Rewarding
VALUE CREATION

Clicks Group’s remuneration policy is aimed at driving a high-performance culture that creates sustainable value for shareholders.

The remuneration policy, which is outlined in part 1 of this report, will again be proposed to shareholders for a non-binding vote at the annual general meeting (AGM) in January 2022. The application of the remuneration policy in 2021, which details how the group has rewarded value creation, is covered in part 2 of this report. In accordance with the King IV governance code, this implementation report will be tabled separately to shareholders for a non-binding vote at the AGM.

Clicks Group values the views and insights of investors, and encourages shareholders to proactively engage with management on remuneration issues to enable informed decisions to be made when voting on the group’s remuneration policy.

In addition to this commitment, and in accordance with King IV, in the event that either the remuneration policy or the implementation report receives 25% or more dissenting votes from shareholders voting at the AGM, management will engage directly with these shareholders to:

• determine the reasons for the dissenting votes; and
• address legitimate and reasonable objections or concerns by clarifying or amending the remuneration policy, its implementation or processes, or reviewing the remuneration governance, or taking other steps to resolve the concerns.

At the AGM held in January 2021 the requisite majority of shareholders did not endorse the group’s remuneration policy or implementation report, which received 71.66% and 73.21% support respectively and not the required 75% in a non-binding advisory vote.

Following the AGM dissenting shareholders were invited to engage with management in relation to the remuneration policy and the remuneration implementation report. No shareholders responded to this invitation.

In the prior reporting period, shareholders had raised concerns regarding the requirement to include malus and clawback provisions in respect of variable compensation for executives. Provisions related to malus and clawback have been duly incorporated in the rules of the long-term and short-term incentive schemes of the group and apply to all executives.

The board approved amendments to the rules of the group’s long-term incentive (LTI) scheme to include environmental, social and governance (ESG) metrics to confirm its commitment to pursue a sustainability agenda which contributes to long-term enterprise value creation.

The LTI scheme rules were amended as of 1 September 2021 to incorporate a 15% consolidated weighted allocation to the ESG performance measurement scorecard. The amendment affects all qualifying executives. The approved amendments include:

• Composite measure: Leadership positioning on FTSE4Good Index relative to the sub-sector average for drug retailers and the consumer services industry average.
• Environmental measure: Carbon -A rating and inclusion in Carbon Disclosure Project (CDP) Index.
• Social measure: BBBEE leadership positioning relative to the retail industry.
• Governance measure: Zero breaches of customer privacy and data security.

In response to shareholder concerns, the board also considered the inclusion of ESG-linked metrics in the short-term incentive (STI) scheme and approved a prospective amendment to the STI scheme. The STI scheme rules will be amended to incorporate a 15% consolidated weighted allocation to the ESG performance measurement scorecard. The amendment affects all senior managers and will be effective as of 1 September 2022 to allow sufficient time to educate the scheme participants.

The remuneration philosophy and reward principles are largely consistent with prior years except for the inclusion of the ESG-linked metrics which have been incorporated into the LTI scheme. The remuneration policy is aligned to King IV and outlines the group’s approach to fair, responsible and transparent remuneration practices across the business.

This report provides an overview of the remuneration of all group employees as well as disclosing executive director remuneration and the alignment with shareholder value creation. The remuneration paid to executive and non-executive directors for the 2021 financial year is detailed here.

Part 1: Remuneration policy

Introduction

The group’s remuneration policy is based on the total rewards model and integrates the five key elements that the group believes attracts, motivates and retains human capital to achieve the desired business results:

• compensation;
• benefits;
• performance and recognition;
• learning and development; and
• work-life integration.

The reward principles of fair and responsible remuneration, market competitiveness, and pay-for-performance are entrenched in the policy. The policy is transparent and incorporates a pay framework that clearly differentiates between occupational levels and pay grades that facilitate remuneration benchmarking for each job within a skill pool.

The remuneration mix includes a combination of monetary and non-monetary rewards for employees in exchange for their time, efforts, talent and performance at an individual, team and company level.

Monetary rewards include annual guaranteed pay, variable pay such as short-term and long-term incentives that relate to performance against agreed targets, as well as other benefits.

Non-monetary rewards are less tangible and range from formal and informal recognition programmes, training and job rotation opportunities and exposure to stimulating work assignments, all of which are designed to motivate, affiliate and retain employees.

Employees receive a total reward statement annually which provides a personalised comprehensive view of all their rewards.

