1 RSSC Integrated Report 2019 CONTENTS 1. ABOUT THIS REPORT ................................. 4 2. HIGHLIGHTS ................................................ 5 Message from the Chairman ..........................................6 3. WHO WE ARE .............................................. 8 Our Vision and Structure .............................................. 12 3. OUR STRATEGY .........................................15 Message from the Managing Director .................... 16 Integrated Growth Plan ................................................. 20 RSSC five-year review ..................................................... 22 Managing risk .................................................................... 22 Load-shedding .................................................................. 23 Adequacy and effectiveness of the Risk management process ........................................... 24 5. OUR BUSINESS ..........................................27 Our value-creating business model .......................... 28 Human Resources (HR) .................................................. 30 Health and Wellness ....................................................... 34 Information Technology (IT) ........................................ 38 Property Services.............................................................. 39 Public Affairs ...................................................................... 42 Stakeholder Relations .................................................... 44 6. OUR PERFORMANCE ................................49 Delivering Value ............................................................... 50 Our Crop .............................................................................. 51 Our Water Resources ..................................................... 53 Our Factories ..................................................................... 56 Ethanol ................................................................................. 58 Ethanol Marketing ........................................................... 59 Procurement ...................................................................... 61 IYSIS ....................................................................................... 62 Mananga Sugar Packers (MSP) ................................... 63 Outgrowers......................................................................... 63 7. OUR GOVERNANCE FRAMEWORK .........65 Our Board of Directors................................................... 66 Governance Overview .................................................... 68 Our Board Committees .................................................. 69 Our Executive Management ........................................ 71 Approach to Governance .............................................. 72 8. ABBREVIATED FINANCIAL STATEMENTS ............................................73 2 RSSC Integrated Report 2019 Our new business as usual Given the nature of the global sugar markets and the volatile exchange rate environment, we have come to accept that there are external factors that affect our industry which we cannot control. It is therefore imperative that we do our best to influence our internal environment by increasing our production capacity, driving down our unit cost and keeping our efficiencies in top notch. This is the case for our Simama 20-20 and the IGP, to ensure sustainability, which in turn guarantees value-creation for all, now and in the future. 3 RSSC Integrated Report 2019 This is the eighth Integrated are necessary, not just for the Report of the Royal Swaziland completeness of reporting, but because this impact will be materially Sugar Corporation (RSSC), and The aim of the felt, not only in the short term, but it outlines the issues, activities, in the medium and long term as report is to provide relationships, interactions and well, with significant implications for a balanced and performance of RSSC, within strategy implementation and value- its operating and marketing creation. integrated insight For more on strategy and operations please refer to pages contexts during the period 16, 18, 20 and 50 into the ability of between 1 April 2018 and 31 RSSC to create March 2019. The aim of the Financial and non-financial report is to provide a balanced reporting value in the short, The report extends beyond financial medium and long and integrated insight into reporting and includes non-financial the ability of RSSC to create performance, opportunities, risks term. value in the short, medium and outcomes attributable to or and long term, which we associated with our stakeholders that have a significant influence on our define as one to two years, ability to create value. three to five years, and five to 10 years respectively, not only Directors’ Statement of to shareholders, but to other Responsibility stakeholders with an interest The responsibility of ensuring the integrity of this report lies with the in RSSC’s activities. Board of Directors. The Board has Reporting boundary applied its collective mind to the presentation and preparation of this While the scope and boundary of report. It is the Board’s belief that the report remain unchanged from this report is a fair representation of those of the prior year, the material the performance of the RSSC Group issues have been identified and and its material matters. Accordingly, reported upon with regard to, and the Board of Directors has approved in cognisance of, the six capitals – the 2019 Integrated Report on the Financial, Manufactured, Intellectual, recommendation of the Audit and Human, Social and Relationship, Risk Committees. The Group Financial and Natural – outlined in the Statements were audited by KPMG. International Integrated Reporting Council (IIRC) framework. The report Materiality and material was also prepared with regard to the matters principles described in the King IV The business’s material aspects that Code on Corporate Governance (King were previously identified have not IV). changed in any significant manner. Certain forward-looking statements Detail on further materiality issues are made in the report, particularly that form the basis of the scope and in relation to the impact on strategy, boundary for this report and which capital expenditure (Capex) and pertain to ongoing stakeholder operational processes in the context management is contained in our of global and regional markets and Stakeholder Relations section of this economic trends. These statements report on page 45. 4 4 RSSC Integrated Report 2019 HIGHLIGHTS RSSC AT A GLANCE With a record year in both cane and sugar production we have been able to achieve good financial results under conditions of depressed sugar prices. This has been attained through the ongoing reduction in our unit cost. E3 047m E277m E283m Revenue Cane-growing Sugar-milling contribution contribution E25m E282m E218m Ethanol Profit before Attributable to contribution tax shareholders 55 RSSC Integrated Report 2019 02 HIGHLIGHTS MESSAGE FROM THE CHAIRMAN What confronted the Board and management during We are closely following any developments in the market and we the year under review was primarily the markets not are making sure that our industry being in our favour. We saw our markets dwindling has appropriate interactions with the because of lower prices, unfavourable foreign South African industry. Networking is exchange rates and the dumping of Brazilian sugar in critical in business, otherwise there is the risk of being overtaken by events. the region, with customers unavoidably seeking this lower-priced product. Consequently, despite a record Board committees year in terms of crop yield and productivity, we were not able to translate this into a record profit. The Board committees continued to work very well, and in particular the Risk Committee was engaged in Given the prevailing conditions, overseeing the concern of damage we were therefore compelled to to property as a result of hailstorms, deliberate on, and implement some which had the potential to jeopardise key decisions, including the review of the productivity and profitability of capital expenditure to ensure that the the business. It was gratifying to see adverse trading conditions could be the positive outcome of the ongoing accommodated. process of engagement with senior We had to make a point of working management in this regard. with management in reducing costs Despite the challenges that the and avoiding overspending. Another Corporation was facing, we remain material issue that occupied the profitable. Management performed minds of Board members was the extremely well in offsetting question of the ineffectiveness of these SACU challenges to deliver the SACU sugar tariff in protecting impressive production levels. The the local market. We are happy that dilution of profitability that we have the relevant bodies in the South seen has been as a result of factors African sugar industry lobbied the beyond management control. government of South Africa to update the tariffs, in order to bring back some control to the markets. Stakeholders Ultimately, we did see a positive The prevailing adverse economic move in that the tariff was reviewed. conditions affect all those with an interest in RSSC’s activities and achievements, as much as they do the Corporation. It is therefore in all our interests that open, transparent and material engagement continues to take place between us. It is important for the Government, labour organisations, growers and