Leadership review. Review of the chief executive officer of the RBNDT

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1 RBH INTEGRATED REVIEW 2017 Our business Leadership review 12 Leadership review The RBNDT and RBH have unique roles within the equally unique Bafokeng structures. Our structures include traditional leadership structures, which have been combined with those legislated by government and the corporate structures we introduced to enable our nation to participate in the commercial world, raise funds for projects when required and protect and grow our assets. The RBNDT, the sole shareholder of RBH, is mandated to take care of the commercial imperatives of the nation. It, in turn, has mandated RBH to ensure it pays sustainable dividends to the nation, grow and diversify the portfolio entrusted to it and protect the financial capital of the present and future generations of Bafokeng. 44 Review of the chief executive officer of the RBNDT The challenges of the South African economy particularly over the past five years are well documented. Despite operating in this environment, RBH managed to preserve and grow the financial capital of the nation. Not only have the investments RBH made substantially increased the resilience of the portfolio in recent years (see page 44 to 55) they have also made it possible for RBH to pay RBNDT much-needed dividends. In 2017, not only did RBH pay the dividend we had agreed to, but it was also able to pay us an additional special dividend, which was most pleasing. In addition to this, the RBH portfolio achieved a return of 12.9% in 2017.

2 The RBNDT and RBH have unique roles within the equally unique Bafokeng structures. 13

3 RBH INTEGRATED REVIEW 2017 Our business Leadership review 14 RBNDT CHIEF EXECUTIVE OFFICER S REVIEW CONTINUED In order to reduce its spending and reposition itself in challenging times, the nation s administration has gone through a very painful process to reduce its spending, which started in Had we not taken these steps the RBN would have had to borrow approximately R1.2 billion to allow it to render services to our community. Instead of having a cumulative operating debt of R1.2 billion at the end of 2017 we have a declining yet positive bank balance of just over R1.2 billion. Our cash cover ratios are beginning to stabilise, which is not only a function of the dividends we received but also efficient spending on the part of the RBN. This achievement would not have been possible if RBH had not continued paying dividends in accordance with the plan RBNDT agreed with it and had the RBN not reduced its spending. I believe this reflects how, through the exercising of sound KIV governance, good performance outcomes continue to be 04 achieved. These governance processes include: 10 RBN s monitoring and oversight of its financial position its diligent and careful response to the challenging economic environment RBH s delivery in terms of the strategic objectives set for it by the RBNDT. The returns from RBH s asset management structure (see page 10) provide for, not only the Bafokeng community, but also for the non-bafokeng people who make up one third of the total number of people living on our land. The benefits flowing from the application of our financial capital are therefore broad-based. In partnership with government, roads such as the Western bypass and the Sun City road (P115) were constructed. The cars and trucks using these roads connect people from elsewhere with the mines and tourist destinations thereby fuelling economic growth in the region. Through RBH s diversification strategy and our investment in infrastructure in other parts of South Africa, such as the Sunrise Energy liquid petroleum gas (LPG) import terminal and the crude oil storage facility under construction in Saldanha Bay, we are creating direct and indirect employment in a province many kilometres from home Intergenerational investment is a guiding philosophy not only in our investments, but in how we invest in our people. To this send, in terms of our social investments, we remain passionate about the transformative power of education among other areas. We continue to look at ways to improve our community s access to quality education and have, in recent times, noted that a significant number of the children benefiting from the 41 public schools we have built are not from our Bafokeng villages. Our investment in exceptionally skilled maths and science teachers to improve the maths and science results in two secondary schools has benefited all the children attending these schools (see page 79 of social and relationship capital for more information). We augment the government services in each of the six clinics we built on our land with medical practitioner(s) including nurses paid for by the RBN. We are proud that in a recent audit of our clinics they all received the highest possible rating of Ideal Clinic Compliance. Royal Bafokeng Platinum (RBPlat), in which we have a majority shareholding, also built and maintains a much-needed pathology facility in Phokeng, which also serves the surrounding areas. These are a few examples of how our financial resources and those of the companies in which we are invested, are being used for the general good. (I would recommend that you take a look at the graphic on pages 42 to 43, which demonstrates how the RBN s commitment to preserving and growing its financial capital, together with RBH s business model (see pages 22 to 25), is not only creating value for the nation but for South Africa as a whole.)

4 15 The challenge of building a diverse and resilient economy While RBH has been successful in achieving resilience in our portfolio through diversification, together with our key stakeholders, we can increase and co-ordinate our efforts in growing and diversifying our local economy. Many of our people still depend on the mining industry for employment, an industry which is in decline and likely to shed a substantial number of jobs in the short term. The unemployment rate in the area around Rustenburg, which includes our region, is at 42%. This is higher than the unemployment rate both in the rest of the North West province and in South Africa as a whole. As a result, the number of people living in our villages is shrinking as people move elsewhere to find employment. Whilst much still needs to be done in this area, our investment in education and upskilling has made it possible for some of our people to find employment elsewhere in the country. We are determined to change this situation and achieve a diversified economy in our region. I hope that we will start making progress in this regard in As an example, the Office of Kgosi, together with the Supreme Council, are in the process of finalising changes to our land tenure policy with the aim of encouraging major companies to establish manufacturing facilities in our region, among others. The Royal Bafokeng Institute s (RBI) skills development programme is aimed at ensuring we provide our people with the necessary skills. Out of approximately R2 billion, 57% of our funds were spent on education in the last nine years, which is testament to our commitment to skills development as a priority. In 2017, we spent R20 million on education programmes at RBI which had an impact on over beneficiaries (including 944 for post-matric and 688 children at our 11 ECD centres who are also being fed by the RBI). Most pleasing is that our bachelor degree passes at matric level improved by 22% from 180 to 209 in 2016 and 2017 respectively (as a direct result of the RBI, RBH and investee companies interventions at our public schools). We also spent R42 million as a grant towards our private school (Lebone II) which continued on its trajectory of achieving a 100% pass rate with an 11% improvement in bachelor degree passes. Our focus in 2018 The RBNDT s focus for the next ten years will be on maintaining a healthy balance sheet so the nation can improve the welfare of the people in our region. RBH will continue to play a key role by providing the dividends that allow us to achieve both these goals. The RBNDT will have to continue balancing short-term needs against the need to grow the financial capital for future generations. The biggest percentage of our budget (57%) will be going to human development, which includes education in Kgosi sees education as a holistic process, which starts before the child is born. This means taking care of mothers throughout their pregnancies and making sure they know how to look after themselves in order to give their babies the best possible chance. This is something we would like to place greater emphasis on in the coming period. We continue to invest in early childhood development (ECD). Currently, the RBI is busy formalising the many informal childcare centres in the community. It is using two ECD centres as pilots and once it is satisfied with the model that has been developed it will be rolled out across the region. We will also be working hard on our efforts to diversify the local economy and I look forward to reporting our progress in our 2018 review. We continue to make meaningful strides towards our development priorities as set out in Plan 35. The progress that we have made thus far would not have been possible without the guidance and outstanding leadership of Kgosi, the Supreme Council and the Trust in the evolution of our journey. Obakeng Phetwe Chief executive officer In 2017, we spent R20 million on education programmes at RBI beneficiaries including post-matric Children at ECD centres Bachelor degree passes at matric level improved by 22% from 180 to 209

5 RBH INTEGRATED REVIEW 2017 Our business Leadership review 16 Review of the Chairman As chairman of the board of RBH I am acutely aware of our responsibility to meet and, where possible, exceed the RBNDT dividend requirements that will allow the RBN to transform the lives of not only the Bafokeng but also those non-bafokeng who live in our region, through the implementation of Plan 35. We also met our commitment to the RBNDT in 2016 and in 2017 we were able to exceed our commitment and provide our shareholder with an additional special dividend. KIV 01 KIV 01 KIV 02 I am proud that, while there is still much to do, the current board and management of RBH have made excellent progress with the sector and geographic diversification of the portfolio. We also met our commitment to the RBNDT in 2016 and in 2017 we were able to exceed our commitment and provide our shareholder with an additional special dividend. I believe this demonstrates that RBH has been effectively managed during Ethical leadership and governance The board and management of RBH have always been committed to establishing an ethical culture in RBH, which included introducing a board-approved code of ethics and an investing code of conduct, which are designed to ensure the effective management of ethics, fraud and corruption in RBH. However, the release of King IV has prompted us to review our leadership in terms of ethics and the governance of ethics in the organisation. We will be reviewing our codes and their implementation during 2018 to ensure we are providing ethical leadership and that our governance of ethics in the organisation supports an ethical culture.

6 17 Transformation We workshopped our position on transformation in During the workshop we debated management s proposed transformation philosophy, position statement and proposed strategic approach to transformation. Our discussions were guided by the B-BBEE Act, supporting the Amended Codes of Good Practice and the dti Black Industrialist policy. The transformation position statement we agreed on is: We exist to create sustainable value by applying an intergenerational outlook to our social investments. In line with the developmental mission of the RBN s Plan 35, we prioritise the creation of long-term, sustainable community development initiatives that drive economic growth and participation while nurturing skills development. Education, enterprise development and sports therefore continue to be at the centre of our socio-economic development focus. We remain committed, in line with national imperatives, to true, sustainable and impactful broad-based socio-economic transformation. During 2017, we struggled to find a way to fit our activities into the requirements of the Codes of Good Practice, which is surprising considering that both RBN and RBH exist to empower black South Africans and achieve their transformation through the nation s investment in: education through the RBI enterprise and supplier development through RBED s efforts procurement from black-owned businesses and in particular local black-owned businesses (see the social and relationship capital section of this review for more information on both RBN and RBH s efforts in this regard). Hopefully, we will be able to engage with government during 2018 and find a way to account for both the RBN and RBH s black empowerment and transformation activities. Values To ensure that our associate and subsidiary companies understand and are committed to living the Bafokeng values, the board and management plan to develop a programme to reintroduce our values throughout the organisation in Refining our risk governance processes RBH had already done substantial work on establishing an effective KIV 11 risk management programme in In 2017 the board held a workshop with the management team during which they presented a proposed framework for the management of risk within our portfolio in addition to our existing processes for managing operational and strategic risks. The framework was adopted by the board and is being 28 rolled out in RBH (see page 28 for more information). Our stakeholder engagement KIV The board maintained its relationship with our shareholder through 16 ongoing, regular and transparent engagement. We also engaged with other stakeholders, including government, on behalf of RBH. KIV The board has reviewed our reporting in the RBH integrated review 05 for 2017 and is comfortable that its contents will allow stakeholders to make informed assessments regarding RBH s performance and its short-, medium- and long-term prospects. In conclusion RBH s performance can have a negative or positive effect on the lives of a nation. This is a huge responsibility. My thanks to my fellow board members and the RBH team for their commitment to achieving our objectives of not only delivering a dividend to our shareholder, but also preserving and growing the financial capital the RBN has entrusted to us. Monhla Hlahla Chairman

7 RBH INTEGRATED REVIEW 2017 Our business Leadership review 18 Review of the chief executive officer The year under review was an exciting year, but one of two very different halves for RBH. The economy was tough, investors lacked confidence and negative sentiment prevailed in the first half of the year, yet we were able to close the year with a pleasing 12.9% portfolio return (2016:16.1%). Following a busy 2016 during which we concluded a number of transactions, some of which were only finalised in 2017, we deliberately chose to consolidate and bed down our portfolio in While the diversification of our portfolio served us well in 2017, it was also a year when it became apparent that, in addition to needing to continue making progress with our sector diversification, we also need to be mindful of increasing the geographic diversification of our portfolio. The relatively small segment of our portfolio that we have already diversified geographically certainly served us well in 2017, assisted by being dollar-based investments at a time when our currency weakened further. The transactions we finalised in 2017 were our investment in Liquid Telecom, which through its acquisition of Neotel has created the largest pan-african fibre network and business-to-business communication services provider; and investments in renewable energy. Not only has the Liquid Telecom transaction increased our diversification into the telecommunications sector, it has also increased our geographic diversification. During 2017 MOGS Oil and Gas, our joint venture with the Public Investment Corporation (PIC), commissioned and started operating Sunrise Energy, a world-class liquid petroleum gas (LPG) import terminal facility in the port of Saldanha Bay. MOGS Oil and Gas has a 60% shareholding in this project in which it is in partnership with the Industrial Development Corporation (IDC). Oiltanking MOGS Saldanha (OTMS), in which MOGS has a 50% shareholding in a partnership with Oiltanking GmbH, has also made good progress with its construction of a crude oil storage and blending facility in the port of Saldanha. Our team has again performed well against our strategic objectives during 2017.

