This report sets out our Remuneration Policy and Remuneration Implementation Report for executive directors and non-executive directors’ remuneration for the 2024 financial year and is presented in three parts:

i) Part 1: The background statement which provides context to our Remuneration Policy and performance;
ii) Part 2: An overview of the forward-looking Remuneration Policy applicable in the 2025 financial year; and
iii) Part 3: The Remuneration Implementation Report which sets out in detail how the existing policy was implemented during the year under review, including disclosure on payments made to executive directors and non-executive directors during the year ended 30 June 2024.

Remgro’s remuneration philosophy is guided by its sustainability-focused business strategy, including ESG as a key component, the outcome of which is geared to deliver sustainable value and accumulative returns for shareholders over the long term whilst simultaneously driving a positive ESG impact that unlocks shared value for all stakeholders.

We utilise a simple pay structure with a clear long-term focus to align employees with our long-term strategy, with the overarching principles that pay should be fair, focused on value-creation, and underpinned by strong governance. An overview of our remuneration approach is outlined in the graphic below.

Remuneration framework and philosophy | alignment with stakeholder outcomes

Overview of performance and remuneration outcomes for the year under review

The challenging environment that businesses are required to operate in has persisted during the 2023/24 financial year. This was again a challenging period for the South African economy – an expected anaemic GDP growth of below 1%, influenced by persisting freight, logistics, governance and energy supply constraints, high interest rates and rising fuel and food prices. In addition, adverse weather conditions continue to affect lives and livelihoods and damage infrastructure. Headline inflation eased further into the reserve bank’s inflation target range of 3% to 6% and it is expected that it will reach the target midpoint of 4.5% towards the end of 2024. With inflation stabilising it is expected that the reserve bank would reduce interest rates that will help lift the financial strain of consumers and could increase disposable income.

The outcome of the long awaited and much debated national election and the formation of a Government of National Unity (GNU) enhanced the general confidence in South Africa as an investment destination and the economic indicators reacted positively to this outcome. It will remain critical for the GNU to now create an environment of policy certainty, sustainable job creation and urgency and efficiency with deploying key initiatives that will facilitate sustained economic growth. Remgro and its investee companies, like all other South African businesses, are expected to successfully and sustainably operate under tough and challenging conditions such as high interest rates, sharp increases in electricity prices, foreign exchange volatility, ongoing geopolitical tensions, weak business confidence and unacceptable levels of crime and corruption. The compounded effects of all these factors have been felt across Remgro’s portfolio companies, creating an incredibly challenging operating environment for its businesses to navigate. As a Group, Remgro has worked hard to mitigate the external pressures to the extent that it can.

For Remgro the year under review has been characterised by consolidation with a focus on embedding the recently completed corporate activities and optimising them within the Group. This process has also involved an intensified focus on driving turnaround and positive momentum in Remgro’s core and growth assets, including Mediclinic Group Limited (Mediclinic), Heineken Beverages Holdings Limited (Heineken Beverages), Community Investment Ventures Holdings Proprietary Limited (CIVH), RCL Foods Limited (RCL Foods) and Siqalo Foods Proprietary Limited (Siqalo Foods). Remgro has seen varying levels of success in this regard, taking into account the different integration timelines of the recent transactions – and their impacts, together with the nuanced ways in which macroeconomics have affected its portfolio companies. The operating environment is starting to show signs of moderation, and Remgro remains well positioned to take advantage of the opportunities that this economic cycle offers. Significant management efforts were focused on driving performance in its underlying portfolio companies and unlocking sustainable value for its shareholders. This underpins Remgro’s strategic imperative of being the trusted investment company of choice. On 1 July 2024, a further milestone strategic priority was completed with the unbundling and separate listing of Rainbow Chicken Limited (Rainbow) by its parent company, RCL Foods.

During the year under review, the Company made good progress in delivering our other strategic priorities. These priorities remain unchanged and focus on growing our triple bottom line sustainably by unlocking value for our shareholders, efficient capital allocation and continued focus on our sustainability drive.

