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Eskom, Transnet and SAA praised for raising the bar

Cape Town – Eskom, Transnet and SAA often come under fire for poor performance and operational issues, but they were praised on Wednesday for raising the bar with their integrated reports.

Assurance and advisory firm Nkonki on Wednesday released findings of its fourth annual review of integrated reporting in South African state-owned companies (SOC) for the 2014 financial year.

“Despite many of the country’s SOCs coming under fire for a variety of reasons, our report indicates that they are in fact doing admirably in terms of their reporting standards, and that their integrated reporting continues to improve,” said Thuto Masasa, the Nkonki lead partner on integrated reporting.

“The average score was 54.2% this year; this compares well against previous years’ scores of 40.2%, 46.4%, and 50.6% respectively,” she said.

SA Post Office lagging behind

While Eskom and Transnet topped the list, the SA Post Office (Sapo) received the worst score and an “F” grading.

Masasa told Fin24 on Wednesday that Sapo was definitely "lagging behind the other SOCs".

At the end of 2014, Dr Simo Lushaba was appointed as administrator to sort out the administrative issues at the entity, so all eyes will be on the next annual review with regard to the entity.  

She said the leading SOCs had much to be proud of. “These guys are reporting transparently and in a way that is recommended by the integrated reporting framework,” she said.

She explained that excellence in integrated reporting was an indication of overall integrated thinking. “It identifies the key things to communicate to people,” she said. “There is integrated thinking where they can communicate their value creation perspective.”

Why top SOCs can be proud

Masasa commended Transnet, Telkom and Eskom for their journey to excellence, explaining that they had participated in the International Integrated Reporting Council’s three-year pilot programme.

“It included 105 private and public companies globally, including Microsoft and Coca-Cola” she said. “For our SOCs to participate is commendable as they opened themselves to processes. If they see value, then we can draw out value.”

Masasa said that SAA, which has improved its ranking from 13 in 2013 to six in 2014, had shown significant improvement in its reporting.

A SOC that “flew under the radar” was the Air Traffic and Navigation Services Company, which jumped from 18th position in 2011 to number two in 2014.

“The Air Traffic and Navigation Services Company are quite outstanding,” said Masasa. “This year they had three reports on their website and they embraced their framework. “The reporting on their business model and capital is impressive. They mentioned integrated assurance, which we’re still debating at a global space.”

She said the integrated reporting framework is here to stay. “It is a global benchmark,” she said. “We want to encourage the framework and give them guidance.”

GRAPH: Integrated reporting index


Globally-accepted Integrated Reporting Framework

The 2015 report provides insights into the extent to which SOCs have applied the International Integrated Reporting Council’s (IIRC) International Integrated Reporting Framework, released in December 2013, to their 2014 reports.

Chaired by Professor Mervyn King, the IIRC had as its mission to create a globally-accepted Integrated Reporting Framework, which brings financial, environmental, social and governance information together in a clear, concise, consistent and comparable format. The aim is to help with the development of more comprehensive and comprehensible information about organisations, prospective as well as retrospective, to meet the needs of a more sustainable global economy.

“This is a radical departure from the past, in which SOCs were measured against the King III Code and Report,” said Masasa. “It must be highlighted that those SOCs included in the report did not have the full benefit of time as they had just three months to become familiar with the Framework as they all had March 2014 year-ends.”

Average score of 50%

Overall the results reflect that out of the 11 expected requirements of the Framework, the SOCs achieved an average score of more than 50% for eight of the 11 expected requirements, and fell below 50% for three of the 11 expected requirements. This suggests that there is respect for and some application of the Framework.

“An important aspect of good corporate governance is to follow best practice and our report aims to support the continued effort and improvement of integrated reporting by SOCs. It also seeks to gain insights in order to provide guidance to others,” said Masasa.

“While we acknowledge those SOCs that do apply the true spirit of the Framework in their corporate reports, we strongly recommend that those that have not yet acted, should start immediately or will simply be left behind, which would be an enormous set-back in the progress shown to date, and no doubt will have serious consequences in terms of disclosure to shareholders and other stakeholders,” she said.


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