8 19 28 The first tanks are due to be delivered in the third quarter of On 14 February 2017 we started operating Ghana Petroleum Mooring Systems (GPMS), an existing facility which we acquired through a partnership with Tema Oil Refinery in which MOGS has a 65% shareholding. GPMS is our first oil operating asset outside South Africa. Risk governance We spent time at both board and management level this year looking at what risk management means in RBH. We gained a better understanding of the risks we need to monitor in our portfolio and the risk tolerance of our shareholder, the RBNDT, not only in terms of matters like concentration, but also in terms of reputational risk, etc. The managing our risks and opportunities section of this review on page 28 will provide you with more information in this regard. Portfolio performance RBH s portfolio grew from R29 billion to R32,1 billion, generating a return of 12.9%. Our financial asset portfolio yielded a return of 22.2%, which represents 63% of RBH s gross assets. RMB Holdings and RMI Holdings displayed resilience during a challenging economic and political environment in South Africa. To boost developed markets exposure, FirstRand launched a 1.1billion takeover of Aldermore, a UK challenger lender, while RMI spent R8 billion on acquiring a 29.9% stake in Hastings, a UK-based short-term insurer. The two transactions further enhance RBH s indirect developed market exposure. Royal Bafokeng Platinum (RBPlat) and Impala Platinum (Implats), our investments in the resources sector, declined by 22% in value in 2017 to R4.3 billion. Platinum and palladium prices averaged US$924 and US$867 respectively in 2017, negatively affecting platinum investment. RBPlat declined by 21.4% while Implats dropped 24.1% as the market favours low-cost platinum miners. We acquired a 30% stake in Neotel at the beginning of 2017 in partnership with Liquid Telecom, a pan-african telecommunication group and a subsidiary of Econet. RBH later in the year flipped its 30% equity stake in Neotel into an effective 10.3% interest in Liquid Telecom. This transaction advances our diversification in the African continent. Liquid Telecom has built Africa s largest independent fibre network which runs from the north of Uganda to Cape Town, covering Africa s fastest-growing economies. Its cross-border fibre network currently spans over kilometres. The property portfolio accounted for around 7% of RBH s gross portfolio with a strong offshore allocation providing rand hedge characteristics. During the year, Attacq committed to changing from being a growth player to a REIT, targeting a dividend of 73 cents per share (CPS) in the 2018 financial year, while NEPI merged with RockCastle to form the largest retail property operator in Central Eastern Europe. Our UK property exposure in Big Yellow continued to outperform with management exceeding their medium-term occupancy target of 80% in the last financial year, well ahead of expectations. A sound performance from Zenprop was also achieved in 2017, following the launch of Auriens, an ultra-high net worth senior care facility in Chelsea, and further progress being made on a mixed-use development in Greenwich. RBH reached financial close on its acquisition of two energy assets at the beginning of 2017, which made a significant contribution to the return of the portfolio. The portfolio generated a pleasing 53% return. We acquired a 10.3% stake in Liquid Telecom RBH s portfolio return grew by 12.9% to R32.1 billion in 2017 Financial portfolio return increased by 22.2% in 2017 to R27 billion

9 RBH INTEGRATED REVIEW 2017 Our business Leadership review 20 CHIEF EXECUTIVE OFFICER S REVIEW CONTINUED Our people Our team has again performed well against our strategic objectives during I would refer you to the financial, manufactured, human intellectual and social and relationship capital sections of this review for more information on what we achieved during I reported to you last year on the review of our investment processes and the new structure we put in place for the investments function. The restructuring has ensured better focus and alignment in managing our portfolio during As we see our team as including the employees in the companies in which we invest, safety performance in our mining investments is top of mind. We were very pleased that RBPlat completed the year without any fatal accidents. Its restructuring efforts appear to have caused some disruption resulting in an increase in lost time and serious injuries during the year, however, its safety performance improved during the fourth quarter of the year and we are hopeful this improvement will continue into the new year. RBPlat has an exciting, but no doubt challenging year ahead in 2018, as it ramps up its organic growth project, the Styldrift I mine, to 150ktpm and beds down its acquisition of Maseve, which has provided it with the concentrator capacity to ramp up Styldrift I to 230ktpm by While we recognise that the current challenging conditions in the platinum industry made it necessary for Implats to reduce its employee numbers, we are also acutely aware that these retrenchments will leave members of the RBN community without jobs. Stakeholder engagement Engaging with stakeholders, particularly those in government and state-owned entities, has been particularly challenging during 2017, when it seemed that the roles of both the nation and RBH, and in particular our contribution and commitment not only to the RBN but also to the transformation of our region of the North West province and South Africa as a whole, were misunderstood. We are hopeful that we can make better progress in this regard in I believe our relationship with our shareholder, the RNBDT, continues to improve through regular in-depth engagement that has led to a greater understanding of each other s thinking in terms of the RBH portfolio. Thanks I would like to recognise my board, my team and my shareholder for the contribution their collective wisdom has made to our navigation of a year of uncertainties. I look forward to working with you in 2018, which I am hopeful will be a rewarding year for us all. Albertinah Kekana Chief Executive Officer

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11 RBH INTEGRATED REVIEW 2017 Our business Our business model 22 Manufactured capital Inputs Systems, technology and office equipment necessary to conduct our business Activities Running our business Outputs An effective business Outcomes Sustainable long-term growth Stable platform with efficient systems How we use our business model to deliver against our strategy and create value 5 our people Financial capital 6 our financial position Inputs Equity funds Debt funding Efficient systems, controls and processes Activities Active investment Risk management Outputs Dividends Diversified portfolio Capital growth Outcomes Our exposure to one sector is reduced Sufficient dividends to fund the development spending needs of the community The nation s wealth is preserved and grown Meet RBN s funding requirement Preserve and grow the nation s wealth 1 3 Manage risk by being a diversified long-term investor brand reputation Intellectual capital Inputs Investment skills Risk management Reputation and brand Governance structures Management systems 8 Align with RBN development imperatives Activities Manage investment portfolio and research new investment opportunities Proactive risk identification Reputation management Develop and implement governance systems and processes Outputs Risks and opportunities identified and responded to Accurate information and cost efficiencies Effective systems and processes Outcomes Innovative ways of working and investing Effective decision-making A well-managed ethical business with access to accurate information governance and risk management Human capital 9 stakeholders Inputs Skills Ability Knowledge Activities Employee relations Rewards Talent management Training and development Performance management Engagement Outputs Effective leaders Skilled employees Outcomes Effective leadership delivering against strategy Increased productivity Safe and healthy working environment Engaged teams Performance-driven culture Social and relationship capital Inputs Communities Employees Ethics and human rights Companies in which we are invested Companies in which we may invest Activities Community social investment Engaging with RBNDT Engaging with companies in which we have invested or may invest Outputs Infrastructure development Enhance community skills Enterprise development Better working relations Improve maths and science education Job creation Constructive engagement with business partners Outcomes More sustainable communities Sustainable small businesses Improved community relations An ethical business Ability to leverage our reputation as a BEE partner of choice

12 23 Creating value by delivering on our strategies Portfolio value and resilience increased through our sector and geographic diversification: Strategies: 1 Manage risk by being a diversified long-term investor 2 The capitals that make up our business model are described in the various sections of the review. We have not included natural capital in our business model because while natural capital plays a key role in our business in the form of mineral resources and land, RBH has no influence over how the RBN manages its mineral assets and the land it owns. However, the revenue the nation earns from its natural capital is what made the formation of RBH possible. RBH s impact on the environment stems mainly from electricity we use in our offices which is accounted for by the owners of the property we rent, and motor and air travel. We are conscious of the need to reduce our use of scarce resources such as water and electricity. We take care to limit our production of greenhouse gas emissions by reducing our use of electricity and avoiding unnecessary travel. Preserve and grow the nation s wealth Sunrise energy, Africa s largest open-access LPG import facility, located in the 59 Western Cape, contributing fuel security and alternative energy to the local economy and further afield OTMS large-scale crude oil storage and blending facility currently under construction will contribute to local economy and earn valuable foreign exchange for South Africa Infrastructure Sector and geographic diversification Value add in addition to portfolio value Fuelling the future through: Renewable energy projects contributing to reduction in greenhouse gas emissions Job creation: 500 full-time at Saldanha Bay of which 90% went to local community members and opportunity to create many more downstream jobs GPMS imports approximately 80% of Ghana s crude oil, gasoline and gas oil on an open-access basis with promising local demand prospects Value add in addition to portfolio value Extensive fibre footprint will provide access via a single connection to over km of crossborder, national and metro fibre networks Telecoms Sector and geographic diversification Connecting Africa through: the provision of telecoms services in 13 countries in East, Central and southern Africa

13 RBH INTEGRATED REVIEW 2017 Our business Our business model 24 Financial services Sector and geographic diversification Value add in addition to portfolio value Sector transformation through longterm, sustainable investments: Property Sector and geographic diversification Value add in addition to portfolio value Sector specialisation: PGM mining and mining services Geographic diversification through mining services offering Value add in addition to portfolio value Broad-based transformation RMI takes stakes in emerging and established financial services businesses, operating in Africa, the United Kingdom, Australia, Asia and China RMH is invested in FirstRand, which operates in South Africa and the broader African continent 85 Royal Investment Managers contribute to the transformation of the asset management sector by partnering with predominantly black-owned asset managers. RBH and RMI are invested in RIM South African Real estate assets in South Africa, the United Kingdom and continental Europe provide geographic and sector diversification 47 Job creation: Over jobs at RBPlat in the North West province of South Africa in 2017 and over in Implats in South Africa and Zimbabwe as well as over jobs in MMS Our investment in RBPlat has contributed R657 million in social and labour plan contributions to RBPlat s doorstep communities, three of which are RBN villages, since 2010 and its local discretionary procurement contributed R964 million to local business in 2017 and Implats invested R106 million in socio-economic initiatives in South Africa in its 2017 financial year and spent R6.7 billion in BEE procurement in South Africa and spent R253 million on local suppliers (including indigenous suppliers) in the 2017 financial year

14 25 Strategies: 1 2 Meet RBN s funding requirement Align with RBN development imperatives History and heritage Education Sports The dividends we provide to the RBNDT are used to meet the socioeconomic objectives of the nation Health Environment Economic development Food Public utilities Security

15 RBH INTEGRATED REVIEW 2017 Our business Our business model 26 CREATING VALUE BY DELIVERING ON OUR STRATEGIES CONTINUED Transformation through education Through its investment in education the RBN improves children s opportunities of finding employment, providing for themselves, contributing to those less fortunate and to the South African economy as a whole. The Royal Bafokeng Institute (RBI) spent over R700 million on education between 2008 and 2017 Two of the South African athletes who participated in the Rio Olympics in 2016 are from the RBN and were trained by Royal Bafokeng Sports Out of 128 Grade 9 classes, who competed in the Allan Gray national entrepreneurship and enterprise talent search competition, the two Grade 9 classes at Kitsong, (the RBN s new low-fee private school) came first, with Pretoria Girls High School second and Herschel in Cape Town third. The RBN, RBH and local mining companies including RBPlat and Implats have invested in: Schooling Early childhood development is a focus of the RBI The construction of 41 schools that provide education to about pupils, the majority of which are bussed in from neighbouring villages The training of school governing bodies in management, financial and administrative skills Teacher support IT infrastructure in schools Maths and science development through the provision of specialist maths and science teachers whose salaries were paid for by RBPlat and RBH Through the school within a school project, provide maths and science teaching through private partners including the RBI Establishment of a low-fee private school Kitsong, based on an innovative model with the aim of developing more schools based on this model Lebone II private school provides pupils with the opportunity to achieve academic excellence. In 2017, for the eighth consecutive year, the school achieved a 100% pass rate and 91% of the matric learners achieved a bachelor s degree pass 15 (see page 15 for more information)

16 27 Tertiary education Because there are very few job opportunities for professionals in the vicinity of the RBN, graduates whose education was sponsored by the RBN have to leave the area to find employment elsewhere in the country. By investing in the tertiary education of these young people the RBN is contributing to the transformation of the South African workforce and to the South African economy: In 2017 the RBI invested R12 million (2016: R20 million) in 146 (2016: 425) university and technical and vocational education and training college (TVET) students RBI offered engineering, construction and hospitality training programmes. In 2017 five of the hospitality-trained students found employment overseas. Health Six clinics built by the RBN were rated Ideal Clinic Compliant At each clinic government-provided health services are supplemented by a medical practitioner paid for by RBN A critically needed pathology facility was built and maintained by RBPlat Royal Bafokeng Emergency and Rescue Services continued to provide ambulance services in the area (also serving local mines). Economic development Development of sustainable local black businesses is critically important, especially in an area where the unemployment rate is one of the highest in South Africa. RBED supports local black businesses through training and development and by helping them become suppliers to the mining industry and large corporates. The RBED database of local businesses is available to companies seeking to procure goods and services from small local suppliers. Food security In total, people were fed in 2017 as part of Bafokeng Health and Social Development Services Contribution to the North West province s Household Food and Nutrition security programme. Public utilities The RBN Public Services management team is responsible for road, water, sanitation and refuse removal on RBN land It provides reliable, efficient and safe supplies of water and electricity, a waterborne sewerage system and waste management collection and disposal to the villages in the RBN region RBN also co-funded public roads in the area such as the road to Sun City, which facilitates tourism in the North West province, and the Western bypass together with government. Sport Through its investment in sport RBN has contributed to the overall well-being of the young people attending the schools on its land. It has also assisted young people develop careers in various sports including athletics, of the six RBN track and field athletes, five are ranked in the top five in South Africa in their respective areas and two of our athletes were members of the South African Olympic team. One young sprinter won a scholarship to the Iowa Community College, where he will compete in the US college leagues. RBH has sponsored primary school netball and football league teams and provided coaching courses for the people who volunteer to coach the teams. RBPlat provided the five schools in its doorstep communities with world-class sports facilities, with each school having a FIFA-approved artificial turf football field, a FIBA-approved netball/ basketball court, male and female change rooms, two pavilions and two boreholes. 46 Over R8 million was allocated to enterprise development by the RBN in 2017 RBH invested R2.5 million in supplier development through the RBED, supported the development of a black women-owned fund management business and black asset management businesses in Gauteng (see pages 46 and 81 and 82 for more information) RBPlat invested R2.4 million in developing the capacity and skills of 60 local black business owners RBPlat increased its procurement from local black businesses by 27% in 2017, spending R924.6 million with these businesses A R9.7 million contribution from Absa Bank is supporting start-ups in the bulk materials handling, engineering and transport sectors.

