South African Companies Research Articles

The bottle has popped – how the Companies Act 71 of 2008 has incorporated derivative actions for stakeholders in South African law

The legal position established in the famous case of Foss v Harbottle (Foss v Harbottle) is no longer applicable under the new corporate legal framework of the Companies Act 71 of 2008 (‘the Act’). The principle in Foss v Harbottle, stated simply, is that where a wrong is done to a company, only the company may sue for damages caused to it. I argue that the derivative actions established through the Act, along with South Africa’s new corporate governance principles, negates the outdated notion that a company alone may sue for damages caused to it. Through the assessment of the case of Hlumisa Investment Holdings (RF) and Another v Kirkinis and Others (‘Hlumisa’), along with ss 218(2), 165, 157, 20(4) and 162(2) of the Act, it will be established that stakeholders of a company have the intrinsic legal standing to institute derivate actions on behalf of companies, in South African Company Law.

Motivations for Adopting Proactive Environmental Management Accounting Practices: Evidence from South African Firms

By examining environmental management accounting practices (EMAP) in South African companies, the study assists the company management to better understand their EMAP more broadly and establish effective EMAP to improve environmental management. This paper explores EMAP adopted by South African companies in Gauteng province and understands the motivation for applying the EMAP. Companies from different industrial sectors were used as the study sample. To accomplish the major aim of the study, 202 questionnaires were received as valid from the environmental managers, accountants and production managers. The study establishes that the companies are mostly using environmental management system, environmental reporting, waste management and water conservation activities as the key EMAP. This indicates that South African companies opt for EMAP with little cost involved and EMAP that does not require advanced systems in place. Also, financial gains were identified as the major motivation of EMAP adoption. This is followed by stakeholder pressure, marketing pressure and regulatory pressure. This paper will amplify literature on the EMAP adopted within industrial sectors and the motivation of adopting EMAP from an emerging market standpoint.

Shareholder sentiment at general meetings: speculating on colonialism

PurposeAnnual general meetings have been variously described as dull rituals for accountability versus entertaining theatre at the expense of accountability. The research analyses director and shareholder participation and dialogic interactions at annual and extraordinary general meetings of Cecil Rhodes' British South Africa Company (BSAC). The BSAC was incorporated under a royal charter in 1889 in return for power to exploit a huge territory, Rhodesia/now Zimbabwe. The BSAC's administration ceased in 1924/25. Thus, the BSAC had a dual mandate as a private for-profit listed company and to occupy and develop the territories on behalf of the British government.Design/methodology/approachThe article analyses 29 BSAC general meeting minutes, comprising 25 full sets of verbatim minutes between 1895 and 1925. The study adopts manual content analysis. First, the research adopts conversational analysis to analyse director and shareholder turn-taking and moves by approving and dissenting shareholders. Second, the study identifies and analyses incidents of shareholder sentiment from the shareholder turns/moves. Finally, the article assesses how shareholder sentiment changed throughout the period and whether the BSAC's share price reflected the shareholder sentiment.FindingsThe BSAC's general meetings were associated with the greater colonial project of building the British Empire. The authors find almost 1,500 incidents of shareholder sentiment. Directors and shareholders take roughly an equal number of turns (excluding shareholder sentiment). Ritual and ceremony dominate director and shareholder turns and moves, while accountability to shareholders was minimal. The BSAC share price spiked in the early years of the project, waning after that. Shareholder sentiment, both positive and negative, reflect the share price behaviour.Originality/valueA unique database of verbatim general meeting minutes records shareholders' reactions to what they heard in the form of sounding off through cheering, “hear, hears,” laughter and applause (i.e. shareholder sentiment).

