all employees to declare alternative business interests. Where there are material conflicts of interest for an employee who is at management level, the Group chief executive officer will consider approving such conflict with measures to limit the conflict.

As an additional safeguard, conflicts of interest and independence are annually assessed for every non-executive director.

DIRECTOR DEVELOPMENT

The development of industry and Group knowledge is a continuous process. On an ongoing basis, directors are briefed on regulatory and legal developments and changes in the risk and general business environment.

Training on directors' duties is available at all times to directors at the company's expense, to promote continuous development of directors. In addition to training sessions, regular updates are also communicated to directors on industry, risk, general business environment and regulatory developments.

Directors are also able to seek independent professional advice concerning the company's affairs, should they require.

IN ACCORDANCE WITH THE JSE LISTINGS REQUIREMENTS, THE BOARD HAS CONSIDERED AND SATISFIED ITSELF THAT GROUP FINANCE DIRECTOR Nopasika Lila, as the Group finance director, has appropriate expertise and experience to meet the responsibilities of her appointed position. The board has also considered and satisfied itself of the appropriateness of the expertise and adequacy of resources of the finance function. COMPANY SECRETARY Andiswa Ndoni, as Group company secretary, demonstrates the requisite level of knowledge and experience to carry out her duties and maintains an arm's length relationship with individual directors. Furthermore, she is neither a director nor a prescribed officer of the company or any of its subsidiaries.

CHAIRMAN AND CHIEF EXECUTIVE

The roles of the Chairman and Chief Executive are clearly defined and differentiated, as set out in the charter. The Chairman is responsible for leading the board, ensuring its effectiveness and setting its agenda, while the Chief Executive leads the executive team in running the business, developing strategy and coordinating proposals for consideration by the board.

While the board may delegate authority to the Chief Executive in terms of the charter, the separation of responsibilities is designed to ensure that no single person or Group can have unrestricted powers and that an appropriate balance of power and authority exist on the board.

ETHICAL LEADERSHIP

The board and executive committee are committed to doing business ethically while also building a sustainable company that recognises the short and long term impact of its activities on the economy, society and the environment.

The board provides effective leadership based on a principled foundation and is ultimately responsible for the company's ethics performance. Executive management is, in turn, responsible for formulating a well-designed and properly implemented ethics management process.

The Group is governed by the Barloworld Worldwide Code of Conduct and Code of Ethics. The Code of Ethics requires Barloworld directors, management and employees to adhere to all applicable laws and regulations, to respect others, to be fair, honest and to protect the environment. The Worldwide Code of Conduct articulates Barloworld's commitment to doing business the right way, according to best practices and guided by our values.

Our ethics and compliance programme is designed to further entrench and integrate good corporate governance throughout the Group. Additionally, we continue to perform assessments of ethical risks and opportunities and integrate these into the risk management processes.

ROTATION OF DIRECTORS

To maintain the independence of the board and ensure fresh and diverse insights and perspectives, one-third of the non-executive directors who have served longest since their previous reelection, are required to retire annually, and if available and eligible, stand for re-election at the company's annual general meeting.

At the 2021 annual general meeting, SS Ntsaluba, HH Hickey, P Schmid and N Nxasana will retire. HH Hickey, P Schmid and N Nxasana, being eligible, offer themselves for reelection.

A retiring director will be considered for re-election subject to the nominations committee recommending his/her eligibility, taking into account past performance and contribution made.

TERM LIMIT OF DIRECTORS

In terms of the director term limit policy, if a director reaches the age of 70 or has been in the office for nine years, they should retire and may not make themselves available for re-election.

A director may continue to serve for longer than nine years but for not more than 12 years, provided the board in its absolute discretion and unanimous decision determines that it is in the best interests of the company and its shareholders to extend the director's service for the additional period of time.

 

BOARD AND BOARD COMMITTEE KEY FOCUS AREAS

BOARD CHANGES AND SUCCESSION PLANNING

Barloworld is committed to forward-thinking succession planning to ensure stability within the governing body and leadership structures. The board ensures that it has robust succession plans that recognise the businesses' current and future needs, taking into account the Group's strategy.

Mrs Neo Dongwana was elected as chairman of the board, strategy and investment committee and the nomination committee, effective 13 February 2020. This followed the retirement of Adv Dumisa Ntsebeza (SC) as the chairman of the board and a non-executive director. The board congratulates Mrs Dongwana on her appointment and looks forward to her continued invaluable contributions.

Mr Michael Lynch-Bell was appointed as the chairman of the remuneration committee, effective 13 February 2020, succeeding Mrs Neo Dongwana.

Mr Sango Ntsaluba was appointed as a member of the nomination committee, effective 13 February 2020, also following the retirement of Adv Ntsebeza (SC).

The key focus areas of the board and the board committees are summarised below. For more details on the responsibilities, powers, policies, practices and processes of the board, directors and committees, refer to the board charter and committee terms of reference, as well as the company's memorandum of incorporation, on our website, www.barloworld.com.

