I am pleased to present the audit committee report for the year ended 31 December 2024. This report reflects the committee's independent role with accountability to the board and shareholders.
Nondumiso Medupe
Audit committee chairperson
Committee members are elected at the AGM by shareholders on recommendation from the board, through the nomination committee.
The board ensures a balance of skills and experience, with a focus on financial literacy, to enable the committee to discharge its function. All committee members are independent non-executive directors.
On recommendation from the board, shareholders at the 2024 AGM approved the appointment of Nosipho Molope as independent non-executive director and audit committee member.
In 2024, the committee maintained its minimum membership of four independent non-executive directors.
The board is satisfied that the committee members have the necessary academic qualifications or experience in economics, law, corporate governance, finance, accounting, commerce, industry, public affairs or human resource management.
Refer to board of directors for members' qualifications and experience.
Non-executive director Isaac Malevu is a standing invitee to the committee. Other meeting attendees include the CEO, FD, head of internal audit, group finance manager, chief finance officer: coal, chief strategic resilience and governance officer, chief technology officer and representatives from the external and internal auditors.
Other individuals, including members of management, external consultants and service providers are invited to attend meetings of the committee from time to time in consultation with the committee chairperson.
The internal and external auditors have unrestricted access to the audit committee.
Gender and racial diversity
As determined by its terms of reference, the committee held four scheduled meetings and one special meeting in 2024.
| Members | Designation | Attendance at quarterly meetings | Attendance at special meetings |
| Nondumiso Medupe | Independent non-executive director and audit committee chairperson | 4/4 | 1/1 |
| Billy Mawasha | Independent non-executive director | 4/4 | 1/1 |
| Chanda Nxumalo | Independent non-executive director | 3/4 | 1/1 |
| Nosipho Molope | Independent non-executive director | 4/4 | 1/1 |
Two additional annual sessions are held separately with the independent external auditor and internal auditor, without management present, to exchange views and concerns to further strengthen the committee's independent oversight.
The audit committee is an independent statutory committee with members appointed annually by Exxaro's shareholders in compliance with section 94 of the Companies Act and the principles of good governance. In terms of the Companies Act, this committee has an independent role and is accountable to the board and the company's shareholders.
The committee does not assume the functions of management, which remain the responsibility of the executive directors, prescribed officers, and other members of senior management, nor does it assume accountability for the functions performed by other board committees. In addition to the Companies Act, the committee's duties are guided by the JSE Listings Requirements and King IV.
The committee's terms of reference govern its role and responsibilities. To assist the board, the committee plays an essential role in providing independent oversight of:
The committee's terms of reference are reviewed annually. The review took place in the first quarter of 2025 and the revised terms of reference were subsequently approved by the board. The review ensured the terms of reference remain aligned to relevant legislation, regulations and King IV.
There is no regulatory requirement to conduct an annual external independent performance assessment. However, King IV recommends regular performance evaluations for all board committees and, as such, it is a governance practice at Exxaro to conduct independent assessments every third year.
An internal evaluation of the committee's performance and effectiveness was conducted in January 2025. The evaluation aims to identify and record areas needing strengthening or refinement while considering internal and external dynamics and factors that may positively or negatively impact the committee's ability to enhance its performance and effectiveness.
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The committee considered and reviewed an internal assessment of Riaan Koppeschaar's expertise and experience as the FD and is satisfied that he has the appropriate experience and expertise to execute his responsibilities, including while acting as CEO from 4 December 2024. The evaluation considered the appropriateness of the expertise and adequacy of resources in the finance function.
The committee is satisfied with the group's hedge effectiveness and loan covenant position applicable to each facility within the group.
The committee considered the criteria for the selection of multi- fund managers and approved the revised dealer limits and counterparty limits for the group's treasury operations in the financial markets.
The committee reviewed the key reporting issues and significant balances for the interim and year-end reporting periods. Furthermore, it reviewed and approved the trading statements for the interim and year-end reporting periods.
Following a deliberation of the base case and downside scenarios presented by management, and having applied the solvency and liquidity test, the committee was satisfied to provide assurance to the board that the company and group satisfied the requirements of the going concern assessment and further recommended the approval of dividends to the board.
The reports to the committee include reporting on all tax matters, including tax audits, tax disputes with tax authorities, recognition of deferred tax assets, and the status of tax returns and payments. The committee was also appraised of global tax developments. The committee is satisfied that the group is tax compliant.
The committee noted the amendments to the JSE Listings Requirements and the new and revised IFRS Accounting Standards and pronouncements, and their impact on the group. In addition, the committee considered the JSE proactive monitoring and thematic reviews.