A FRAMEWORK FOR QUALITY AND OPERATIONS MANAGEMENT PERFORMANCE DURING THE COVID-19 PANDEMIC PERIOD: A CASE OF SELECTED BUSINESSES IN PRETORIA, SOUTH AFRICA

Drastic and dynamic changes related to the COVID-19 pandemic have forced businesses to reimagine a sustainable way of ensuring business survival in the long term. The present study seeks to design a framework for quality and operations management performance during the covid-19 pandemic period following the case of selected manufacturing companies in South Africa. The regression analysis indicates a significant correlation together with the R square confirming that 98.1% of the performance elements are defined by the COVID-19 risk types, operations management structures, operations-based Risk management, operational practices, pandemic constraints and Business challenges. Efficient operations management structure should be tailored by the application of good governance policies business transformation, planning management, environmental adaptation, stakeholders’ development. Businesses should enable digital adoption, quality management system, green operational management, stakeholder commitment and the integration of management system. The proposed framework includes upgraded business processes, operational practices, and operations-based risk management using successful operations management structure for business optimization, especially during crises connected with drastic and dynamic changes. Policymakers should be proactive in developing and implementing business tragedy policies and regulations to tackle severe business penalties and thus ensure business sustainability.

The value relevance of mandatory sustainability reporting assurance

Sustainability reporting assurance (SRA) ensures the credibility of sustainability information disclosed by companies. This practice has continued to evolve, particularly within regulatory frameworks. The SRA is widespread among the largest French and South African companies because of the requirements of GRENELLE II and KING III laws. The increased regulation of SRA and the increased rate of obtaining assurance motivated us to conduct our study. This study examines the impact of mandatory SRA on firm value. We run a fixed-effects ordinary least squares (OLS) panel model to test our hypothesis for the 2007–2018 period on a sample of 88 South African listed companies on the Johannesburg Stock Exchange (JSE) and 83 French listed companies on the SBF120 index. We use Tobin’s Q to measure firm value. Our results show a significant positive association between mandatory SRA and firm value. This finding implies that SRA regulations positively affect investors’ perceptions of firm performance, particularly firm value, for two reasons. First, mandatory SRA may strengthen firm legitimacy and establish a good reputation. Second, the adoption of SRA regulations plays an important role in reducing asymmetric information between various actors and solving agency problems between managers and shareholders. Regulators may be interested in the findings when considering current and future assurance requirements for sustainability reporting, and shareholders when considering SRA as an investment choice criterion.

Employee perceptions of non-communicable diseases health risks, absenteeism and the role of organisational support in a South African pharmaceutical manufacturing company.

The growing prevalence of non-communicable diseases (NCDs) in South African workers has been shown to be associated with absenteeism and increased risk of morbidity. Low-income workers living in urban settings are particularly vulnerable. Consultation with workers is crucial for understanding risks and identifying opportunities for intervention to promote health in the workplace. The purpose of this study was to examine South African pharmaceutical manufacturing workers' perspectives of health risk factors and absenteeism, and to identify how they perceived a role for the organisation to initiate interventions to improve their health. Five focus groups were conducted to capture 27 employees' perspectives. The semi-structured focus group discussions were recorded and analysed using a thematic content analysis approach. Participants indicated that they were aware of behavioural health risks such as prolonged sitting. They showed insight into strategies to prevent injuries and stay healthy, but also expressed dissatisfaction about the lack of organisational support, leading to stress and consequently absenteeism. Participants emphasized the responsibility of the organisation to support a range of health promoting strategies. The findings of this study are important for cultivating a tailored workplace intervention to reduce NCD risk factors in the pharmaceutical manufacturing workforce. It is vital that these be supported by leadership of the company through the provision of funding and the development of internal healthcare services.

Internationalisation of South African companies in the hardwood industry in the European market

Orientation: Export opportunities, internationalization, have been prioritised by South African Trade and Industry in order to promote economic growth. Research purpose: It is critical for the expansion of organisations to consider internationalisation when there are prospects for expanding trade activities in already existing and sometimes firmly established markets. Motivation for the study: Upon entering an international market competitively, a clear understanding of all factors impacting on profitability and sustainability of the organisation strategic endeavour, is required. Research design, approach and method: A case study research design was selected for this study. The parameters presented a large role player in the hardwood industry and export trade at the time of the data gathering. Qualitative research approach represented the data collecting process as observational and specifically perceptible. The data acquired from participants in their natural environment and preference given to the ways in which individuals interpret their social world. Secondary data was used. Main findings: Belgium’s market size for hardwood products is greater than the consumption indicating an over-supply, whereas Germany’s supply and demand are exactly equal. The Netherlands’ demand for wood is greater than the supply. Practical/managerial implications: Although all the European Countries are possible export markets for wood, it is recommended rather to concentrate exports of wood products to the Netherlands. Contribution/value-add: The international market for hardwood in Europe is available for exports from SA. The Forest Stewardship Council (FSC) certification awarded South African plantations is sufficient to serve as the requirements stipulated by both the European countries and CITES.

