Audit and risk committee report

Dear Stakeholder,

I am excited to address you for the fourth consecutive year from my seat as the chair of the audit and risk committee and provide you with a brief overview of the committee’s agenda, activities and decisions during the reporting period.

As stipulated by the Companies Act, the audit and risk committee comprises of 5 members, all being non-executive directors and 4 being independent. Shortly after the commencement of the financial year, a valued member of the team, Mr Sello Rasethaba, faced some personal health concerns and stepped down from the committee and the AYO Board. Although in this reduced team complement the committee was still compliant with statutory requirements, the nominations committee was engaged to assess the unit’s residual capacity, skills and expertise to execute its mandate. Fortunately, Mr Rasethaba’s speedy recovery permitted him to resume his duties soon thereafter and no changes to the composition of the committee were required. With the committee back to its full size, I am confident that it is more than adequately skilled and resourced to discharge its duties.

In terms of its mandate, which is formally regulated through its charter, the committee is responsible for independent oversight of the effectiveness of AYO’s assurance function and services, the integrity of the annual financial statements and the governance of risk. The committee has the power to make decisions, but does not assume the function of management, which remains the responsibility of the executive team. Rather, it holds an independent role with accountability to both the Board and shareholders.

The audit and risk committee is an active and engaged unit, enjoying full attendance at all of the five formal meetings held during the financial year. These meetings were also attended by AYO’s executive team and other key staff members, including internal audit, as well as the external audit partners. Additionally, we maintain unrestricted, open lines of communication with these important stakeholders throughout the year. Therefore, I can assertively declare that the committee executed its statutory responsibilities pursuant to section 94(7) of the Companies Act, paragraph 22.15(h) of the JSE Listing Requirements and the King IV™ Code for the 2021 financial period.

Should shareholders have any specific questions, concerns or comments regarding the workings or the performance of the committee, I will gladly address them in person at the next AGM.

FINANCIAL REPORTING

The Group has adequate and appropriate financial reporting procedures, which are effectively implemented by a well-resourced and skilled team, as stipulated in paragraph 3.84(g)(i) of the JSE Listing Requirements, under the leadership of the Chief Financial Officer, Mr Tatenda Bundo. 2021 is Mr Bundo’s third year in his tenure and the audit and risk committee, having given due consideration to his expertise and track record, is pleased with his valuable contributions in terms of accuracy and efficiency of the financial reporting process to date. We are confident in his wellproven expertise, experience and abilities to continue to effectively fulfil the responsibilities of the role.

During the reporting period, the finance team prepared and published AYO’s Group and Company Annual Financial Statements, as well as half-year interim consolidated results, under the review and oversight of the audit and risk committee. Several new and/ or revised amendments to the IFRS accounting standards were adopted, as they came into effect, namely IAS 1, IAS 8 and IFRS 7. These amendments were primarily of terms clarification nature and had no material impact on the financial statements. However, more disclosure was provided to ensure statutory compliance and transparent information is made available to shareholders to enable quality decision making. Having considered the appropriateness of the accounting policies adopted and applied, the treatment of significant transactions and the processes implemented in the preparation of the reports, the committee was satisfied that the financial statements fairly represent AYO’s financial position for the period. Further, the committee verified that all recommendations, as detailed in the JSE Proactive Monitoring Report of 19 February 2021, have been duly considered and where relevant, appropriate actions were taken in the preparation of the interim and annual financial statements.

Additionally, the committee reviewed and accepted the 2021 Integrated Annual Report as a document of the highest quality, integrity and disclosure.

COMPLIANCE GOVERNANCE

The committee is accountable for setting the direction on how compliance is managed throughout the Group and exercising ongoing oversight of compliance governance, in view of South Africa’s dynamic and evolving regulatory environment. A multi-disciplinary team continuously monitors and identifies key regulatory changes relevant to the business, determines their impact on the Group and recommends appropriate controls. 

While tax and labour law compliance are recurrent areas of focus in this regard, during the reporting period the committee directed the implementation of the requirements of a brand new piece of legislation, namely the POPI Act, which came into full effect on 1 July 2021. AYO was well-prepared for the application of the act. Information officers and deputy officers were swiftly appointed across all Group companies and units, formal policies were approved and adopted and training workshops were held at all levels of the organisation. An in-depth assessment of departmentspecific practices was carried out and the committee is wellassured that material compliance with the provisions of the act is achieved throughout the Group.

