Corporate Governance

In a drive to reflect the enshrined principles of sustainable development and the recommendations of the Corporate Practices and Conduct as set out in the King II Report on Corporate Governance, Pebble Bed Modular Reactor (Pty) Limited (PBMR) has actively pursued the creation of a corporate governance structure to guide its strategic direction, operational effectiveness, performance measurement and accountability.

The Company has developed a governance framework to enable objectivity and performance management. Furthermore, the Company acknowledges that systems of corporate governance should be reviewed regularly to ensure they are sound, consistent with world-class standards and relevant to the business of the Company.

The appointment of the Board of Directors is conducted by the shareholder of the Company, which is in line with the provisions of an investor cooperation agreement between the shareholder and other joint-venture parties that contribute to the funding of the Company. This ensures representation of such funding parties on the Company’s Board. The Board operates within a unitary structure that provides interaction among all Board members in the decision-making process on strategy, planning, performance, allocation of resources, business ethics and communication with stakeholders.

A key principle within the governance framework is to ensure that the Board is of appropriate size and composition, with the right skills and resources and also to ensure that there is an appropriate election and tenure procedure.

The Board provides strategic direction and leadership and formally delegates duties to management through various structures, including responsibility and accountability for operations to the Executive Management Committee. Committees of the Board include the Audit, Risk and Finance Committee, the Human Resources and Remuneration Committee, the Commercial Committee and the Technical Committee. The Board committees are selected according to the skills set required so that they are able to fulfil their functions.

The Board acts as the accounting authority of the Company in terms of the Public Finance Management Act (PFMA) No 1 of 1999, as amended. With the guidance of the Company Secretary, the Board also has the duty of ensuring that the Company complies with all the relevant laws, regulations and codes of good business practice.

The Board approves the mission, strategy, goals, operating policies and priorities of the Company and monitors compliance with policies and achievement against objectives.

Specific responsibilities of the Board are governed by the Companies Act No 61 of 1973, as amended, as well as the PFMA.

The Board meets on a quarterly basis. The Board also meets by means of special board meetings, if and when necessary, to attend to other urgent Company matters which cannot be dealt with at regular board meetings. The following table reflects the number of Board and Board Committee meetings for the period April 2007 to March 2008.

• Nuclear licensing strategies to ensure consistency with the safety aspects of PBMR.
  
• International nuclear safety events, issues, trends and new initiatives, and their applicability to PBMR.
  
• PBMR potential safety performance compared with international benchmarks.
  
• International and/or external safety assessments and peer reviews of the design, safety and engineering aspects of design, any recommended corrective actions and progress in achieving corrective actions.
  
• Sensitivity to the environment.
  
• National and international nuclear policy.
  
• Any issue that would normally be presented to the Board or a committee of the Board in terms of the potential impact on nuclear safety.

The Company is committed to the highest standards of ethical behaviour in all its actions and decisions. This expectation and commitment is realised through a code of ethical conduct, supported by relevant policies and procedures and a Company-wide ethics programme, which includes an Economic Crime Prevention Policy and Incident Response Plan. This covers ethical matters such as nepotism and non-adherence to Company policies and procedures, and all relevant aspects of economic crime, such as fraud, bribery and corruption, and includes a commitment to conduct our business with due regard to the interests of all our stakeholders and the environment.

An ethics-hotline exists which facilitates the reporting of unethical behaviour. Reported items are duly considered and investigated.

The Company continually strives to ensure that reporting and disclosure to stakeholders is relevant, transparent and effective. The Company currently reports to its shareholders by means of the annual general meeting of the Company. The Company also submits quarterly reports to the DPE.

Strategic direction is obtained from the Company’s board, being the authority entrusted by the shareholders to deal with the Company, its strategy and the execution thereof.

Enterprise Risk Management is in the process of being implemented within PBMR. The PBMR Board is accountable for the process of risk management and the system of internal control. These are reviewed regularly for effectiveness. Relevant policies are established and communicated by management across the Company.

The PBMR Board retains ultimate control through the final review and adoption of key risk factors affecting the Company. Risk management is an ongoing process and is focused on identifying, assessing, managing and monitoring all known forms of risk across the Company.

The Company has put systems in place to review the efficiency and effectiveness of preventative and corrective controls. Strategic risks for the Company as a whole have been assessed and reported on, and management is involved in a process of implementing and improving systems and procedures to ensure effective mechanisms are in place for identifying and monitoring risks internal and external to the Company.

Compliance is an important element of the Company’s risk management approach, and dedicated resources assist the Company to address compliance to relevant requirements. The evolving South African regulatory framework of relevance comprises legal and technical requirements in the form of codes and standards of various kinds. PBMR has developed a register that encapsulates the regulatory and legal framework within which the Company operates. This register is used to ensure compliance with all relevant laws, regulations and other requirements.

As a state-owned enterprise, PBMR and its Board are in support of the DPE’s risk management framework and will be reporting as per the framework requirements. This will assist the DPE in effectively executing its oversight responsibility, while recognising the risk management responsibility and independence of the PBMR Board.

The PBMR Board is accountable for the Company’s system of internal control, designed to provide reasonable assurance against material misstatement and losses. Management has the responsibility for maintaining a sound system of internal control and for reviewing its effectiveness.

The internal audit function is responsible for assisting the Board and management in monitoring the effectiveness of the Company’s system of internal control. It maintains sound practice by evaluating controls continuously to determine their efficiency and effectiveness, and recommending corrective actions and suggested enhancements.

The controls subject to evaluation encompass the information management environment, the reliability and integrity of financial and operating information, the safeguarding of assets, and the effective and efficient use of the Company’s resources.

The purpose, authority and responsibility of the internal audit function are formally documented in the internal audit charter. A generally risk-based internal audit plan is used to direct the efforts and priorities of the internal audit function. The audit plan is regularly reviewed and updated as appropriate, to ensure responsiveness to changes in the business environment.

Significant findings are reported to the Audit, Risk and Finance Committee and follow-up audits are conducted in areas where significant internal control weaknesses are found.

The internal audit function is fully supported by the Board and Audit, Risk and Finance Committee, and has full, unrestricted access to all organisational activities, records, property and personnel. Internal audits are mainly conducted by an in-house internal audit function, and specific engagements are outsourced where required.

Legal fulfilment of all statutes and regulations is germane to the Company business of ensuring SHEQ compliance.

SHEQ management systems are implemented throughout the Company in accordance with the requirements of international and national regulatory requirements. These systems not only address requirements but also provide values for employee behaviour in creating a culture of “safety first”.

The commitment of the Company’s executives ensures that the quality management system meets all requirements to maintain certification under the ISO 9001:2000 standard. PBMR implements the environmental management requirements of IS0 14001:2004 and safety and health management requirements of OHSAS 18001:2007.

As a core function of the Corporate SHEQ Department, quality audits are conducted to verify the ability of the Company to meet customer and regulatory requirements and to determine the effectiveness of the quality management system. The audit programme was fully implemented, ensuring that every PBMR department was audited at least once during the year. A number of significant management and technical processes was also audited. The results of these audits indicate that the quality management system is generally effective.