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Corporate Governance
An annual report for the NedNamibia
Holdings group is distributed to minority
shareholders for the first time this year,
following the successful implementation
of the scheme of arrangement on
11 February 2005, whereby minority
shareholders have exchanged their shares
in Nedbank Namibia Limited for shares in
the holding company, NedNamibia
Holdings Limited.
This corporate governance report covers
mainly Nedbank Namibia Limited’s
governance structures, since the bank is
the main operational entity within the
NedNamibia Holdings group.
Corporate governance and risk monitoring
The board of directors recognises that
good governance practices form an
integral part of developing and sustaining
any successful business and is committed
to best-practice governance processes in
all operations going forward.
The directors endorsed and, during the
period under review, have principally
applied the code of corporate practices
and conduct, as set out in the King II
report on corporate governance. By
adhering to the code, the directors have
recognised the need to conduct the affairs
of the group with integrity and in
accordance with generally accepted
corporate practices. The board will during
the next financial year ensure ongoing
compliance to support the code.
Compliance reports are submitted to the
bank’s board via the audit, risk and
compliance committee quarterly.
Financial statements
The directors are responsible for the annual
financial statements which are prepared in
accordance with Namibian Statements of
Generally Accepted Accounting Practice and
the Namibian Companies Act. The
accounting policies used are consistently
applied, appropriate and supported by
reasonable and prudent judgement and
estimates. The directors are responsible for
ensuring that the financial statements fairly
present the state of affairs of the group as
at the financial year end and the results of
its operations for the year under review.
The external auditors are responsible for
independently reviewing and reporting on
the fair presentation of these financial
statements.
Board of directors
Following the successful implementation
of the scheme of arrangement, the board
of NedNamibia Holdings has been
reconstituted and mirrors the board of
Nedbank Namibia.
The NedNamibia Holdings’ board is
constituted with one executive and eight
non-executive directors, four of whom are
independent non-executive directors. The
directors have a wide range of skills and
experience. In appointing directors,
emphasis is placed on retaining the balance
of skills necessary for achieving strategic
objectives. Both the NedNamibia Holdings’
and the bank’s boards are chaired by an
independent non-executive director and
this function remains separate from that of
the managing director.
The board is responsible to shareholders for
setting the direction through the
establishment of objectives, strategies
and key policies. It monitors the
implementation of its strategies and
policies through a structured reporting
approach, accepts accountability and
recognises its responsibility for
relationships with its various stakeholders.
The non-executive directors are actively
involved in board deliberations and
discussions and bring independent
judgement to the board.The chairman has
significantly more involvement in
the bank than most other non-executive
directors. The level of involvement is
considered necessary for the provision
of adequate guidance and input, but
does not constitute the exercising of
executive powers.
Both the NedNamibia Holdings and
Nedbank Namibia boards meet quarterly
and retain full and effective control over
the group and the bank.
With the exception of the managing
director, all directors retire by rotation
and, if eligible for re-election, submit their
names for election at the annual general
meeting. The board as a whole approves
the appointment of new directors. The
retirement age for the managing director
is 65, while a non-executive director is
required to retire at age 70.
All directors have access to the advice and
services of the company secretary.
The following board committees assist
the bank’s board in discharging its
responsibilities:
- Audit, risk and compliance committee
- Loan review committee
- Remuneration, nomination, equity
and skills retention committee
- Transformation committee
During the 2004 financial year, the board
committees reported to the Nedbank
Namibia board of directors quarterly.
