Candidate exam number 911 in 2006, inconsequentially ‘opted’ to write this entrance exam paper in English Language. There are many who were not successful in passing this paper given many nuances including the well researched ‘mother tongue benefit to learners’ – psychologists term it : Familiarity Bias. For some, the benefit of mother tongue exam language ensures their assimilation to some highly prestigious qualifications in the country…with the majority – in 2017 – unable to even participate on a simplified language platform, let alone vernac examination languages. A call to simplify entrance exam languages in certain professions is a progressive ones as it may eradicate any glaring systematic injustices to advance Radical Socio Economic Transformation.
This week, South Africa’s 2017 medium term budget statement was delivered our new Finance Minister. The turnover rate of the office-bearers in the Finance Ministry is congruent with the trends of the current political ecosystem. Regrettably, the past 3 budget statements have all exhibited the same features – a downward revision of growth forecasts; lamentations about the growing trade deficit, the decline in projected tax collections and a lack of clarity about what exactly will be done to fix the current challenges.
Minister Nhlanhla Nene’s 2015 budget revised growth forecasts from 2% to 1,5% all in the shadow of a 4% budget deficit. Minister Gordhan’s statement – delivered in the shadow of a revised 3.4% deficit – shifted Nene’s growth forecast to just 0.5% with an expected rise to 1,7% in 2017. Forecast growth as presented by Minister Gigaba is expected to be 0,7%, paired with a deficit of 4,3%, the sub-1% growth forecast suggests more urgency for reforms to add credibility to the suggested 1,1% forecast for 2018. It is important to view this in the context of global growth forecasts by the IMF of 3,7% in 2018.
The tax gap of R50 billion for 2017 is a glaring signal of the desperation in our economy. The main highlight of the budget statement was simply the honesty with which it was delivered. In a world where the trust deficit between the politicians, the electorate and society widens with every single scandal, it is most refreshing to see a statement that stated the hard truths.
As Minister Gigaba articulated, the economy remains binary and rigid in multiple facets. Market concentration in key sectors makes the much-needed growth in small enterprises difficult to achieve. The consequence of such concentration patterns is that once the big market players reach a saturation point, there are no small players to keep the growth momentum in the winder economy. The government’s own spending patterns focus on the polar ends of the economic divide – social assistance for the poor and bailouts for state entities – not much happens in between.
In light of this, one would expect that any budget statement would specifically identify ways of addressing these challenges. Each of the recent budget statements has made loose references to the National Development Plan whose goals become more elusive each year. Minister Gigaba’s speech could have also highlighted that the objectives of the NDP are in the extreme, difficult to achieve in the context of the current economic fundamentals. More importantly, government seems to be unable to articulate whether the NDP goals should drive monetary and fiscal policy or if the NDP is to be a bye-product of the economic fundamentals. If one sees the NDP as the end result then the budget statement should be able to link the revised economic outcomes to the prospects of the NDP’s ambitions being adjusted.
In the alternative, if the NDP is to be pursued at all costs, we should be able to see this commitment in the budget statements. One glaring example is the NDP’s estimate on graduate outcomes. It is said that South Africa needs to have 400 000 new university graduates in the system by 2030. The day before the budget statement was delivered, Statistics SA highlighted that one of the key weaknesses in the education and skills rollout in the country is the low graduate outputs. We are hopeful to soon learn on what will be done to address the constipation in the university system in order to meet the NDP goals in this respect.
The Minister indicated that the sale of the Telkom stake will be supplemented by an option to buy it back in the future. In explaining the rationale for this approach, the Minister indicated that SAA remains a strategic asset which needs to be kept afloat. Additionally, the option of an equity injection into SAA remains on the cards. Whilst this all makes sense, it is possibly worth noting that the sale of the Telkom stake simply means the current dividend stream – which the fiscus desperately needs – will be sacrificed until the state is able to buy back the Telkom shares in the future. Given the declining state of public finances, it is difficult to understand this action as a suitable one. And in a speech which articulates that the state is not actually averse to a third party equity injection into SAA, surely the acceleration of that transaction rather than the sale of the Telkom stake would have made more economic sense in the current climate.
