Transformation

The Group regards transformation as a social, moral and strategic business imperative. Management recognises that as a responsible corporate citizen, the Group has an obligation to contribute to bringing about a more equal and inclusive society – starting within our own business. Our transformation strategy is closely aligned to the objective of the BBBEE Codes and we employ an integrated approach to accelerate transformation across the code's five criteria.

BBBEE CODES

In 2017, a BBBEE Committee comprising senior management was constituted, and is tasked with driving transformation in the Group. The Committee meets quarterly to gauge and manage progress against set targets.

As a consequence of implementing a range of meaningful interventions and sustained management focus on transforming the business over recent years, the Group has improved its BBBEE status from non-compliant in 2016 to compliant – at level 6 – in 2018.

This consistent progress in the Group's score is depicted below.

During the year under review, improvements were achieved across three of the five scorecard criteria, namely equity ownership, enterprise and supplier development, and socio-economic development. While there was a marginal decline in the skills development score, management is confident that the interventions underway in the business will remedy this and result in a higher score in the 2020 assessment.

ACHIEVEMENTS

During the reporting period, we introduced diversity, equity and inclusion workshops to the business, aimed at developing and embedding a culture of inclusion by acknowledging differences and equipping diverse employees to build better relationships.

In terms of the BBBEE Codes scorecard, we made progress regarding the following:

Skills development

The Group continued to invest in a range of skills development programmes focused on employees from previously disadvantaged groups. These included:

• sponsored partnerships with academic institutions to further the education of 40 of our employees and to develop their leadership competencies;
• internships and learnerships for both qualified students and inexperienced job seekers, with 27 of those learners ultimately employed in the group; and
• we operate accredited training academies, and offer local and international courses and e-learning tuition across our brands for our employees, our franchisees and their employees. These training interventions reached 2 179 (including franchisees) of our employees during the year.

Enterprise and supplier development

• Good progress was made in preferential procurement: expenditure with exempted micro-enterprises ("EMEs") and qualifying small enterprises ("QSEs") increased to 24,9% of Group spend from 13,3% in 2017.
• Contributions to supplier development initiatives amounted to R19,9 million. These initiatives included:
  • loans at preferential rates to identified EME and QSE suppliers who provide goods and services to the Group;
  • investment in an income yielding fund which invests and mentors small black-owned businesses; and
  • contributions to the MyGrowthFund for the establishment of a container-based artisan training business.
• We launched PiViCal Panels, a joint venture partnership with a local previously disadvantaged entrepreneur. This import-replacement business was commissioned in August 2018 and produces PVC panels for the TopT brand; panels comprise one of TopT's fastest growing merchandise categories.

Socio-economic development

• Our spend on socio-economic development exceeded 1% of net profit after tax. The funding, majority of which was spent by the Foundation, was allocated to:
  • education (40%);
  • sport (39%);
  • conservation (11%); and
  • other (10%).

Equity ownership

Subsequent to year end we concluded a BBBEE ownership transaction with Yard Investment Holdings ("Yard"), in order to improve the Group's black ownership credentials, and to establish a medium to long-term relationship with a BEE partner with international commercial experience relevant to the Group's business. In terms of the agreement, Yard has acquired 2% of the Group's issued share capital.

OUTLOOK

The Committee will be targeting a BBBEE status level 5 in the year ahead, and level 3 by 2022. The following key initiatives across the five criteria will be implemented in order to attain that target:

YES initiative

• Incorporate the YES programme, a business-led collaboration with government and labour, to contribute to creating one million work opportunities for youth in the country.

Management control

• Advance and/or appoint black females for management positions at all levels; and
• Employ black disabled individuals.

Skills development

• Invest in learning programmes for black individuals;
• Invest in learning programmes for disabled black individuals;
• Place previously unemployed black individuals on learnerships; and
• Retain black individuals on a permanent basis post-learnerships.

Enterprise and supplier development

• Divert spend to EMEs or QSEs;
• Divert spend to 51%+ black-owned and/or 31%+ black women-owned businesses;
• Impose minimum empowerment ratings requirements for suppliers with spend in excess of a predetermined amount;
• Fund qualifying EME and QSE suppliers;
• Fund TopT BEE partners;
• Contribute to incubator or similar initiatives; and
• Extend favourable settlement trading terms for empowered suppliers.

Socio-economic development

Contributions of product and/or cash to qualifying schools and charities, with the largest donation to be made to the Italtile and Ceramic Foundation. The Foundation is the Group's broad-based black ownership scheme, whose goal is the transformation and upliftment of previously disadvantaged communities through distributions made to public benefit activities related to education, sport and conservation.

Refer to the supporting our communities report.