How clover creates value and reporting on the six capitals

• How Clover creates value today
• Overview of Clover’s value creation process
• Reporting on the six capitals
• Clover’s business model
• Human capital
• Natural capital
• Manufactured capital
• Intellectual capital
• Social and relationship capital
• Financial capital
• How Clover sustains value for Tomorrow
• Clover’s future value creation philosophy
• Human capital
• Natural capital
• Manufactured capital
• Intellectual capital
• Social and relationship capital
• Combined Assurance

Social and Relationship Capital

How Clover creates value today: Social and Relationship Capital

Clover Mama Afrika

Good corporate citizenship

Clover prides itself on conducting business by taking into account our legal, ethical and economic responsibilities. While it is our goal to increase profitability for our shareholders, we also aim to create higher standards of living and quality of life in the communities in which we operate.

Corporate social and community investment Clover Mama Afrika Trust was started 13 years ago and has since established a reputation for being one of the country’s most innovative, effective and sustainable corporate investment programmes, bringing tangible benefits to the people it aims to empower.

The Clover Mama Afrika initiative has set out to restore some of the best aspects of African tradition into modern life, such as caring for one another, passing on skills and protecting the young, the weak, the aged as well as HIV/AIDS victims. Today, the Clover Mama Afrika project places a strong emphasis on assisting people in disadvantaged communities to empower them with the skills to establish self-sustaining livelihoods and become contributing members of their communities and to society at large.

At the heart of the programme are the carefully chosen “mamas” who already act as pillars of strength in their communities. The mamas are incredibly special ladies who already make a difference in the lives of the people around them and have earned their respective communities respect. They want to be empowered with skills that can generate an income for themselves and teach others to become self-sustaining too. The programme sees that they are trained in a variety of essential skills that can then be passed on to other community members. Cooking, baking, sewing, quilting, mosaic, egg laying project, welding, hairdressing and food gardening are just some of the training they receive and significantly, they are also presented with the necessary tools, equipment and infrastructure to create an income for their communities on the back of their newly acquired skills. Clover Mama Afrika has appointed 43 Mamas over a period of 13 years but unfortunately has lost 3 Mamas due to illness. Currently, the operating Clover Mama Afrikas collectively care for over 15 500 children and more than 2 500 elderly across South Africa.

Value drivers of the Clover Mama Afrika initiative

• Skills selection centres: Relevant, employable and marketable skills are aligned to the needs of each respective community to ensure that the centres become self-sustainable. After skills-training, Clover Mama Afrika provides start-up equipment to allow for immediate income generation and passing on of skills.
• Site improvement: Clover Mama Afrika assists communities with the repairs and renovations to basic facilities such as appropriate ablution facilities. It is important to create a safe haven for all the children in the care of a Clover Mama Afrika.
• Monitoring and Evaluation: Regular monitoring and evaluation of each self-help project is implemented, which allows for the identification of strengths and weaknesses on an individual basis. Immediate support and assistance is provided where necessary.
• Partners: Clover is of the firm belief that the best way for Clover Mama Afrika to have the greatest possible impact is through partnership and collaboration with other organisations and individuals that want to embed sustainability into the fabric of South African society..

Hugely important to the success of Clover Mama Afrika is the open-hearted attitude of the programme’s corporate partners and sponsors who assist to make it meaningful for so many needy people across South Africa. Professor Elain Vlok, Clover’s manager of Corporate Services who drives Clover Mama Afrika with passion, dedication and insight, believes that the programme’s ongoing success is built on a generosity of spirit that is at the same time, the very essence of “Ubuntu”.

Blue chip partners who contribute to the success of Clover Mama Afrika and co-fund 20% of the Trust’s expenses include:

• HCI Foundation;
• HFR Transport;
• Eqstra Flexi Fleet; and
• MiX Telematics.

Clover Mama Afrika has positioned itself as a successful, award winning example of a sustainable and effective CSI project, which is making a real difference in the lives of many needy South Africans.

Based on the most recent B-BBEE verification performed by EmpowerLogic, Clover achieved full allocation of available points under the Socio-Economic Development element of the B-BBEE balanced scorecard.

As a respected JSE-listed company with a century-long history of serving farmers and the public through a wide range of world-class “Way Better” dairy and beverage products, Clover is committed to maintaining Clover Mama Afrika’s status as a corporate social investment programme that makes a real difference. In line with its commitment to the programme, Clover also ensures that Clover Mama Afrika meets the highest levels of transparency and corporate governance.