17 RBH INTEGRATED REVIEW 2017 Our business Our management of risks and opportunities 28 Our management of risks and opportunities RBH s approach to risk, which has been qualitative so far, is evolving into a more quantitative approach. Our current risk philosophy and board-approved risk management policy and framework were established in 2015, following which we established strategic and operational risk registers. Our management and board appreciate that our core purpose, risks and opportunities, strategy, business model, performance and sustainable development are all inseparable elements of our value creation process. The uncertain socio-political environment that has prevailed in South Africa over the past two years, as well as global economic uncertainty, has made it increasingly difficult to predict the outlook in the short and medium term and has made our ability to manage our risk exposures, further diversify our portfolio and reduce our gearing levels key to our sustainability. Our risk philosophy Our risk philosophy reflects the shared beliefs and attitudes that characterise how RBH considers both its business and strategic risks in its day-to-day activities. As a responsible investor RBH: aims to preserve and grow its purchasing power in rand terms over the longer term and to deliver returns in excess of South African inflation recognises that its long-term real return targets cannot necessarily be consistently achieved over the short term, given the inherent uncertainty in capital markets. The RBH fund will therefore be judged against this target over a period no shorter than ten years, on a cumulative basis focuses on taking an acceptable level of risk based on a deep understanding of the industry, geographies and the asset itself, with the aim of protecting and enhancing the wealth of the RBN in order to provide intergenerational income and growth. KIV 11 KIV when any major strategic or tactical decision is made by RBH and the compatibility of a course of action with our risk appetite is always questioned. We continually seek ways to improve the management of our risks and opportunities by better understanding the possible impact they could have on our business. During 2017, the RBH management team proposed a revised approach to the management of the risks associated with our investment portfolio to the RBH board that will assist with aligning the board s risk appetite and risk tolerances with RBH s strategic asset allocation. The new approach will have a greater focus on a quantitative and strategically aligned approach, where information allows, and a more granular qualitative approach, where appropriate. It will also provide an investment portfolio risk register addressing: Market risk: using a quantitative approach to our listed portfolio as the data is available to analyse and build a robust risk model using a qualitative approach to our unlisted portfolio as it does not lend itself to an in-depth quantitative risk management Liquidity risk Regulatory/political risk Dividend risk Credit risk King IV s Principle 17, states that the governing body of an institutional investor organisation should ensure that responsible investment is practised by the organisation to promote the good governance of and creation of value by the companies in which it invests. As part of our risk management process RBH plays an oversight role in most of its investments through which we ensure that we invest in companies that are well run and like-minded. We consider the environment, social and governance (ESG) issues as part of our investment oversight (see page 44 of this review for more information). Our board s ultimate responsibility for risk management in RBH includes the development of our risk appetite and the setting and monitoring of risk tolerance. Our risk appetite statements are designed to ensure that risk factors are taken into account

18 29 The risk landscape Our risk landscape constantly changes, with change being driven by geographic diversification and changes in the socio-political environment in which we operate. Our value drivers Core area Value drivers Page references for information on our performance in this regard Governance Stakeholder relations Governance structures Ethics Stakeholder expectations Collaboration Brand reputation Finance Human resources Investments Funding and liquidity Financial reporting Talent and performance Investment sourcing Investment performance Performance and monitoring of our investments

19 RBH INTEGRATED REVIEW 2017 Our business Our material issues 30 Our material issues Process Our materiality determination process is an integral part of our efforts to embed integrated thinking in RBH, create value for our stakeholders over the short, medium and long term, and ensure the long-term sustainability of RBH and the RBN. It not only identifies the issues material to our business and our stakeholders (currently and in the future), it also allows us to review the stakeholders we have previously identified and identify any new stakeholders. To assess what value we have added to the business in the year under review and what we need to do to add value in the year ahead, our process is both retrospective and forward looking. We establish what our material issues are by: identifying the issues that could have the greatest impact on our ability to achieve our strategy and create value for our stakeholders identifying external local and global factors that could impact our portfolio at a local and global level identifying our material internal and external stakeholders engaging with these stakeholders to establish what is material to them in relation to RBH identifying the positive or negative impacts we could or do have on each other. RBH s material issues in 2017 Our ability to deliver on our shareholder s expectations Opportunities to grow through the diversification of both our portfolio and the geographic location of our investments Our commitment to long-term strategic partnerships Managing expectations in a challenging environment Nation building through responsible investment RBH s material issues for 2018 Our ability to deliver on our shareholder s expectations Opportunities to grow through the diversification of both our portfolio and the geographic location of our investments Our commitment to long-term strategic partnerships Managing expectations in a challenging environment Nation building through responsible investment Positioning the role of RBH in the broader South African context

20 31 Our stakeholders RBN Members of the Royal Bafokeng community Supreme Council RBNDT The companies we invest in Members of the public Communities in which we operate The media Tlhompho (respect) Funders (public and private) Financial institutions Our employees Employees of our associate and subsidiary companies Government and parastatals Corporate partners who assist the RBN through their CSI and potential partners who can assist with the community s developmental needs as potential socio-economic partners National, provincial and local government Sector education and training authorities (SETAs)

21 RBH INTEGRATED REVIEW 2017 Our Leadership Our board 32 OUR LEADERSHIP Steve Phiri Fran du Plessis Monhla Hlahla Nakedi Ramaphakela

22 33 OUR BOARD Albertinah Kekana Obakeng Phetwe Tshidi Nyama Tom Boardman

23 RBH INTEGRATED REVIEW 2017 Our Leadership 34 Board of directors Monhla Hlahla (55) Chairman BA (Honours) (Economics), Pomona College (USA); MA (Urban and Regional Planning), UCLA School of Architecture and Planning (USA) Monhla, who joined our board on 1 March 2011, was appointed chairman on 27 March She was previously the managing director of Airports Company South Africa, chairman of the Industrial Development Corporation (IDC) and the president of the African chapter of Airports Council International. She is a member of the remuneration and social and ethics committees. Tom Boardman (69) BCom, University of the Witwatersrand; Chartered Accountant (SA) Tom was appointed to the board on 1 January During his career he held senior positions at Anglo American Corporation, Sam Newman Limited and Boardmans and was the chief executive of the Nedbank Group before he retired. He serves on the boards of African Rainbow Minerals Limited, Kinnevik, Woolworths Holdings and Milicom International Cellular SA, among others. He is the chairman of the audit and risk committee and a member of the remuneration committee. Fran du Plessis (64) BCom, LLB, Chartered Accountant (SA); BCom (Hons) Taxation, University of Cape Town; LLM, University of Stellenbosch Fran, who was appointed to the board on 1 June 2012, has practised as a chartered accountant specialising in the fiscal laws of taxation since She is currently a director of the advisory firm LDP Compliance Proprietary Limited and has sat on the boards of several companies, including Naspers, Life Healthcare, Sanlam, ArcelorMittal and KWV Holdings, as well as lecturing on an ad hoc basis at the University of Stellenbosch. She is a member of the audit and risk committee and chair of the remuneration committee. Tshidi Nyama (57) BCom, University of the North; MBA, University of Bridgeport (USA) Tshidi was appointed to the RBH board on 1 October She is a partner at Makhup Business Services and Coaching. She currently serves on the board of AVBOB and chairs its social and ethics committee. Tshidi is a member of the RBH remuneration and audit and risk committees, and chair of the social and ethics committee. Non-executive directors Obakeng Phetwe (40) BCom, North-West University; BCom (Hons) CTA, University of South Africa; Chartered Accountant (SA) Obakeng was appointed to the board on 27 March A chartered accountant, he completed his articles with PricewaterhouseCoopers Inc. He is currently the chief executive officer of the RBNDT. He previously held the positions of group treasury and business manager for the RBN; finance manager for the RBA; and senior audit manager at Mokua and Associates, Chartered Accountants. Obakeng is a member of the remuneration and the social and ethics committees and a permanent invitee to the audit and risk committee. Steve Phiri (61) BJuris, University of the North; LLB, Vista University; Diploma in Corporate Law, Rand Afrikaans University; LLM, University of Johannesburg Steve, who is the chief executive officer of RBPlat and was previously chief executive officer of Merafe Resources for six years, was appointed to the RBH board on 24 July He has been admitted as an attorney to the High Court of South Africa and is a member of the Black Lawyers Association. Steve s contribution to the board includes his expertise in governance and stakeholder relations. He is a member of the social and ethics committee. Executive directors Albertinah Kekana (45) Chief executive officer BCom; Chartered Accountant (SA); Post-Graduate Diploma in Accounting; Advanced Management Programme, Harvard University (USA) Albertinah was appointed CEO and a member of the RBH board with effect from 1 November She was previously the chief operating officer of the Public Investment Corporation and has extensive asset management, investment banking and business leadership experience. Nakedi Ramaphakela (31) Finance director BAccSc (Hons), University of Witwatersrand; Chartered Accountant (SA) Nakedi was appointed finance director on 1 July Nakedi joined RBH in July 2012 and grew into her current role after serving as a group finance manager at RBH. Prior to joining RBH she was an assistant manager at PricewaterhouseCoopers.

24 35 Meeting attendance in 2017 Attendance Name of director Date of appointment Board and strategy session attendance Audit and risk committee Remuneration committee Social and ethics committee Directors retired by rotation and eligible for re-election Independent non-executive directors Monhla Hlahla 1,2 Chairman 1 March /10 5 5/5 2/2 Tom Boardman 1,3 Chairman of the audit and risk committee 1 January /10 4/4 4/5 Fran du Plessis 1,3 Chairman of the remuneration committee from 19 September June /10 4/4 2/2 7 Tshidi Nyama 1,2,3,8 1 October /10 4/4 5/5 2/2 Non-executive directors Obakeng Phetwe 1,2,4 27 March /10 4/4 5/5 2/2 Steve Phiri 2 24 July /10 2/2 Executive directors Albertinah Kekana* + Chief executive officer Nakedi Ramaphakela* Finance director 1 November /10 4/4 4/5 2/2 1 July /10 6 3/4 6 3/3 6 1 Member of the remuneration committee 2 Member of the social and ethics committee 3 Member of the audit and risk committee 4 Invitee to the audit and risk committee 5 Three special board meetings and two board strategy sessions held during the year in addition to the four board meetings 6 The finance director was on maternity leave for the two board special meetings, one board strategy session and an audit and risk committee meeting 7 Fran du Plessis was appointed as the chairman of the remuneration committee on 19 September Chairman of the remuneration committee until 18 September 2017 * Ex officio member of the audit and risk committee + Ex officio member of the social and ethics committee

25 RBH INTEGRATED REVIEW 2017 Our Leadership Our executive committee 36 Lesego Lebuso Udo Lucht Albertinah Kekana Ditiro Chesalokile Nakedi Ramaphakela

26 37 OUR EXECUTIVE COMMITTEE Albertinah Kekana Chief executive officer (See board of directors for CV) Nakedi Ramaphakela Finance director (See board of directors for CV) David Wilson Head: Financial services and consumer goods investments BCom, Diploma in Accounting (UCT); CA(SA) Udo Lucht Head: Resources and industrials investments BCom (Hons), University of Natal; CA(SA); CFA Lungelwa Silomntu Head: Infrastructure investments BAdmin Hons (Business management), MCom (Finance) Buyi Mlangeni Group company secretary BTech Durban University of Technology; National Diploma, (Natal Tech) Executive Development Programme, Wits Business School Ditiro Chesalokile Human capital manager BCom (Hons) Human Resource Management, University of Johannesburg; MAP, Wits Business School Lesego Lebuso Group Manager Stakeholder Relations Lungelwa Silomntu Buyi Mlangeni David Wilson BA (Industrial Psychology), UNISA; BA (Hons) University of Johannesburg; Master of Business Leadership, UNISA Graduate School of Business Leadership

27 RBH INTEGRATED REVIEW 2017 Our Leadership Our executive committee 38 Board level of independence % Non-executive directors 25% Executive directors 50% Indepedent non-executive directors Racial composition 75% Black % White South Africans Board gender composition % Female 38% Male

28 39 Our board and committee activities in 2017 What kept our board busy this year What will keep our board busy in 2018 Enhancing our portfolio risk framework Integrating King IV principles into our activities Debt refinancing Implementing our infrastructure strategy Continued implementation of our property strategy Continued implementation of our infrastructure strategy Reduction of debt Reviewing new funding models Reducing concentration risk Governance of ethics Embedding core values What kept our audit and risk committee busy this year What will keep our audit and risk committee busy in 2018 Portfolio risk framework Debt refinancing Determining optimal debt level Implementing portfolio risk management framework IFRS 9 implementation IT governance strategy What kept our social and ethics committee busy in 2017 What will keep our social and ethics committee busy in 2018 Transformation position statement B-BBEE strategy B-BBEE strategy Impact assessment of our developmental initiatives Addressing the transformation imperative What kept our remuneration committee busy in 2017 What will keep our remuneration committee busy in 2018 Revising the corporate scorecard to reflect the changing portfolio and move towards strategic asset allocation Embedding King IV principles in our remuneration policy and remuneration disclosure

29 RBH INTEGRATED REVIEW 2017 Our performance Financial Capital OUR PERFORMANCE Financial capital RBH is mandated to deliver a yield from its portfolio that will meet the development needs of the RBN in the short term, while preserving and growing the nation s assets for the medium and long term. This section of our review provides an overview of our investment and portfolio management approach. It also provides a view of what we have achieved in over a decade of investing to preserve and grow the RBN s assets as well as the progress we have made towards diversifying our portfolio to increase its resilience and sustainability. RBH has its roots in Royal Bafokeng Resources (RBR), which was established in 2002 to oversee the mining interests of the nation following the signing of a landmark agreement between the RBN and Impala Platinum (Implats). This agreement resulted in the nation receiving royalties from the metals mined in the Impala Lease Area. In the same year, RBR negotiated a joint venture with Anglo American Platinum (Amplats), which resulted in the formation of the Bafokeng Rasimone Platinum Mine (BRPM), and it also invested in what was then SA Chrome and today is known as Merafe Resources. Kgosi Leruo Molotlegi had the foresight to recognise that while its mineral resources had provided the nation with a wonderful financial legacy, it needed to diversify its investments to ensure it could continue to fund the nation s development needs and provide for its future sustainability. Royal Bafokeng Finance (RBF) was formed in 2004 for this purpose and in 2006 RBR and RBF were merged into RBH. The graphic on page 42 to 43 depicts the progress that has been made in diversifying RBN s asset base from one entirely invested in the mining industry to today when only 10% of the portfolio is in mining assets.