Pay levels are benchmarked on national and retail market benchmark data. The 2021 benchmarking process and the resultant pay framework was peer reviewed by independent reward consultant, 21st Century, who verified the accuracy of the benchmarking process and outcomes, as well as compliance to King IV. A market-related adjustment has been applied to the pay framework for 2022 and verified against survey benchmarks to ensure that the group’s pay remains competitive. Premiums are paid for scarce and critical skills such as pharmacy, buying and planning, finance and IT skills, based on the relevant market data.

Annual salary increases are merit based, with increases being directly related to each employee’s annual performance rating. The range of increase percentages per performance rating is applied consistently across the group, including to the executive directors. The annual increase for an employee in the bargaining unit is based on a collective bargaining process (refer to the section on remuneration of management and staff).

Remuneration structure

The total rewards framework provides flexibility to meet the differing needs of employees.

Annual guaranteed pay is determined by considering the following factors:

• the size of the job, based on the Hay job evaluation methodology;
• the nature of the job relative to its defined market position, including any market premiums for scarce and critical skills;
• individual performance as assessed during the performance review process; and
• individual position in the pay band range relative to competence and talent positioning.

The remuneration and nominations committee (the committee) reviews the group’s overall pay framework annually against defined market benchmarks per job grade, job size or skill pool.

The group’s benchmarking and market information is based on independent surveys, including the Old Mutual REMchannel, Deloitte Top Executive and the Korn Ferry surveys. These benchmarking exercises recognise the complexity in the group’s business model and the regulatory environment within which the group operates.

The group also participates in a biennial benchmarking exercise to maintain a competitive remuneration position in respect of pharmacists and pharmacy managers.

The annual performance review of all employees focuses on both financial and non-financial levers across the following metrics:

• financial performance;
• business process improvement metrics, including transformation targets, where these can be influenced by the employee;
• customer satisfaction; and
• learning and growth.

Executives are also measured against the objectives set by the social and ethics committee in relation to all the elements of the BBBEE scorecard.

All employees are required to achieve a satisfactory performance rating to qualify for full participation in the STI scheme.

Executive directors’ remuneration

The group’s remuneration policy has been reviewed by the committee to ensure that executive directors’ remuneration is fair and responsible in the context of overall employee remuneration, particularly given the nature of the retail industry and considering South Africa’s socio-economic landscape.

The policy prescribes that the levels of pay and incentives awarded to executive directors are set rationally and impartially, and are free from discrimination, self-interest, prejudice or favouritism. Executive pay is linked to value creation and positive outcomes, is subject to independent oversight and approval by the committee, and is considered by the directors to be sustainable and responsible.

To align with shareholder interests, executive remuneration is linked to the group’s performance, with clearly defined and measurable one-year and three-year deliverables.

The remuneration of executive directors consists of three components:

The performance of the chief executive officer is assessed by the committee, while the performance of the other executive directors is evaluated by the chief executive officer and reviewed by the committee.

The annual pay increase of the executive directors is directly related to individual performance ratings and aligned to the annual increase ranges per performance rating as determined by the committee and applied consistently across the group. The sustainability of the group’s business is critical in determining remuneration and the board is satisfied that the performance targets do not encourage increased risk-taking by the executives.

Incentive schemes

A significant portion of executive remuneration is variable and designed to incentivise executives. Short-term and long-term incentives are an integral part of the total rewards framework and aim to align employee performance with the interests of shareholders. LTI schemes are aimed at aligning executive remuneration with shareholder interests by rewarding executives for the creation of shareholder value over the medium term. Participation in the LTI scheme is limited to senior employees including executive directors. The LTI scheme is regularly reviewed and enhanced to align with evolving best practice locally and internationally. In 2020 the board approved the inclusion of malus and clawback provisions in relation to variable compensation payable to executives, for short-term and long-term incentives. These provisions have been included in the applicable scheme rules prospectively from 1 September 2020 in respect of the STI scheme as well as new tranches awarded to executives in terms of the LTI scheme.

In 2021 the board reviewed and approved the inclusion of ESG-linked targets to the LTI scheme which will apply to all new tranches awarded to participants in terms of the LTI scheme.

Should executive directors not meet the targets set by the committee for the STI and LTI schemes, then no amounts will be payable under the schemes and executive directors will only receive their guaranteed remuneration. Performance hurdles and caps for both the STI and LTI schemes apply to the participants, including the executive directors, which are set out below.

