About our integrated report

ABOUT OUR INTEGRATED REPORT

Our integrated report is the primary report to our stakeholders. It is structured to show the relationship between the interdependent elements involved in our value creation.

Our integrated report is prepared by following the International <IR> Framework of the International Integrated Reporting Council (IIRC). It enables our providers of financial capital and all stakeholders to make an informed assessment of our ability to create sustainable value.

Our corporate governance section provides a brief overview of the Group, covering ethics, directors’ and executive profiles, key policies and committee reports. The entire corporate governance report is available on www.aeei.co.za/investor-relations/integrated-reports-and-online-suite-of-reports/.

We have provided a brief overview of our sustainability report, covering our approach to sustainability, human capital, social and relationship capital, corporate social investment and natural capital. For more information, refer to online Sustainability Report on www.aeei.co.za/investor-relations/integrated-reports-and-online-suite-of-reports/.

Our investment portfolio report covers the various divisions within the Group. For more information, refer to the online Investment Portfolio Report on www.aeei.co.za/investor-relations/integrated-reports-and-online-suite-of-reports/.

The Group’s annual financial statements provide a comprehensive report of the Group’s financial performance for the year. Refer to the chief financial officer’s report and the online Group’s annual financial statements on www.aeei.co.za/investor-relations/annual-financial-statements/.

Our notice of AGM and Proxy provides supporting information for shareholders to participate in the AGM and is available on www.aeei.co.za/investor-relations/notices/.

REPORTING SCOPE AND BOUNDARY

Our integrated report presents our strategic framework for creating value over the short, medium, and long-term in a way that gives stakeholders a holistic view of the African Equity Empowerment Investments Ltd (AEEI, the Company or the Group) Group and our future prospects. This report provides an overview, performance, and governance of the Company on delivering on our strategy over the past year. It reflects how we have created, preserved or eroded value over time. Our report provides information on our business model, material risks and opportunities, governance and operational performance for the financial year ended 31 August 2021. It also incorporates the financial reporting boundary of the Group and its subsidiaries. In addition, details of our investments in subsidiaries and strategic investments appear in our annual financial statements.

It also covers our response to the global COVID-19 pandemic, the resultant ongoing lockdown and the effects on the Company.

THE IMPACT OF COVID-19

Is there light at the end of the tunnel?

COVID-19 has become the greatest global shock in decades, and the world’s economy likely faces the worst recession since the 1930s.

South Africa, like many other countries across the globe, cannot escape the ongoing pandemic. The third wave of pandemic hit the country very hard and infection rates kept escalating with the Delta variant, with possibly a fourth wave in the near future. Like many other businesses, the resultant loss of employment and income will cause further damage to livelihoods, health, and sustainable development. While the country is set to emerge from the crisis weaker than it was going into, the pandemic has exposed long-standing structural weaknesses that have progressively worsened. Moreover, South Africa’s weak recovery is putting pressure on public finance and businesses.

Before the onset of the COVID-19 pandemic, the South African economy was already struggling. The reasons being the unstable electricity supply, business confidence, the diversion of departmental funds to bail out state-owned enterprises, low consumer and business confidence and lack of structural reforms.

The COVID-19 pandemic exposed South Africa’s biggest challenge to date – the job market with high levels of unemployment. The lower-income group suffered the most in job losses in comparison to higher-paid workers. Job recovery remains modest, with many businesses having to shut their doors permanently while others are still recovering from the stringent lockdown in March 2020 and the continuing varying restrictions instituted throughout the pandemic. However, there are some positive developments with an increase in start-up businesses and young entrepreneurs.

The outlook remains uncertain due to the many factors that influence the pandemic and associated restrictions will come to an end remain unknown. Such factors include subsequent waves of the pandemic in South Africa and abroad and the rate of vaccinations in the country and overseas. In addition, the virus continues to evolve with the many variants that are now spreading. Thus, it remains challenging to predict how the economic recovery will proceed and what setbacks will surface for as long as the pandemic continues.

Despite this, AEEI continued to manage the spread of the virus and business continuity by being proactive and responsible. Our COVID-19 committee and Compliance Officers monitor our actions and manage the risks in line with our Office Workplace Plan in terms of the Disaster Management Act, Regulation 16(6)(b). In addition, our executive team focuses on operational matters, including managing the business, its continuity plans, maintaining liquidity and managing risks.

At the start of COVID-19, we acted quickly to position our business to meet the challenges of the pandemic in uncharted territories. We worked closely with our stakeholders, worked on innovative ways to sustain our businesses, proactively supported our employees, service providers, suppliers while managing potential risks and challenges.