Another key issue noted by ABASA is that the state is now in danger of breaking its own spending ceiling by R3,9 billion. A few days before the speech, the Auditor-General indicated that the prevalence of fruitless, wasteful and irregular expenditure in state departments and enterprises remains a problem. We would then have expected a clear commitment from the minister to address such inefficiencies within the public sector as one of the ways in which the state of public finances can be improved.
The nature of such dilemmas relating to public finances is that most of what we interrogate relates to past actions which can no longer be remedied. What is needed at this stage is a collective effort by all stakeholders within and outside the state to lift us out of the current situation. After all, a viable economy is necessary for us to all enjoy the rights associated with our citizenship and the South African Constitution.
Durban – White and Indian South Africans own 80% of buildings the KwaZulu-Natal government rents.
That’s according to Ravi Pillay, the provincial MEC for Human Settlements and Public Works.
He said the provincial government spent R275 million a year leasing buildings from private landlords and the ownership patterns reflected where wealth in the province lay.
“This pattern is simply politically, socially and economically unsustainable,” he said.
Pillay was talking to the Daily News after reports that the KZN government wanted to exclude certain blacks (coloureds and people of Indian and Chinese origin) from BEE deals worth more than R50 million.
“After applying the legal framework which defines black, and provides for 80/20 and 90/10 points allocation for companies bidding for a government contract, whites and Indians are still the majority landlord beneficiaries.
“There is a need to level the playing field,” Pillay said.
To do this, the government is thinking about ensuring that, on all new leases, the successful bidder should be at least 51% owned by a black African.
“Whites and Indians who own buildings must seek partnerships with black Africans to maximise their chances of winning tenders in terms of the criteria we are setting,” Pillay said.
He said the government needed to find ways to incentivise black African property owners through its empowerment funds, and banks needed to do their bit to help fund emerging black African property owners.
After perceptions that Indians were getting a disproportionate number of tenders, government convened the 2015 Procurement Indaba.
An analysis of R1.3 billion worth of government tenders showed 34% of the tenders went to whites, 32% to Indians and 30% to black Africans.
“This should not have been a crisis but it showed a regression from a previous study a few years before which showed black Africans benefited from 38% of tenders,” said Pillay.
“One of the key resolutions of the indaba was that government procurement should strive to achieve a 60% black-African beneficiary profile.
“That’s not excluding whites, Indians and coloureds because combined they make up 13% of the population in KZN and have the remaining 40% to share,” Pillay said.
He said the government needed to look at how it could change the laws to get a different outcome, but in a “progressive” way.
Pillay defended the stance of Sihle Zikalala, the KZN MEC for Economic Development, who is spearheading the move to “reshape” the BEE policies to benefit black Africans.
Pillay said Zikalala was “truly committed” to social cohesion because he was removing a threat to social cohesion.
“We must deal with these matters in a way that does not polarise society.”
Several opposition parties have criticised the stance taken by the KZN government but Zweli Sangweni, the spokesman for the Mazibuye African Forum, said only laws could change the economic inequalities in KZN.
He said that, as things stood, black Africans would not succeed in government procurement.
“There are many buildings sold to minority groups by the government, leaving black South Africans out because of a lack of funding and government support.
“There is no government procurement policy which is meant to empower black (South Africans),” he said.
The recent developments relating to the auditing profession require all stakeholders to reflect on the state of the profession. ABASA – as a body representing various members within and outside the profession – has also been paying keen attention to the latest developments. It is no secret that the developments around the KPMG SA engagements with SARS and the Oakbay business group have cast the profession in a less-than-favourable light. It is also evident to all stakeholders that KPMG has a lot of work to do in addressing the loss of trust in the business itself and the profession as a whole.