Attendance of board and board committee meetings for the
financial year ending 31 December 2004
| NedNamibia Holdings Limited board of directors |
Attendance |
New
appointment dates |
Resignations |
| Meetings held: |
4 |
|
|
| Attendance: |
|
|
|
| Rossouw RJ (Chairman) |
2 |
|
13/05/2004 |
| Pearce CJ (Chairman) |
3 |
as chairman
13/05/2004 |
|
| Drew CM |
3 |
|
20/10/2004 |
| Frost WP |
1 |
|
27/02/2004 |
| Hudson KF |
1 |
|
20/10/2004 |
| Drew CM |
3 |
|
20/10/2004 |
| Frost WP |
1 |
|
27/02/2004 |
| Hudson KF |
1 |
20/10/2004 |
|
| Nkuhlu MC |
2 |
29/07/2004 |
|
| Pityana SM |
0 |
|
13/05/2004 |
| Shipanga MK |
4 |
|
|
| Weston MR |
2 |
13/05/2004 |
|
| |
|
|
|
NedBank Namibia
Limited board of directors |
Board |
Audit, risk and
compliance
committee
(previously audit
committee) |
Loan review
committee
previously risk
management
committee) |
Remuneration,
nomination,
equity and
skills retention
committee |
Transformation
committee |
| Meetings held: |
4 |
4 |
4 |
4 |
3 |
| Attendance: |
|
|
|
|
|
| Rossouw RJ (Chairman) |
2 (res 13/05/2004) |
|
|
|
|
| Drew CM |
3 (res 20/10/2004) |
3 (res 20/10/2004) |
2 (res 20/10/2004) |
1 (app 27/02/2004)
(res 20/10/2004) |
2 (res 0/10/2004) |
| Frank TJ (Adv) (Chairman) |
4 (app as chairman 13/05/2004) |
2 (res 13/05/2004) |
|
4 |
3 |
| Frost WP |
1 (res 27/02/2004) |
|
|
|
|
| !Gawaxab J |
1 (app 13/05/2004) |
|
|
|
|
| Hudson KF |
1 (app 20/10/2004) |
1 (app 20/10/2004) |
1 (app 20/10/2004) |
0 (app 20/10/2004) |
1 (app 20/10/2004) |
| Kankondi SI |
2 (app 18/06/2004) |
|
|
|
|
| Nkuhlu MC* |
2 (app 29/07/2004) |
2 |
2 |
|
|
| Pearce CJ |
3 |
3 |
3 |
2 (res 27/02/2004) |
|
| Peters RH |
4 |
4 |
4 |
4 |
3 |
| Pityana SM |
0 (res 13/05/2004) |
|
|
|
|
| Shipanga MK |
4 |
4 |
4 |
4 |
3 |
| Tjingaete F |
3 |
3 |
|
|
|
| Weston MR |
2 (app 13/05/2004) |
|
|
|
|
| * attended board committee meetings by invitation |
| res resigned |
| app appointed |
Schedule of delegated
authorities (SODA)
A schedule of delegated authorities,
setting out the mandates, powers and
authority levels that apply to the various
decision-making bodies and officers
who are responsible for governance
and management of the bank, is being
finalised and will be tabled for board
approval shortly. This document will
replace the existing board and board
committee charters as well as the
guidelines for the conduct of business.
Directors’ interest in
the company
NedNamibia Holdings Limited
As at 31 December 2004, no shares were
held by directors in the holding company.
Nedbank Namibia Limited
As at 31 December 2004, the directors’
interests in shares in the bank were
as follows:
| |
2004 |
2003 |
| Beneficial |
|
|
| Direct |
|
|
| MK Shipanga |
198 400 shares |
– |
| TJ Frank |
10 000 shares |
10 000 shares |
| F Tjingaete |
1 000 shares |
1 000 shares |
| Indirect |
|
|
| RH Peters |
243 667 shares |
243 667 shares |
| Non-beneficial |
|
|
| Direct |
|
|
| CJ Pearce |
100 shares |
100 shares |
Subsequent to the approval of the scheme
of arrangement by the requisite majority
of scheme members present at the
scheme meeting either in person or by
proxy and the agreement to the scheme
by the High Court of Namibia, these
Nedbank Namibia shares have all been
exchanged for NedNamibia Holdings
shares at a ratio of one ordinary share in
the issued share capital of NedNamibia
Holdings Limited for every one ordinary
share held in Nedbank Namibia Limited.