We responded by right-sizing our businesses to match current trading conditions. Unfortunately, this resulted in staff retrenchments. This comes after a year of using our financial resources to continue employing staff. This action will ensure the sustainability of the business, allowing us to employ more staff in the future when the macro environment, especially the COVID-19 pandemic, is under control.

Our capital expenditure has been halted as far as possible without harming our ability to operate now and in the future.

We embraced technology a lot more in the way we work as remote working enables us to continue operating in the reality of continued lockdowns and keeping our staff safe. We improved communication within the organisation to ensure that information is available in real-time as far as possible, enabling the identification of potential risks before they arise, which is vital in this dynamic COVID-19 environment. In addition, we improved communication with stakeholders, including our overseas suppliers, who assist us in ensuring that products are shipped on time and on reasonable terms, considering restrictions on the movement of goods.

EFFECT OF COVID-19 AND RESPONSE STRATEGY

Leadership and governance	Maintaining high levels of corporate governance and leadership continues to remain critical through unchartered territory. The Board and management team continue to lead by example through their commitment and tenacity, providing support and guidance, and ensuring business continuity
Solvency and liquidity	The Board and executive management reviewed the projects for the financial year and implemented the following: Working capital was preserved to secure the solvency and liquidity of the Group; All major capital and project expenses have been deferred unless it was critical to the business unit; and Certain planned investments have been deferred.
Employees	The health and welfare of our employees remains a high priority Measures have been put in place to secure the well-being of all employees and their families. Protocols and policies were put in place to align with requirements of Section 8 (1) of the Occupational Health and Safety Act, No. 85 of 1993. COVID-19 has brought about high levels of stress and anxiety to everyone, and the Group has made support available. – A 7-day Mental Health Survival online course was made available to all employees, including dealing with stress, anxiety, daily routines, depression, isolation, coping mechanisms, lifestyle adaptation, fitness, incorporating physical well-being etc.; and – COVID-19 employee assistance screening service provided to all employees, including medical attention Daily on-site screening. Transportation arrangements are in place for the most vulnerable employees. As a result of COVID-19, some employees tested positive and had to self-quarantine. Unfortunately, we had some fatalities and wish to extend our heartfelt condolences to the families and our colleagues. Online learning has been encouraged, with many employees taking the opportunity to further their skills capabilities.
COVID-19 Plan	It was imperative to have a best practice return to work procedure in place, including training for the safe return of all employees during the various levels of lockdown. Training to all employees. A continued phased approach to the resumption of work in the office during the various levels of lockdown. Personal protective equipment made available to all employees. We continuously monitor and ensured adherence to all protocols
COVID-19 Recovery Plan	Management continues to reflect on the changes that COVID-19 has brought daily, and our recovery plan is a work in progress. We continue to realign our operating strategies to the constantly changing environment. Our method is to streamline operations and ensure survival in this volatile environment so that our businesses have the chance to continue operating in the future. We know that stability will come; it's just a matter of when it will happen.

We continue to do all that we can to help our stakeholders during this unprecedented and uncertain time. During this period, we have had to restructure some business units. Unfortunately, employees took a salary reduction with some employees being deployed in other areas in the Group and, as a last resort retrenched.

Our key actions include:

Shareholders, the investment community and providers of capital	Employees	Business Partners	Communities & NGO’s
We kept our shareholders, the investment community and providers of capital abreast of our activities that would impact them Our primary focus remains on the liquidity and capital of the Company and the Group by: – Streamlining operations by reducing expenditure; – Optimum capital management; – Negotiating with service providers and suppliers for better terms; and – The optimum management of our debtors to ensure timely cash receipts. We monitor our risks and emerging risks and take immediate action by: – Keeping the Board and EXCO’s abreast of industry trends and developments in macro environments; – Continuous and robust communication with internal and external stakeholders; and – Our adoption of agility in operating plans to respond to emerging risks. – Our adoption of agility in operating plans to respond to emerging risks. We continue to manage what we can control – by reducing our costs. We remain committed to our strategic initiatives to support our growth in revenue and efficiencies by: – Supporting organic growth in our businesses and acquiring new businesses at the right time and for the right price.	The health, safety and wellbeing of our employees and their families remain a priority. We have continued to adhere to all protocols put in place at the start of the pandemic. Remote working for nearly all employees remains in place. However, some of our businesses are regarded as essential services providers, and protocols have been established to ensure their safety. Teams are split and work rotational shifts Due to technology, all meetings are held remotely. PPE continues to be made available to all employees with an increased focus on sanitation and health practices. Offices are sanitised regularly. Social distancing remains a priority to contain the spread of the virus. International travel has been put on hold and local travel within the country is restricted	Social distancing remains in place. We try and refrain from physical client and service provider interaction as far as possible. We negotiated payment terms with some suppliers and adhered to them to ensure the continuity of their businesses. We maintained the quality of our products and services. We supported SMME’s	The spread of COVID-19 exacerbated the high levels of inequality, poverty and unemployment, making our social and economic contributions more critical by supporting our people and communities. However, we were unable to have our usual “handson” approach with our communities. We continued to support our social investment programmes. We continued to ensure food security in our community projects by feeding the children at an ECD facility. We continue to assist those in the most impoverished areas with food parcels. We continued to support the payment of teachers salaries at an NGO to ensure the continuity of learning. We participated in community initiatives by giving back to communities and orphanages.