As ABASA, we haven also engaged with the leadership of KPMG in recent weeks. As part of our mandate, we sought assurances from KPMG that they were proactively dealing with the issues. ABASA met with the new leadership at KPMG to discuss our concerns. ABASA seeks to ensure that transformation in the industry occurs within our lifetime. We have been vocal in the past in dealing with the matters of succession planning within KPMG which we viewed as a setback for transformation. Disappointingly, we do not feel that in the recently-announced leadership structures, KPMG has managed to deal decisively with its transformation issues. It is with great disappointment that we were made aware that the new CEO has in fact been given a temporary 24-month contract rather than a permanent post as the CEO. This is in light of the fact that the process of selecting the new leader for KPMG – through a partner vote process – will likely yield the same results from a couple of years ago. It is also a sad state of affairs that the white levels of ownership in KPMG are currently recorded at 69% – this cannot be accepted in the South African state where over 80% of the population is black. KPMG needs to take this opportunity to seriously consider the sustainability of its operations in light of its current ownership levels. A serious, committed resolution to address the current ownership patterns is critical in order to ensure that KPMG just not find itself permanently consigned to the wrong side of the transformation journey.
We would have been more comfortable with KPMG providing a tangible roadmap of how they will incorporate transformation into their succession planning. As it currently stands, we do not believe that KPMG has taken the right steps in ensuring that its transformation roadmap is feasible and progressive.
A key issue that has arisen from the recent developments is the loss of key clients for KPMG. Whilst we remain cognizant of the fact that KPMG employs a significant number of black professionals and is a significant contributor to employment in the country, we do feel that the loss of key clients is as a result of KPMG’s tentative rather than decisive approach to dealing with the current crisis. As it stands, South Africans are not in a position to understand the steps that preceded the retraction of the SARS report for example. Unfortunately that simply gives the impression that KPMG has not been fully forthcoming with the details behind what issues were at play. In a profession where perceptions count for so much, it is inevitable that KPMG will face a loss of clients. It is in our view, KPMG’s primary responsibility to ensure that the market and the public at large start believing that KPMG is being transparent in its engagements with the public. An inability to do that will exacerbate the trust deficit that is already evident.
We have noted that the Independent Regulatory Board for Auditors and the South African Institute of Chartered Accountants have both committed to initiating processed aimed at investigating the true nature of events. Whilst IRBA is the statutory body empowered to conduct investigations of this nature it is also limited in its powers as it can only investigate audit firms and registered auditors. In the KPMG case, the nature of investigations required relate to both the auditing division and the advisory division. As we currently understand it, IRBA has jurisdiction relating to the audit-related matters and not necessarily the advisory side. However, as far as the public interest is concerned, an investigation that covers the audit and advisory divisions is warranted. More importantly, such an investigation needs to be and be seen to be credible. This can only be achieved by the appointment of an independent tribunal/commission to oversee the process. We are aware that KPMG has committed to participating in such a process. However, we do not believe that KPMG itself – as an affected party – should be appointing such a tribunal. If KPMG appoints and funds such a tribunal, then public perception may not regard it as an independent and credible process. This would make public buy-in for its recommendations even more difficult.
In addition, due to the rather pervasive nature of interactions between SAICA and KPMG – as evidenced by KPMG representation on various SAICA governance structures – including the presence of the former CEO on the board of SAICA – we do not think that a SAICA-led process would be seen as independent and credible. More importantly, a SAICA-led process might be seen as a replication of the IRBA-led process. In such a case, there is a risk that the 2 processes might generate different outcomes which would further dent the credibility of the profession in the eyes of the public. In this case – even though IRBA’s mandate is limited by the Auditing Profession Act – we suspect that getting IRBA to appoint the independent tribunal to oversee both the auditing-related investigation and the advisory-related investigation would lend credibility to the process. This will assist in helping to address the trust deficit that is currently harming the profession.