30 RBH has its roots in Royal Bafokeng Resources (RBR), which was established in 2002 to oversee the mining interests of the nation following the signing of a landmark agreement... 41

31 RBH INTEGRATED REVIEW 2017 Our performance Financial Capital 42 RBH is formed R bn RBR and RBF merged to form RBH 12% shareholding in Implats 100% of Fraser Alexander 26% joint venture in Metuba 51% 25.1% equity interest in Hard Rock Mining stake in Pasco RBH participates in the Libstar formation RBH purchases: RBH increases its shareholding in the BRPM JV to 67% RBF formed to reduce reliance on income from the mining sector and the platinum industry in particular % 12.5% 2007 Interest in Metair interest in M-Tech MOGS Proprietory Limited formed 2008 RBH shareholding in Zurich insurance increased to 25.1% RBH acquires 1.97% in Vodacom SA 2009 RBPlat is formed, takes over management of BRPM JV and lists on the JSE 52.8% (RBH s interest in listed entity) 5% interest in RMBH 4.9% interest in RMIH % shareholding in Atterbury Investment Holdings acquired 15% 2011 RBH further diversifies by increasing its investments in RMBH and RMIH to First stage of diversification of assets begins RBH is formed Diversification grows as excess capital invested in non-platinum assets

32 43 Other Property Mining Services Industrials Telecoms Infrastructure Financials Mining RBH increases stake in Attacq to 15% Attacq lists on the JSE RBH increases its shareholding in M-Tech to Stake in Zurich insurance sold 50.1% RBH acquires 16.7% interest in STANLIB infrastructure fund created to focus on renewable energy projects RBH disposes of a portioin of its Metair shares RBH acquires: an investment of R500 million in NEPI 30% interest in JCDecaux SSA and enters into a joint venture with Zenprop UK RBH completes its exit of Metair, disposes shareholding in Merafe Resources reduces shareholding in Attacq RBH: reduces its shareholding in Implats to 6.3% acquires a 1.87% stake in Big Yellow Group PLC concludes a partnership with the PIC, which now owns a 49% shareholding in MOGS Proprietary Limited RBH increases its investment in NEPI by R200 million 10.3% stake acquired in Liquid Telecom Holdings RBH acquires a stake in two renewable energy assets Diversification strategy confirmed in terms of Compact signed with RBNDT Rollout of diversification strategy continues

33 RBH INTEGRATED REVIEW 2017 Our performance Financial capital Our approach to investing To meet our unique responsibility of having to provide the funding for the development needs of the Bafokeng community requires a prudent approach to our investment decisions. Our shareholder, the RBNDT, holds both our board and our executive team accountable for the implementation of our investment strategy. Our investment and portfolio management activities are governed by our Policy for Sustainable Investment and Portfolio Management, which sets out our responsibilities, our investment decisionmaking process, the economic, social and governance (ESG) investment and management criteria we apply and the type of investments that RBH will not invest in. See pages 78 and 83 of the intellectual capital section of this review for details of the policy. Our environmental, social and governance (ESG) investment and management criteria Return on investment Evidence of: effectiveness of risk identification process and management of system implementation appropriate assessment of the environmental impact and mitigation or offset strategy compliance with RBH s investment exclusion list Acceptable levels of: legal compliance ESG awareness within the organisation consideration of ESG principles in the business strategy and decision-making King IV compliance Compliance with: anti-corruption laws of the country employment equity requirement W For the type of investments we will not consider see: While we are active and participative shareholders, RBH does not involve itself in the day-to-day management of the companies in which it invests. Our executives are members of the boards of these companies and as such are able to influence both the strategy and governance of these businesses. Our investment strategy commits us to long-term investment in like-minded companies with established track records, strong management teams and a competitive advantage. Paying a fair price for a top asset is part of our investment philosophy, rather than purchasing a lesser quality asset at an attractively low price. Our need to be prudent means we strive to protect and grow capital and do not invest in start-ups.

34 To achieve our strategic objective of diversifying our investments, both geographically and by asset class, we are increasing our investments in property, telecoms and infrastructure. Property is an asset class that has delivered sustainable, growing dividend yields over decades. Our investments in NEPI Rockcastle plc, Zenprop and Big Yellow have not only increased our diversification into property, but have also increased the geographic diversification of our portfolio. Increasing our diversification into infrastructure through our longterm investment in MOGS also increases our investment in the energy sector, which has considerable potential for growth in both South Africa and the rest of Africa (see the section on MOGS on pages 59 to 63 of this review for information on how well-positioned MOGS is both in South Africa and the rest of Africa in terms of providing oil and gas infrastructure). Our active involvement in the South African energy sector has seen us contribute a total of 712MW to the national grid through our direct and indirect investments in energy assets. In the year under review we acquired a 25.1% stake in Gouda Wind, a 138MW power plant located in the Western Cape, and a 25.1% stake in a 74MW solar PV power plant, Sishen Solar, located in the Dibeng municipality, Northern Cape province. 49 Investment review 2017 RBH produced a double digit growth for the second consecutive year. In 2017, we achieved a return of 12.9% compared to 16.1% in This performance was mainly driven by strong growth from our financials, infrastructure, property and telecommunications assets, with our mining assets underperforming due to persistently low PGM prices. The gross dividends from the companies in which we are invested increased by 5.1%, year-on-year. We will continue with our diversification strategy in the year ahead with a view to growing our property and infrastructure asset classes. Our focus on risk management and improving the resilience of the portfolio will mean that we will also revisit our portfolio s leverage. We are delighted that we again met our dividend commitments to our shareholder in 2017 and paid an additional special dividend. The graph on page 49, which compares the cumulative return performance of the RBH portfolio with the ALSI shows that our portfolio of assets has outperformed the index since its inception in Our performance in the various sectors Financial services and consumer goods 2017 was a very challenging year, with our financials and consumer goods sectors sensitive to both the economic and political environment. The cabinet reshuffle, followed by the ratings downgrade to junk by Fitch and S&P, negatively impacted our financial assets portfolio at the end of quarter 1. However, following the market-friendly political events of December 2017 our financials portfolio yielded a return of 22.2%. Rand Merchant Bank Holdings (RMH) increased normalised earnings by 6.6% (2016: 6.9%) to cents per share (cps) (2016: 542 cps). RMH continues to execute on its property strategy. RMH paid a dividend of 327 cps (2016: 295 cps), an increase of 10.8% (2016: 6.8%). Rand Merchant Investment Holdings (RMI) delivered an 18% increase in normalised earnings for the 2017 financial year. The earnings were underpinned by strong performance from OUTsurance and Discovery, which increased their earnings by 25% and 8%, respectively. MMI s earnings were flat for the year, strained by the impact of weak investment market returns on asset-based fees over the past two years and the negative underwriting experience on group disability business. RMIH kept dividends flat at 118 cents per share.

35 RBH INTEGRATED REVIEW 2017 Our performance Financial capital 46 Royal Investment Managers (RIM) Transform. Partner. Grow. RIM, a black-owned investment holding company that acquires stakes in existing or new asset management firms with a strong focus on diversity, was formed in May RBH and RMI each have a 45% shareholding in RIM, with Royal s black management team owning the remaining 10% shareholding. Overall, 2017 was a milestone year for RIM, during which it acquired its first affiliate, Sesfikile Capital, one of South Africa s biggest institutional listed property fund managers with assets under management of over R19 billion. A track record of Sesfikile s continued performance, including its best of breed management team, are some of the reasons why RIM partnered with Sesfikile Capital. Since December 2016, Ethos, a private equity pioneer founded in 1984, and Balondolozi have also joined the RIM affiliate. The landmark Ethos transaction fulfils the typical characteristics RIM looks for in acquiring minority equity stakes in asset management businesses; most notably the genuine embracing of diversity, which to RIM means black participation not only at ownership, management and employee level but, more importantly, at investment team level. The launch of the Ethos mid-market team (run and managed by a black team with its own independent investment committee) is an initiative of which RIM is proud. To have a second layer of predominantly black investment professionals bodes well for future succession and diversity and is something that RIM will continue to champion. Balondolozi is a quantitative investment management company managing approximately R4.5 billion in assets on behalf of institutional and individual clients. In December 2017 RIM also acquired a 30% equity stake in Balondolozi Investment Services, a black asset management firm established in With capabilities in money market, bond, equity and multi-asset class mandates, Balondolozi is a quantitative investment management company managing approximately R4.5 billion in assets on behalf of institutional and individual clients. The company was awarded Best Fixed Income Manager of the Year 2017 by the Association of Black Securities and Investment Professionals (ABSIP). RIM aims to drive diversity, growth and sustainability in the financial services sector. As part of its efforts to achieve this RIM initiated and sponsored a new ABSIP award category: The Most Transformed Retirement Fund. It proposed this award, not only to celebrate those retirement funds enabling transformation in the sector, but also to improve dialogue with asset owners and facilitate collaboration between retirement funds, umbrella funds and industry stakeholders.

36 47 Property The property portfolio accounted for around 7% of RBH s gross portfolio with a strong offshore allocation providing rand hedge characteristics. During the year under review Attacq committed to changing from being a growth player to a REIT, targeting a dividend of 73cps in the 2018 financial year, while NEPI merged with RockCastle to form the largest retail property operator in Central Eastern Europe. Our UK property exposure in Big Yellow continued to outperform with management exceeding their medium-term occupancy target of 80% for the past financial year, well ahead of expectations. A sound performance was also delivered by Zenprop in 2017, following the launch of Auriens, an ultra-high net worth senior care facility in Chelsea and further progress on a mixed use development in Greenwich. Resources and industrials RBH s resources portfolio, which represents 10.2% (2016: 15%) of the overall portfolio, declined by 22% from R5.6 billion to R4.3 billion. During 2017, RBPlat raised convertible bonds of R1.2 billion to finance the ramp-up of the Styldrift I project. RBPlat also acquired the neighbouring Maseve mine with concentrator capacity, which equips RBPlat to further ramp up Styldrift to 230ktpm. Implats experienced challenges in its Rustenburg operations, exacerbated by lower PGM prices and a stronger rand. A review of Implats Rustenburg operations, with the aim of reducing unit costs to provide for the current PGM price environment, is currently under way. Infrastructure By December 2017, 93% of our infrastructure portfolio had exposure to South African-based energy assets. The remaining 7% is held in a public private partnership (PPP) accommodation infrastructure asset. In the past year our infrastructure portfolio generated a return of 53%. We also acquired two renewable energy assets which increased our portfolio s infrastructure exposure from 0.9% to 2.8%. The infrastructure portfolio contributed a total of R85 million in dividends during The past year has been challenging for the infrastructure sector in general, as most energy projects were put on hold due to pending South African government decisions. This affected the execution of the 600MW coal project of which RBH is a part. The project was awarded a preferred bidder status in the coal independent power producer (IPP) programme in 2016.