The purpose of the incentive schemes (which are aligned to the group’s strategic objectives and shareholder interests) is to:

• create an effective method of aiding the recruitment and retention of key employees by allowing them to participate in the growth of the diluted headline earnings per share (DHEPS) and the compounded TSR of the group; and
• provide participants with short-term and long-term financial incentives to maximise their contribution to the group’s continued growth and profitability and to deliver sustained performance over a three-year rolling period.

As a result of the significant impact of the civil unrest in KwaZulu-Natal on the group’s financial results, the committee applied its discretion (as provided for in the group’s STI rules) to approve STI bonuses to qualifying employees. The endorsement was based on the following factors:

• The civil unrest in July 2021 was an uncontrollable insured event that could not have been foreseen or mitigated by the group.
• The group has adequate South African Special Risks Insurance Association (SASRIA) and general insurance cover for material damage to assets, stock and business interruption.
• The group’s retail and distribution businesses responded swiftly, resulting in the group’s supply chain network being fully restored by 16 August 2021.

The 2021 STI bonuses were based on the year-end RONA and profit results, adjusted for the financial impact of the civil unrest.

In addition to the approval of the 2021 STI bonuses, the committee applied its discretion and approved the STI targets and budgets for the 2022 financial year (adjusted for the impact of the civil unrest).

In August 2021 the committee resolved to retrospectively amend the LTI scheme rules to accommodate an extraordinary insured event, such as the July 2021 civil unrest, by adjusting the DHEPS. In this case the adjustment was 67.3 cents per share for the financial impact of the civil unrest which included the inventory write-offs, additional costs of working, insurance recoveries received and an apportionment of the estimated insured gross profit impact for the seven weeks post the civil unrest disruption until the end of the financial year. This was necessary as the majority of the insurance proceeds will only be received in the 2022 financial year.

The effect of the DHEPS adjustment described above increased the amount payable to participants in respect of the DHEPS portion of the LTI 2018 – 2021 tranche and will similarly be used to reduce the amount payable to participants in respect of the DHEPS portion of the LTI 2019 – 2022 tranche. Furthermore, the DHEPS base in respect of the LTI 2022 – 2024 tranche (which commenced on 1 September 2021) was also adjusted by the aforementioned adjustment in order to ensure participants would not be unfairly advantaged by a lower base due to the impact of the civil unrest.

The civil unrest had no impact on the group’s TSR as the gain in the volume weighted average price (VWAP) of the group is calculated with reference to the market price over 20 business days inclusive of and preceding the group’s financial year-end.

Short-term incentive scheme

In terms of the short-term incentive scheme design a percentage of annual guaranteed pay is paid on the achievement of an on-target performance, with performance hurdles of at least 95% of the targeted group RONA and operating profit. After the committee reviewed the STI scheme rules, the chief executive officer’s on-target bonus remains at 60% of annual guaranteed pay and at 50% of annual guaranteed pay for the other executive directors.

• Performance exceeding the targeted performance may result in the payment of a higher bonus. This is self-funded and only paid if the group exceeds the targeted operating profit.
• The scheme provides for a stretch performance incentive to drive extraordinary performance. The stretch performance hurdle is met when the targeted group RONA is achieved and the targeted operating profit has been exceeded by at least 5%.
• Bonus payments are capped at 120% of annual guaranteed remuneration for the chief executive officer and at 100% for the other executive directors.

The achievement of targets is reviewed by the committee before any incentive payments are made.

Long-term incentive scheme

Executive directors participate in the cash-settled LTI scheme which is detailed further below.

Remuneration of management and staff

Senior managers receive an annual guaranteed salary and participate in the STI bonus scheme. Salaries may include premiums for scarce and critical skills. A limited number of senior managers participate in the LTI scheme, based on their strategic contribution, the retention of key talent and their individual performance levels.

An annual performance-based salary increase is paid to all permanent monthly paid non-bargaining unit employees. The annual increase date is 1 September which is aligned with the start of the group’s financial year and budgeting period.

Collective salary increases are negotiated with the representative trade union for the Clicks bargaining unit. The negotiation team is headed by the Clicks human resources executive. Trade union membership comprises 13% of the total group employees (2020: 12%). The employees in the bargaining unit also participate in the group’s STI schemes.

All store employees’ compensation complies with the Sectoral Determination 9: Wholesale & Retail Sector, South Africa and is above the national minimum wage or statutory requirements in all countries in which the group operates and the minimum rates of pay as determined for the retail industry are either met or exceeded.