With the numerous adjustments and movements in and out of lockdown levels over the last 18 months, the committee also ensured the ongoing implementation and compliance with the disaster management act regulations, as relevant to occupational health and safety of AYO employees. We reviewed the health and safety measures in place at the various operating sites, as well as the procedures and protocols adopted to ensure the health and wellbeing of AYO staff and visitors. 

Additionally, we ensured that PPE was reasonably provided for all employees. The committee is comfortable that appropriate compliance was achieved, as evidenced by the negligeable number of infections reported throughout the Group. As there is no conclusive indication of abating of this global pandemic, the committee will continue to exercise oversight in this important area for the foreseeable future.

INTERNAL AUDIT

Internal control mechanisms and systems, assessing the adequacy of governance structures, managing risks and providing assurance to the reliability and integrity of financial reports are of particular importance for any reputable business organisation. AYO, having expanded significantly as a Group over the last couple of years, both in terms of number of operating units and complexity of transactions, necessitated a much more focused approach to the function during the reporting period and going forward.

I am pleased to announce the appointment of Ms Adri Arendse as the internal audit group executive during the year. Ms Arendse is a wellseasoned professional with extensive experience, who managed to “hit the ground running”, so to speak, and make invaluable inroads in AYO’s internal controls environment. Reporting directly to myself, Ms Arendse and her team completed internal audits at all 18 operating entities within the Group, reviewing management accounts, drafting SOPs and regularly engaging with the external audit partners. They, further, developed a financial control checklist, which is currently being rolled out at subsidiary level, aimed to facilitate overall audit readiness and streamline the audit process.

This much stronger internal audit team, now comprising of four members, has undeniably improved the efficiency and reliability of AYO’s risk and control environment and their contribution has been welcomed by the committee, as well as the external audit partners. I believe this will lead to heightened reliance on the team’s reports by the external audit partner in the medium term and ultimately, lead to a more streamlined year end audit process, while strengthening our assurance mechanisms. In terms of internal objectives for the next financial period, the team will focus on monitoring the implementation of recommendations revealed at the extensive Group audit this year at subsidiary level, particularly in the areas of governance policies, SOPs, documentation and risk awareness.

EXTERNAL AUDIT

In the previous reporting period, 2020, following a long-standing relationship with BDO South Africa Inc., AYO appointed a new, joint team of external audit partners – Crowe JHB, led by Lerato Futshane, and Thawt Inc., under the stewardship of Gary Kartsounis. The appointment was ratified by an ordinary resolution at AYO’s 2021 AGM, achieving 100% positive vote.

I am happy to inform stakeholders that the inaugural year of collaboration went smoothly with the team providing an unqualified audit report for the 2020 financial year. The committee is satisfied with the scope and cost of services, provided by the external auditors, as well as their level of professionalism and expertise, independence and objectivity and look forward to an enduring relationship with the joint team going forward.

The external audit partners’ detailed report in regards to the 2021 financial period can be found in the Group Annual Financial Statements available online at www.ayotsl.com under the Investor Centre tab. The external audit partners also presented the detailed findings from the IRBA review to the audit and risk committee, in accordance with paragraph 22.15(h) of the JSE Listing Requirements.

RISK MANAGEMENT

The audit and risk committee is also tasked with assisting the Board in its oversight of risk, reviewing the Group’s risk appetite and tolerance profile, evaluating the effectiveness of the Group’s risk management framework and respective responses. In this respect, we have placed tremendous focus in the past 12 months in promoting and monitoring a paradigm shift to a more integrated enterprise risk management approach. This involves the synchronisation between strategy and risk, which we view as critical to overall performance and value creation.

With the assistance of the fortified internal audit unit, risk identification, monitoring and mitigating processes were thoroughly evaluated during the reporting period. Formalised risk policies and charters were adopted by all Group operating units and risk registers were developed with inputs from the associated functional departments. Training workshops were held to raise understanding and embed careful and informed risk consideration in operational decision making.

Looking forward, the committee will continue to put emphasis on integrated risk management throughout the organisation, driving focus on upside risk exploitation (opportunity), rather than just downside risk mitigation. Opportunistic thinking is an essential element in the strategy planning process that can lead to greater value creation for all stakeholders.

Rosemary Mosia 
Chair of audit and risk committee
17 December 2021