Management remains committed towards unlocking further value through intensified focus on its core turnaround and growth assets and disposal of non-core assets, combined with a renewed focus on new growth opportunities. The Company also continues its sustainability drive to position Remgro as an ESG industry leader through continuous improvement in disclosure and shareholder engagement. In this regard, we held our inaugural annual ESG conference with our investee companies and made a key appointment of a head of ESG just before the start of the year under review.

Total guaranteed package (TGP)

In line with Remgro’s philosophy on fair and responsible remuneration, the following decision was taken with regards to increases:

  • Executive directors, members of the Management Board and Executives were granted increases of circa 6.13% for the 2024 financial year.
  • Employees at management levels received increases of around 6.25% and non-management employees received salary adjustments of on average around 6.5% for the 2024 financial year.

Long-term incentive (LTI) plans

The vesting outcomes for the 2021 LTI awards, for which the performance period ended on 30 June 2024, was 89%. The better than target outcome, should be considered against the background of the sustained growth in the intrinsic net asset value (INAV) (albeit from a lower post Covid-19 base), the full vesting of the free cash flow measure and very good progress on the qualitative ESG measures achieved over the three-year period from 1 July 2021 to 30 June 2024 that is used to determine the performance outcome for the 2021 LTI awards.

Details on the vesting of these awards are set out in Part 3 of this report.

Going forward, the business will move to making 100% of the annual awards in the form of CSP awards rather than a combination of SAR and CSP awards as was done in the past, which allows for a stronger performance focus through the application of more stretching performance measures. The ESG performance measure has evolved to align with an output-driven assessment of the ESG scorecard.

Amendments have been proposed to both the Remgro Equity Settled Share Appreciation Rights Plan (SAR Plan) and the Remgro Equity Settled Conditional Share Plan (CSP). Although the CSP will exclusively be used going forward, the SAR Plan remains in force and effect for outstanding awards, and will not be cancelled, although the Remuneration and Nomination Committee (the committee) does not foresee further awards being made in terms of this plan after the 2023 awards.

Succession planning and fair pay

Succession planning is and has been a key focus area for the committee, with equitable representation within our organisation being of particular importance and being prioritised when the opportunity to make new appointments arise. The committee is satisfied that there are no significant gender pay gaps within the different levels of responsibility, but continues to monitor the gender pay gap and other fair pay ratios. Going forward, the committee will ensure the adoption of a fair pay policy that will not only address fair and equitable pay but also the new disclosure requirements imposed by the Companies Act Amendment Bill.

Embedding Environmental, Social and Governance (ESG) measures within reward

Remgro aims to be the trusted investment company of choice that consistently creates sustainable value. Besides financial returns for shareholders, we aim to make a positive ESG impact that benefits all stakeholders. ESG practices have been part of Remgro’s core values and governance framework; now we aspire to be an ESG leader within South Africa through stewardship.

Since 2021, we have emphasised ESG practices, recognising that the best way to advance our sustainability agenda is by partnering with our investee companies across their value chains to implement ESG principles. We have focused on the creation of consistent standards in order to collectively deliver greater and more measurable impact. This has been driven from within the Remgro holding company through our Strategic and Operational ESG Committees and the newly established collaboration network.

Our investment stewardship drives our ESG and sustainability approach. Responsible investment guides our decisions, ensuring adherence to robust principles and criteria for sustainable financial returns, and positive, measurable ESG impact. We integrate these principles throughout the investment lifecycle to sustain long-term value and improve ESG performance.

Remgro is dedicated to shaping the ESG approach of its investee companies, ensuring our investments reflect our commitment to creating environmental, social and economic change throughout our ecosystem. Governance and climate risk mitigation practices have been embedded into Remgro’s value chain activities across the Group and its investee companies’ ecosystem to drive progress.