Directors’ fees
NedNamibia Holdings
For the 2004 financial year, no directors’
fees were paid to the directors of the
holding company.
Nedbank Namibia
Directors’ and board committee fees are paid quarterly. Board committees are
categorised as “A” and “B” committees.
The following directors’ and board committee fees were paid for the financial year
2004:
| Annual directors’ and board committee remuneration |
| |
Chairman
(fees per annum) |
Members
(fees per annum) |
| Directors’ fees |
N$96 000,00 |
N$48 000,00 |
| “A” committee fees |
N$60 000,00 |
N$30 000,00 |
| • Audit, risk and compliance committee |
|
|
| • Loan review committee |
|
|
| “B” committee fees |
N$48 000,00 |
N$24 000,00 |
• Remuneration, nomination, equity
and skills retention committee |
|
|
| Transformation committee |
N$1 000 per hour |
|
Directors’ qualifications
Board members have the following academic qualifications:
| Names |
Academic Qualification |
| Frank Theo J |
BA Law; LLB; Dip in Business Management;
Certificate in Tax Law |
| !Gawaxab Johannes |
MBL; MA; BA; BCom |
| Hudson Kevin F |
BA; LLB |
| Kankondi Sebulon I |
Degree in Business Administration; Senior
Management Programme (USB); Marketing
Management Programme (UCT); Mechanical
Engineering Diploma |
| Paul Baloyi |
MBA |
| Pearce Christopher J |
BCom; CA(SA); AMP (Harvard) |
| Peters Rolf H |
BCom; BCompt (Hons); CA(SA); CA (Namibia) |
| Shipanga Martin K |
BCom; MSc Public Policy and Administration;
Leadership and Management (University of
Virginia); Executive Development Programme
(Harvard University) |
| Tjingaete Fanuel |
Masters degree and doctorate in Economics |
| Weston Mark R |
BCom; CA (New Zealand) |
Director development and
board evaluation
For the first time in 2004, a full board
evaluation was done of the bank’s
board of directors and, subsequently,
existing and newly-appointed directors
attended a comprehensive induction
programme to familiarise themselves with
their fiduciary duties and responsibilities
as well as matters specific to the board,
the group structures, the operations of the
bank, senior management and the
business environment.
Individual board members and board
committees will be assessed for the first
time in 2005.
Audit, risk and compliance
committee (ARC)
During the 2004 financial year, the audit
and risk management committees have
been integrated into one committee, the
audit, risk and compliance committee. The
ARC committee presently comprises four
non-executive directors, the chairman
being an independent non-executive
director. Internal audit and the external
auditors have unrestricted access to the
chairman of the committee. It meets
periodically, at least four times a year, to
review the annual financial statements
and accounting policies, interim results,
the effectiveness of management
information and assurances provided by
management, to assess with internal and
external auditors other systems of internal
control, including the internal audit
function and to consider the external
auditors' reports. The committee also
monitors the efficiency and effectiveness
of the risk management policies,
procedures, practices and controls applied
within the bank. The formalisation of the
compliance function to centralise
enforcement and monitoring in the bank,
which started in the prior year, is still in
the process of implementation.
Internal audit
The objective of the internal audit
function is to assist the managing director
and the audit, risk and compliance
committee in the effective discharge of
their responsibilities by performing an
independent appraisal activity of the
bank's management controls, with the full
co-operation of the managing director
and the board of directors. By virtue of its
mandate, any material or significant
control weakness that may be identified
from time to time is brought to the
attention of the managing director and
the audit, risk and compliance committee
for consideration and the necessary
remedial action.
Internal control
For the board to discharge its
responsibilities to ensure the accuracy
and integrity of the financial statements,
management has developed and continues
to maintain adequate accounting records
and effective systems of internal control.
The board has ultimate responsibility
for the systems of internal control
and reviews their operation primarily
through the audit, risk and compliance
committee and various other riskmonitoring
committees.
As part of the systems of internal control,
the internal audit function conducts
operational, financial, and specific audits
and co-ordinates audit coverage with the
external auditors.