Historically investigations of such a nature take a long time to complete, however we would appeal to IRBA to find ways to fast-track the process given the heightened levels of public interest in the matter.
A sad indictment of the profession is that one of its fundamental problems remains the issue of market concentration. As we have seen, most of the clients that have terminated KPMG mandates have gravitated towards appointing another Big 4 firm as the new auditors. The reality is that for a long time, the profession has seen a concentration of high-value clients centred around the Big 4 firms. This means that we have not done enough to grow the stature and capacity of the mid-size firms and the indigenous firms. Given the risk that this model poses, we do think that the profession needs to reflect on this and initiate reforms that will ensure the long-term sustainability of the profession.
Chairman of the standing committee on finance Yunus Carrim says transforming the auditing profession is non-negotiable
-by Linda Ensor
Transforming the auditing profession is non-negotiable and has to be placed more robustly on the agenda, says chairman of the standing committee on finance Yunus Carrim.
The issue emerged as a key one during public hearings on the decision by the Independent Regulatory Board for Auditors (IRBA ) to introduce mandatory audit firm rotation. This decision has been criticised for not being well thought out or researched.
Criticisms came from the Reserve Bank, Ernst & Young Africa CEO Ajen Sita and PricewaterhouseCoopers (PwC) CEO Dion Shango.
“We are telling you, you have to move faster,” Carrim said to industry representatives.
IRBA has also raised its concerns over the slow pace of transformation, with CEO Bernard Agulhas insisting transformation has to move beyond numbers and begin to empower black accountants and black-owned auditing firms.
This included providing them with equal opportunities to access the audit market.
His views were supported by Association for the Advancement of Black Accountants of Southern Africa president Gugu Ncube, who said mandatory audit firm rotation could provide an opportunity to achieve transformation, though on its own would not do so.
Most critics disagreed, saying rotation will continue to take place among Deloitte, KPMG, PwC and Ernst & Young. SizweNtsalubaGobodo CEO Victor Sekese, also the interim chairman of interest group the Black Chartered Accountants Practitioners, supported mandatory rotation as a way of black firms getting access to private sector audits, levelling the playing field and lessening the concentration of the market.
A major challenge, he noted, was the demand by banks and financial institutions that their clients be audited by one of the big four firms.
Sita, also chairman of the Thuthuka Education Upliftment Fund, suggested measures to accelerate transformation, including reviewing the current model that required chartered accountants to train for 12-15 years before becoming partners. He also suggested reviewing the ownership models of audit firms to create space for new entrants; provide support for small-and medium-sized black firms; and encourage the private sector and listed companies to make greater use of black companies.
Agulhas said in the past the lack of progression of young black professionals to the highest level in audit firms was explained by the assumption that many young black accountants complete their traineeship and leave auditing for more lucrative roles in the government, the corporate sector or to explore entrepreneurial opportunities. This, he said, was cited as a challenge for the sector in its transformation initiatives.
“The harsh reality is that of the 4,283 registered auditors in South Africa, 74.8% are white and only 10.5% are black African. More focus should be given to long-term career prospects, including equity partnerships and senior management and executive responsibility. “
The Independent Regulatory Board for Auditors says of the almost 4,300 registered auditors, 74.8% are white and only 10.5% are black African
-by Linda Ensor
The Independent Regulatory Board for Auditors (Irba) has expressed concern about the slow pace of transformation in the auditing profession.
There are 41 black-owned asset management companies in the country.
Concern was raised on Tuesday, as Parliament’s finance and trade and industry committees held a public hearing on the transformation of the financial services sector.
Irba CEO Bernard Agulhas The Independent Regulatory Board for Auditors says of the almost 4,300 registered auditors, 74.8% are white and only 10.5% are black African said in a statement that transformation had to mean truly empowering black accountants and black-owned auditing firms, “which includes providing equal opportunities to access the audit market.