Journey to date

The first Remgro LTI awards with ESG measures were awarded in 2020 (being the 2019 and 2020 LTI awards). To further incentivise and motivate management in driving this journey, qualitative ESG measures were incorporated into the Remgro LTI awards in 2021 and 2022, which measures detailed strategic milestones to be achieved by specified dates. By incorporating specific ESG measures into the LTI, Remgro is illustrating its public commitment to ESG. From the 2023 awards, ESG targets will form 15% of the LTI awards, with the focus on key measures which form part of the ESG scorecard. These are discussed in more detail below:

During the year under review a number of initiatives were introduced to enable a more inclusive and participative process throughout the Remgro group of companies. In October 2023 a Group ESG conference successfully engaged key stakeholders from across the Group to agree on certain goals, focus areas and action steps as a collective.

During the year the Remgro collaboration network was also further expanded to include amongst others ESG, Innovation and People networks to capacitate, facilitate and execute agreed projects and initiatives.

Management identified six key focus areas that will represent the focus over the short to medium term. These focus areas and their goals are:

  • Climate change: To undertake climate change scenario analysis for Remgro and identified group companies to enable an informed commitment to a Net Zero ambition and commitment to an action plan.
  • Waste to landfill reduction: To deliver on specific projects identified through the ESG conference and the Collaboration networks. One initiative that has already started is a collaboration between a number of group companies on addressing the challenge of post-consumer packaging waste.
  • ESG risk and opportunities analyses: A comprehensive top-down and bottom-up analyses has already been started at Group level and at identified group companies. The outcome of these analyses will inform our critical focus areas that could include water, sustainable energy and others.
  • Diversity, equity and inclusion: In addition to the numerous programmes already implemented at various group companies, a focus will also be on fair pay analyses, wage differential baseline analyses and action plans to address any potential areas of concern.
  • Responsible sourcing and procurement: Remgro to have a formalised policy and strategy in place and group companies to introduce similar policies and strategies where not yet in place.
  • Disclosure: To further enhance Task Force on Climate-Related Financial Disclosure (TCFD) reporting in 2024, with full disclosure by 2025. ESG reporting to align with internationally accepted frameworks and standards.

It is the committee’s view that the specific qualitative targets were suitably challenging, aligned with the Company’s strategy and successfully laid a solid foundation upon which the Company can deliver on its ESG ambition.

More details are provided in Parts 2 and 3 of this report.

Voting results and shareholder engagement

At the Annual General Meeting (AGM) held on 4 December 2023, 65.02% of Remgro’s ordinary shareholders voted in favour of the Remuneration Policy, with 66.99% of ordinary shareholders voting in favour of the Remuneration Implementation Report. In light of the fact that more than 25% of listed ordinary shareholders voted against the Remuneration Policy and the Remuneration Implementation Report, and in compliance with King IV and the JSE Listings Requirements, dissenting shareholders were invited to engage with the Company. Shareholders were provided further focused engagement opportunities through virtual engagement sessions during our shareholder engagement roadshows.

The committee has taken an active role in listening to shareholder concerns over the past few years which has resulted in necessary updates to its pay philosophy and policy. The journey to a robust and fit for purpose remuneration philosophy and policy has so far been successful. The committee remains open to actively considering shareholder views on all matters relating to remuneration and nomination with a view to find a balance between implementing initiatives that require immediate attention and those that require consideration and further exploration before implementation. In summary, the changes that have been made as a result of shareholder feedback include:

  • The introduction of performance based LTI plans;
  • Continuous review and introduction of more stretching targets for the LTIs;
  • There has been a significant shift in focus on how the Company views its ESG obligations with stretching targets imposed on executives;
  • The Company has disclosed non-financial targets for the executives;
  • The introduction of a Malus and Clawback policy;
  • The Company has implemented a minimum shareholding requirements (MSR) policy that ensures executives are locked-
    in and closely aligned with the interests of shareholders;
  • The contracting of an independent expert to assess the long-serving independence of non-executive directors; and
  • The voluntary vetting of all non-executive directors.

These initiatives highlight the committee’s intention to align the interests of shareholders with those of the executives.