The influence of carbon tax on financial sustainability of South Africa’s cement and mining industry.

This paper examines the impact of carbon tax on financial sustainability of cement and mining companies in South Africa listed on the Johannesburg Stock Exchange. Quantitative research method was used. Correlation analysis was used to analyse the data. Secondary data in form of annual integrated reports, sustainability reports and annual audited financial statements from 2016 to 2020 were used as sources of the variables. The results show that carbon tax adversely influences net profit margin. Therefore, this suggests that carbon tax also negatively impacts shareholders’ dividends. Therefore, this suggests that carbon tax also negatively impacts shareholders’ dividends. This study is significant to policy makers by providing valuable information relating to the effect of carbon pricing decisions on the profitability of the cement and mining sector in South Africa. This gives the policy makers an evidence-based opportunity on designing and developing policies that take into consideration that carbon tax is reducing financial performance of the corporate sector in South Africa. This study contributes to the contemporary literature on nexus between carbon tax and financial sustainability from developing country perspective. Furthermore, this is the first empirical study in South Africa focusing on this relationship.

Air Contamination and Ecological Information Disclosure From South Africa’s High Energy Consumption Industries

Globally, South Africa is currently amongst the countries with the poorest air pollution. Recently, organization ecological information disclosure has turned out to be a progressively more prevalent method for ecological by-laws. However, at the moment, there is an absence of empirical confirmation on the organization ecological information disclosure effects of air contamination. This research investigates the relationship between air contamination and organization ecological information disclosure applying cross sectional data gathered from listed South African companies in high energy consumption sectors from 2015 to 2021. The findings disclose that the link between air contamination and organization ecological information disclosure is substantially adverse. The Northern province has huge effects on organization ecological information disclosure in comparison with the Eastern province. Furthermore, effect air contamination has on organization ecological information disclosure also varies in companies situated in province with various corporate ecological information disclosure transparency. This study makes available a portrait of the interaction between air contamination and ecological information disclosure expansion in emerging economies such as South Africa.

Organisational support: Associations with psychological contracts and turnover intention in the South African food manufacturing industry

The study examined the role of employee perceived organisational support (POS) in the relationship between employee psychological contract (PC) and turnover intention (TUI). The participants comprised employees in a South African (SA) food manufacturing company (n= 385 employees; female = 33.8%; age range 35 to 44 years; mean period tenure = 13 years, SD = 10.98 years), who completed the Perceived Organisational Support Scale (POSS), the Psychological Contract Scale (PCS), and the Turnover Intention Scale (TIS). Hierarchical regression results indicated that POS was associated with low transactional psychological contract (PC-T) and TUI levels. Additionally, the results indicated that POS to be associated with a higher level of psychological contact (PC-R) and lower TUI. Furthermore, the results indicated that females, older, and longer tenure, as well as higher level of formal education were associated with higher psychological contact and lower turnover intention. The findings are consistent with social exchange theory and organisational support theory in respect of creating a trusting work environment. By implication, employees with a high relational psychological contract type and perceived high organisational support, may have a higher organisational commitment and hence lower intent to quit.

Influence of environmental management accounting practices on the environmental sustainability of South African cement and mining companies

Most companies in emerging economies need to be more conscious of environmental initiatives such as environmental management accounting practices (EMAP) that can effectively improve environmental sustainability. Therefore, this study investigates the effect of EMAP on the environmental sustainability of listed South African cement and mining companies. To achieve the aim of the study, 45 Johannesburg Stock Exchange-listed cement and mining companies were sampled based on data extracted from the annual integrated reports, financial statements, environmental and sustainability reports from 2012 to 2021. IBM SPSS Statistics 24 was used to analyze the relationship between EMAP and environmental sustainability. The results show that two environmental sustainability proxies, water consumption and recycled water, are significantly and positively related to EMAP. However, carbon emissions (p < .061) insignificantly influence environmental sustainability. This suggests that some EMAP used by the sampled companies are inadequate to amplify environmental sustainability. The paper is essential to provide empirical evidence that managers of the cement and mining companies in South Africa need to devise better and new EMAP to reduce carbon emissions.