“Previously, the lack of progression of young black professionals to the highest level in audit firms has been explained by the assumption that many young black accountants complete their articles and leave auditing for more lucrative roles in the government, the corporate sector or to explore entrepreneurial opportunities. This is frequently cited as a challenge for the sector in its transformation initiatives.
“The harsh reality is that of the 4,283 registered auditors in SA, 74.8% are white and only 10.5% are black African. More must be done,” Agulhas said.
“It’s not just about increasing the number of black trainee accountants; it’s about giving black accountants and auditors long-term prospects in the profession equivalent to that of their counterparts. It requires a cultural shift and a more inclusive approach, which will provide black accountants with a positive experience at the firms that will result in higher retention.”
Agulhas said more focus had to be given to long-term career prospects, including equity partnerships and senior management and executive responsibility.
“High on the Irba agenda is a desire to capacitate mid-tier and home-grown audit firms, and build a more diverse profession with increased opportunities. Currently, exposure of black-owned firms to the auditing of JSE-listed companies is minimal, with up to 94% of the market capitalisation of the JSE being audited by the ‘big four’ audit firms comprising Deloitte, KPMG, EY and PriceWaterhouseCoopers.”
Agulhas said: “It is critical that our black-owned firms be given access to the same opportunities. We need to see them growing in scale and capability. This cannot happen unless we create the opportunity for them to have equal access to the markets. Of the approximately 65 black African auditors accredited to sign off on 300-odd JSE-listed companies’ financial statements, fewer than nine have the opportunity to do so, according to our research.”
EY Africa and PricewaterhouseCoopers warn against rushing in to change the system there have been no crises of independence of SA’s auditing profession -by Linda Ensor
Further work was needed to understand the effect and consequences of mandatory audit firm rotation that the Independent Regulatory Board for Auditors (IRBA) has decided on, EY Africa CEO Ajen Sita and PricewaterhouseCoopers (PwC) CEO Dion Shango said Friday.
They told members of Parliament’s finance committee during a public hearing on the IRBA decision that SA did not have a known crisis of the independence of its auditing profession, so should not rush into changing the system.
“The work is simply too important for our country to get wrong,” Sita stressed, noting that there had not been any audit failure in the past 20 years that could be attributed to a failure of independence.
“The World Economic Forum’s assessment of South African audit standards and capital markets as being number one in the world for the last seven consecutive years is testament to the fact that existing regulations and practices are already working,” he added.
Shango argued that mandatory audit firm rotation would not achieve the outcomes that the IRBA believed it would and would further constrict an already over-regulated market and concentrate it further. It would also not increase auditor independence nor enhance audit quality.
Sita said safeguards already existed in regulations and in audit firms to ensure the independence of auditors in relation to their clients. For example, all audit partners cannot serve their clients for longer than five years and their audit opinions are subject to an independent review.
“Audit partners, family members and those in their chain of command are barred from owning shares or having any other form of financial interest or business relationship with their audit clients, thus removing any self-interest threats,” Sita said.
Audit committees of public companies had a statutory duty to assess the independence and quality of their choice of auditor and make a recommendation to their shareholders.
“Disempowering the audit committee from making its own choice due to a forced rotation opens up a new risk in the topic of directors’ liability — an example of unintended consequence.”
Sita argued that mandatory audit firm rotation did not address independence as a new audit firm could be less independent than the previous one.
Regarding market concentration, Sita noted that the four largest auditing firms audited 66% of the companies listed on the JSE. But it was important to note that the largest 20 listed companies had operations in the rest of the world and needed a firm with a similar global reach.
The experience in other countries that introduced mandatory audit firm rotation was that it had failed in many of them, either increasing costs to the economy or being suspended in its entirely as was the case in Indonesia, Brazil and Argentina.
Furthermore, Sita believed that mandatory audit firm rotation would compound the loss of critical talent from the industry. Transformation should be addressed by other means. For example, the current education model that required a 12-15 year cycle for graduates to become partners should be changed.