A second governance roadshow was arranged to include interested shareholders that holds significant shares in the Company. In response to shareholder feedback, the roadshow was scheduled prior to the finalisation of the Integrated Annual Report to provide feedback and allow time to consider shareholder feedback on the year in review. Through this process, the Company engaged with close to 50% of the Remgro ordinary shareholder base and the presentation and conversations were mainly around the Board composition, tenure, succession planning, and the remuneration policy and implementation.

The engagements were very productive but were only concluded towards the end of August 2024, allowing very little time for the committee to consider and respond to shareholder feedback. However, the Board have approved the following key changes:

1. Board composition, tenure and succession planning

  • In terms of the tenure of non-executive directors, the committee resolved that due to the diverse and complex nature of the Remgro investment portfolio and the time required for directors to gain a proper understanding of the overall business a suitable time for a director to be classified as independent would be 12 years. The independence of directors is evaluated annually on a holistic basis in accordance with the South African Companies Act and on a substance-over-form basis as recommended by the King IV Report on Corporate Governance. For all future appointments, a non-executive director that has served on the Board for a period of more than 12 years will no longer be classified as independent.
  • The Board further resolved to recommend to shareholders for approval at the Remgro 2024 AGM, that the Audit and Risk Committee be comprised of the following three independent non-executive directors: Ms S E N De Bruyn, Mr G G Nieuwoudt and Mr K S Rantloane.
  • With regards to Board succession the Board approved that Mr F Robertson and Mr N P Mageza will retire as independent non-executive directors at the end of June 2025 they have reached the age of 70, and that Mr P J Moleketi will be appointed to the Social and Ethics and Sustainability Committee with effect from 18 September 2024.
2. Remuneration policy

The committee was well represented during the governance roadshow by Ms S E N de Bruyn, Mr F Roberson and Mr P J Moleketi and they provided comprehensive feedback to the committee. Following robust discussions, the committee resolved the following:

  • To change the performance measures of the LTI Plans by including two new financial measures, namely total shareholder return (TSR) and headline earnings per share (HEPS) and to discontinue the Strategic Initiative non-financial measure. The addition of the TSR measure is to focus management strategies and efforts on growing the share price to narrow the discount to INAV that persistently widens, while retaining the INAV measure retains focus on management’s ability to grow the INAV per share in the long term. The HEPS measure is included to represent an objective, audited perspective of the profitability of the portfolio, which over time should provide a good proxy for shareholder value creation.
  • The committee is still in the process of developing suitable performance targets for the new performance measures but will finalise these targets before the 2024 LTI awards are made to participants.
    (For more information on the performance measures, refer to the Remuneration Policy)

We believe that these revised performance measures combined with the shareholdings of executives which they already hold, and with the shareholding to be built up through the MSR commitment, represents a strong alignment with shareholders which motivates executives to address their concern regarding the persistent and widening discount to INAV, insofar as it is within their control.

Remuneration is key in incentivising employees across all levels to work towards driving the execution of Remgro’s strategic objectives and to build a sustainable business over the long term. The committee remains committed to ongoing engagement with shareholders and welcomes any constructive feedback they may wish to provide to ensure the Company’s approach to remuneration supports fair and responsible remuneration.

At the 2024 AGM Remgro will put its Remuneration Policy and Remuneration Implementation Report to two separate non-binding advisory shareholder votes (see Ordinary Resolutions Numbers 13 and 14 in the Notice to shareholders) and the committee looks forward to a positive outcome in this regard.

Remuneration and Nomination Committee activities during 2024

The committee’s activities for 2024 were geared towards monitoring the achievement of Remgro’s strategic objectives. In addition to the committee’s normal duties, the committee oversaw:

  • Updates to the SAR Plan and CSP rules;
  • Reviewing the dilution limits on an individual basis from the 5 290 000 (c. 1%) of issued Remgro ordinary shares to 2 645 000 (c. 0.5%) of issued Remgro ordinary shares;
  • Implementation of the MSR policy;
  • Migration to full awards under the CSP and upward calibration of performance targets to reflect this shift;
  • Formulation of output-driven ESG and Strategic Initiative targets for LTI awards. Performance against targets assessed on a portfolio of evidence to be presented and assessed on a five-point scale; and
  • Assistance to investee companies in developing MSR policies.