Evaluation of the Effectiveness of and the Extent to Which Large and Medium Logistics Organisations Report on Social Sustainability—The Case of South Africa

Despite the importance of the logistics sector to the South African economy and the significant negative impact of the sector on South African society, little research has been conducted to determine the extent to which South African logistics companies report their social sustainability and the effectiveness of their social sustainability reporting. The objectives of this study were to determine the extent to which South African logistics companies report on social sustainability performance and to evaluate the effectiveness of social sustainability reporting practices of South African logistics companies. A documentary analysis of the sustainability information of the logistics companies was conducted using a control list and a judgment scale. A purposive sample of 50 companies was used. The majority of the companies in the sample are private companies that are not listed. Of the sample group, 20% are family-owned, and 16% of the companies are publicly listed in the Johannesburg Stock Exchange (JSE). The results indicate that social sustainability reporting by logistics companies is very low. The range of scores is from a minimum of 0% to a maximum of 57%. Only two companies attained a score above 50%. About 61% of the companies did not disclose any of the stated themes of social sustainability, while 25% of the companies disclosed the themes in narrative form, and 12.1% disclosed them relative to prior periods of disclosure by the companies. Only 1.4% disclosed themes relative to the targets set by the company, and 0.3% of the companies disclosed them relative to industry standards. Regarding the effectiveness of social sustainability reporting, nine companies (18%) had a score of 50% and above. Only 13 companies (26%) have a score of 40% or higher. This is indicative of the fact that, in general, road logistics companies are not effective in their reporting of social sustainability activities. We endeavour for the study to assist South African logistics companies in being aware of elements to consider when reporting on their social sustainability, as well as assist them in improving their reporting.

Framework for Screening and Evaluating the Competencies and Qualities of the Board of Directors in South Africa’s State-Owned Companies

Purpose—This research paper presents a framework for screening and evaluating the competencies and qualities of the board of directors in South African state-owned companies (SOCs). Design/methodology/approach—This study conducted a systematic literature review to gather primary data which was used to prepare a questionnaire for two rounds of the Delphi process, where data was analysed both qualitatively and quantitatively. Findings—The findings from the study revealed the ideal competencies and qualities of individual directors, the optimal collective competencies of directors, and the most appropriate screening and evaluation methods that could be adopted to benefit SOCs. Originality/value—This paper adds to the limited studies investigating the competencies and qualities of directors in SOCs, as most research is focused on listed private companies. Furthermore, there is currently no framework in South Africa that outlines the process for screening and evaluating the competencies and qualities of directors in South Africa’s SOCs. In an effort to support the South African government screen and evaluate the key competencies and qualities of directors in state-owned companies, this team has developed a theoretically informed framework that can be used to screen potential board members’ abilities and capabilities before they are appointed as well as to evaluate the relevance of existing board members.

Practices applied by practitioners to achieve management and financial control during business rescue

Orientation: To resuscitate financially distressed companies in South Africa, business rescue as introduced through the enactment of Chapter 6 of the Companies Act 71 of 2008 requires the business rescue practitioners (BRPs) to take management and financial control as part of their specific powers and duties.Research purpose: This study investigated what practices BRPs apply in order to achieve management and financial control.Motivation of the study: Business rescue practitioners are faced with complex assignments with no clear measurements in practice, thus making judgements subject to the perception of the enquirer. It was important to better understand the practices applied by BRPs to achieve management and financial control.Research design, approach and method: A qualitative study was conducted and 13 BRPs within the Gauteng Province were approached. These BRPs were registered with the Companies and Intellectual Property Commission and consisted of junior, senior and experience BRPs. A thematic analysis was conducted to analyse the interview data. This study was approved by the Research Ethics Committee of the Faculty of Economics and Management Sciences at the University of Pretoria.Main findings: The findings indicate that management control is pursued via four main categories of tasks: meeting with stakeholders; clarification of roles; taking control of decision-making and understanding the business model. Taking financial control consists of managing finances, examining key financial information and engaging with financial people.Practical/managerial implications: For practitioners and educators, this study highlights the importance of using these practices to take control and remain in control in conjunction with management to achieve a productive rescue outcome.Contribution/value-add: This study minimises the gap that exists in the literature, detailing the specific activities conducted to achieve management and financial control and how to remain in control.

