Transformation

 

IN THIS SECTION:

Review of the Group’s transformation strategy and direction
Employment equity
B-BBEE
Skills development
Preferential procurement
Enterprise development
 

AT A GLANCE

 
Sun International’s transformation strategy is based on:
The employee profile increasingly reflecting the broad diversity of South Africa.
Diversity being valued and actively promoted.
Our staff interacting positively by using the Group’s values as a guide for their behaviours.
 
We aim, over time, to have a fully-representative structure. As a consequence, employment equity is a critical component of our business strategy.
 
OUR ACHIEVEMENTS
We have increased our Black employee representation over the past year. At a senior level, the Group has made significant progress with a 38% increase in Black senior managers over the past year.

Our second (2010) formal B-BBEE verification exercise with Empowerdex returned very satisfactory results, with all units exceeding their targets. Below is a summary of the scores achieved at each unit and at Group level:
 
OUR CHALLENGES
 
OUR OBJECTIVES
To maintain Level 3 contributor status at the end of 2012.
To successfully complete the General Review by the Department of Labour that tests our compliance with the Employment Act. 
To bed-down the U-Count Reporting and Dashboard Solution.
 
Our transformational objectives are the following:
Compliance and stakeholder engagement.
Delivering on Codes of Good Practice and other legislative obligations.
Ensuring that the governance, coordination and structural basics are in place.
Ensuring clarity and efficiency in delivery.
Addressing key inequalities in the Group’s employee profile.
Eliminating discrimination.
Ensuring that all employees understand and support transformation.
 
B-BBEE Element Targets Sun City Carousel Sibaya Golden Valley Flamingo Board-walk Grand West Carnival City Meropa Windmill Morula Table Bay Wild Coast SI Group Con-solidated Score
100 – Own 21.7 20.9 20.9 21.7 19.3 12.6 20.6 19.5 18.1 19.2 21.6 20.9 15.0 18.9 20.9
200 – MC 3.8 5.1 5.1 5.1 5.1 5.1 5.1 5.1 5.1 5.1 5.1 5.1 6.9 5.1 5.1
300 – EE 7.5 3.4 5.2 8.8 9.4 7.5 8.8 8.7 10.6 13.0 12.2 12.7 7.5 8.3 9.2
400 – SD 9.0 10.2 10.1 13.0 8.0 8.5 9.1 5.5 12.1 11.7 9.3 9.5 18.3 11.8 10.0
500 – PP 13.0 17.3 18.1 18.5 18.3 18.1 19.6 20.0 20.0 18.3 17.7 19.8 12.2 18.5 19.3
600 – ED 10.0 15.0 15.0 15.0 15.0 15.0 15.0 15.0 15.0 15.0 15.0 15.0 14.0 15.0 15.0
700 – SED 5.0 5.0 4.1 5.0 5.0 5.0 4.5 5.0 5.0 5.0 5.0 4.9 8.0 5.0 5.0
Overall Score 70.0 76.9 78.5 87.1 80.1 71.8 82.7 78.8 85.9 87.3 85.9 87.9 81.9 82.6 84.5
Rating Level 4 3 3 2 3 4 3 3 2 2 2 2 3 3 3
* scored against the transformation charter.
 
In terms of preferential procurement, we have experienced an overall increase of 14% in the total number of B-BBEE suppliers across the Group and a threefold increase in the number of Black Women Entities in 2011, over the previous period.
 

Review of the Group's transformation strategy and direction

Ownership and management
Sun International Employee Share Trust (SIEST)
The SIEST gives employees the opportunity to benefit from equity ownership in Sun International Limited. The trust, set up in 2003, owns an effective 5.6% (for BEE measurement purposes, excluding 40% mandated investments, equates to 9.3%) of the Group’s shares and up to 3.5% in a number of the Group’s operating subsidiaries. The trust has the benefit of an interest-free loan from the Group of which it has repaid R47 million to date. During the year under review a further amount of R2 million was made by SISA towards the Worcester capitalisation, leaving a balance of R99 million at 30 June 2011.

During the current year, eligible employees benefited from the SIEST via the bi-annual distributions in October 2010 and April 2011 to an amount of R21.5 million in aggregate, or R2 632 per employee. Since inception the trust has distributed R166 million in total or an aggregate amount of R22 615 per employee.
 