BOARD AND COMMITTEES' RESPONSIBILITIES

BOARD	Exercised independent, informed and effective judgement relating to material decisions of the company and Group companies Provided oversight of the two acquisitions relating to the Mongolia business and Ingrain business Embarked on a shareholders' governance roadshow led by the Chairman Reviewed and approved a refreshed Group strategy in September 2020 and related strategy activities in 2020
AUDIT	Assisted the board in its responsibilities, including the internal and external audit processes for the Group, considering the significant risks, the adequacy and functioning of the Group's internal controls and the integrity of financial reporting Assisted the board in its responsibility of ensuring that a tax policy is compliant with the applicable laws but is also congruent with responsible corporate citizenship and that takes account of reputational repercussion. Looking ahead the committee will: a) continue to monitor the Group's IT governance structure to ensure it addresses critical IT risk and IT investments; b) monitor a potential credit-ratings downgrade in South Africa and the implication on revolving credit facilities; and c) continue to monitor cyber-security controls and cyber-attack risks Oversaw the onboarding of the new external auditors and appointed outsourced internal auditors For more details on the responsibilities of the audit committee, refer to the audit committee report included in the 2020 financial statements here
RISK AND SUSTAINABILITY	Set the Group risk culture, appetite, framework, policies and strategy and ensured that resilient risk management processes are in place Reviewed the Group's directors' and officers' liability insurance
NOMINATIONS	Provided advice and guidance on succession planning, director appointments and director induction and training Appointed Michael Lynch-Bell as chairman of the remuneration committee Ensured that directors are not over-boarded Looking ahead the committee will: a) conduct a robust assessment to assess the skills, experience and composition requirement of the board; b) monitor the Group's voluntary race and gender diversity targets; and c) will implement the wider diversity requirements in accordance with the JSE Listings Requirements
REMUNERATION	Advised and provided guidance to the board on director remuneration, setting, amending and implementing remuneration policy and the approval of general composition of remuneration packages Engaged shareholders on the remuneration report and remuneration issues Looking ahead the committee will: a) continue to improve annual disclosure in relation to remuneration policies; b) continue dialogue with shareholders regarding remuneration practices and policies; and c) monitor implementation of a new long term incentive conditional share plan. For more details on the responsibilities of the remuneration committee, refer to the remuneration committee report here
SOCIAL, ETHICS AND TRANSFORMATION	Assisted the Group in discharging its social, ethics and transformation responsibilities and implemented practices consistent with good corporate citizenship Addressed sustainable development in the company including climate change and environmental stewardship Looking ahead the committee will: a) continue to monitor the Group's social, transformation, economic and environmental performance; b) ensure transparent and proactive engagement with communities where we operate; and c) monitor the Group's progress against the prioritised sustainable development For more details on the responsibilities of the social, ethics and transformation committee, refer to the social, ethics and transformation report here
STRATEGY AND INVESTMENT	Reviewed significant transactions and legal matters, including matters of a strategic nature Recommended the acquisition of Ingrain business to the board, and continued to monitor risks associated with the two acquisitions, Mongolia and Ingrain business in particular, the calling of the material adverse change event Looking ahead the committee will: a) monitor integration of the two acquisitions into the business; and b) oversee the implementation of the refreshed strategy

BOARD AND COMMITTEE MEETING MEMBERSHIP AND ATTENDANCE

AS AT 30 SEPTEMBER 2020, OUR BOARD COMMITTEE MEMBERSHIP IS AS OUTLINED IN THE TABLE BELOW

NON-EXECUTIVE DIRECTORS	AUDIT COMMITTEE	NOMINATION COMMITTEE	REMUNERATION COMMITTEE	SOCIAL, ETHICS AND TRANSFORMATION COMMITTEE	STRATEGY AND INVESTMENT COMMITTEE	RISK COMMITTEE
Neo Dongwana		Chairman	✓	✓	Chairman
Ngozi Edozien				✓	✓
Hester Hickey	✓					Chairman
Michael Lynch Bell	✓		Chairman			✓
Nomavusa Nxasana	✓	✓		Chairman
Hugh Molotsi					✓	✓
Neo Mokhesi		✓	✓	✓
Sango Ntsaluba	Chairman	✓	✓		✓	✓
Peter Schmid			✓		✓
Dominic Sewela				✓	✓	✓
Nopasika Lila						✓