Healthcare benefits

The company funds the cost of employee contributions to the Flexicare scheme for staff with six months’ continuous service in customer service, clerical and supervisory roles. Employees have the option to include their spouse and child dependants at their own cost through a monthly payroll deduction. The plan provides comprehensive primary and trauma care, including unlimited access to a general practitioner, optical and dental benefits, ambulance and casualty services. The introduction of this health benefit in January 2019 has contributed to reducing the inequality in healthcare services provided to the group’s employees, as well as improving the health and well-being of employees and their family members.

The healthcare needs of all other permanent employees are catered for through membership of one of the company’s approved medical aid schemes:

• Discovery Health Medical Scheme; and
• Profmed Medical Aid Scheme.

Group retention scheme

The group retention scheme is aimed at retaining talented employees by providing them with a long-term financial incentive which is aligned with shareholders’ interests.

The scheme targets high-potential employees, black staff and employees with scarce and critical skills. There are currently 50 employees participating in the schemes, of whom 44% are black and 26% are women.

Incentive schemes

Short-term and long-term incentives are an integral part of the total rewards framework and aim to align employee performance with the interests of shareholders.

Short-term incentive schemes

All permanent employees in the group participate in the STI schemes which reward the achievement of performance targets of the business.

• RONA-based short-term incentive scheme
  

  Performance for the group’s RONA-based STI scheme is measured at the group, business unit and team level against agreed targets. Although the scheme rewards team performance, individual performance as measured through the group’s annual performance appraisal process may limit the value of the payment should an employee not meet individual performance targets.

  Performance exceeding the targeted performance may result in the payment of a higher incentive, provided this is funded by an increase in the operating profit. Incentives for management and staff are capped at two times the value of an on-target bonus.

• Retail store incentive scheme
  The retail store incentive scheme rewards staff in retail stores for outperforming quarterly store sales targets.

Long-term incentive scheme

The LTI scheme is aimed at aligning executive remuneration with shareholder interests by rewarding executives for the creation of shareholder value. The LTI scheme has a three-year term, with performance hurdles. Successive annual allocations ensure that the executives and senior managers who participate in the scheme are incentivised based on the sustained performance of the group measured by the increase in diluted headline earnings per share (HEPS) and the increase in total shareholder return (TSR).

The LTI scheme is regularly reviewed and enhanced to align with evolving best practice locally and internationally, and based on engagement with major shareholders.

• The scheme is cash settled and based on share appreciation units. As there are no shares issued in terms of the LTI scheme, there is no share dilution.
• The remuneration multiple used to determine the number of appreciation units granted is unchanged.
• A cap limits the value payable for the normal vesting of each LTI tranche at the end of the three-year performance period to a maximum of five times the annual guaranteed pay of participants in the scheme.
• The scheme rules provide that, subject to remuneration committee approval, in the event of the retirement, disability or death of a participant, the settlement amount for outstanding LTI tranches shall be calculated based on the HEPS and TSR appreciation unit values as at the most recently completed financial year. Such settlement will be subject to a separate cap of a maximum of five times the participant’s annual guaranteed pay.
• The group has implemented a programme to hedge against the economic risk linked to the share price based on the anticipated payout of the TSR portion of the LTI.

Currently 11 (2020: 14) executives participate in the scheme. The relevant amounts are expensed through the statement of comprehensive income.

• 2019, 2020 and 2021 LTI scheme

  The LTI scheme aligns executive and long-term investor interests by including both an earnings performance metric as well as exposing participants to market volatility.

  The design of the 2019, 2020 and 2021 tranches of the LTI scheme are unchanged, with the value of appreciation units being subject to performance hurdles.

  The value of appreciation units is apportioned equally between two performance components:

  (1) diluted HEPS; and

  (2) total shareholder return (TSR).

  In addition the 2021 LTI tranche will incorporate ESG modifiers as outlined above.

  The group adopted IFRS – 16 Leases in 2020 using the full retrospective approach. As a result of this adoption, diluted HEPS was restated and accordingly the base value of this component for the respective tranches in the existing LTI scheme was also restated. The restatement of the base values was approved by the remuneration committee and forms part of the group’s annual financial statements on which Ernst & Young has issued an unqualified audit opinion.

  (1) Diluted HEPS appreciation units

  The base value for the diluted HEPS appreciation units is calculated at the date of allocation by multiplying the group’s reported diluted HEPS by an internal price-earnings ratio of 12.

  An exercise value is determined at the end of the three-year period by multiplying the published diluted HEPS for the year by the same factor of 12.

  The difference between the exercise value and the base value is the amount paid out in cash.