SIEST distributions
  Total
distribution
R
Dividend per
participant
R
October 2010 11 173 029 1 359
April 2011 10 399 794 1 273
Total for the 2011 financial year 21 572 823 2 632
October 2009 9 405 597 1 164
April 2010 8 033 595 977
Total for the 2010 financial year 17 439 192 2 141
Total since inception 165 715 854 22 615
 
The trust enables employees to share in the benefits of good performance of the Group, empowering our people and encouraging a spirit of ownership. All permanent full time and permanent scheduled southern African employees with at least six months’ Group service are eligible. No directors, executives or senior managers who already participate in Group share incentive schemes are eligible to be beneficiaries of the Trust.

The trust now has more than 8 100 employees as beneficiaries who benefit by way of income distributions. These distributions are made in equal shares, irrespective of seniority or length of service, to eligible employees at the date of distribution. Bi-annual dividend distributions are paid net of loan repayments and other liabilities. The estimated value of the trust shareholdings net of debt at 30 June 2011 is R428 million, or R52 438 per employee.

The trust is administered by a board of trustees (currently 19), of whom 14 have been elected by employees from among their number, and three nominated by Sun International – including professional advisors from the Group’s investment bankers and legal advisors.
 
Sun International Black Executive Management Trust (SIBEMT
The SIBEMT was established as part of the Group’s commitment to the economic empowerment of black people and to retain and attract black executive management. The SIBEMT has an effective 0.7% interest in Sun International through Dinokana, in which it has a 6% interest.

Dinokana holds no other interests other than its interest in Sun International. The SIBEMT’s shares in Dinokana are held in trust by trustees in terms of the provisions of a trust deed regulating the conduct of the SIBEMT.

A beneficiary is not entitled to encumber, dispose of, or transfer any of the Dinokana shares prior to the expiry of the lock-in period (i.e. 3 December 2014). The SIBEMT may from time-to-time receive dividends and/or other distributions from Dinokana. Beneficiaries are entitled to participate in dividends declared by Dinokana.

If, after the expiry of the lock-in period, Dinokana has not unbundled its shareholding in Sun International, participants may dispose of the Dinokana shares to a willing buyer subject to any pre-emptive rights attaching to those shares. Sun International will, at its discretion, assist beneficiaries to realise their investments in Dinokana in terms of the rules of the scheme.
 
Dinokana shareholding in Sun International
As at 30 June 2011, Dinokana owned 6 719 759 ordinary shares in Sun International (or a 6.7% interest). During the year, Nedbank’s funding of Dinokana was extended to December 2014 to coincide with the end of the lock-in period. In terms of the extended funding arrangement Dinokana sold 270 000 shares in Sun International in order to reduce its debt to the maximum permitted. In addition to the reduction in debt, and as approved by shareholders, Sun International provided Nedbank a R60 million guarantee in respect of Dinokana’s obligations to Nedbank. Dinokana is required to maintain a minimum share cover ratio of 1.4.

The table below sets out the direct BEE shareholding in the Group and its subsidiaries:
 
Company
Empowerment partner
 
%
holding
Sun International Limited*
SIEST
Sun International Employee Share Trust
9.3
 
SIBEMT
Trust formed for the benefit of Sun International senior black managers
0.7
 
Dinokana (excluding SIEST)
Broad-based North West province BEE grouping led by Lereko
5.9
Subsidiaries
     
SunWest
GPI
Broad-based Western Cape empowerment grouping
30.0
 
GPI (through RAH)
 
4.3
 
SIEST
 
3.3
 
Other PDI minorities
 
1.1
Afrisun Gauteng
Afrisun East Rand Community Trust
Trust formed for the benefit of the local community
3.4
 
SIEST
 
3.5
 
GPI (through RAH)
 
6.6
Afrisun KZN
Dolcoast
Broad-based KwaZulu-Natal BEE grouping
22.4
 
Afrisun KZN Community Development Trust
Trust formed for the benefit of the local community
9.3
 
SIEST
 
3.5
 
GPI (through RAH)
4.2
 
Other PDI minorities
 
3.1
Emfuleni
Zonwabise
Broad-based Eastern Cape empowerment grouping
20.3
 
SIEST
 
3.5
 
GPI (through RAH)
 
2.5
Meropa
Domba
Polokwane based BEE grouping
28.9
 
SIEST
 
3.5
Teemane
Meriting
Northern Cape based BEE grouping
21.4
 
SIEST
 
3.5
Mangaung
Etapele
Free State based BEE grouping
15.4
 
Thabo Community Development Trust
Trust formed for the benefit of the communities in the Thaba’Nchu and Botshabelo areas effected after transfer of the Thaba’Nchu casino licence to Bloemfontein
11.1
 
SIEST
 
3.5
Transkei
Mbizana Community Development Trust
Trust formed for the benefit of the Mbizana community
30.0
Worcester
GPI
 
36.7
 
GPI (through RAH)
 
2.3
 
SIEST
 
3.5
 
Other PDI minorities
 
7.7
* The empowerment shareholding in Sun International has been calculated excluding the 40% mandated investments in terms of the B-BBEE codes.
 

