Play Your Part: Corporate Failures in South Africa – Ince has a solution for that

Published - 11 March, 2020

The investor community is growing increasingly frustrated to see the types of bad behaviour coming out of corporate South Africa, with the latest being the news of Tongaat Hulett’s management overstating profits.   

Notably, South Africa is now ranked as the third country in the world, after China and India, in terms of having the highest reported incidents of economic crime, according to PwC’s 2020 Global and Economic Crime and Fraud Survey.  

This behaviour is said to be a complete and clear disregard for the interests of shareholders and other stakeholders. In a conversation on the Rational Perspective podcast presented by journalist Alec Hogg, he refers to “the use of ‘creative accounting’ to simulate a successful business, rather than actually building a successful business,” and how problematic this becomes.  

Test case  

Hogg senses that the Tongaat Hulett situation is going to be used as a test case going forward. He suggests that the situation highlights that being a non-executive director comes with a lot of responsibility. He emphasises that non-executive directors in their unique position need to ask the right questions of management.  

“Capitalism should have a strong moral undertone – in corporations, that moral undertone is set by the directors,” Hogg says. “Directors, therefore, need a strong understanding of the company otherwise they’ll be led by the nose by managers.”  

In order to curb the rise of economic crimes in the country, the prosecution needs to happen faster, despite limitations presented by the country’s justice system which makes it hard to criminally prosecute, according to PWC.  

Chief Executive Officer at Tongaat Hulett’s Gavin Hudson, said the company has opened a criminal case against the previous head of its property business and since the crimes unit and the NPA have been involved, the case has been expanded to include five of the previous executives which are being investigated.  

Ince is Here to Help  

Large institutions that manage big pools of money – acting on the behalf of retail investors – should be more proactive when engaging with the companies in which they hold shares. The failures seen in corporate South Africa, where boards are not being held to account is a supposed correlation to the fact that boards are not holding managers accountable. This ultimately reflects poorly on institutional shareholders (the managers of investment funds) who have the legal and moral obligation to act on behalf of shareholders, which means holding everyone to account.  

Ince has various tools and solutions that will support transparency which can result in entities being held accountable for what they do. 

iProxy is an online proxy voting solution for the digital age. With shareholders being able to vote on resolutions in absentia, iProxy takes the process of submitting proxy voting forms into the digital space. iProxy mirrors the paper-based proxy voting system and can be used in conjunction with, but not replace, paper-based voting. The benefits of using iProxy’s online voting solutions mean attaining a higher rate of responses and making it easier to reach the required quorum for any legal meetings. Results of iProxy voting are securely sent to those tallying up the votes at the live annual general meeting so that results on the various resolutions can be announced.  

The iCA4M platform is an alternative to admin-heavy, costly and non-revenue generating activities designed for fund managers. It provides proxy voting functionality to fund managers for electronic voting and supports the feeding of data from upstream systems such as ASISA while integrating final results back into line-of-business systems. What this means is greater transparency and accuracy of the information that minimises compliance, legal and financial exposure. iCA4M automates traditionally labour-intensive processes and empowers shareholders by providing a seamless online voting experience.  

Fund managers using iCA4M have seen average rates of voting and election of between 30% and 40% and enjoy guaranteed on-time consolidated summary reports delivery to the Central Securities Depository Participants on the event due dates. 

Our voting platforms are customisable to our clients’ individual needs. Talk to us today to find our more or to request a demo. 

Call us on 011 305 7300 or email marketing@ince.co.za