Future areas of focus

During the 2025 financial year the committee will focus on the following forward-looking considerations:

  • In line with our commitment to transparency and our philosophy of remunerating fairly and responsibly, continue with our wage differential analysis, including continuing to identify and address any wage differentials. We plan to disclose our wage differential analyses and plans for addressing any discrepancies, if necessary, in the 2025 Integrated Annual Report;
  • Make any other changes to our remuneration reporting required by the Companies Act Amendments;
  • To continue to ensure our internal human resources and remuneration policies support transformation across the business;
  • Formulation of a fair and responsible pay policy; and
  • Finalise the performance targets applicable to the LTI performance measures.

Advisors

During the 2024 financial year, the committee has engaged REMchannel, to assist management and the Board in performing their duties and responsibilities.

The committee is satisfied and regards the consultants as being wholly objective and independent.

In conclusion

The committee is of the view that during the 2024 financial year, Remgro’s Remuneration Policy achieved its stated objectives. Remgro constantly strives to improve the Company’s remuneration practices and we look forward to our engagement with our shareholders and receiving their support on the resolutions for both the Remuneration Policy and Remuneration Implementation Report (see Ordinary Resolutions Numbers 13 and 14 in the Notice to shareholders) at the AGM on 28 November 2024.

The Remuneration Policy provides an overview of Remgro’s remuneration principles for the organisation as a whole and applies to all permanent employees. The information provided in this policy has been approved by the Board on recommendation by the committee. This Remuneration Policy will be put to a non-binding advisory vote by shareholders at the next AGM on 28 November 2024.

Governance

The committee is appointed by the Board with delegated powers and the functioning of this dedicated Board committee is well established within Remgro’s mode of operation. In essence, it is the committee’s role to ensure fair and responsible remuneration across the Company, by way of policy making and implementation, and that the disclosure of remuneration is accurate, complete and transparent. Ultimate responsibility remains with the Board.

The committee is governed by a mandate, reviewed and approved by the Board annually, that incorporates best practice governance recommendations and serves to assist members of this committee in the execution of their role and responsibilities.

The committee consists of four non-executive directors, three of whom are independent. The members of the committee for the year under review were:

  • Mr J P Rupert (chairman);
  • Ms S E N De Bruyn (lead independent non-executive director);
  • Mr P J Moleketi (independent non-executive director); and
  • Mr F Robertson (independent non-executive director).

The Board acknowledges the recommended practice in King IV that the Chairman of the Board should not be the chairman of this committee but given the following reasons, this arrangement is deemed appropriate:

  • The necessity to align the Company’s remuneration approach with corporate strategy;
  • The Chairman receives no emoluments or fees from Remgro thus there are no conflicts with regard to the approval of non-executive director fees;
  • The Chairman is a significant shareholder in the business hence it is not regarded as unreasonable for him to chair this committee; and
  • In terms of committee composition, the majority of the committee remains independent non-executive directors.

The committee formally met twice during the year and had numerous informal interactions in preparation for the formal meetings, engagements with shareholders and pre-meetings. The details on the attendance of the formal meetings are set out in the Corporate Governance Report.

The mandate, set out in the terms of reference of the committee, includes the following:

In respect of its nomination function –

  • Assist the Board with the process of identifying suitable candidates for appointment as directors;
  • Ensure the establishment of a formal and transparent process for the appointment of directors;
  • Oversee the development of a formal induction programme for new directors;
  • Evaluate the performance of the Board; and
  • Ensure that succession plans for the Board, Chief Executive Officer (CEO) and other Management Board members are developed and implemented.