Shango noted that mandatory audit firm rotation would put audit quality at risk as it would mean the loss of the firm’s cumulative knowledge of the company’s business. He agreed with Sita that the IRBA decision would rob audit committees of their power to choose auditors and their ability to discharge their oversight responsibilities.
“The work is simply too important for our country to get wrong.”
He said “less intrusive” measures should be found to strengthen auditor independence.
Henk Heymans, a partner of RSM SA, a member of RSM International, a global network of audit, tax and consulting experts, also strongly opposed the IRBA decision. He did not believe mandatory audit firm rotation would have a significant effect on the business of his firm and other medium-sized audit practices.
Heymans said there was not any empirical evidence that he was aware of that supported the belief that mandatory audit firm rotation contributed significantly to audit quality. “It is too soon to embark on a project of such magnitude with such huge potential unintended consequences,” Heymans said. Not enough research had been undertaken to show that mandatory audit firm rotation was necessary.
Association for the Advancement of Black Accountants of Southern Africa president Gugu Ncube told MPs that the association did not believe that mandatory audit firm rotation would achieve the IRBA aim of auditor independence and enhanced audit quality or contribute to transformation, which the IRBA needed to address urgently.
“A review of 26 reports by regulators or other representative bodies from around the world reveals that 22 conclude that mandatory audit firm rotation is not beneficial and four are in favour thereof. A majority of a sample of 33 academic studies did not support mandatory audit firm rotation therefore an alternative means to ensure increased perceived auditor independence should be pursued,” Ncube said.
Instead of mimicking white elite lifestyles, the ambition should be to launch a new path that frees everyone, writes Joel Netshitenzhe
Most black professionals nowadays belong, at once, in the binary settings of opulence and wretchedness. The sense of “arrival” is daily tempered by the realisation that we are only at the beginning of another episode in a never-ending journey. To ensure the gold at the end of the rainbow does not turn into a mirage, professionals need to relate their narrow interests to the broader aspirations of society.
If there were any fitting articulation of the generic ideal that should guide black professionals, three such assertions from three generations of leaders stand out.
In his speech at Columbia University at the turn of the past century, Pixley ka Isaka Seme asserted: “The regeneration of Africa means that a new and unique civilisation is soon to be added to the world…. The most essential departure of this new civilisation is that it shall be thoroughly spiritual and humanistic — indeed a regeneration, moral and eternal!”
In his book, Let My People Go, Chief Albert Luthuli says: “Somewhere ahead there beckons a civilisation which will take its place in God’s history with other great human syntheses: Chinese, Egyptian, Jewish, European. It will not necessarily be all black: but it will be African.”
Writing in Some African Cultural Concepts, Steve Biko argued: “The great powers of the world may have done wonders in giving the world an industrial and military look, but the great gift still has to come from Africa — giving the world a more human face.”
The significance of these assertions lies in their transcendental paradigm about what should constitute the organising philosophy of black thought, black aspiration and black responsibility.
It would not be correct if, as we seek to construct a new society, the ultimate ambition of black professionals is mimicking white elite lifestyles, believing that being accepted to the colonial courtyard of privilege constitutes the essence of economic transformation.
It would be amiss if, in seeking to correct what is wrong with our social inheritance, the only preoccupation of black professionals is about demanding of the erstwhile oppressors to lift and “bless” us, so we can remake ourselves in their image.
Otherwise, empowerment will merely complement white entitlement to historical privilege with black-elite entitlement to larger crumbs that purchase co-optive silence.
Rather, the black professional should, in outlook and aspiration, present a destination that is liberating of the erstwhile oppressor and the oppressed, to define the new in terms of its broader transformative value.
South African intellectuals and their continental peers became an important frame of reference on theories of social change because they were better able to interrogate, and present solutions to a generic global problem: the intersection of race, class and gender. In that sense, SA remains a giant social experiment to which humanity shall always pay special attention.