  The performance hurdles for the diluted HEPS appreciation units have remained unchanged and are as follows:

  Diluted headline earnings per share

  Performance hurdle	Range (based on three-year CAGR in diluted HEPS)	Percentage of LTI payout
  Weak	0% or negative growth	0%
  Below target	Up to 7.9% growth	70%
  On target	8% to 14.9% growth	100%
  Above target	15% to 19.9% growth	150%
  Exceptional	Above 20% growth	200%

  (2) TSR appreciation units

  The base value for the TSR appreciation units is the 20-day volume weighted average price (VWAP) of the Clicks Group shares, measured over the 20 business days at the end of the previous financial year.

  The exercise value is the corresponding 20-day VWAP at the end of the three-year period. The financial incentive received by the participants is the appreciation in the Clicks Group share price over the three-year period.

  TSR is defined as: "The overall return to shareholders, being the appreciation in the 20-day VWAP of the Clicks Group share, plus dividend payments reinvested over the three-year performance period, divided by the VWAP of the Clicks Group share at the commencement of the period, expressed as a percentage."

  The performance hurdles for the TSR appreciation units have remained unchanged as follows:

  Total shareholder return

  Performance hurdle (based on three-year CAGR in TSR)	Percentage of LTI payout
  Below 9%	Unit allocation forfeited
  Above 12%	Unit allocation increased by 50%
  Above 15%	Unit allocation increased by 100%

Directors’ participation in the LTI

Executive directors have been awarded the following appreciation units:

In line with best governance practice, non-executive directors do not participate in incentive schemes.

Executive service conditions

The chief executive officer is subject to a 12-month notice period and the other executive directors to a six-month period. Vikesh Ramsunder will continue to act as a strategic adviser to the group until 31 August 2022. The retirement age for executive directors is 63 years. None of the executive directors are appointed on fixed-term contracts.

Non-executive directors' fees

The fee structure for non-executive directors is based on a review of a number of internal, economic and market factors. The group’s policy is to pay non-executive director fees in a range of 80% to 120% of the median of a comparator group of JSE-listed retail companies. The median is based on the number of board and committee meetings held per annum. Following the independent benchmarking conducted in 2020 and resultant increases proposed to the non-executive directors’ fees for 2021, the group’s fee structure is aligned to the comparator group and the group’s policy. The fee structure for non-executive directors was benchmarked for application in the 2022 year to consider the economic impact of the pandemic on fees in 2020 and the impact of greater board oversight and time commitments in 2021. An independent specialist reward consultancy, 21st Century, was appointed to conduct the market benchmarking survey. The survey results indicated that the group’s inclusive fee for the chairman and fees for the social and ethics committee chairman and members were below the market benchmarks to the extent that these required adjustments which formed the basis for the proposed increases. Consequently, the proposed average fee increase of 7.0% for directors on a comparable basis is aligned to the benchmarks. In accordance with the policy, benchmarking of non-executive directors’ fees will be conducted every three years in conjunction with the calibration of the group’s pay frameworks. For intervening years the average pay increase awarded to the group’s employees will be applied to the non- executive directors’ fees.

Non-executive directors receive a base fee for serving on the board or any committee, together with an attendance fee per meeting. The base fee comprises 75% of the total fee. The chairman of the board or any committee receives a higher fee. Directors’ fees are determined for a calendar year.

Remuneration governance

The remuneration committee (the committee), operating under the authority delegated by the board, is responsible for overseeing the establishment and maintenance of the group’s remuneration policy, policy outcomes and pay practices. The committee assists the board in ensuring the group has a competitive remuneration policy and governance framework which is aligned with the group’s strategic and organisational performance objectives.

In line with the recommendations of King IV the committee comprises only independent non-executive directors, namely Professor Fatima Abrahams (chair), John Bester, David Nurek and Martin Rosen. The chief executive officer and the group corporate affairs director attend committee meetings by invitation but are recused from discussions that relate to their own performance appraisal and remuneration. Detail on the committee meeting attendance is included here.

The members of the committee have independent access to an adviser and may request professional advice on any remuneration issue.

The primary responsibilities of the committee include:

• ensuring the remuneration policy is aligned to and promotes the achievement of the group’s strategic objectives and encourages individual performance;
• ensuring the critical elements of the remuneration policy, including annual guaranteed pay, scarce skills premiums, benefits and incentives, are appropriately benchmarked to ensure the group is competitive in the employment market;
• ensuring all benefits, including retirement benefits and other financial arrangements, are justified and correctly valued;
• reviewing and approving the performance evaluation of the chief executive officer and executive directors against agreed deliverables;
• reviewing incentive schemes to ensure alignment to shareholder value creation and that the schemes are administered in terms of the rules; and
• reviewing the remuneration of non-executive directors and recommending adjustments to the fees at the AGM.