Clover’s sponsorship budget for the period under review was submitted and approved by Executive Management. Management is responsible for the tracking, accounting and reporting to the Social and Ethics Committee all sponsorships, donations and charitable givings. Supporting documentation is maintained by each business unit to enable transparent reporting. Sponsorships are used with a purpose of gaining brand awareness, corporate identity or consumer loyalty, which is aligned with Clover’s vision and mission.

Key Social Capital inputs

• 43 Mamas appointed to care for children and the elderly.
• Clover Mama Afrika assists communities with repairs and renovations to needed infrastructure.
• Skills selection centres.
• Relevant, employable and marketable skills are aligned to the needs of each respective community to ensure that the centres become self-sustainable.
• Food gardens created to enable the selected Mamas to feed their communities.

Outputs

	2017	2016
Total beneficiaries trained	2 054	2 022
Training/Skills development	R2,99m	R2,74m
Site Improvements and communications development	R1,69m	R849 101
Total Sponsorships and Charitable givings	R4,68m	R5,19m

Outcomes

• Targeted, effective CSI (Mama Afrika) that sets a benchmark.
• Sustainable CSI projects through effective skills transfer.
• Clover’s excellent reputation, attested by numerous awards.

SUSTAINABLE IMPACT OF CLOVER MAMA AFRIKA SINCE INCEPTION

SKILLS TRAINING	Clover Mamas/members trained beneficiaries	Operating Clover Mama Afrika centres	Skills transferred to fellow community members	Employed members earning wages/salaries as reported
Sewing	122	22	1 886	45
Bread Baking Project	715	21	2 192	105
Cooking & Baking	98	21	1 231	47
Food Gardens*	557	16	823	26
Quilting	51	14	385	9
Crochet/Knitting	28	14	599	19
Hairdressing	32	4	219	14
Pottery	1	1	20
New Earth Pottery	6	6	35	3
Egg Farming	14	5	45	8
Flower Arrangement	42	10	621	13
Beadwork	21	12	419	25
ADDED VALUE SKILLS
Art/Mosaic	40/7	22/11	678	19
Welding	9	5	52
Mobile Phones/Save a Child	79/175	13/26
Basic Admin/Finance	49	27
TOTALS	2 054		9 961
* Food gardens feed over 5 600 members per day

 

In order to achieve Clover’s strategic objectives as described in Clover’s vision and mission, the Company relies on effectively executing all value creation processes in its business model, which are interdependent of Clover’s material stakeholders’ contributions. These stakeholder groups or individuals can be affected by Clover’s actions and operations or their operations can materially impact on Clover’s operations.

Clover actively engages with all our stakeholders throughout the year on its strategic aspirations as well as understanding stakeholder’s needs, interests and perspectives. Material matters arising from stakeholder engagements are managed as part of the risk management process, in so far as the review of material risks and opportunities include stakeholders’ perspectives, to ensure alignment of Clover’s and its stakeholders’ respective business models.

Clover’s material stakeholder groups are described in table below:

From 1 July 2017, Clover restructured its milk procurement department to operate from a newly formed entity, Dairy Farmers of South Africa (DFSA), that will perform milk procurement for Clover. DFSA will also take over Clover’s low margin fluid dairy product business, while Clover will still provide manufacturing, distribution and head office support services.