In respect of its remuneration function –

  • Oversee the establishment of an organisation-wide Remuneration Policy that promotes positive outcomes across the economic, social and environmental context in which Remgro operates;
  • Promote an ethical culture and responsible corporate citizenship in the context of remuneration;
  • Oversee the fair, responsible and transparent setting and administering of remuneration of all employees;
  • Advise on the fees of non-executive directors, for approval by shareholders at the AGM;
  • Ensure that remuneration meets Remgro’s needs and strategic objectives and is administered in accordance with the shareholder-approved plan rules;
  • Oversee the preparation and recommendation to the Board of the Remuneration Report to be included in the Integrated Annual Report; and
  • Ensure that the Remuneration Policy and Remuneration Implementation Report are put to two separate non-binding advisory votes by shareholders at the AGM.

Linking ESG to remuneration

Existing practices

Workplace, economic, social and environmental sustainability practices have always been part of Remgro’s core values and through our new ESG strategy, these practices are entrenched within our overall remuneration framework.

Link to ESG Link to reward
Environmental Inclusion of ESG measures within the LTI plans
Individual KPIs include specific ESG measures
Social TGP of non-management employees is competitive and is positioned around the 75th percentile of the market
All employees participate in the LTI plan
Lower-level employees typically receive higher percentage increases
Governance Balancing employee interests with that of shareholders by rewarding for the delivery of growth in INAV
Alignment of executive remuneration and shareholder value creation through the adoption of MSR
Aligning to international best practice by incorporating Malus and Clawback provisions into variable pay
Clear and transparent remuneration reporting
Development of an ESG governance framework

Remgro’s ESG journey

Remgro is focused on maximising its impact as an investment holding company by establishing and rolling out an ESG strategy and governance framework throughout the Group of identified investee companies. Remgro commenced its ESG journey in 2020 and introduced ESG measures to the LTIs from 2021.

Building from the foundation which has been established, Remgro continues to incorporate ESG measures through a balanced scorecard approach, with the 2024 awards to include
a 15% weighting towards ESG measures. The short to medium- term focus for the ESG journey will be to:

  1. Execute on the six key focus areas as described in part 1 of the report; and
  2. To further refine and enhance these focus areas to include specific and measurable outcomes for reporting in future reports.

Fair and responsible remuneration across the Company

The delivery of Remgro’s strategy is dependent on the values, talent and skills of all employees across the Company. Therefore, Remgro views employees as critical assets. Remgro committed to the principle of rewarding all employees across the Company in a manner which is fair, equitable and responsible and strives to create an environment which is inclusive. This commitment is entrenched in the Remuneration Policy.

The TGP of all employees is positioned around the 75th percentile of the market which takes into account that the Company does not have short-term incentives (STI) in place. For executive directors, prescribed officers and senior managers, the Company targets the median of the reference group on a Total Reward (TR) comparison. All employees are eligible to receive LTI awards and not only executives. Lower-level employees typically receive higher percentage increases than other employees.

Further ongoing actions taken in this regard include:

  • Assessment of remuneration conditions between employees at the same level in accordance with the principle of “equal pay for work of equal value” to identify and address any unjustifiable remuneration disparities, particularly any differentials for gender and race.
  • Investing in its people initiatives, which include: talent management; development opportunities for all employees; various training courses as per identified needs and an employee value proposition aligned with the corporate values and culture.
  • Fair and responsible remuneration practices remain a key focus area for the committee in the 2025 financial year and we aim to put a fair and responsible pay policy in place.

Components of remuneration

Remgro has two components of remuneration, namely fixed remuneration (which includes benefits) and LTIs in the form of the SAR Plan and CSP. Remgro does not pay short-term incentives and believes that management’s decision-making should be long-term focused and aligned with the philosophy that they should be rewarded where long-term value creation is demonstrated, without excessive risk taking in the short term.

The same remuneration principles and components apply to all employees of Remgro. The remuneration policies, principles and practices of investee companies are governed through remuneration committee structures in these organisations.

Click here for more information