37 RBH INTEGRATED REVIEW 2017 Our performance Financial capital 48 The dividends RBH has paid to its shareholder since Dividend Paid to shareholder (R m) Cumulative total return performance (RBH s performance compared with the ALSI) RBH ALSI

38 49 Portfolio diversification 2016 Mining 2016 Financials Telecoms Mining services Property Other Portfolio diversification 2017 Mining 2017 Financials Telecoms Mining services Property Infrastructure Other

39 RBH INTEGRATED REVIEW 2017 Our performance Financial capital 50 Our portfolio as at 31 December 2017 MINING 10.1% of gross assets Actual interest 6.3% Actual interest 51.74% Implats is one of the world s largest producers of platinum and associated platinum group metals (PGMs) producing approximately 25% of the world s PGM supply. It mines, refines and markets PGMs, nickel, copper and cobalt from its operations in South Africa and Zimbabwe. Royal Bafokeng Platinum (RBPlat), a shallow depth platinum miner of the Merensky and UG2 reefs, is an independent black-controlled company listed on the JSE (RBP), which operates the Bafokeng Rasimone Platinum Mine (BRPM), the BRPM JV concentrator and is constructing the Styldrift I project. FINANCIAL SERVICES 63.4% of gross assets Actual interest 15.0% Actual interest 14.7% Royal Investment Managers Actual interest 45% A focused investment company with a 33.9% stake in leading banking group FirstRand, which includes the following financial services franchises: Rand Merchant Bank, WesBank, Ashburton Investments and First National Bank. RMI Holdings is a separately listed investment holding company. It holds a diversified portfolio of strategic investments in some of South Africa s premier insurance brands. Its investments include MMI Holdings (Momentum and Metropolitan), Discovery, OUTsurance and RMB Structured Insurance. A black asset management company in which RBH and RMI each have a 45% shareholding with Royal s black management owning the remaining 10% shareholding. The aim of RIM is to partner with predominantly black-owned asset managers and support their growth and sustainability. TELECOMS 11.7% of gross assets Vodacom Proprietary Limited (unlisted subsidiary of Vodacom Group Ltd) Actual Actual interest 1.97% Liquid Telecom Holdings Limited Actual interest 10.34% A leading mobile telecommunications company providing voice, messaging, data and converged solutions. In South Africa Vodacom SA reported having 37.1 million active customers in Liquid Telecom is a leading communications services and solutions provider across 13 countries in Eastern, Central and southern Africa that serves carrier, enterprise and retail customers with high-speed, reliable connectivity and digital services.

40 51 INFRASTRUCTURE 2.8% of gross assets The fund was established in May 2013 with a mandate to make long-term equity and equity-related investments in greenfield and brownfield infrastructure projects located in sub-saharan Africa, principally in South Africa. STANLIB Infrastructure Fund Actual interest 16.7% RBH has a 16.82% economic interest. Through the fund RBH has indirect interest in the following renewable energy assets supplying power to Eskom under the REIPP programme: Project Kalkbult, 75MW-Solar PV Kouga Wind Farm, 80MW-Wind Project Linde, 42MW-Solar PV Project Druenburg, 75MW Solar PV Project Kathu, 75MW-Solar PV Adams Solar PV Project Two Proprietary Limited Actual interest 30.0% Adams is a solar photovoltaic (PV) power plant with a gross capacity of 82.5MW located in Kgalagadi District Municipality, Northern Cape, South Africa. Adams was awarded preferred bidder status in bid window 3 of the South African REIPPP Programme and signed a PPA with Eskom with a contracted capacity of 75MW. The shareholders are Enel Green Power SA Limited (60%), RBH (30%) and the Adams Community Trust (10%). The plant was built by Electronica South Africa Proprietary Limited and they are also responsible for operations and maintenance. Electra Capital (RF) Pty Ltd Electra Capital (RF) Proprietary Limited Economic interest: 30% Electra is a solar PV power plant with a gross capacity of 82.5MW located in the Cederburg Local Municipality, Western Cape province, South Africa. Electra was awarded preferred bidder status in bid window 3 of the South African REIPPP Programme and signed a PPA with Eskom with a contracted capacity of 75MW. The shareholders are Enel Green Power SA Limited (60%), RBH (30%) and the Adams Community trust (10%). The plant was built by Terni Energia Proprietary Limited and they are also responsible for the operations and maintenance. Gouda Wind Energy Facility Economic interest: 25.1% Sishen Solar Facility Economic interest: 25.1% Gouda is a wind power plant with a gross capacity of 138MW located in the Paleisheuwel Local Municipality, Western Cape, South Africa. Gouda was awarded preferred bidder status in bid window 2 of the South African REIPPP Programme and signed a PPA with Eskom with a contracted capacity of 135.5MW. The shareholders in Gouda are Acciona (54.9%), RBH (25.1%), Soul City (10%) and The Community trust (10%). The EPC contractor was Oakleaf Investment holdings 86 Proprietary Limited, a company jointly owned by Acciona Energy South Africa and Aveng Africa. Acciona is responsible for the operations and maintenance of the plant. Commercial operation date was reached in August Sishen is a solar PV power plant with a gross capacity of 94.3MW located in the Dibeng Municipality, Northern Cape province, South Africa. Sishen was awarded preferred bidder status in bid window 2 of the South African REIPPP Programme and signed a PPA with Eskom with a contracted capacity of 74MW. The shareholders in Sishen are Acciona (54.9%), RBH (25.1%), Soul City (10%) and The Community Trust (10%). The EPC contractor was Oakleaf Investment holdings 86 Proprietary Limited, a company jointly owned by Acciona Energy South Africa and Aveng Africa. Acciona is responsible for the operations and maintenance of the plant. Commercial operation date was reached in November 2016.

41 RBH INTEGRATED REVIEW 2017 Our performance Financial capital 52 OUR PORTFOLIO AS AT 31 DECEMBER 2017 CONTINUED PROPERTY 7.1% of gross assets Actual interest 5.53% Actual interest 50.0% Attacq is a leading South African capital growth fund in the real estate sector, which holds property assets in South Africa, the rest of Africa and Europe. It focuses on sustainable capital appreciation through the development and ownership of a balanced portfolio of properties with contractual income streams. Capital appreciation is supplemented by development and redevelopment profits made within the company. RBH has established an exclusive partnership with Zenprop UK, a leading real estate advisory, development and management business with investments in niche property classes across the UK and continental Europe. RBH made an initial equity investment commitment of GBP 26 million to this partnership which was increased to GBP 50 million in Actual interest 0.89% NEPI Rockcastle plc is the largest listed real estate group focused on Central and Eastern Europe. The group was formed from the merger of NEPI and Rockcastle Global Real Estate Company Limited in July MINING OIL AND GAS SERVICES Actual interest 1.87% Actual interest 51.0% Big Yellow PLC is the United Kingdom s brand leader in self storage, operating from 89 stores with a current maximum lettable area of over 490 m % of gross assets MOGS Oil and Gas is a South African-based company created in 2007 to invest in oil and gas infrastructure and services businesses in Africa and the Middle East. OTHER Actual interest 51.0% Actual interest 30.0% The MOGS Mining Services Group is invested in nine businesses, which together offer an integrated mining services platform. 1.2%* of gross assets RBH has invested in JC Decaux Sub-Saharan Africa, a leading African outdoor advertising contractor and producer of outdoor advertising material operating in I5 countries. The information on these pages is drawn from information available on corporate websites during December 2017 *Includes cash and other investments less than 1% of the portfolio.

42 53 RBH asset portfolio composition as at 31 December 2017 (R million) 2017 YoY % change* 2016 YoY % change 2015 YoY % change 2014 YoY % change Market value of listed investment (27) Impala Platinum (24.1) (5) (67) (38) Royal Bafokeng Platinum (21.4) (49) (3) RMB Holdings (14) RMI Holdings (5) Attacq Limited 825 (13.5) 953 (19) (32) NEPIROC Big Yellow Group Merafe Resources (disposed) Metair (disposed) Directors valuation of unlisted investments (6) Gross asset value excluding cash Cash (realised from disposals and dividends) 138 (13.7) Less: liabilities (10.3) (3.0) Net asset value (22.8) The strategies applied by these businesses complement RBH s strategy of diversification by sector and geography. *Reflects a percentage change in market value of a security on an annual basis.

43 RBH INTEGRATED REVIEW 2017 Our performance Financial capital 54 Our net asset value increased by R3 billion to R32.1 billion.

44 55 45 W W W W RMH RMH, well known for its entrepreneurship, innovation and value creation, was listed on the JSE in Its insurance interests were listed separately as RMIH in Its three tiered investment strategy, which it believes ensures superior returns by way of sustainable dividends and capital growth (see performance on page 45), includes diversification geographically and by business and product; optimisation through the design of the group and its capital structure to provide optimal returns to shareholders and to create a platform for potential value-adding mergers and acquisitions or fundraising opportunities; and modernisation through identifying and assessing new businesses, technologies and trends that complement RMH and the companies in which it invests. RMH s banking interests through FirstRand, which operates in South Africa and the broader African continent, include: First National Bank ( which operates in the retail and commercial segments RMB ( which operates in the corporate and investment banking segments WesBank ( which provides instalment finance in the retail, corporate and commercial segments Ashburton Investments (ww.ashburtoninvestments.com), a new generation investment manager bringing together the expertise from across FirstRand. RMIH RMIH takes material stakes in financial services investments, becoming a long-term partner that allows management teams the individuality to operate their businesses as owners. RMIH s primary objective is to create value for its shareholders by optimising, diversifying and modernising its investment portfolio which includes: Discovery (25% shareholding) Discovery is a pioneering market leader with uniquely positioned businesses in the healthcare, longand short-term insurance, wellness and financial services industries. Founded in 1992 as a specialist health insurer, Discovery operates in South Africa, the UK, China, Singapore, Australia, Japan, Europe and the USA. It has an innovative business model that incentivises people to live a healthier lifestyle and offers them protection products. MMI (25% shareholding) formed in 2010 through the merger of Metropolitan and Momentum, MMI conducts business in South Africa, various other African countries and selected international countries. MMI s core businesses are short- and long-term insurance, asset management, savings, healthcare administration, health risk management, employee benefits, property management and rewards programmes. 81 Hastings (30% shareholding) is a UK-listed short-term insurer. It commenced operations in 1997 and listed on the LSE in It is a fast-growing agile digital general insurance provider operating principally in the UK motor market. It provides private car and other forms of personal insurance cover (home, van and bike). Hastings has a 7% market share of the UK private car insurance market and has 2.5 million live client policies. The group s success in capturing market share has been combined with consistently strong underwriting performance and growing retail profitability. The group is headquartered in Bexhill-on-Sea with offices in Newmarket, Leicester and Gibraltar. OUTsurance (88% shareholding) provides short- and long-term insurance products in South Africa and short-term insurance products in Australia, New Zealand and Namibia. It has a client-centric ethos of providing value for money insurance solutions backed by awesome client service. RMI Investment Managers (100% shareholding) establishes, partners and grows world-class asset managers and investment teams by acquiring equity in boutique independent asset managers. RMI Investment Managers through its recently launched affiliate investment manager model invests in and partners with independent investment managers and specialist investment teams with the aim of helping asset management businesses grow. RMI Investment Managers affiliate model enables the company to access a differentiated part of the investment management industry by investing in and partnering with independent investment managers, as well as specialist investment teams. RMI Investment Managers has taken equity stakes of up to 30% in boutique investment managers and will continue to evaluate opportunities that will complement RMI s existing suite of managers, as the company builds its share of the South African investment management market. Alpha Code (100% shareholding) is an innovation hub, growing next generation financial services entrepreneurs with the aim of building the broader entrepreneurial sector (see page 81 for the progress entrepreneurs supported by Alpha Code have made in the past year). There are prospects of a market improvement for platinum in 2018 for a number of reasons including increased industrial demand for platinum, the projected steady recovery of jewellery demand from growth in India and a slow turnaround in jewellery demand in China. A deficit of over one million ounces is expected in the palladium market, while rhodium is likely to remain strong throughout 2018.

45 RBH INTEGRATED REVIEW 2017 Our performance Manufactured capital 56 Manufactured capital Royal Bafokeng Platinum (RBPlat) (RBH s shareholding in this listed entity is 51.74%) Despite the challenging circumstances, both locally and globally, we made good progress at RBPlat with restructuring and optimising the business for tough times and, most importantly, achieving a meaningful reduction in costs. Adv. Kgomotso Moroka SC Independent chairman W RBPlat, the first and only community-owned company to list on the JSE, is a 52% black-owned, controlled and operated mid-tier platinum group metals (PGMs) producer. Its broad-based ownership structure provides stability, certainty and sustainability (see for its group structure). RBPlat owns 67% of the BRPM joint venture originating from the Bafokeng Rasimone Platinum Mine Joint Venture between the RBN and Anglo American Platinum, which has been in operation since Its operations consist of BRPM, an existing mine where it accesses the ore reserve via the North and South shaft decline complexes at a depth of less than 500 metres, and Styldrift I a new mechanised underground mine, which it is developing at a depth of 758 metres which is on track to ramp up to 150ktpm by the end of When indications in the last quarter of 2016 pointed to a further deterioration in the PGM market in 2017, RBPlat knew it needed to make sure it equipped its business to be fit for purpose in a tough operating environment. To achieve this it undertook a strategic and operational review, which was followed by a restructuring process aimed at optimising the business. This included suspending the mining of UG2 at BRPM s South shaft, which allowed RBPlat to increase its mining of the better quality Merensky reef. Post year-end RBPlat finalised its acquisition of Maseve. The opportunity to purchase Maseve, with its 110ktpm concentrator capacity, will allow RBPlat to implement its organic growth strategy through mining 230ktpm at Styldrift I by 2020, as well as mining 150 to 180kptm at BRPM. Maseve is also ideally positioned, being approximately 3km from both RBPlat s North shaft and Styldrift I. In addition, instead of closing down the whole of BRPM s South shaft by the end of 2018, RBPlat will be able to continue mining the tail end of Merensky in this shaft until early Owning Maseve could, in the future, facilitate early access to RBPlat s Frischgewaagd ore body.