TARGETS AND STRATEGY

Our report covers the strategic progress made during the 2021 financial year. In addition, it provides insight into the Group’s strategy and financial and non-financial targets for the short, medium and long-term. With the impact of COVID-19, AEEI adapted its business strategy and key targets to meet the challenges of the pandemic.

MATERIALITY AND MATERIAL MATTERS

This report aims to disclose matters that substantively affect our ability to create value over the short, medium and long term. Accordingly, material matters and developments are comprehensively dealt with throughout the report. As described here, our material matters influence our strategy and inform the content of this report.

OUR APPROACH TO MATERIALITY

Our report provides information that we believe is relevant to current and prospective investors and other stakeholders who wish to make an informed assessment of our ability to generate value over the short-, medium- and long-term.

It also covers our business model, activities and the impact on the capitals and how we created, preserved or eroded value. Our ability to create value is determined by the material risks and opportunities facing our business, our response to our operating context, and our key stakeholders’ material interest. It also covers our leadership team, our governance and our remuneration practices.

OUR REPORTING PROCESS

Our business model – how we create value;
Outcomes – the material impact and influence of our activities on the six capitals;
The external environment – material trends, risks and opportunities;
Strategy – our business strategy; and
Stakeholders – noting the material interests of our key stakeholders.

OUR INTEGRATED RISK MANAGEMENT APPROACH

At AEEI, we believe that an effective risk governance model contains checks and balances to support appropriate consideration of risk and opportunity management throughout the Group. Further information can be found here.

OUTLOOK

AEEI’s outlook information is considered to be all the information that answers the questions in terms of:

What challenges, opportunities and uncertainties are we likely to encounter in pursuing our strategy, and what are the potential implications for our business model and future performance?

You can find our outlook information throughout this report and in the following sections:

Our material matters – https://onlinereport2021.aeei.co.za/our-operating-context-and-strategic-response/materiality-risks-and-opportunities/.

Our value-creating business model – https://onlinereport2021.aeei.co.za/aeei-at-a-glance/our-value-creating-business-model/.

Our chief executive officer’s report – https://onlinereport2021.aeei.co.za/our-performance/chief-executive-officers-report/.

Our chief financial officer’s report – https://onlinereport2021.aeei.co.za/our-performance/chief-financial-officers-report/.

OUR BOARD RESPONSIBILITY STATEMENT

The Board is ultimately responsible for ensuring that the integrity of the integrated report is not compromised. In the Board’s opinion, the report addresses all issues that are material to the Group’s ability to create value and fairly represents the performance of the Group. Accordingly, the integrated report and the annual financial statements for the Group for the year ended 31 August 2021 were approved by the Board on 23 November 2021.

COMBINED ASSURANCE

AEEI has a combined assurance model, which includes internal and external assessments of crucial strategic risks, internal controls and other material areas to support the integrity of the management, monitoring and reporting of data. Crowe JHB (Crowe) and THAWT Inc., a member of Crowe Global, audited our 2021 consolidated annual financial statements and provided an unmodified opinion thereon.

The Board paid attention to the combined assurance, ensuring that our combined assurance model adequately addressed the Group’s risk and material matters. The audit and risk committee provides internal assurance to the Board quarterly on the execution of the combined assurance plan. The Group’s financial, operating, compliance and risk management controls are assessed by the Group’s internal audit function, which is overseen by the audit and risk committee.

We continually optimise our combined assurance model to avoid duplication of efforts, rationalise collaboration and manage assurance costs. This enables an effective control environment and ensures the integrity of the information used for reporting and decision-making.