The internal controls include risk-based
systems of internal accounting and
administrative controls, designed to
provide reasonable, but not absolute,
assurance that assets are safeguarded
and that transactions are executed
and recorded in accordance with generally
accepted business practices and the bank's
policies and procedures. These internal
controls are based on established and
written policies and procedures and are
implemented by trained, skilled staff with
an appropriate segregation of duties, are
monitored by management and include a
comprehensive budgeting and reporting
system, operating with strict deadlines and
an appropriate control framework that has
been developed in accordance with the
bank's activities. Internal control issues are
regularly discussed with the managing
director and at board level.
Nothing has come to the attention of the
directors to indicate that any material
breakdown in the functioning of these
controls, procedures and systems has
occurred during the year under review.
Loan review committee
A loan review committee, which is a
supporting committee of the board, was
established to retain the responsibility for
credit risk. It meets at least four times
a year and its primary objective is to
identify and analyse credit risk and
to approve the adequacy of interim
and year-end provisions.
Risk monitoring
In the course of normal business
operations, the bank is exposed to
a number of risks, the most significant
of which are interest rate, liquidity,
trading, solvency, credit and operational
risks. These risks are managed through a
comprehensive framework encompassing
infrastructure, policies and methods that
support active and effective control as
well as compliance with regulations laid
down by the authorities.
A credit committee has been established
in the bank to approve all third-party risks
including sovereign and counterparty risks
within a prescribed limit as delegated by
the board of directors.
Credit risk
Credit risk is the risk of financial loss
resulting from failure of a debtor for
any reason to fully honour its financial
or contractual obligations. The credit
department assesses all exposures and
monitors the implementation of the
bank’s credit policy to ensure that the
extension, control and maintenance of
credit, as well as the process of providing
for and writing off of bad debts is
executed in a proper way and within laiddown
policy.
Asset and liability management
The effective management of risk is
critical to the success of any financial
institution. The asset and liability
committee (ALCO) strives to ensure
that acceptable levels of financial risk,
excluding credit and operational risk, are
identified, understood and effectively
managed, while achieving the strategic
and financial objectives of the bank.
The committee meets monthly, or more
frequently, should changing interest rates
require it to do so and reports to the
bank’s board of directors through
the audit, risk and compliance committee.
Interest rate risk
Interest rate risk can be defined as the
exposure of the bank’s net interest
income to adverse movements in
interest rates, and arises as a result of
mismatches in the term characteristics
of assets and liabilities.
Interest rate risk is assessed through
the use of traditional gap analysis
techniques. Gap analysis measures the
volumes of assets and liabilities subject to
repricing within a given period. For this
purpose, assets and liabilities are classified
according to their contractual repricing
characteristics.Through the use of balance
sheet stress testing and net interest
income scenarios, the impact of interest
rate movements and risk concentrations
can be measured and identified.
Strategies are then developed for
mitigating such risks.
Liquidity risk
Liquidity risk is defined as the potential
inability of the bank to raise funds
at market-related prices to meet
commitments as they fall due or to satisfy
client demands for funds. By monitoring
the maturity profile of the current balance
sheet as well as the expected future
structure, ALCO is proactively monitoring
this risk and is able to manage any
potential mismatches in accordance with
best banking practice.
Solvency risk
Solvency risk is defined as the inability
of the bank to pay its debts in full.
The board and management, as well as
banking regulators, monitor this risk
through the assessment of capital
adequacy.The internal requirements of the
bank are more conservative than those
imposed by the regulating authorities.
Currency risk
Currency risk is the potential change
to the value of financial instruments
denominated in foreign currency due to
exchange rate movements. The treasury
department continuously monitors
exchange rate movements and dealers
operate within preapproved limits based on
their knowledge, expertise and experience.
Operational risk
Operational risk is the risk of direct or
indirect loss resulting from inadequate
or failed internal processes, people and
systems or from external events. Effective
operational risk management enhances
and protects shareholder value,
specifically against unexpected or
unwanted events. The management of
operational risk is based on a system
of internal controls.This system includes a
documented organisational structure with
policies, procedures and reasonable
segregation of duties that are
communicated throughout the bank.