Part 2: Remuneration implementation report 2021

Annual salary increase

The average performance-linked increase effective from 1 September 2021 is 3.9% (2020: 4.7%).

Negotiations regarding the salary increase for the bargaining unit employees in South Africa in 2018 resulted in a two-year agreement. In 2020 the average salary increase for bargaining unit staff (effective annually in July) was 5.7%. Due to the national lockdown the finalisation of the current wage negotiation process (implementation date of 1 July annually) has been delayed and will be implemented retrospectively.

The annual guaranteed pay of the chief executive officer was determined by the committee within the group’s pay range, after reviewing the benchmarks prepared by Deloitte based on the group’s comparator group of listed retail companies in South Africa. The surveys indicated that the chief executive officer’s annual guaranteed pay was appropriate to the median pay within the comparator group.

Short-term incentive schemes

The remuneration committee reviewed and approved the group’s and businesses’ RONA-based STI achievements which were adjusted for the financial impact of the civil unrest.

The remuneration committee approved R118.3 million be paid to qualifying employees (2020: R98.9 million). This includes incentives paid in terms of the retail store incentive scheme where R27.0 million (2020: R28.7 million) was paid to retail store staff for the 2021 financial year.

Group retention scheme

During the financial year R39.7 million (2020: R51.8 million) was paid out to participants in the scheme.

Long-term incentive scheme

For the three-year performance period ended 31 August 2021 the group achieved the following compound annual growth rates (CAGR):

• Diluted HEPS (adjusted for the financial impact of the civil unrest – refer above): 14.0% CAGR: This represents an on-target performance.
• TSR: 16.4% CAGR: This exceeds the “above 15%” performance hurdle and the TSR appreciation units allocated to participants were increased by 100% in accordance with the rules of the scheme.

The payout of the TSR portion has been fully hedged to limit the cost to the group.

The committee approved the LTI payment of R78.4 million (2020: R105.3 million) to the scheme participants.

Directors' remuneration

Executive directors’ remuneration

Non-executive directors’ remuneration

None of the non-executive directors have service contracts with the group and no consultancy fees were paid to directors during the year.

Total directors’ remuneration

Directors’ shareholdings at 31 August

The total number of ordinary shares in issue is 245 557 066 and the percentage of issued share capital held by directors is 0.09% (2020: 0.10%). Details of dealings in Clicks Group shares by directors during the financial year are contained in the directors’ report in the annual financial statements on the website.

Non-executive directors' fees

The fee structure for non-executive directors is based on a review of a number of internal, economic and market factors. The group’s policy is to pay non-executive director fees in a range of 80% to 120% of the median of a comparator group of JSE-listed retail companies. The median is based on the number of board and committee meetings held per annum. Following the independent benchmarking conducted in 2020 and resultant increases proposed to the non-executive directors’ fees for 2021, the group’s fee structure is aligned to the comparator group and the group’s policy. The fee structure for non-executive directors was benchmarked for application in the 2022 year to consider the economic impact of the pandemic on fees in 2020 and the impact of greater board oversight and time commitments in 2021.

An independent specialist reward consultancy, 21st Century, was appointed to conduct the market benchmarking survey. The survey results indicated that the group’s inclusive fee for the chairman and fees for the social and ethics committee chairman and members were below the market benchmarks to the extent that these required adjustments which formed the basis for the proposed increases. Consequently, the proposed average fee increase of 7.0% for directors is aligned to the benchmarks. In accordance with the policy, benchmarking of non-executive directors’ fees will be conducted every three years in conjunction with the calibration of the group’s pay frameworks. For intervening years the average pay increase awarded to the group’s employees will be applied to the non- executive directors’ fees.

Dr Moumakwa joined the board in April 2021 and Sango Ntsaluba will join the board at the commencement of the 2022 financial year. The skill set and unique experiences of these two most recent appointments progress the revitalisation of the board and further enhance the eminence and diversity of the board.

Non-executive directors receive a base fee for serving on the board or any committee, together with an attendance fee per meeting. The base fee comprises 75% of the total fee. The chairman of the board or any committee receives a higher fee. Directors’ fees are paid for a calendar year.

The fees for the 2022 calendar year are subject to approval by shareholders at the AGM in January 2022.