Tiger Brands: Integrated Annual Report 2018

We have zero compromise on employee safety and security. Safety procedures aligned with the global OHSAS 18001 standard are embedded across all our manufacturing facilities, with restricted access controls at all production facilities.

Ongoing risk assessments are focused on reviewing the strategy to reduce the safety risk to employees in certain businesses. A tailored response was developed from detailed risk assessments across these businesses. Partnerships have been established with law enforcement to combat crime and armed escorts are in place for high-risk routes. Our response is detailed in the sustainability report.

Tiger Brands is committed to producing quality products that are aligned with our superior brand equity. Good manufacturing practice (GMP) standards and the food safety system certification 22000 (FSSC 22000) have also been revised and implemented across the group. Our manufacturing, group legal and regulatory compliance functions collaborate effectively to ensure our products comply with all regulatory standards and meet consumer preferences.

Further improving quality-related processes, controls and practices was a major focus in FY18. Group quality standards have been established and this function has been centralised. Quality self-assessments have been standardised for all manufacturing sites and a supplier quality management process (including supplier qualification) is also being implemented.

Tiger Brands has partnered with Stellenbosch University to remain at the forefront of scientific developments and trends, with a memorandum of understanding signed to establish a Centre for Food Safety.

Refer to the sustainability report for an update on quality and food safety.

A comprehensive safety programme has been implemented across Tiger Brands. Each site is subject to self-audits and annual independent safety audits. A dedicated group security manager is responsible for continuous improvement on security measures and a group occupational health risk manager was appointed in FY18 to drive group-wide awareness of the occupational health framework. To further strengthen the environment, integrated safety, health and environment systems will be benchmarked to improve the group risk outlook.

Our safety and health performance for the review period is on Our people page, with more detail in the sustainability report.

Increasing interconnectivity, globalisation and ‘commercialisation’ of cybercrime are driving greater frequency and severity of cyber incidents, including data breaches. Group IT monitors the cyber security landscape continuously with a view to implementing the latest security practices and revising existing controls to safeguard the group against cybercrime. A two-year remediation plan has been designed in partnership with an external security specialist provider to ensure that we prioritise high-risk areas as well as quick wins to enhance our security posture.

Complete business-continuity plans are already in place for high-priority packaging and raw materials across the business. The roll-out of a formal business-continuity management process for the group’s manufacturing facilities is on track, ensuring a systematic and consistent approach. This risk is managed with appropriate group insurance cover, reviewed annually, and disaster-recovery plans that include replicating core business applications and services, with maintenance and support service agreements in place with key vendors.

The Western Cape water-supply risk has been reduced after recent rainfalls improved dam levels. Borehole water applications continue to be explored for sites in areas where the water table is high. Work has been undertaken to scope the feasibility of fit-for-purpose solutions for water recovery and water-treatment systems at various operations. Risk, control and environmental audits are performed by an external specialist annually. Results are used to improve business-continuity planning and disaster-recovery processes.

Our energy strategies are detailed in the sustainability report.

As outlined in Our operating environment page, our operating environment continues to be intensely challenging. We are focusing on significant opportunities for efficiency improvements that have been identified in developing our new operating model. These will enable us to channel scarce resources to activities with the greatest impact.

Suboptimal information management disciplines could lead to inconsistent and poor data quality that could compromise decisions and give rise to privacy/identity management and information security risks. Increased regulation will also place additional demand on our system capabilities and IT teams. There are substantial regulatory changes pending (cyber crime bill, IFRS 5, money laundering (FICA), protection of personal information (POPI), general data protection rules (GDPR)) that could materially impact on our strategic execution if unmanaged.

We have a robust process for ensuring all new initiatives consider security testing as part of the project. This helps strengthen our technology control environment for data security. A new information classification policy is the basis for better understanding how we handle different classes of information in the organisation. This is being driven as part of the POPI project. A gap assessment is also under way to identify key risk areas and implementation plans for POPI compliance. A holistic approach to data and information management is being established to ensure there is a defined group strategy. This includes ownership of the data and information held by Tiger Brands.

Our earnings are affected by income from associates, predominantly Oceana which accounted for 57% of total earnings from associates of R731 million in FY18. Oceana has significantly diversified its portfolio in recent years to reduce the level of reliance on fishing rights in South Africa and neighbouring countries, as the risk of these rights being allocated on increasingly stringent empowerment credentials has risen materially.

For all our associates, exchange rate volatility can materially impact their contribution to Tiger Brands. The performance of our associate companies is summarised also on Operational review page with further information in the company’s annual financial statements (www.tigerbrands.com).

Internal controls are continuously reviewed to guard against fraud and crime through employee awareness campaigns, strict access control at all facilities, and working with local police in investigating syndicated crime.

Our people are annually required to acknowledge compliance with key group policies on anti-bribery and corruption, ethics, and gifts and entertainment. The Tiger Brands ethics line is available to all employees, suppliers, customers and consumers to confidentially report unethical business practices without fear or victimisation. The ethics committee independently validates the effective finalisation of all reports.

To address efficiency and capacity, we have dispersed R720 million in capital expenditure over the year and plan for a further R2 billion in FY19. This includes investments in Davita in the exports segment, our beverages division and breakfast, which are planned for completion in FY19. Upgrades to the Germiston Enterprise factory have been completed and the Polokwane factory upgrades are under way.

Manufacturing optimisation studies are ongoing. Standards for facilities are being developed, including personal and food safety requirements, with planned completion by the end of FY19. Manufacturing excellence customs and practices (MECP) is being rolled out at all manufacturing facilities and was completed in FY18. Where possible, sustainability is considered for these projects to reduce our environmental impact, improve a safe production environment and address any potential health risks such as ergonomics.