46 57

47 RBH INTEGRATED REVIEW 2017 Our performance Manufactured capital 58 Key facts in 2017 By year-end RBPlat had enrolled employees and contractors, a 13.1% increase year-on-year, with employee numbers at Styldrift I more than doubling as a result of the increased activity at the mine 94.6% of the members of its workforce are historically disadvantaged South Africans (HDSAs) 50.0% of its board members are HDSAs 61.5% of its senior management are HDSAs Since its inception in 2010 RBPlat has invested R948.6 million in its social and labour plan (SLP) and wage agreement commitments (R251.1 million of this expenditure was invested in RBPlat s employee home ownership scheme in 2016). RBPlat ended 2017 with: No fatal accidents, but disappointing lost time injury and serious injury frequency rates that had started improving by the fourth quarter of 2017 Strong cash position of R1.3 billion (2016: million) Improved EBITDA margin of 16.4% (2016: 15.0%) Cash operating costs of R2.8 billion (2016: R2.7 billion) Headline earnings of R108.8 million (2016: R166.7 million) Headline earnings per share of 56.4 cents (2016: 86.7 cents) An average rand basket price of R per platinum ounce (2016: R18 906) Cash generated by operating activities of R581 million R2 billion in expansion capital invested in organic growth through the Styldrift I project Outlook RBPlat has a busy year ahead of it in 2018 as it prepares for the ramp-up of Styldrift I, and incorporating Maseve into its business.

48 59 Mining, Oil & Gas Services (MOGS) Mining Oil and Gas Services (MOGS) Proprietary Limited is a pan-african leader in the oil and gas infrastructure and mining services sectors. Its two strategically important divisions, MOGS Oil and Gas Services and MOGS Mining Services (MMS), were created in 2007 with the aim of diversifying its investment portfolio through the acquisition of synergistic mining, oil and gas services. RBH has a 51% shareholding in the business and the Public Investment Corporation (PIC) holds the balance of shares. Both divisions made significant progress with achieving their strategic objectives in the year under review. GPMS 65% shareholding partnership with Tema oil refinery (TOR) Sunrise Energy 60% shareholding in partnership with the IDC Oil tanking MOGS Saldanha (OTMS) 50% shareholding in partnership with Oiltanking GmbH BRM 25% shareholding in Horn of Africa project MOGS Oil & Gas Services is investing and building capacity in African oil and gas infrastructure, with the aim of increasing energy security in the regions in which they operate. In August MOGS Oil & Gas subsidiary, Sunrise Energy, officially opened Africa s largest open-access liquefied petroleum gas (LPG) import terminal, in Saldanha in the Western Cape while construction of the R2.6 billion OTMS storage and tank farm facility (also in Saldanha) progressed according to schedule, with the first phase of operations on track to start in Q In Ghana, GPMS (65% owned by MOGS) successfully completed its first full year of operating the terminal, which imports 80% of that country s crude oil and petroleum products, under a 15-year exclusive concession. GPMS is a partnership between MOGS Oil & Gas and the Tema Oil Refinery (TOR), representing the Government of Ghana.

49 RBH INTEGRATED REVIEW 2017 Our performance Manufactured capital 60 In 2017 MOGS Oil & Gas management progressed discussions with a number of government and state-owned entities on investing in and operating public assets, all on an open-access basis and to worldleading technical, environmental and social standards. MOGS Oil & Gas Services MOGS Oil & Gas s business model and strategy are underpinned by the imperative of delivering widespread social value. It achieves this by developing, owning, operating and investing in midstream oil and gas infrastructure. Infrastructure assets are typically large and of strategic significance, their size and complexity representing high barriers to entry. Assets derive revenue from throughput and/or storage tariffs and all are operated on an open-access basis. MOGS and its partners do not trade in the commodities they handle. Sunrise Energy Sunrise Energy is an LPG import facility in the port of Saldanha which was built at a cost of over R1 billion to provide clean, affordable energy to, especially, the Western Cape. MOGS owns 60% of Sunrise Energy and the Industrial Development Corporation (IDC) 31%. The first LPG shipment was received in June The facility consists of five very large steel bullets representing a potential throughput of metric tonnes of LPG monthly, a floating multi-buoy mooring system, pipelines, storage, blending and dispatch facilities. As this competitor was not required to charge a tariff for the (costly) offshore discharge, loading and pipeline infrastructure, Sunrise Energy was compelled to seek legal action to assert its rights and to enforce the conditions of its licences. Oiltanking MOGS MOGS Oil & Gas is a 50% shareholder in Oiltanking MOGS Saldanha (OTMS), a new large-scale crude oil storage and blending facility under construction in Saldanha Bay. In partnership with Oiltanking GmbH, a R2.6 billion world class, commercially flexible facility is being developed which will consist of twelve million-barrel in-ground crude-oil storage concrete tanks. OTMS will exploit South Africa s location and infrastructure (which in Saldanha Bay includes an existing crude-oil jetty and pipeline) to earn valuable foreign exchange. It will do so by storing, blending and transshipping crude oil for bulk building and for balancing production and offtake. All tanks will be interlinked, allowing for efficient on-site blending of different crude oils. The first eight tanks are scheduled to be commissioned in the fourth quarter of 2018 with construction being completed by August In 2017 construction began and progressed to plan, expenditure in the year amounting to some R900 million with individuals working full-time on the project. Oiltanking GmbH is a leading global supplier of storage solutions for oils, petroleum products, chemicals, biofuels and gases. OTMS enjoys funding support from the IDC and the Deutsche Investitions-und Entwicklungsgesellschaft. Sunrise Energy is an open-access facility and never trades in the products it imports, processes and distributes. Unlike other, similar facilities, this means that anyone importers, aggregators, traders and distributors may use its infrastructure. Sunrise Energy s construction and fabrication created 500 jobs in the construction phase, of which 90% were taken by members of the local community. However, the company estimates that by addressing current provincial LPG shortfalls through imports, as many as jobs can be created by the downstream sector in the Western Cape. (The province s per-capita consumption of this clean, abundant energy source is extremely low compared to other, similar economies.) Following the successful commissioning of the terminal, commercial operations were hampered by a competitor being granted emergency permission to offload LPG at the Saldanha port quayside in contravention of accepted safety norms and standards and contractual agreements between Sunrise Energy and the authorities.

50 61 By 2018, Sunrise Energy and OTMS will represent manufactured capital value amounting to more than R1 billion and R2.6 billion, respectively, capital which will translate into considerable social value for South Africa. Sunrise Energy will make widespread, affordable and clean energy available to industrial, commercial and domestic users in the Western Cape and further afield. OTMS will generate sustainable long-term foreign-exchange revenue, tax income and jobs. Ghana Petroleum Mooring Systems (GPMS) GPMS is an offshore terminal responsible for the import of approximately 80% of Ghana s crude oil and petroleum products under a 15-year exclusive concession. GPMS facilities operate on an open-access basis, servicing bulk distribution companies and the Tema Oil Refinery on a throughput tariff basis. The facility handles in excess of 3.5 million tonnes of petroleum products per annum. MOGS has a 65% equity stake in GPMS, the concessionaire being responsible for the operations and maintenance of facilities for the duration of the concession agreement. With its investment in GPMS, MOGS envisages working to develop specific oil and gas infrastructure, including the development of a network of storage tanks, pipelines and other bulk transportation infrastructure as well as developing natural gas infrastructure throughout the country. In 2017 GPMS suffered a drop in projected revenue after a fire in January shut the Tema Oil Refinery for much of the year. (GPMS has traditionally supplied crude oil to the barrel-per-day capacity refinery. Deliveries returned to historical levels in 2018.)

51 RBH INTEGRATED REVIEW 2017 Our performance Manufactured capital 62 Exploration Drilling MOGS mining services MMS is a portfolio of mining services assets owned between 51% and 100% by MOGS with Fraser Alexander, which is by far the largest business in the group, being 100% owned. Operating both in South Africa and internationally, the division offers services across the mining value chain. Mining Environmental Consulting MMS remains the leading black-owned mining services provider in South Africa and the business considerably improved its financial performance in 2017 from The diverse range of services and products MMS offers to both the underground and open-pit mining industries in and out of South Africa, together with improving global and local market conditions, will allow for ongoing growth in both revenues and profit. MMS has put forward an aggressive 2018 budget and we are confident that we will be able to deliver to it and that we will continue to outperform our market and our peers going forward. Fraser Alexander Booysens Bore Geoserve Exploration Drilling M-Tech Industrial Trident SA Battery Electric An iconic, over 100 years old, South African, African and global mining services company dominating the market in tailings deposition, hydraulic re-mining, the construction of tailings storage facilities and the manufacture, funding, operation and management of coal wash plants A leading South African production drilling company offering blast hole and de-watering drilling specialising in difficult formations A specialised exploration and grade control drilling company providing services to South Africa s foremost iron ore, manganese, coal, platinum, chrome and diamond mining companies Engineering company supplying design, analysis and optimisation of energy solutions and fluid dynamics. South African and global leader in power plant (and other industrial) efficiency software (FlowNex) and consulting services. Leading South African industrial heat pump manufacturer and installer. Manufacturer and installer of unique, highly efficient underground mobile air cooling units Leading, South African original equipment manufacturer (OEM) of various underground mining equipment, including locomotives, rock shovels, loaders, mono rope winches and DC traction motors, supplied to the underground South African and global market place BE offers a range of solutions to the mining industry, including battery locomotive controllers, battery chargers, AC locomotive controllers, auto re-closers, remote control systems for locomotives. It also supplies overhead electric locomotive lines and is a leading supplier of industrial LED lighting solutions Production Drilling The MSA Group Elbroc The MSA Group is a leading provider of exploration, geology, mineral resource and reserve estimation, mining and environmental consulting services to the mining industry Elbroc manufactures, and supplies underground roof support props, sets, underground pumps and roof drills to the African and North American mining markets Civils Construction Mining Consulting Stopetech Underground contractor installing roof support solutions and providing underground asset management services

52 63 Exploration Consulting Power Management Consulting and Systems Oil and Gas Environmental Consulting Power Plant Heatpumps Soil Sampling Geology Exploration Management Mapping Geophysics Tailings Re-mining Mineral Processing Water Treatment Air Cooling Units Props Batteries, Electrical Controllers and Chargers Materials Handling Locomotives and Loaders Stope Support Contracting Mining Equipment Proximity Detection Systems (PDS)

53 RBH INTEGRATED REVIEW 2017 Our performance Human capital 64 Human capital Kgetsi ya tsie e Kgonwa ka go pataganelwa RBH is comitted to upholding the United Nations Declaration of Human Rights and the International Labour Organisation s Declaration of Fundamental Principles and Rights at Work. Our human capital focus is centred around making sure we have the right people on the RBH bus by making sure that there is a clear alignment between the company, the team and the individual, and that everyone s efforts are channelled towards the delivery of our mandate to our sole shareholder, the RBN. Our value proposition speaks to our mission of becoming a leading investment partner, enabled through transparent, honest and future looking performance management that is linked to compensation, benefits, recognition and work-life effectiveness measures that are meaningful to both RBH and its employees. Our staff composition is made up of experienced and highly qualified individuals with undergraduate and postgraduate degrees in disciplines such as accounting, corporate finance, investment banking, corporate social investment, corporate governance, risk and human resources. Key statistics YoY % change Number of employees Percentage of women employees (2) Percentage of employees who are black Percentage of senior managers who are black Percentage of middle managers who are black Voluntary turnover of employees during 2017 (%)

54 65 Our employee value proposition While it is important to build a thriving company founded on strong values and with an emphasis on delivering successful outcomes, at RBH we also recognise that our employees are diverse individuals with rich technical abilities, experience and life philosophies. We are therefore sensitive to our employees individual needs and take cognisance of their unique cultural backgrounds and personalities. Driving an understanding of our individual differences and a mission towards a common purpose allows us to work as a team as the Setswana saying Kgetsi ya tsie e kgomma ka go pataganelwa (a heavy sack of work can be easily accomplished by working together). Our employees are the key determinant of our success. Through our ongoing engagement with our employees we share RBH s vision, values and culture, and the terms of our Compact with our shareholder. Our performance management philosophy Performance management has a key role to play in the achievement of our goal of becoming a leading investment partner. During 2017, RBH reinvented its performance management process during which we defined the behaviours we wished to encourage in our business. These behaviours align with the RBH values. Our performance management philosophy, aims to foster the development of: engaged teams honest and open communication supported by constant leadership feedback on matters of strategic importance employees ready to be accountable and to hold each other accountable a supportive environment and culture that is building an irresistible organisation for all our employees. We believe in rewarding our employees fairly and incentivise performance by means of short- and long-term incentive structures. We also regularly benchmark our remuneration to ensure that it is aligned to the market. The benefits we offer our employees, over and above the legally mandated benefits, include medical aid, retirement benefits, study assistance and bursaries, as well as group life, disability cover and flexible working hours. Diversity We recognise that we are all different and RBH is sensitive to and respectful of the differences in our people. It is these differences and different life experiences that enrich the intellectual capital of our organisation and contribute to its success. The nature of our business requires that the majority of our employees are experienced and highly qualified graduates. Diversity statistics YoY % change Percentage of senior management who are black Percentage of senior management who are women Percentage of middle management who are black Percentage of middle management who are women (4)

55 RBH INTEGRATED REVIEW 2017 Our performance Human capital 66 Employee wellness To encourage our employees to be healthy, enhance their quality of life, reduce absenteeism and increase productivity and performance, RBH provides a wellness programme, facilitated by ASI together with Discovery, for all its employees. As part of our efforts to develop a healthy living culture we run an annual employee wellness day. Training and development initiatives Employees During 2017, we provided training to our employees in the areas of company secretariat, investment, media, human resources, finance, and governance. Number of employees 2017 % 2016 % YoY % change Percentage of employees who received training Percentage of employees trained who were members of management (38) Percentage of employees trained who were unskilled (7) Youth empowerment Youth empowerment is a major part of our commitment to training and development. This includes our chartered accountant (CA) programme, Class of programme for undergraduates needing assistance with work experience and job opportunities. RBH CA programme In 2017, RBH received accreditation from the South African Institute of Chartered Accountants (SAICA) as a training institution. The training programme is structured to develop well-rounded finance professionals and involves a three-year rotation plan which exposes trainees to various business units within the Royal Bafokeng Group. The programme is aligned to RBH s transformation strategy, which is to position youth and graduates for employment opportunities. It further promotes education, training and the retention of key accounting professionals within the RBH businesses.