The committee ensured that the finance function re-evaluated its disclosures in line with the latest accounting developments. A clear focus was placed on financial reporting risks and controls presented by geopolitical macro-economic conditions including supply chain disruptions, inflation, interest rates and market volatility.
The group and company annual financial statements for the year ended 31 December 2024 were prepared by management, reviewed by the committee and the board, and audited by the independent external auditor.
The committee is satisfied that the group and company annual financial statements for the year ended 31 December 2024 comply with the relevant provisions of the Companies Act, IFRS Accounting Standards, interpretations issued by the IFRS Interpretations Committee, Financial Pronouncements (as issued by the Financial Reporting Standards Council), the SAICA Financial Reporting Guides (as issued by the Accounting Practices Committee), the JSE Listings Requirements and applicable accounting policies and practices. The committee is satisfied that the group and company annual financial statements for the year ended 31 December 2024 fairly present a balanced view of the group and company's financial position, financial performance and cash flows.
Internal control confirmations are distributed to all BUs and corporate service departments in order for management to confirm that no additional reporting issues need to be brought to the attention of the committee. This process verifies that internal controls are being followed in line with policies and governance requirements, it identifies any gaps or weaknesses in internal control processes, and it holds the BUs responsible for maintaining and reporting on their control environment.
During the year, the committee, with input and reports from the independent internal and external auditors, as well as an ERM benchmarking exercise, reviewed the system of internal financial reporting procedures. This review considered all Exxaro entities within the consolidated group to ensure that the committee had access to all financial information to allow for effective preparation and reporting on the group and company annual financial statements for the year ended 31 December 2024. Informed by these reviews, the committee confirmed that no material findings came to the committee's attention to indicate the ineffectiveness of internal financial reporting controls during 2024.
KPMG was the independent external auditor for 2024, with its delivery partner, AM PhakaMalele. Their reappointment was approved by shareholders as presented by a separate resolution at the AGM on 23 May 2024, in terms of paragraph 3.84 of the JSE Listings Requirements.
The committee oversaw the extent of services provided by the external auditor for assurance and other services.
The committee has evaluated the appointment of the external auditor and designated audit partner and is satisfied that KPMG meets the independence requirements outlined in section 94(8) of the Companies Act.
The committee considered the relevant information under paragraph 3.84(g)(iii) of the JSE Listings Requirements. Thus, the committee executed its responsibility to consider the suitability of the external auditor and designated individual auditor, as required by paragraphs 3.84(g)(iii) and 3.87, and in terms of their mandate required by paragraph 3.86 of the JSE Listings Requirements.
The committee recommends KPMG with its delivery partner, AM PhakaMalele, for reappointment for the ensuing year ending 31 December 2025 at the upcoming AGM on 15 May 2025 by way of a separate resolution by shareholders in terms of paragraph 3.84(g)(iv) of the JSE Listings Requirements and section 61(8) of the Companies Act.
During the review period, the following fees were paid to the independent external auditor:
| 2024 Rm |
2023 Rm |
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| Statutory audit fees | 31 | 30 | ||
|---|---|---|---|---|
| Non-audit service fees | 3 | 3 | ||
| Total | 34 | 33 |
The policy for engagement of the external auditor to supply assurance and other services was reviewed in 2024. The committee considered the Revisions to the Non-Assurance Services Provisions of the Code from the International Ethics Standards Board for Accountants and the Revisions to the Non-Assurance Services Provisions of the Code from the Independent Regulatory Board for Auditors and set the threshold for assurance and other services for the external auditor at a maximum of 20% of the statutory audit fee for any given financial year. It was confirmed that KPMG, in terms of its internal policy, will not provide any advisory or tax services to its audit clients.
The committee is satisfied with the level and extent of assurance and other services rendered by the external auditors during the year. It was confirmed that KPMG and AM PhakaMalele remained independent of Exxaro.
The committee approved the external audit plan and approach for the financial year ended 31 December 2024.
For 2024 and 2023, KPMG partnered with AM PhakaMalele, a level 1 B-BBEE company, fulfilling Exxaro's commitment to transformation.
The committee ensured that assurance provided by the internal audit function focused on the company's key risks and that the services provided by the function add value to the organisation.
The internal audit function is partially outsourced to PwC under the management control of Exxaro's head of internal audit. PwC partnered with a level 1 B-BBEE company, Ngubane & Co, to fulfil the internal audit support function. The responsibilities of the internal audit function are detailed in an internal audit charter approved by the committee, which is reviewed and approved annually.
The main function of internal audit is to express an opinion on the effectiveness of governance, risk management and systems of internal controls as well as the internal control environment within the group. It provides an independent and objective consulting service designed to add value, maintain assurance, and improve Exxaro's operations.
