EMPLOYMENT EQUITY AND BROAD-BASED BLACK ECONOMIC EMPOWERMENT (BBBEE)

EMPLOYMENT EQUITY: BACKGROUND AND STRATEGY

AECI is committed to transforming itself into a fully representative South African-based Group of companies and recognises that meeting the requirements of the Employment Equity Act, in terms of representative employment and human resource development, is a business imperative. Closely aligned to this is the achievement of acceptable Broad-Based Black Economic Empowerment ("BBBEE") scorecards.

Accordingly, AECI's employment equity and BBBEE targets have been stated as follows:

• all operations in South Africa must achieve contribution levels (excluding the ownership element) of level 8 by the end of 2009 (to be measured in the first half of 2010), with AEL Mining Services Limited (AEL) maintaining its current level 5 contribution status;
• all operations in South Africa must improve on this target by one level by the end of 2010; that is, level 7 for all operations except AEL which must achieve level 4;
• by mid-2011 AECI is planning to implement a BBBEE transaction along the lines of the transaction contemplated in 2008 and 2009 (more detail on this transaction is provided later in this report). Thus the objective, by mid-2011, is that all AECI Group companies will be at level 6 or better and the Group as a whole will be at level 6;
• in mid-2011 the Group will review its BBBEE performance against set targets and will set new targets for 2014 and beyond.

In the recent past some success in improving the representation of designated groups in AECI's employment profile has been achieved in parts of the Group. However, overall progress has been slow in terms of improving representation in skilled and more senior employment categories. Renewed efforts to accelerate improvements were formalised in 2009.

The Executive Committees of AECI, AEL, Chemical Services Limited (Chemserve) and Heartland have been tasked with implementing individual plans to achieve the above noted targets in their respective areas. Achievement of these targets will be formally measured as a Key Performance Indicator and the result will influence individual performance bonuses.

EMPLOYMENT EQUITY: STATISTICS

(Excluded here are employees at manufacturing and business activities outside of South Africa).
% = percentage of employees from designated groups per category.
Figures in all the graphs refer to employee numbers.

Top management – 21%		Top management – 20%
Senior management – 19%		Senior management – 18%
Middle management and professionals – 43%		Middle management and professionals – 41%
Skilled and semi-skilled – 87%		Skilled and semi-skilled – 86%
Unskilled – 99%		Unskilled – 97%

In the 2008 annual report, the percentage of designated employees in top management was stated as 28%. Therefore, the 21% stated for 2009 would appear to represent a year-on-year decline. However, a recount of the figures published for 2008 highlighted a misstatement in the original count. The 2008 figure for White males should have totalled 16 employees, which would reflect a 20% representation of designated employees in top management positions. Accordingly, the relevant graph has been corrected and restated.

There has been an increase in the number of designated employees across all categories. All AECI businesses have implemented formal programmes for the development and promotion of staff in designated groups. More detail on this is given below and in the BBBEE section of this report.

AEL

To achieve improved demographic representation, AEL has adopted a policy of mandatory employment equity appointments wherever there is a demographic imbalance and where external recruitment is required. All recent external senior management appointments have been Black, including three appointments in the last quarter of 2008.

In support of its policy, AEL has reviewed its succession planning and this has informed its Management Development Programme.

CHEMSERVE

In the Chemserve group, compliance with the Employment Equity Act continues to take place within the two-tier consultation process.

To redress the imbalance of demographic representation at senior management levels in subsidiary companies and within the group as a whole, Chemserve only recruits Black candidates into vacant positions of grade C lower (skilled band) and above except where a thorough and diligent search has not identified a suitable qualified Black candidate.

HEARTLAND

Recruitment statistics show that improvement has occurred in the demographic representation of skilled and middle management levels, whilst no change has been recorded at professionally qualified and senior management levels. Programmes and plans are in place to improve the situation over the medium- to long-term.

All three businesses submitted statutory Employment Equity plans and reports to the Department of Labour, as required by current legislation. Furthermore, all three maintain consultative processes for dealing with employment equity issues.

BBBEE

As indicated in the 2008 reporting period, investigations into a transaction to facilitate a Black ownership initiative in AECI's ordinary share capital had reached an advanced stage. It was contemplated that the transaction would be implemented in 2009, thus complementing the Group's other BBBEE strategies and programmes.

The transaction as contemplated comprised two elements, the first being the empowerment of permanent South African employees of the AECI Group through an employee share trust and the second being the creation of a perpetual community service trust promoting education and development in areas immediately adjacent to the manufacturing sites and operations of the AECI Group in South Africa.

The structure and terms of the transaction were approved by the AECI Board. Regrettably, its implementation in 2009 was precluded by the volatility of equity markets. A similar transaction, or another structure that provides the desired sustainable benefits to employees and shareholders, will be considered when market conditions are more conducive. It is currently envisaged that this will take place during 2011.

In the meantime AEL, Chemserve and Heartland will continue to manage progress in BBBEE and transformation at company level within the framework of targets set by the AECI Board. The approach is multi-faceted and, in addition to employment equity-related matters, will address issues such as skills development, preferential procurement and corporate social investment.