The corporate governance framework for
operational risk management includes
monitoring bodies such as the audit, risk
and compliance committee, internal
audit, and the internal operational risk
committee (ORCO). Operational risk is
reported to the board of directors via
the audit, risk and compliance committee.
Line management is responsible for the
day-to-day management of individual
operational risks. Senior management
holds collective responsibility for all
aspects of risk management, including
operational risk.
The internal controls in place are designed
to provide assurance that transactions,
records and management information are
complete, valid and accurate, and that
business objectives will be achieved.
This internal control system is supported
by a control self-assessment methodology,
which enables line management to
integrate control responsibilities with each
job function and to ensure that supervisory
controls are effectively applied.
Internal audit independently and
continuously monitors the adequacy,
appropriateness and effectiveness of
these internal controls and reports its
findings to management and the audit
risk and compliance committee.
Going concern
The directors confirm that they are
satisfied that the bank has adequate
resources to continue in business for the
foreseeable future. The going concern
basis in preparing annual financial
statements is therefore considered
appropriate.
The new Basel Capital
Accord (Basel II)
The new Basel II regulations aim to
improve the safety and soundness of the
financial system by aligning capital
adequacy assessment much more closely
with the underlying risks (and introducing
a capital charge for operational risk) in the
banking industry, providing a thorough
supervisory review process and enhancing
market discipline through significantly
increased risk disclosure.
Basel II is a long-term project, the
implementation of which has to be
finalised by 2007. The groundwork has
been completed and, under the guidance of
Nedbank SA, the bank will commence with
the implementation of Basel II this year.
Remuneration,
nomination, equity and
skills retention committee
The remuneration, nomination, equity and
skills retention committee operates in
terms of a mandate approved by the
board and its primary objectives are to:
- ensure that an environment is created
and a human resources philosophy is
maintained which attracts, retains,
motivates and rewards staff to
successfully implement the bank’s
strategy and achieve the group’s
objectives.
- ensure that a competitive human
resources strategy is developed and
implemented to comply with the
guidelines provided by the employment
equity commissioner and affirmative
action initiatives to support superior
business performance.
- ensure that a balanced board structure
is established and maintained to ensure
proper and effective functioning of
the board.
The remuneration, nomination, equity and
skills retention committee comprises
three non-executive directors and is
chaired by an independent non-executive
director. The managing director is not a
member of the committee but attends all
meetings. The committee meets quarterly.
Transformation
committee
The transformation committee comprises
four members (including the managing
director) and is chaired by an independent
non-executive director. Its primary
objective is to monitor and manage the
restructuring, group rationalisation and
black economic empowerment processes
in the group.
Executive committee
An executive committee comprising seven
members has been established to assist
the managing director with the
management of the bank. The committee
is a management committee and is
headed by the managing director. The
bank’s board of directors appoints the
members of the executive committee.
Affirmative action
The bank's affirmative action policy
has been in place for several years and
complies with legislation in Namibia. It is a
carefully planned, managed and monitored
process, incorporating proactive strategies
aimed at transforming the employment
environment within the bank. These
mechanisms provide for the recruitment,
development and promotion of competent
individuals, especially those from
previously disadvantaged groups, for such
persons to gain access to opportunities
based on their suitability, while also
ensuring the maintenance of core
standards within the organisation.
Code of ethics
The NedNamibia Holdings group is
committed to organisational integrity and
high standards of ethical behaviour in its
dealings with all the group’s stakeholders.
Failure to maintain ethical standards will
result in disciplinary action.
Insider trading
A policy for the prevention of insider
trading is in place, whereby directors,
management and staff with access to
confidential financial information are
prohibited from trading in NedNamibia
Holdings shares (prior to the scheme of
arrangement, Nedbank Namibia shares)
for a prescribed period immediately
preceding the publication of the interim
and year-end financial results.
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