Stakeholder	Stakeholder needs and expectations	Stakeholder contribution to value creation	Means of engagement with stakeholders
Communities, traditional and civic society	Ongoing commitment to our core strategic social investment initiatives adding to the wellbeing of the community: Consideration of community interests. Corporate social investment and donations. Preferential procurement policy. Employment opportunities across South Africa Reduction in use of natural resources	Participation with the community affords Clover the opportunity to understand their needs and to further align our business in a way that improves the lives of our communities at large. Clover’s continued support enforces the Clover brand, while assisting in implementation of Clover’s Masakhane distribution model in the informal markets.	Direct interaction through various corporate social investment initiatives and environmental campaigns in various communities, such as: Supporting communities through Clover Mama Afrika Clover contributed with product donations to the Kellogg’s Breakfast for Better Days project Advertisment of new job opportunities on Clovers’ website Clover recruits trainee graduates from GradX
Consumers	Providing high-quality and trusted products under some of the country’s most admired brands in fulfilling consumers’ needs: Research in gaining consumer insights in product categories. GDA table (guideline daily amount) informs consumers of nutritional values in Clover products. Cost competitiveness of products. Food safety standards. Developing products seen as healthy alternatives.	Loyal consumers continued support of their most admired brands and trusted products. Consumer loyalty translates to sustainable revenue and brand support	Promotions, above the line advertisments (TV), below the line advertisement through instore promotions, sampling etc Tropika Island of Treasure TV show Community based initiatives Regular communication on all core brands via social media. Brandseye monitoring over concerns on social media Clover Consumer Centre dealing with complaints and enquiries Membership held at the Consumer Goods Council Sponsorships
Customers/trade	Providing good quality products at competitive prices: Effective product stewardship. Effective merchandising services Valued partnerships to drive efficiency and continued future growth. Provide necessary marketing brands especially when launching new product categories. Grow retailer profitability while ensuring competitive pricing Presence of sales representatives for ongoing support in store meeting.Require a variety of products to cater for both formal and informal markets, considering minimum delivery quantitiesClover Masakhane focused on supporting informal market stores Availability of products in informal markets, while store owner requires assistance for growth Category expansion and volume growth. Cost efficiencies/optimisation. Ensuring optimum stock levels at retail outlets.	Extensive retailer footprint providing the basis for continued growth. Clover’s brand expansion through retail expansion into informal markets and into Africa growing revenue in the medium- to long-term.	CSC taking orders from trade. Participation in retailer promotional activities Presence of sales representatives for ongoing support in store meeting Clover Masakhane focused on supporting informal market stores
Employees/ management	A stimulating and gratifying work environment, while offering prospects to meet career growth aspirations: Safe and healthy work environment. Ongoing training and development. Career development plan. Open communication between employees and managers. Transformation in line with EE Plan. Access to HIV counselling and employee wellness programmes. Competitive remuneration	Employees acting in accordance with Clover’s values of respect, integrity, fairness and responsibility form the foundation of our business. By providing timely business information and strategic information, Clover can put its strategy into action for sustainable returns.	CE briefs and conferences on material strategic direction Corporate bi-monthly newsletter (In Clover), Training programmes, learnerships, apprenticeships, interns and workplace skills programmes Formal Performance reviews against agreed objectives Intranet has relevant communication, information and document storage such as policy and procedures
Government and regulatory authorities	Continued contribution to the economic growth and social upliftment of the communities in which we operate. Exercise good corporate governance practices while ensuring compliance with all applicable legislation: Increased contribution to the South African economy, including job creation and youth development. Good corporate citizenship. Timeous payment of taxes. Empowerment, transformation and adherence to the relevant B-BBEE Codes and newly formed B-BBEE Commission’s requirement. Reduction of energy and water consumption. Disclosure and management of carbon emissions Regulatory compliance to material legislation, such as competition legislation. Submission of B-BBEE certificate to the B-BBEE commission Provide input on policy changes in the agricultural sector and food security.	Government gives us our license to operate and provides the enabling regulatory framework.	Personal meetings, written and verbal communication, through business organisations, Parliamentary portfolio committees. Disclosure and management of carbon emissions. Submission of B-BBEE certificate to the B-BBEE commission. Participate in the DTI’s Jobs Fund project, stimulating Job creation in the “Masakhane Together we grow” project.
Insurers	Open and transparent communication enabling insurers to assess risk appropriately: Proactively ensure that sites conform to legislative requirements and best practice fire safety requirements.	Through pro-active risk management practices, ensure Clover has adequate insurance cover. For all potential insurable loss events that would be material.	Site surveys; annual renewal of insurance policies.
Media	Good Corporate Citizenship: Transparent and responsible reporting.	The media contributes in sustaining our brand reputation and increase awareness on new products, community development programmes and changes in our business strategy.	Timeous media statements and briefings Keep media informed on key product offerings and new product launches
Milk Producers (DFSA*)	A stable market for milk produced for delivery to Clover: Large fluctuation in milk prices. Increases in farm overhead costs. Land reform.	Milk producers provide quality raw milk used in manufacturing of our dairy products.	Regular Circulars group meetings with producers Clover producer forums.
Principals	Timely delivery of ordered product with professional in store merchandising: Clover not meeting the agreed upon service levels in distribution and merchandising activities.	Participation in growing the combined distribution footprint in retailers while achieving economies of scale and reducing costs in the supply chain.	Contract and service level agreements, Transactional information integrated via respective ERP systems. Regular sales conferences enabling marketing plans and effective planned promotional activities.
Shareholders, investors and analysts (Refer to Report on Governance, Risk and Compliance for more detail)	Providing sustained returns on investment by achieving business objectives through delivery on embedded strategy, sound risk management identifying strategic growth opportunities and good governance practices: Delivering consistently superior financial results for sustainable growth given economic constraints. Leadership and strategic direction. Strategy to ensure sustained financial performance. Sound Corporate governance processes and ethics embedded. Responsible investment for future growth by seizing strategic opportunities. Effective risk management process over risks and opportunities.	Investors provide the financial capital necessary to sustain growth. Shareholders are encouraged to attend Clover’s AGM to vote on resolutions and to discuss relevant issues with the directors and management.	Investor presentations and road shows, circulars to shareholders, Integrated Annual Report, Annual General Meeting, press releases, announcements and notifications through SENS, Clover website and site visits.
Suppliers and service provider	Conducting business in a transparent manner that is mutually beneficial and sustainable: Timely payment and fair terms Effectiveness of planned procure-to-pay process. Preferential procurement. Efficiency with imports.	Our suppliers provide us with good quality raw materials and services that enable us to produce quality products for our consumers, enforcing the Clover brand.Supporting Broadbased black economic empowerment compliance (B-BBEE)	Supplier meetings, site visits, performance evaluation and audits, business association meetings.
Trade unions	Positive work relationships in dealing with matters sensibly during negotiation processes: Provision of competitive remuneration packages and safe working conditions.	Organised labour to engage Clover in a positive manner on matters affecting their members as well as other matters of mutual interest.	Regular meetings with trade unions and collective bargaining forums.