Make personal information security great again: A case of users’ perspectives on personal identifiable information in South Africa

Background: There is concern that information technology (IT) users are not taking cognisance of personal information security (PIS), with many keen to disclose personal identifiable information (PII) across connected and integrated IT systems that use the Internet. Compromised PII has led to many users being vulnerable to information security risks emanating from malicious software and hackers.Objective: This article elicits perspectives from IT users in the metropole area of Johannesburg, South Africa, in an effort to raise awareness of the dangers of oversharing PII across the Internet.Methods: The study uses a quantitative approach to elicit data on user perspectives. The quantitative data were collected through online surveys distributed amongst IT employees working across various companies in Johannesburg.Results: The results revealed that of the four constructs drawn from the literature review, namely training, interest, awareness and action that possibly predict user predisposition to maintain information security at a personal level, of concern is that only the construct interest would not likely predict PIS.Conclusion: Dangers such as identity theft and phishing attacks are exacerbated by the willingness of users to overshare PII across social networks. A concerted user awareness campaign to promote user PIS needs to be revisited whilst incorporating innovative ways to raise interest amongst users regarding these dangers. South African companies are encouraged to invest resources in bespoke ways to increase user interest, which would be seen as an ideal starting point to making PIS great again.

IMPLEMENTING CONVINCIVE AND PERSUASIVE STRATEGIES IN THE DISCOURSE OF COMMERCIAL TRANSACTIONS (based on commercial letters of South African companies)

The article justifies the relevance of the study of convinciveness and persuasiveness categories in the commercial discourse. An attempt is made to analyze the genre «сommercial letter» in accordance with discursive strategies and tactics that promote effective business communication in the commercial activities. Based on the pragma-linguistic analysis of the written business discourse, the typological characteristics of commercial letters are defined. The ways of implementing convincive and persuasive strategies based on commercial letters of South African companies are considered. Strategies and tactics of convinciveness and persuasiveness are studied in the terms of the speaker’s influential potential and argumentation. The types of argumentative strategies in the commercial transactions’ discourse are differentiated and their classification is given. Linguistic and paralinguistic means of implementing the speaker’s convincive and persuasive influence are described.

Use of impression management practices in the chairman’s statements in South African annual reports

Impression management is the study of how individuals present themselves to be perceivedfavourably. Using agency theory, this article investigates impression management practices,influenced by the company’s underlying performance, that may be present in the chairman’sstatements in annual or integrated reports of Johannesburg Stock Exchange listed companies inSouth Africa. This research uses content analysis and specifically focuses on the identificationand measurement of three pre-determined textual characteristics referenced in these chairman’sstatements. There is reasonable evidence to suggest that management employs impressionmanagement strategies that are dependent on the level of a company’s performance. In addition,while variability in readability was not found to be a strategy used to manage impressions, theoverall readability of the chairman’s report was found to be relatively difficult and this, in turn,may affect the ability of stakeholders to benefit from the information it contains. This study islimited to the analysis of a single section of narrative reporting (the chairman’s statement) and, assuch, does not consider any impression management practices that may be present in the restof the annual or integrated report as well as in other communications between stakeholders andthe company in question. It is anticipated that the results will be of importance to professionalaccountancy bodies, users and preparers considering the negative perception of the accountingprofession owing to recent scandals. This is also one of the first studies to explore the use ofimpression management practices in South Africa and the linguistic variation employed inmanagement commentary within a South African context, thereby contributing to the readabilityof the chairman’s statements.