56 67 Class of programme The aim of the Class of programme is to facilitate the placement of deserving undergraduates who have performed well academically and are in need of a job opportunity. RBH, together with its subsidiaries and RBN entities, work together continually to identify mentorship/ training opportunities within their businesses. In 2017, 18 graduates were placed on our programme, eight females and 10 males. Four of the interns left the programme voluntarily due to permanent employment offers elsewhere. We are hopeful that once the graduates complete the programme they will have the advantage of securing themselves permanent employment given their work experience. Class of profile Thabiso Aphane Thabiso joined DHL in 2014 on a Class of learnership as a 6 sigma intern supporting DHL Gateway in the modelling process and ISO of customs procedure and data analytics. She joined DHL s Customer Service Business Support in 2015 as a Junior Analyst and was promoted to a Senior Analyst position July On 1 April 2018 Thabiso was appointed as DHL Express Customer Service Development Manager for South Africa, based in Johannesburg. Thabiso is completing a six-week process assessment report in order to obtain his three-year qualification, National Diploma in Operations Management (TUT). In addition Thabiso has been an employee of the Year finalist and was recently announced as the Silver Stevie Awards winner for Contact Centre Professional of the Year. DHL told us that they were excited to see the improvement initiatives that will come from Thabiso leading the team from good to great.

57 RBH INTEGRATED REVIEW 2017 Our performance Human capital 68 Thutopele The programme is aimed at learners who have successfully completed their Grade 12 but are unable to further their studies due to funding or low admission point score for university entrance. In 2017 RBH, in partnership with Ubank, rolled out an NQF 5 national certificate in banking services advice (BSA) offered through Milpark Education. Fifteen learners were placed on the programme, five male and 10 females. The learners are due to complete their studies in March Thutopele profiles Gama Gontse Gama Gontse who comes from Tantanana village was given an opportunity by RBH to pursue a career in accounting through a one-year course during He passed his modules and graduated with an Advanced Certificate: Accounting Technician National Qualifications Framework (NQF) Level 4. In 2017 RBH once again gave me an opportunity to study further. This time for a Higher Certificate in Banking Services Advice NQF 5, which I have completed. This course has given me an advantage by broadening my career opportunities. I plan to study further as I want to achieve more in life. This is only the beginning of my career. Given the opportunity, I would study for a BCom in accounting or perhaps study human resources. Lesego Mataboge Lesego Mataboge comes from a family of five. Her elder sister is the only one who is currently working. I am from Bobuantswa. The learnership I was on with RBH and Ubank has given me much-needed experience and a good qualification. I even managed to save some money. I still want to further my studies and pursue a Bachelor degree in accounting. My ambition is to become a chartered accountant so studying accounting will be the way to go. Martha Lethoba Martha Lethoba comes from Chaneng, an RBN village. I have always been keen on working with numbers and want to have my own business one day. I knew accounting was one of the subjects I have to do. In 2017 when I joined the banking service advice learnership sponsored by RBH and Ubank, I knew it was the beginning of a great and educational journey for me. The programme has given me the courage and confidence in my own work and also being responsible and accountable. I have achieved my NQF Level 5 in banking service advice within record time. My plan is to further my studies. If I would be given an employment opportunity, I will study Bachelor in Commerce because I believe it is the continuation of what I have started at Milpark. I really appreciate the opportunity that I was given by RBH together with Ubank. My parents did not have money to take me to varsity but with the help of RBH, I can now stand boldly and say I am a graduate. Thank you RBH for making it possible for me to further my studies till I complete them.

58 Intellectual capital Our intellectual capital is what sets us apart. It is a key driver of our sustainable growth. It encompasses our organisational knowledge, culture, governance and leadership structures. It also includes our processes, approach to remuneration, risk management, the systems that support and facilitate integrated thinking in RBH, our ability to deliver on our business strategy and our all-important relationships. Our economic value depends on how we manage and use these assets to extract value and make the best possible use of them. Leveraging our intellectual capital allows us to implement our strategy in the most effective and efficient way possible. We have identified the key elements of RBH s intellectual capital as being: the skills and experience of our investment team and support functions (see pages 45 and 47) our ability to establish and maintain successful relationships our ability to adapt to a rapidly changing business environment, reinvent ourselves, achieve cost efficiencies and the courage to make tough decisions (see our strategy and business model and value creation on pages 26 to 27 and the leadership review pages 12 to 21 strategies, policies, procedures and codes that govern how we do business, including King IV which follows in this capital investment in our people and the community (see page 79 to 80) robust and fit for purpose computer systems the use of technology and innovation to support the achievement of our strategic objectives. Lesego Martha Gontse The Thutopele learners in 2017

59 RBH INTEGRATED REVIEW 2017 Our performance Intellectual capital 70 Assessing the effectiveness of our approach to corporate governance RBH believes King IV presents us with an opportunity to assess whether our approach to corporate governance, an essential element of our intellectual capital, is facilitating: During the year under review RBH has been through an extensive exercise to ensure our policies, charters, memorandum of incorporation, etc, are aligned with King IV. Our board received training in King IV and devoted a substantial amount of time to reviewing our application of King IV in RBH and whether we are achieving the outcomes realised through good governance of an ethical culture, good performance, effective control and legitimacy. We also became a member of the Ethics Institute. Our commitment as a member of the Institute is to building an ethically responsible society and encouraging and demonstrating ethical conduct within our sphere of influence, from our interpersonal interactions, to our workplace practices and our broader societal impact. Towards achieving an ethical culture By our application of: For more information on our application of these principles ethical and effective leadership and establishing an ethical culture Principle 1 The governing body should lead (see page 15 of the leadership review and page 70 of this section of ethically and effectively the review responsible corporate citizenship Principle 2 The governing body should 71 accountability and effective control govern the ethics of the the governance of risk organisation in a way that supports the establishment of transparency that ensures stakeholders are provided with the an ethical culture information they need to make an informed assessment of our performance Principle 3 The governing body should 71 value creation for all our stakeholders. ensure that the organisation is and is seen to be a responsible corporate citizen The contribution establishing an ethical culture makes to our stock of intellectual capital RBH s commitment to ensuring that the governance of ethics in our organisation support an ethical culture previously included a boardapproved code of ethics and an investing code of conduct, both designed to achieve the effective management of ethics and fraud and corruption in RBH. They are in line with international best practice and make it clear that we do not tolerate acts of bribery or fraud by our employees, contractors, suppliers, joint venture partners, associates and other business partners. The board plans to review its leadership in terms of ethics and the governance of ethics in RBH and it associate and subsidiary companies. The board will also be reviewing our codes and their implementation during 2018 to ensure they support an ethical culture. Currently, the chairman of our board ensures that the behaviour of board members is in accordance with the codes, in turn our board and its committees monitor compliance with both our codes.our chief executive officer is ultimately responsible for the implementation of both these codes in RBH. The Compact our board signed with RBNDT commits us to our code of ethics and our investing code of conduct and our conflicts of interest policy, which provides guidelines for both directors and employees.

60 71 79 Ensuring we are a responsible corporate citizen and are seen to be so The entire aim of RBH is to be a responsible corporate citizen by meeting our commitment to preserve and grow the financial capital of the RBN and ensure its long-term future. Our efforts to be a responsible corporate citizen include our investment in our corporate social investment programme, which focuses on maths education, sports development in the young and providing opportunities for community members to obtain work experience and employment opportunities through our various programmes (see pages 79 to 80 of this review). Our investment and portfolio management activities are governed by our policy for sustainable development and portfolio management, which sets out our responsibilities, our investment decision-making process, the economic, social and governance (ESG) investment and management criteria we apply and the type of investments that RBH will no invest in. Achieving good performance By our application of: For more information on our application of these principles Our application of Principle 4 RBH recognises that its activities and outputs can have both positive and negative impacts on the triple context: (the economy, society and the environment) in which we operate and the capital we employ in our business to create value for our stakeholders by achieving a good performance. When we set our strategic objectives (see pages 23 27) we assess the risks and opportunities they present in relation to our risk appetite and risk tolerance, which considers the triple context. We establish our key performance indicators (KPIs) in terms of RBH s mandate set out in our Compact with our shareholder and measure our performance against these KPIs. The business model we use to create economic value (see page 22) also incorporates the triple context and explains how we use our stock of capitals to create value (for details of our performance in terms of our financial, manufactured, human, intellectual, social and relationship capital see pages 40 to 83). Our main commitment is to creating social value through meeting our commitment to providing the RBNDT with an annual dividend and preserving and growing the financial capital of the RBN. Our application of Principle 5 The board of RBH collectively assesses our integrated review to ensure it addresses all matters material to its stakeholders and its short-, medium- and long-term prospects. The board s unanimous approval of this report can be found on page 3. It also reviews all other reports issued by RBH during the financial year including the annual financial statements. Principle 4 Principle 5 The governing body should appreciate that the organisation s core purpose, its risks and opportunities, strategy, business model, performance and sustainable development are all inseparable elements of the value creation process The governing body should ensure that reports issued by the organisation enable stakeholders to make informed assessments of the organisation s performance and custodianship of corporate governance in the organisation 73 79

61 RBH INTEGRATED REVIEW 2017 Our performance Intellectual capital 72 Achieving effective control and legitimacy By our application of: Principle 6 Principle 7 Principle 8 Principle 9 Principle 10 The governing body should serve as the focal point and custodian of corporate governance in the organisation The governing body should comprise the appropriate balance of knowledge, skills, experience, diversity and independence for it to discharge its governance role and responsibilities objectively and effectively The governing body should ensure that its arrangements for delegation within its own structures promote independent judgement and assist with the balance of power and the effective discharge of its duties The governing body should ensure that the evaluation of its own performance and that of its committees, its chair and its individual members, support continued improvement in its performance and effectiveness The governing body should ensure that the appointment of and delegation to management contributed to role clarity and the effective exercise of authority and responsibilities For more information on our application of these principles W Our application of Principles 6, 7, 8, 9 and 10 The leadership role of the board in taking responsibility for the good governance of the group Through the appointment of strong independent directors and the separation and clear definition of the roles and responsibilities of the chairman and chief executive officer, RBH has established a clear balance of power and authority at board level. Our board performs its duties within a framework of policies and controls, which provide for effective risk assessment and management of our economic, environmental and social performance. The RBH board Charter, which we have reviewed to ensure it is closely aligned with the recommendations of King IV, details the responsibilities of the board, while our memorandum of incorporation (MOI) also addresses certain of the directors responsibilities and powers. The board has a formal schedule of matters reserved for its consideration and decision at its meetings including approving: strategy, business plans and budgets, significant acquisitions and disposal of assets, executive directors appointments and remuneration, review and approval of significant group-wide policies and frameworks, capital expenditure for investment, operational, and financial risk, board sub-committee and stakeholder relations reporting, as well as a solvency and liquidity assessment and a market assessment. Delegation of authority in RBH Through the delegation of authority policy the board delegates authority to the executive committee, which in turn delegates authority to heads of department, who in turn delegate authority to members of the RBH team. Our MOI sets out the shareholder s delegation of authority to the board, which has a formal schedule of matters reserved for its consideration and decision. Its delegation of certain matters to committees is described in the terms of reference of these committees, which can be found in the governance section of our website

62 73 Our governance framework RBNDT RBH board of directors Board committees Audit and risk Remuneration and nominations Social and ethics The RBNDT structure Elected from the Bafokeng regions 5 4 Kgosi appointees Chairman and Kgosi Representative of Traditional Council of Dikgosana 1 Representative of Traditional Council

63 RBH INTEGRATED REVIEW 2017 Our performance Intellectual capital Our governance framework Achieving effective control By our application of: Principle 11 The board determines the group s risk appetite and levels of risk tolerance (see the risk management section on page 28). RBH also establishes the issues that could have the greatest impact on our ability to achieve our strategy and create value for our stakeholders. The process allows us to assess what value we have added to the business and what we need to do to add value in the future. Our audit and risk committee oversees the governance of risk in conjunction with our social and ethics committee through our system of internal controls. We actively manage our risk (see pages 28 to 29) and recognise that the effective management of risk is ongoing. Achieving effective control By our application of: Principle 12 The governing body should govern risk in a way that supports the organisation in setting and achieving its strategic objectives The governing body should govern technology and information in a way that supports the organisation setting and achieving its strategic objectives For more information on our application of these principles 28 For more information on our application of these principles 74 RBH s strategic risk register sets the direction for RBH s approach to technology and information. The audit and risk committee assists the board in carrying out its technology and information governance objectives. Achieving legitimacy By our application of: Principle 13 The governing body should govern compliance with applicable law and adopted, non-binding rules, codes and standards in a way that supports the organisation being ethical and a good corporate citizen Compliance governance For more information on our application of these principles The audit and risk committee obtains assurance on the financial statements, internal controls and sustainability information included in RBH s integrated report and carried out its statutory duties set out in section 90 of the Companies Act 71. It satisfied itself as to the expertise and experience of the financial director and the financial function and assessed the independence and performance of the internal and external audit functions. The social and ethics committee advises and provides guidance to the board on the effectiveness of management s efforts in respect of social, ethics and sustainable development-related matters. It also carries out its duties as prescribed in the Companies Act 71 of 2008 and reports on its discharge of its duties in this regard to the board and stakeholders. RBH is a Level 4 contributor in terms of the Broad-Based Black Empowerment Codes of Good Practice. 74