Broad-Based Black Economic Empowerment (B-BBEE)

Clover supports the transformation of South Africa’s economy and we regularly review our overall business strategy in the context of these principles.

Clover’s most recent B-BBEE verification was performed by Empowerlogic (Pty) Ltd, a verification agency approved by the South African National Accreditation System (SANAS). Based on our June 2015/16 year-end, Clover was assessed against the current AgriBEE Sector Codes for the fourth time. Clover’s overall score was 66.55, which retained our status as a Level 4 B-BBEE contributor.

The extent to which the AgriBEE Sector Codes will be modified in accordance with the newly amended generic B-BBEE Codes, which became effective as from 1 May 2015, is uncertain. All sector codes were intended to be aligned to the amended generic B-BBEE Codes by 31 October 2015, but no feedback has yet been received from the Department of Agriculture, Forestry and Fisheries.

Once the amended AgriBEE Sector Codes have been finalised, Clover will re-assess its B-BBEE strategy and make the necessary adjustments.

Annual Compliance Report

The Annual Compliance Report prepared pursuant to section 13G(2) of the B-BBEE Amendment Act stipulates that all public-listed companies on the JSE must provide the B-BBEE Commission, in such manner as may be prescribed, a report of their compliance with Broad-Based Black Economic Empowerment, as specified under section 12(3) .

Clover’s current B-BBEE certificate is based on its financial year ending 30 June 2016 and was issued on 19 May 2017, expiring on 18 May 2018. Clover and its Subsidiaries’ consolidated current B-BBEE certificate as well as information required to be reported in the Compliance Report (Form B-BBEE 1) follows below. The Subsidiaries include the following companies:

• Clover Industries Limited
• Clover Fonterra Ingredients (Pty) Ltd
• Clover Frankies (Pty) Ltd
• Clover Good Hope (Pty) Ltd
• Clover Milkyway (Pty) Ltd
• Clover SA (Pty) Ltd
• Clover Waters (Pty) Ltd
• The Real Beverages Company (Pty) Ltd

To align Clover’s B-BBEE reporting period with that of its financial year-end (June) and to meet the reporting deadlines implemented by the B-BBEE Commission going forward, Clover will undergo another B-BBEE verification shortly after its 30 June 2017 financial year-end, and formally report its compliance report (Form B-BBEE) to the BEE Commission within allowed timelines.

Compliance Report

Details of Entity
Name of Entity	Clover Industries Limited
Registration number	2003/030429/06
Physical address	200 Constantia Drive, Constantia Kloof, Roodepoort, 1709
Telephone number	011 471 1400
Industry/Sector	Agriculture
Email Address	darren.chetty@clover.co.za
Name of verification agency	Empowerlogic (Pty) Ltd
Name or technical signatory	E Ackroyd CA(SA)
Clover’s Accounting Officer	Elton Bosch

2016 BEE Scorecard

B-BBEE Element	2016
Ownership	10,06
Management Control	7,79
Skills Development	15,30
Enterprise and Supplier Development	22,4
Socio-Economic Development	11,00
Total score	66,55
Priority Elements Achieved	N/A
Empowering Supplier Status	N/A
Final B-BBEE Status Level	Level 4

Clover’s and its Subsidiary’s consolidated current
B-BBEE Certificate