MEETING ATTTENDANCES 1 OCTOBER 2019 TO 30 SEPTEMBER 2020

BOARD-10	14 NOV 19	12 FEB 20	24 MAR 20	08 APR 20	18 MAY 20	19 JUN 20	29 JUN 20	11 AUG 20	12 AUG 20	23 SEP 20
Neo Dongwana - C	✓	✓	✓	✓	✓	✓	✓	✓	✓	✓
Dumisa Ntsebeza	✓	✓	-	-	-	-	-	-	-	-
Ngozi Edozien	✓	✓	✓	✓	✓	✓	✓	✓	✓	✓
Hester Hickey	✓	✓	✓	✓	✓	✓	✓	✓	✓	✓
Michael Lynch-Bell	✓	✓	✓	✓	✓	✓	✓	✓	✓	✓
Nomavuso Nxasana	✓	✓	✓	✓	✓	✓	✓	✓	✓	✓
Neo Mokhesi	-	✓	✓	✓	✓	✓	✓	✓	✓	✓
Hugh Molotsi	-	✓	✓	✓	✓	✓	✓	✓	✓	✓
Sango Ntsaluba	✓	✓	✓	✓	✓	✓	✓	✓	✓	✓
Peter Schmid	✓	✓	✓	✓	✓	✓	✓	✓	✓	✓
Dominic Sewela	✓	✓	✓	✓	✓	✓	✓	✓	✓	✓
Nopasika Lila	✓	✓	✓	✓	✓	✓	✓	✓	✓	✓

AUDIT COMMITTEE - 6	12 NOV19	05 DEC 19	11 FEB 20	17 APR 20	19 JUN 20	21 SEP 20
Sango Ntsaluba - C	✓	✓	✓	✓	✓	✓
Neo Dongwana	✓	✓	✓	-	-	-
Hester Hickey	✓	✓	✓	✓	✓	✓
Michael Lynch-Bell	✓	✓	✓	✓	✓	✓
Nomavuso Nxasana	✓	✓	✓	✓	✓	✓

STRATEGY AND INVESTMENT (GENERAL PURPOSE) COMMITTEE - 7	12 NOV 19	11 FEB 20	28 APR 20	13 MAY 20	03 JUN 20	14 SEP 20	22 SEP 20
Neo Dongwana - C with membership and chairmanship effective 28 April 2020	-	✓	✓	✓	✓	✓	✓
Dumisa Ntsebeza	✓	✓	-	-	-	-	-
Ngozi Edozien	✓	✓	✓	✓	✓	✓	✓
Hugh Molotsi	✓	✓	✓	✓	✓	✓	✓
Sango Ntsaluba	✓	✓	✓	✓	✓	✓	✓
Peter Schmid	✓	✓	✓	✓	✓	✓	✓
Dominic Sewela	✓	✓	✓	✓	✓	✓	✓

NOMINATIONS COMMITTEE- 3	13 NOV 19	11 FEB 20	22 SEP 20
Neo Dongwana - C	✓	✓	✓
Dumisa Ntsebeza - C	✓	✓	-
Nomavuso Nxasana	✓	✓	✓
Neo Mokhesi	✓	✓	✓
Sango Ntsaluba	-	-	✓

REMUNERATION COMMITTEE-7	12 NOV 19	04 DEC 19	11 FEB 20	12 FEB 20	17 APR 20	13 MAY 20	22 SEP 20
Michael Lynch-Bell - C	-	-	-	✓	✓	✓	✓
Neo Dongwana	✓	✓	✓	✓	✓	✓	✓
Neo Mokhesi	✓	A	✓	✓	✓	✓	✓
Sango Ntsaluba	✓	✓	✓	✓	✓	✓	✓
Peter Schmid	✓	✓	✓	✓	✓	✓	✓
Dumisa Ntsebeza	✓	✓	✓	✓	-	-	-

RISK AND SUSTAINABILITY COMMITTEE-4	12 NOV 19	24 MAR 20	12 MAY 20	21 SEP 20
Hester Hickey - C	✓	✓	✓	✓
Neo Dongwana	✓	-	-	-
Michael Lynch-Bell	✓	✓	✓	✓
Hugh Molotsi	✓	✓	✓	✓
Sango Ntsaluba	✓	✓	✓	✓
Dominic Sewela	✓	✓	✓	✓
Nopasika Lila	✓	✓	✓	✓
Donald Wilson	✓	-	-	-

SOCIAL, ETHICS AND TRANSFORMATION COMMITTEE-4	13 NOV 19	11 FEB 20	13 MAY 20	22 SEP 20
Nomavuso Nxasana - C	✓	✓	✓	✓
Dumisa Ntsebeza	✓	✓	-	-
Neo Dongwana	-	-	✓	✓
Ngozi Edozien	✓	✓	✓	A
Michael Lynch-Bell	✓	✓	-	-
Neo Mokhesi	✓	✓	✓	✓
Dominic Sewela	✓	✓	✓	A

A Apologies
C Chairman
- No longer part of the board or committee

GOVERNANCE OF INFORMATION TECHNOLOGY The board and executive management are well-informed about the role of technology and information and its impact on business. The risk and sustainability committee and audit committees of the board promote the awareness of an ethical IT governance and management culture and provide transparency through regular reporting to board. It is the role of the various board committees to ensure that ongoing focus is placed on both technology and information; elevating the importance of IT governance and ensuring that it forms an integral part of the overall corporate governance and Group strategy. The audit function provides independent assurance on implemented IT-related frameworks, strategy, policy, procedures and standards. The risk and sustainability committee considers the technology and information risk register on a regular basis. The Barloworld IT Governance team warrants that it adds value by enabling the improvement of the company's performance and sustainability; utilising IT resources in an efficient and effective manner. 12            9