Explaining the performance of South African firms

PurposeThe discussion of competitive strategy in recent years has turned to exploring the differences between emerging market (EM) companies and traditional companies from the US, Europe and Japan. In particular the question has been: do we need a new theory of EM companies, or can existing theory be applied, perhaps with adaptations? The authors intent in this paper is to show what features enable EM firms to succeed in domestic competition, where institutional settings are different from those in Triad countries. The authors do not explore the issue of EM companies competing internationally.Design/methodology/approach The authors argue that competitive advantages (Porter) or resources (Barney; Wernerfelt) offer a solid base on which to build an understanding of successful domestic strategies of firms in EMs, also recognizing that the specific advantages differ somewhat in EMs, due to institutional differences (Peng). The authors explore characteristics of the 250 largest publicly-traded South African firms which enable them to compete successfully (incl: company size, brand value, company age, international sales and family ownership). The authors conclude that existing theories do indeed serve in this context, but that they need to be adjusted for the different institutional environments in EMs.FindingsFactors that contribute to performance include: company size(+),brand value(+), company age (+), international sales(+) and family ownership(−). The literature that has developed on EM companies competing internationally fails to recognize that most of the features identified exist for all companies in a given country – so they do not explain domestic performance. Of course, even in the domestic context some companies will be better able to take advantage of institutional capabilities such as dealing with the government and with volatile economic conditions than other companies.Research limitations/implicationsThe study results come from only one EM, so there may be limits on generalizing to others. If China is excepted, the results here are broadly applicable to medium-sized and larger EMs today, with idiosyncrasies remaining for individual countries (such as natural resources, location, etc.)Practical implicationsEM companies to succeed in their domestic markets should look to build size/scale, to develop their brands and to expand internationally. They should also expand ownership to non-family investors. These factors were significantly correlated with superior performance of listed companies in South Africa and have been shown to apply elsewhere as well.Originality/valueAlso, most analyses of EM companies focus on their distinctive institutional capabilities for competing with firms from Triad countries. The study analysis focuses on domestic competition rather than on going abroad.

Determinants of choice between equity issuance, equity repurchase and debt issuance of South African companies listed on the Johannesburg Stock Exchange

Purpose: The introduction of dual decisions (such as the issue of shares and the issue of debt; the repurchase of shares and the repayment of debt; and share issues and share repurchases) has provided an order of preference of financing decisions influenced by company-specific attributes. The aim of this study is to investigate determinants of choice of South African companies listed on the Johannesburg Stock Exchange (JSE) between different financing decisions.Design/methodology/approach: Data were obtained from Integrated Real-time Equity System (IRESS), a reliable supplier of financial data. Data of 90 companies were analysed. A logistic regression model (fixed effect) was used, and multinomial logistic regression (fixed effect) was done using a generalised structural equation model.Findings/results: The research findings highlight the significance of the trade-off theory, the pecking order theory and models based on asymmetric information in elucidating financing decisions in a developing country. The findings extend empirical evidence of determinants of choice between equity issuance, equity repurchase, the no-transaction alternative and debt issuance decisions in South Africa’s emerging economy. The findings also suggest that South African companies listed on the JSE must evaluate company-specific variables and theories that correspond to such variables if they wish to make better financing decisions.Practical implications: The findings will help corporate decision-makers decide between equity issuance, equity repurchase and debt issuance. The findings will also help shareholders make better investment decisions.Originality/value: The article investigates the determinants of choice between four financing decisions and the no-transaction alternatives within the same framework.

Impact of Firm-specific Attributes on the Shareholder Value Creation of Listed South African Companies

This article identifies firm-specific attributes with a substantial impact on the capabilities of listed South African companies to create shareholder value. It shows that the firm-specific attributes that contribute to shareholder value creation differ when value is measured using economic-based shareholder value measures, such as Economic Value Added (EVA) and Market Value Added (MVA), versus using accounting-based shareholder value measures, such as earnings per share (EPS). Data cover financial years from 2000 to 2018 for 35 JSE-listed companies. Multiple regression analysis is employed to study the relationships. The study revealed different results on shareholder value creation utilizing accounting-based and economic-based performance measures. Shareholder value measured by EVA is created by larger companies with higher profitability, lower systematic risk and efficient asset management. MVA identifies increased shareholder value for larger firms and higher profitability. MVA also pinpoints enhanced investor value by firms with lower liquidity ratios which invest less in research and development (R&D). EPS achieved different results from EVA and MVA, indicating that according to accounting-based measures, companies add value through lower profitability (measured by return on investment), efficient asset management and a higher risk profile. Understanding the effect of firm-specific attributes on shareholder value creation can assist managers in developing strategies and decision-making.