The committee holds management accountable to ensure corrective measures are in place to address control deficiencies identified by internal audit or forensic investigations. The committee will continue to monitor the efficacy of these measures.
During the period under review, the committee authorised the CEO and FD to sign the management representation letter for the interim and year-end reporting periods. Additionally, internal audit provided an assessment to support the CEO and FD in effecting their responsibility to sign the mandatory responsibility statement in terms of the JSE responsibility statement requirement Item 14, section 3.84(K) which affirms that the internal control environment can be relied on in compiling the annual financial statements.
The committee considered the status of the execution of the annual internal audit plan and the results of completed audits. The committee is pleased with the overall performance of the internal audit function and the services provided.
The internal audit charter was reviewed and presented to the committee for approval on 6 March 2025. Exxaro internal audit decided to be an early adopter of the new Institute of Internal Audit model charter which is aligned to the new Global Internal Audit Standards.
The model charter was utilised as the base document where the bespoke Exxaro requirements were added:
The committee noted the status of:
As required by King IV, assurance was broadened to cover all sources of assurance, including external assurance, internal audit, management oversight and regulatory inspections. In 2024, the combined assurance model was updated to include the five lines of assurance to differentiate the level of risk ownership and independence of assurance efforts by providers.
The model incorporates and optimises all assurance services and functions to enable an effective control environment and support the integrity of information used for internal decision making by management, the governing body and its committees and the organisation's external reports.
An annual combined assurance plan is submitted for approval to the committee, detailing all proposed assurance activities within the group, including the level of assurance. The committee ensures alignment of the combined assurance plan, and internal and external audit plans. Risk acceptance, level 1 finding disclosure process and risk extension requests are adopted as protocols.
The committee's role is to review the effective establishment and operation of combined assurance within the group. To this end, the company established a combined assurance framework. The committee is satisfied that the combined assurance framework is a platform to coordinate Exxaro's assurance functions. The combined assurance framework coordinates assurance coverage for Exxaro's risk exposure as identified and ranked by Exxaro's risk management function, including optimisation of assurance functions aligned with King IV recommended assurance practices.
The committee is satisfied with the arrangements for ensuring an effective and efficient combined assurance model within the group. Furthermore, a benchmarking exercise will be conducted to align the roles and responsibilities of different assurers to avoid duplication.
In terms of King IV, the committee exercises oversight of technology and information governance.
The committee received reports on the group's digital transformation as well as the impact of cyber risk on information technology performance to support strategy execution.
The recent organisational effectiveness process necessitated a review of the current information management operating model, and the committee noted the information management strategy, governance, internal and external audit findings, portfolio and enterprise architecture, risk management and enterprise resource planning journey.
In the year, the committee oversaw the implementation of key security projects including the implementation of the privileged access management tool and multi-factor authentication for privileged users.
Several management governance forums enhance decision making, oversight and strategic direction. Foundational policies support these structures by guiding behaviour, expectations and operations.
As it is increasingly challenging for companies with a large carbon footprint to obtain insurance coverage at competitive terms, this is a focal point for the committee. Exxaro has a separate captive insurance company registered in terms of the Insurance Act, 2017 (Act 18 of 2017) to manage short-term insurance arrangements, being Exxaro Insurance Company Limited.
A formal memorandum is submitted quarterly to the committee, setting out the main activities of the insurance company. The committee considered regulatory compliance, level of self- insurance, financial position, external audit plan for the 2024 audit, investment strategy, performance of investments, insurance renewal programme, and associated costs and exclusions during the period under review. In addition, the committee reviewed Exxaro's strategy regarding insurance coverage and self-insurance.
Key focus areas 2024/2025 |
| Monitor the progress and implementation of the strategy concerning the deployment of new post-modern enterprise resource planning solutions to ensure acceptable cost, risk and alignment with the Exxaro strategy |
| Evaluate whether the company has incorporated digitalisation and utilisation of advanced technologies, eg AI |
| Review Exxaro’s future strategy regarding insurance cover and self-insurance, considering global resistance to thermal coal and insurance markets |
| Monitor the impact of cybersecurity risks in the finance and internal control environment |
| Monitor talent challenges in the finance and internal audit functions as a result of the global war for talent |
The committee is satisfied that it has discharged its responsibilities and fulfilled its mandate in accordance with its terms of reference, the Companies Act, the JSE Listings Requirements (paragraph 3.84(g) in particular) and King IV.
On behalf of the audit committee
Nondumiso Medupe
Audit committee chairperson
15 April 2025
IR