We can recount to no end the massive progress that has been made in the transformation process since 1994.
However, if since the political transition, we had been as prolific as before in conceptualising national objectives and acting in unity to realise them, would we have had the Marikana tragedy, the destructive effects of the #FeesMustFall campaign, and the self-immolation of Vuwani, where schools were destroyed to make a point about demarcation?
Auditor-general reports a progressive, marginal three-year improvement in national and provincial government audit results
CAPE TOWN – The auditor-general (AG), Kimi Makwetu, today reported a slight improvement in the audit results of national and provincial governments over the past three years.
Releasing this year’s audit outcomes of national and provincial government departments and public entities (auditees), Makwetu revealed that in the three-year period under review (2013-14 to 2015-16), 24 % of the auditees improved their audit results; 14 % regressed; while the results of the majority (62 %) remained unchanged.
He further announced that during this period, public entities fared the best with continuous improvement year on year; however, the audit results of departments regressed in 2015-16. Click here to read the full media release and/or view the additional highlights for each province in the block to the right. .
AG reflects on this cycle’s outcomes
Watch this space: Over the few days a number of video clips featuring the AG’s reflections on this cycle will become available
The Association for the Advancement of Black Accountants of Southern Africa (ABASA) is pleased that draft KING IV has consolidated the principals of good corporate governance – making them easier to understand and implement and to measure their intended outcomes.
ABASA would like to make the recommendations, which in our view would strengthen the report and its aims of strengthening an ethical culture and effective leadership in South Africa.
We support the view that individuals [directors?] that have exposure to an organisation for longer period as required by the code should retire. While such individuals may be a valuable resource to organisations, long-standing and close relationships inevitably undermines the independence. A review of the independence of such directors must be performed annually to ensure that the independence of the director is maintained.
A limited tenure also provides organisations with an opportunity to increase their diversity.
Governing Structures and Delegation
We share the view that the governing body should not comprise a balance of skills; competencies, experience, diversity, independence and knowledge needed to discharge their roles and responsibilities. However it is our stance that ‘diversity’ should be defined to mean a reflection of the race and gender demographics of the country.
Chair of the governing body
ABASA welcomes the recommendation that the chairman of the governing body be a member of the boards sub committees. However, we caution the King IV committee to try and ensure the respect of the current chairpersons of these sub committees is maintained, so that the governing body chairman will not be dominate in these committees.
Auditor independence, mandatory audit firm rotation and tendering have been introduced in a number of international jurisdictions. It is our view that South Africa should join these jurisdictions, as auditor independence and audit quality is key to sound Corporate Governance.
ABASA acknowledges the risks of Mandatory Audit Firm Rotation. However we view this as an opportunity for previously disadvantaged firms to enter markets that are currently only serviced by the larger audit firms. Risks could be reduced and skills transferred through a dual audit partnership, among other possibilities.
Information and technology governance is essential given its increasing importance in most industries. The director’s criteria or characteristics must be expanded to include digital technology competence and there should be provision for a Chief Digital Officer or a similar role in King IV.
It is our opinion that the governance of remuneration policies and practices remains central to managing stakeholders’ agency risk. King IV’s enhanced disclosure requirements of remuneration practices will go a long way to managing that risk. We endorse the comparison of executive remuneration with other employees. We also urge that all listed entities provide detailed disclosure of their remuneration practices.
We further support that the 75% non-binding advisory voting right (as a bare minimum) by the shareholders be used. We also further encourage that the voting right be made binding and much higher to achieve.
We urge the committee to take note of the recent developments in integrated thinking. ABASA believes that more emphasis is required to link the governing body policies to the operational level of the organisation, in a much livelier way.
Health Sector Code
The size and value of the medical industry has significantly improved and is likely to continue to do so with the introduction of the National Health Insurance. This sector should not be excluded from the initial King IV sector codes and principles.