Employment equity

Employment equity is a critical component of our business strategy and is integral to both strategic employment relations and talent management initiatives.
 
Employment equity progress report (South Africa)
Sun International has increased its Black employee representation from 83.5% to 84.2%, and its Black female representation from 43.7% to 44.3%. At a senior level, the Group has made significant progress: from 26 to 36 Black senior managers of whom 15 are Black females as compared to 11 in the previous year.
 
  Male   Female   Foreign
Nationals
   
   
Occupational Levels A C I W   A C I W   Male Female   Total
Top management 2 1 1 12   1 1   2   20
Senior management 8 1 7 27   6 3 6 9   6   73
Professionally qualified and experienced specialists & mid-management 13 8 17 99   14 4 4 35   23 4   241
Skilled technical and academically qualified workers, junior management, supervisors, foremen & superintendents 516 165 109 293   372 109 72 208   32 19   1 894
Semi-skilled & discretionary decision-making 1 316 288 93 87   1 788 340 108 152   18 10   4 200
Unskilled & defined decision-making 81 6 1   103 4     195
Total permanent 1 956 469 228 518   2 284 460 190 405   80 33   6 623
Non-permanent 66 19 5 19   79 22 5 16   5 5   241
Total 2011 2 022 488 233 537   2 363 482 195 421   85 38   6 864
Total 2010 2 020 483 238 575   2 316 489 200 440   78 45   6 884
Total 2009 2 022 470 233 594   2 319 488 177 493   83 44   6 923
 
Employment equity indicators
Sun International delivers on transformation and key employment equity indicators through team-based, company-aligned goals and through individual performance contracts. Failure to achieve individual and team goals on employment equity is a critical performance issue.
 
Full representation
Sun International’s objective is to have defined groups (Blacks, Coloureds, Indians, women, and people with disabilities) fully and meaningfully represented at all levels within the Group. ‘Full representation’ takes into consideration legislative provisions, operational and business needs, integrated human resource plans, the need to attract top talent in South Africa, and the application of business best practices according to the requirements of the Company. Our existing distribution is illustrated in the graph:
 
 
Employment Equity Challenges
On 1 March 2011, Sun International was placed under Director General Review by the Department of Labour, in terms of Section 43 of the Employment Equity Act, 1998. The review is to determine whether we are complying with the Employment Act. The review process is long term and is expected to conclude within the next 18 months.

As part of the review process Sun International had to conduct a s19 analysis as per the Employment Equity Act. The analysis consists of a review of employment policies, practices and procedures, a numerical analysis of the current workforce demography against the benchmark of the National Economic Active Population (NEAP) and a qualitative staff survey to assess perceived levels of discrimination in order to identify Employment Equity barriers in the culture and climate of the organisation.

We received the results of the survey which we are currently unpacking in order to decide the way forward. Recommendations were also made which includes the following considerations; Full leadership commitment process, Organisation wide communication, Group-wide Diversity training and a communication and behaviour change process. Management will consider and decide the way forward including communicating the results of the survey to the Group.
 

B-BBEE

We remain committed to transformation through the ongoing advancement of our Broad-Based Black Economic Empowerment (B-BBEE) initiatives. The Group sets itself targets against the dti codes of “Good Practice”, which represent the framework on which government policy is being rolled out. The current Group targets are: Level 3 contribution by the end of 2012; and Level 2 contribution in 2015.

During this financial year, the Group underwent its first formal B-BBEE verification exercise with Empowerdex, using the Department of Trade and Industry generic codes. For our Table Bay property, which is our only hotel in South Africa without a casino, the Tourism B-BBEE scorecard was used. The seven pillars which were verified were ownership, management control, employment equity, skills and development, preferential procurement, enterprise development and socio-economic development.

The verification process, conducted by Empowerdex, commenced in the middle of February 2011, and covered the period January 2010 to December 2010. The Group has performed exceptionally well and far exceeded our original target for 2010, which was to achieve Level 4 status. The Empowerdex certificate awarded to the Group verifies that we are a Level 3 contributor: with five units achieving a Level 2 rating, 7 units achieving a Level 3 rating and only one unit achieving Level 4 rating. The B-BBEE certificates are valid from 01 July 2011 and will expire on 30 June 2012.