64 75 Rotation of directors In terms of our board charter one-third of our directors are required to retire from office by rotation at every annual general meeting and if eligible are available for re-election. Company secretary RBH s company secretary is not a director of RBH or any of its associates or subsidiaries and on that basis, the board is comfortable that she maintains an arm s length relationship with the executive team. Also, the board does not interfere with her performance of her corporate governance responsibilities. The board has also assessed her abilities based on her qualifications, experience and the levels of competence she has demonstrated as RBH s company secretary over the past eight years, in alignment with section 3.84(i) of the JSE Listings Requirements. Following this assessment, the board endorsed and confirmed her appointment as company secretary. Achieving legitimacy By our application of: Principle 14 Principle 15 The governing body should ensure that the organisation remunerates fairly, responsibly and transparently so as to promote the achievement or strategic objectives and positive outcomes in the short, medium and long term The governing body should ensure that assurance services and functions enable an effective control environment and that these support the integrity of information for internal decisionmaking and of the organisation s external reports For more information on our application of these principles Principle 16 In the execution of its governance role and responsibilities, the governing body should adopt a stakeholder-inclusive approach that balances the needs, interests and expectations of material stakeholders in the best interests of the organisation over time 76 Application of Principle 14 RBH understands that it is essential that our strategy, risks, performance and rewards are aligned if we are to create shareholder value. The remuneration committee is charged with ensuring that executive directors and senior management are fairly rewarded for their individual contributions to the company s overall performance and for ensuring that RBH s remuneration policies and practices are designed to align performance with reward and to attract and retain the right talent, while having regard to the interests of stakeholders and the financial condition of the group. The individual performance of executives is measured against key performance indicators linked to the achievement of our mandate from our shareholder.

65 RBH INTEGRATED REVIEW 2017 Our performance Intellectual capital 76 Application of Principle 15 Combined assurance Combined assurance is provided through three lines of defence: Management oversight The risk management framework, which is updated, reviewed and monitored quarterly Independent and objective assurance by the audit committee, supported by external audit. Annual financial statements RBH s annual financial statements for the year ended 31 December 2017 will be prepared in accordance with International Financial Reporting Standards (IFRS) by the accounting staff of RBH, headed up by finance director Nakedi Ramaphakela CA(SA). The financial statements will be audited by the group s independent statutory auditors, PricewaterhouseCoopers, an internationally recognised accounting firm. A copy of their report will be available for inspection at the company s offices. Compliance with laws and regulations Our board is committed to full compliance with all applicable laws and regulations and the South African Government s National Development Plan. Our regulatory compliance framework and our regulatory risk management process ensure that the effectiveness of the key internal controls in place to mitigate our compliance risks is continually monitored and that risk management plans are in place to ensure compliance with new legislation or amendments to current legislation Application of Principle 16 Our approach to stakeholder relations Balancing the needs, interests and expectations of RBH s stakeholders has been identified as being one of RBH s material issues. Information on how we have approached our stakeholder relations can be found in the social and relationship capital section of this report (pages 80 and 83).The board also identified stakeholder relations in terms of its role regarding investors as being a material corporate governance issue. To address this issue RBH regularly engages with its stakeholders. Achieving legitimacy Practising responsible investment Our primary responsibility in the sustainable development of RBH, the RBNDT and the RBN is to act as a responsible investor. Our sustainable responsible investment and portfolio management policy sets out our investment approach and defines our: principles, objectives and systems for sustainable responsible investment with respect to environmental, social and governance (ESG) issues investment and management objectives. Our performance in this regard is set out on pages 40 to 45 of financial capital section of this review.

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67 RBH INTEGRATED REVIEW 2017 Our performance Social and relationship capital 78 Social and relationship capital Social capital RBH exists to deliver sustainable and predictable income and capital growth towards meeting the development needs of the Bafokeng community. In addition, we also have our own commitment to social transformation. Our approach to social transformation The three-year social transformation plan we began implementing in 2017 focuses on: Education and skills development (including sports development) Supplier and enterprise development Preferential procurement R4.1 million of which R1.5 million was spent on sports development (2016: R2.8 million) R2.5 million (2016: R3.7 million) R37.7 million (B-BBEE recognised preferential procurement) (2016: R43.7 million) The figures included relate to costs for the learnerships in the 2017 education and skills development numbers.

68 79 The youth empowerment initiatives with Transcend, the Thutopele learnerships and the Class of initiative are run by human capital, and information on them can be found on page 66 to 68. Measuring the effectiveness of our investment To assess the effectiveness of our programme in supporting sustainable socio-economic empowerment of vulnerable communities in South Africa we engaged the Siyakhula Trust to undertake an independent monitoring and evaluation of our education, enterprise and sports initiatives in February Siyakhula indicated that our investment in the Focused Approach enterprise development programme is contributing significantly to the growth and success of the participating small, medium and micro-enterprises (SMMEs). The impact assessment also found that the Thethe maths improvement programme had achieved a noticeable improvement in maths results in the school and suggested it be extended to other secondary schools. Education and skills development During 2017 we: paid the salaries of three maths teachers (who ran a supplementary maths programme) at the Thethe Secondary School, with the aim of improving the maths results of senior learners provided career guidance counselling and career profiling at eight Bafokeng high schools provided life orientation teacher training in how to assist learners to make informed decisions regarding subject and career choices funded the participation of primary schools in the Metshameko netball and football league and coaching courses funded the training of nine young people who were not in education, employment or training (NEET) by the Thutho Thebe Educational Fund, with the aim of equipping them to find employment partnered with Ubank to put 15 post-matric learners on the Thutopele learnership programme through the banking services advice (BSA) qualification through the Class of programme helped 18 deserving undergraduates with work experience and job opportunities funded the training of 25 SMMEs on the Focused Approach programme provided by Royal Bafokeng Enterprise Development (RBED). Progress at Thethe Secondary School During 2017 the number of learners taking maths in Grade 10 increased from 43 to 76 (a 77% increase) and the maths pass rate in Grade 10 increased from 53% in 2016 to 74% in 2017 (a 40% increase). The programme was also extended to 100 Grade 8 and 9 learners. The fact that 88% of the Grade 12 maths learners passed will continue to encourage our future efforts. The key challenges the project faces is overcoming the lack of interest of learners in studying maths, the majority of those studying maths achieving pass marks below 50%, lack of support for the project from the school management team and a lack of resources. The success of this intervention has encouraged RBH to continue supporting the programme. Developing sports skills in learners Our support of the Metshameko netball and football league included providing 22 coaches with training through which they earned SAFA D-Licence certificates. Fifteen of these coaches have volunteered to coach in Bafokeng schools. Two hundred and fifty-six league games were played in 2017 in which 27 primary schools and 830 learners participated. As the majority of learners in the Bafokeng schools are not Mofokeng, but children bussed in from neighbouring areas, the benefits of the league extend beyond the people of the RBN. Life orientation support programme The programme provided by Career Monitor, a black-owned business, focused on developing the skills of life orientation teachers so they can better assist learners in making career choices. It also provided 249 learners with information on the economy of South Africa, the various sectors in the economy and how to go about choosing a career. In total, learners were profiled in terms of their career interests, 515 learners received sector education and 11 life orientation teachers were trained in career coaching. Career Monitor had hoped to reach more learners and teachers, but it was a challenge to secure appointments to run sessions for learners and teachers.

69 RBH INTEGRATED REVIEW 2017 Our performance Social and relationship capital 80 Supplier and enterprise development The beneficiaries of the Focused Approach programme we supported are all 100% black-owned businesses in accordance with the definitions for the Codes of Good Practice. The programme is an individualised enterprise development programme spanning three years that aims to accelerate the growth of high-potential SMMEs. Participants can graduate before the end of the three-year period if they reach their developmental objectives earlier. The programme is managed by RBED using specialist service providers to support the development work with the SMMEs. The RBED, using a rigorous selection process, assessed and re-assessed 51 SMMEs for the first intake from which they selected 25 SMMEs to participate in the programme. Each SMME is offered a selection of services defined in their individualised development plan. The SMMEs on our programme represent a wide range of businesses including: services construction, manufacturing, training and consulting, logistics, human resources, media, technology, optometry, tourism, recycling, waste management, transportation, sports and recreation, etc. How Heritage Capital has fared since 2016 In 2016, our CEO Albertinah Kekana met up with the Heritage Capital team when they entered the Alpha Code competition for next generation financial services entrepreneurs for which she was a judge. RBH provided them with start-up funding and included them as a supplier within our investment value chain. In seeking to facilitate opportunities for job creation in the country, we continue to invest in emerging businesses beyond the North West region. Our investment in Heritage Capital, a thriving black femaleowned asset management company, has seen it approach its target fund size of R500 million. Heritage capital also contributed to job creation in 2017 when they hired a graduate they are training to take up an analyst role in their team. During this period, RBH also invested in Everest Ventures, a black-owned SMME targeted financial advisory and investment company, which seeks to connect high growth SMMEs to finance by offering advisory services such as transaction structuring, company valuations and capital raising.

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71 82 Supplier development our support of black-owned SMMEs in 2017 During 2017, RBH s support supplier development programme helped three black-owned businesses grow. We supported Zingaphi Ngewu, who is passionate about assisting learners in making informed career choices. RBH contracted her organisation Career Monitor SA to capacitate life orientation teachers with career coaching skills so they can continue to improve and better assist learners in making career choices. During the programme, learners are familiarised with the South African economic framework, enabling them to identify scarce and critical skills they may be able to provide. Learners are then profiled according to their desired sectors of interest so they can receive relevant information that speaks to their interest. Emmanuel Modisane and his brother Bethuel Modisane, who started a tour operator business in 2004, Tlhago Nature Travellers cc, also run a bus/coach hire business. They currently have 11 buses that range from 22 to 44 to 65-seaters including luxury coaches. They had a vision to expand into the Gauteng market. RBH facilitated this by providing them with an office in Johannesburg. Through this opportunity, Tlhago was able to assess the prospects of operating in a new market and generate business in Gauteng, but have been limited by the lack of a local depot for their buses and the cost of acquiring a depot in Gauteng. They are determined to pursue growing their business in Gauteng and finding a way to overcome the challenge of securing property for a depot. In the meantime these entrepreneurs, in a move to diversify their business, purchased a wooden door manufacturing business that was closing down and are doing really well with it as well. Zingaphi Ngewu, who heads up Career Monitor SA. Her company was contracted by RBH to assist learners in making informed career choices and to capacitate life orientation teachers with career coaching skills We also supported Tirafalo IT Solutions in 2017, which is headed up by entrepreneur Kgomotso Mathebula who, after working as a systems analyst, decided to set up her own business as an IT consultant and service provider. She currently provides IT hardware, software and support to the Royal Bafokeng Administration (RBA), RBED and RBI. She has also a been working with Impala Platinum (Implats) to provide ICT in schools, setting up computer labs, training and supports for those schools Implats support and has also secured work for herself outside Phokeng, with clients such as Electronic Toll Collection (SANRAL), government departments, ORBIT TVET colleges and the City of Tshwane. Tirafalo currently has five employees that they have trained.

72 83 Relationship capital Our broader guiding rationale at RBH is that healthy stakeholder relations are influenced by a focused approach to building and maintaining relational equity. To this end, we believe the implementation of effective communication methods that are linked to RBH s overarching corporate strategy (of portfolio diversification) is a key enabling factor towards achieving successful outcomes. Our stakeholders concerns are identified through our materiality process and through the interaction we have with our board, our shareholder and the community. The bi-annual media perception audit we commission also helps us identify the concerns of the media. During 2017, we spent time addressing the concerns we had identified and building relationships with our key internal and external stakeholders, through regular engagement. We also worked on improving our communication and engagement with the companies in which we are invested, and protecting and creating awareness of RBH s reputation as an empowerment partner of choice and a contributor to the economic development of South Africa as a whole. To support the RBN s efforts to establish mutually beneficial partnerships and collaboration regarding education, infrastructure development and skills development where possible we assisted by facilitating engagement between RBN s entities and potential funders, government and the sector education training authorities (SETAs). Our board s key stakeholder engagement responsibility is regular engagement with our shareholder, the RBNDT. Our management team also maintains regular engagement with the RBNDT on the performance of the RBH portfolio and any other matters of interest or concern to our shareholder. Our employee volunteer programme also facilitates engagement between the Bafokeng community and RBH. To keep our employees informed we publish an employee newsletter. Our CEO regularly engages with our employees and provides them with feedback on our achievements and board decisions that may affect them. Creating brand awareness among our employees and increasing their understanding of the role they can play in building the reputation of our brand, as well as their responsibilities as brand advocates, remains a key objective of our stakeholder relations team. Produced by ahcomm & green grass design

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