The Group scored well on all the pillars, exceeding the targets set in Management Control, Employment Equity, Skills Development, Preferential Procurement and Enterprise Development. We achieved the set target in Socio-Economic Development and, although we did not meet the Ownership target, it was the highest contributor to the overall score. The scorecard appears in the introduction to this section.
 

Skills development

People development and support for B-BBEE transformation objectives are key focus areas for learning and development and, to this end, we have developed a comprehensive learning strategy and formalised learning processes to ensure consistent delivery.
 
Skills Development Element Score 2011
Skills development Target level Target score Verified level Verified score
Spend on black staff as a % of leviable amount 3.00% 6.00 3.00% 6.00
Spend on disabled staff as a % of leviable amount 0.00% 0.00 0.00% 0.00
Category B – D programmes for black staff as a % of total staff 2.50% 3.00 3.36% 4.03
Total score   9.00   10.03
 
In South Africa, 6 866 employees attended training programmes/modules conducted during the financial year, and in line with our B-BBEE targets, 83% of the delegates were Black (African, Coloured or Indian), and 51% were female.
 
Beneficiaries of Learning Interventions
  2011   2010   2009
Beneficiaries 6 866   6 605   6 593
Black as a % of beneficiaries 85%   83%   83%
Female as a % of beneficiaries 51%   51%   51%
 
394 courses were presented to the 6 866 beneficiaries. A total of 45 859 interventions were delivered and on average each training beneficiary attended 6.7 different interventions.

The Skills Development Element presented the most challenges, with the late introduction (November 2010) of the U-Count Reporting and Dashboard Solution to replace the manual tracking of our skills development score. While all the units completed the retrospective capturing of the data into the new system before the Empowerdex site visits, some units were unable to provide all the evidence required to corroborate what they had loaded into U-Count.

This notwithstanding, the Skills Development score of 10.03 points against a set target of 9, showed a significant improvement over the previous verified score of 5.9 achieved in 2008. This can be attributed to both the improved tracking of Skills Development expenditure through the use of U-Count, and a focus on conducting category B and D programmes which resulted in employees achieving National Certificates and Diplomas.
 
 

Preferential procurement

As one of the largest leisure groups in South Africa, Sun International utilises in excess of 4 000 suppliers who provide various goods and services. In its engagements, the procurement function continued to place more emphasis on promoting openness and transparency in all its dealings with suppliers and service providers; while encouraging more participation of BEE suppliers. We have seen the Group’s Preferential Procurement score showing a steady improvement, with a con-solidated score of 19.29 out of a maximum of 20 points; as compared to the previous year (this was a self-assessed score as the last verification was in 2008), when the score was 18.4. This improvement is attributable to the Group’s ability to sustain and exceed targets under All Spend, QSE & EME (Qualifying Small Enterprises and Exempted Micro Enterprises), and Black Owned Businesses; while focusing its efforts on improving the Black-Women-Owned-Business Score. We have experienced an overall increase of 14% on the total number of B-BBEE suppliers across the Group. In addition, we have seen a threefold increase in the number of Black Women Entities in 2011, over the previous period.
 
Supplier development and management
The initiative has progressed well during 2011; the forum engaged over 100 SMEs most of whom presented their product and service offerings and have been added to the Group’s supplier database. The Group is currently examining various categories of spend, within its supply chain, in which it can engage qualifying ED beneficiaries. The Group’s Con-solidated Preferential Procurement Score moved from 18.4 in the previous year to 19.29 out of a maximum of 20 points, with Black Women Owned entities increasing by up to 3 times.
 

Enterprise development

Our enterprise development programme has been successfully implemented in all our South African-based units. During the recent verification process conducted by Empowerdex, all the units achieved the maximum of 15 points for enterprise development, exceeding the target of 10 points.

To date, the emphasis has been on early settlements to improve the cash flow of our suppliers. Going forward, units are exploring projects linked to our supply chain that could benefit from enterprise development support. The projects that have been successful, are those directly linked to our operations - involving either a current supplier, or a new enterprise that we have included in our supplier database.

In 2010, we granted more than R1 million in interest-free loans to enterprises, enabling them to procure equipment and fund start-up costs. In addition, we have made R2.4 million in grants. Grants can take a number of forms, including: providing rent-free space to businesses that operate from our premises; providing businesses with the necessary utilities without passing on the cost of the services; or directly purchasing provisions that are part of the operating expenses of a business.

Once a project is up and running, the challenge is to ensure that it remains sustainable and that the opportunities for expansion and growth are identified and supported. To this end, the management at a unit level has to regularly interact with the business in order to monitor progress; and to provide the necessary business advice, guidance, coaching and mentoring.